“INADVISABLE”

Timaru Herald, Volume CXXXIX, Issue 20067, 26 March 1935, Page 12

“INADVISABLE”

RURAL MORTGAGORS’ BILL MR P. B. FOOTE’S VIEWS “Inadvisable” and “unnecessary’” were terms used by Mr P. B. Foote at a meeting of the Rotary Club yesterday when he discussed the Rural Mortgagors’ Final Adjustment Bill. He described the Bill an undesirable piece of class legislation and expressed the opinion that it would hinder economic recovery. Mr A. M. H. Shirtcliff, a visitor to the Club, deplored the belittling of the farmer, which he said, the Bill did. Before dealing with the Bill, Mr Foote reviewed recent Government enactments which had preceded it. The Mortgagors’ Relief Act, which had come into force in 1931, had set out in its preamble'that it was “desirable to confer jurisdiction to postpone the exercise of powers of sale by mortgagees in certain cases,” but that had applied only to farm lands and the Act was to expire after 18 months. It had not been on the Statute Book more than six months when it was found necessary to amend it, giving power for the Supreme Court to prevent the mortgagee exercising power of sale, and empowering a Magistrate to act in certain cases. In November a new Bill was before the House extending the Act and giving further powers, the most important of which were the remission or writing off of arrears of interest and the reduction in the rate of interest payable under mortgages and the power to postpone the payment of interest for two years. By that Act Adjustment Commissions were set up to assist the Court. In the next year three Acts were passed all amending the mortgage legislation. The first applied the original Act to all mortgages, not only those on farm lands, and extended it to apply to leases so that tenants could apply for relief as well as mortgagors. Commissions Praised After dealing with further amendments to the legislation, Mr Foote said that in 1933 all the Acts were consolidated. Under the National Expenditure Adjustment Act all interest rates and rentals were reduced 20 per cent., and in the case of interest the lowest rate which could be charged on first mortgages was fixed at 5 per cent. The effects of the relief Acts were that mortgagors and mortgagees could apply to the Commissions for relief. “I have nothing but admiration for their work,” said Mr Foote, who added that the Commissions soon got into their stride and protected the mortgagor rather than the mortgagee, it being considered that the slump would pass and that a little relief would see the mortgagor through. As the Commissions had got a better hang of the position they had dealt with matters more sensibly (although perhaps, he had not used the best word). They had not been inclined to give relief to the farmer who was in a hopeless position. “I can’t say that all their findings have given general satisfaction, but there has been general acquiescence with their findings,” added Mr Foote, who said that there were now many more mortgage settlements made outside the Commissions than went before them. New Bill Explained Mr Foote said he did not propose to deal with the Mortgage Corporation Bill, for he could not see how it affected the new Bill to any extent, although the Government had said that the two Acts were interdependent. The Rural Mortgagors Final Adjustment Bill was divided into five parts. Part 1 set up a special court for rural mortgages with a judge of the Supreme Court as president and was purely a piece of machinery. Part 2 provided for voluntary adjustment. The Commissions would still operate and could call meetings of creditors and submit their findings to the Court of Review. Under Part 3, if voluntary settlement were not arrived at the Could could issue a stay order which prevented the creditors from exercising their usual rights against the mortgagor for a period of five years. Under Part 4 the effects of the stay orders were that trustees were appointed to whom the mortgagor must account, the trustees to keep the accounts and to distribute the income according to a schedule. Also a supervisor could be appointed. Part 5 provided that if the mortgagor were not conducting himself satisfactorily the stay order could be set aside. At the conclusion of the five years the Court would, having regard to the production capacity of the property during that time, fix its value and leave the farmer up to 20 per cent, equity in it. “ Undesirable Class Legislation” “To my mind the Bill as a whole is inadvisable and certainly is, from my experience in this district, unnecessary. It is class legislation of a most undesirable kind,” said Mr Foote. “It benefits the farm mortgagor by dispossessing the mortgagee lender. A contract as a contract should be honoured and anything which tends to loosen an agreement between one man and another is, on principle, bad for the whole public.” He pointed out that if the Bill went through, there would be claims from all mortgagors, town as well as country, who would be entitled to similar benefits. The unfortunate businessman who, through hard times has had to fade out, would be entitled to ask why he had not been brought in under some similar scheme. In the speaker’s opinion, the Commissions were doing all that was necessary. They were doing their work well and were gradually giving the able farmer protection and. in the case of a man in a hopelessly bankrupt position, were taking the place from him and giving it to someone else. The whole question of mortgages was increasing

the difficulty of farmers’ finance. As a result of all the recent enactments people were becoming suspicious of mortgages. Removing Farmers’ Freedom The Bill could be divided into three headings insofar as it affected the borrower, the lender and the public, said Mr Foote, who added that the public were the most important of the group. The Bill cut the borrower’s independence right away from him. “He can not even get 6d or 1/- for a haircut without the permission of the trustee. If it is necessary for a farmer to have all his freedom taken away under those circumstances, then he should not have a farm.” Under the five year period of review there was a definite inducement for the farmer to so limit the production of his property during that time as to give a low valuation of his land, and thus reduce part of his indebtedness. That inducement should not be there. Also the trustees and supervisors had to be paid and they were merely making farming all the more expensive. “I, personally, am satisfied that farmers would be wiser to seek the bankruptcy court or call a meeting of creditors rather than stay on as they are. They would then have a chance of making a fresh start, whereas some of these men have no chance of carrying on,” continued Mr Foote. He said that there was a general idea that the lending classes were rich people. That was not correct, for they had suffered through recent relief legislation and they would have to pay indirectly for the trustees and supervisors provided for in the Bill. “Interference by legislative action has to be bolstered up by other enactments until we hardly know where we are, and that is the position to-day.” “ Lowering Morality ” Mr Foote said that interference with contracts by Government action also was bad. “There has been a general lowering of commercial morality due to the lead given by the Government itself,” he asserted, adding that the idea to-day was that if a contract were good one should keep to it, but if it Were bad one should get the Government to help one out of it. “Once an Englishman’s word was his bond, but I am afraid that it is not so much so to-day. All of this is hindering recovery.” Expressing the opinion that the Mortgagors’ Relief Act was a fine piece of legislation, Mr Shirtcliff said that With a 50 per cent. drop in prices during the slump contracts could not be carried out. “Although I believe in the sanctity of contracts, when something happens which is beyond a man’s control, he has to have help.” Under the Relief Act matters had gone fairly smoothly in South Canterbury, and, in his opinion, if things were left as they were voluntary settlements between mortgagor and mortgagee would go on and ultimately some stability would be achieved. The new Bill was taking all independence from farmers and, as someone had said, was making serfs of them. “I would be sorry to see South Canterbury farmers placed in that position and there is no necessity for it,” said Mr Shirtcliff. The work had been done at practically no expense to the country, but under the new Bills it was going to cost the country thousands of pounds to do the work no more efficiently than it had been done by the banks and mercantile firms. A Change of Mind There had been a change of mind in the mortgagee since 1931, and he was now realising his responsibility to share the illness which had fallen on the Dominion. The Bill was supposed to make things easier for the farmer, but it was hard to reconcile that with a letter which a man whom he knew had received that morning. The man’s lease was due to expire and he had received word that the lease would be renewed but the rental would be raised by 33 1-3 per cent. The man was slightly in arrear with the rent but had made an honest attempt to pay. If that sort of thing was to go on the whole farming business would stop. When he was drafting the Mortgage Corporation Bill, Mr Coates had toured the centres and collected evidence and the speaker contended that had he done so in this case a Bill far more acceptable would have been brought down. “Under this Bill the farmer is being belittled, and there is no necessity to belittle the backbone of this country,” concluded Mr Shirtcliff. On the motion of Mr W. D. Campbell the speakers were accorded a vote of thanks.