QUESTION OF RATES

Poverty Bay Herald, Volume LIII, Issue 16376, 25 June 1927, Page 6

QUESTION OF RATES

POSITION OF COLLEGE

INTERESTING LEGAL POINT

(Per Press Association.) AUCKLAND, June 24

A claim lur the recovery of £199 16s 3d as hospital and general rates for the financial year 1925 20 was made by One Tree llill Road Board against the Auckland Presbyterian College tor Ladies Ltd.. iii I lie Supreme Court. A counter claim for exemption from paymenl of all rates was made by the company Mr. Stanton, [or ihe company, said .St. C'ulhhert's College was taken over from a private owner in 1914 by a limited liability company comprising certain members ol the Presbyterian Church in Auckland. Exemption was claimed on the grounds that the college was not. carried on exclusively for pecuniary gain, and did not therefore tome within the meaning of the Rating Act 1925. The company established the school primarily lor girls of the Presbyterian denomination, and it was laid down that religious, as well as secular instruction, was to be given. The capital was £12,000, and was fully subscribed, 1560 £1 shares bieng fully paid up, and 10,640 shares bring paid up to 10s. The articles of association slated Hint the dividend in any one year was not to exceed 6 per (•cut., and £25/ 4s 4(1 was paid out in dividends for the year ended January 31, 1926. In forming the company there was no intention of making profits. The actual capital subscribed at January 31, 1926. was, £63U5. In addition, £40,000 had been raised bv debentures, £IO,BOO on mortgage, £2OOO on daposits, and £c#93 from the bank, these items, making a total of £58,693. Any money available alter the 6 per cent, dividend was paid was used in carrying out improvements at the college. The company had to meet normal charges in connection with the school, while several pupils were receiving free education. His Honor: I think it is usual for minister's children to be admitted at a lower rale in such schools.

Air. Stanton said the present claim for exemption was unlike others previously made in New Zealand, as in previous cases schools were established by public bodies and provided with endowments of some sort. No " endowments wore possessed by defendants in tins case. ROAD BOARD'S ATTITUDE His Honor: Vour difficulty is that a dividend was paid out of'the prolits ti'om the school. Counsel contended that the dividend was only interest on money lent.

Mr. Kogerson, for the road board, suggested that the question was not whether a school was formed tor the making of profits, but whether under its present constitution it- was possible for private, profits to bo made, ft was difficult to say where they were to draw the line. In connection with the 6 per cent, .profit, this profit was free of income tax, and the articles of association also provided for the payment of an interim dividend. On these facts alone it was suggested that the school was being run for profit, even although it was of a limited nature. The company might at any time go into liquidation, realise its assets, and divide its profits. J i was not suggested such a course would have been considered by those who were responsible for the foundation of the college, 'there was no restriction whatever upon the transfer of shares, and it was possible for the whole share capital to go into the hands of persons whose only concern would be private gain. The 'company had been lormedwith a provision for the partial realisation of assets, which would naturally return a profit. There was nothign to prevent the accumulation of a reserve fund made upon money in excess of that required for the payment of bonus shares. In the ordinary commercial manner such shares would be regarded not as ordinary profits, but as an accretion of capital". It was quite possible, I here lore, that, the whole of the prolits might, be divided anions shareholders.

Mr. Stanton said the profiteering schemes put- forward bv Mr. Rogorson quite impossible. Capitalisation and the division of profits were not permissible unless specially provided foi hi the articles of association. There was no suggest ion or the intention bv the company to carry out such suggest ions. "

Hi's Honor said bo. would reserve his decision. Th.e question was an interesting one, he added.