B.—l [Pt. ll].

XVI

It appears to Audit that the powers given to the Public Trustee by section 20 (j), Public Trust Office Amendment 1921, must be read subject to the express directions given to the Board with regard to margin of security contained in section 34, Public Trust Act, 1908. Doubtless the Board could have elected to postpone action pending developments by allowing it to " run on," but there is a distinct difference between allowing a mortgage to run on " and the granting of a renewal for a fixed term of years. G. F. C. Campbell, Controller and Auditor-General. Solicitor-General's Office, Wellington, 19th June, 1926. The Controller and Auditor-General. Audit of Public Trust Office Accounts: Advance of £1,300 to 0. T. Imlah. 1. Referring to your memorandum hereon of the 16th instant, I have given careful consideration to the Public Trustee's memorandum of the 14th instant and the Public Trust Office file relating to this matter ; but I can see no reason for modifying my previous opinion. The amount involved is not large. If it had been recognized that an error had been made the matter would not have been of great importance, when the volume of business transacted by the Public Trust Office is taken into account; but, in view of the general questions now raised by the Public Trustee, it is desirable to go into the matter in more detail. The grave inaccuracies in stating the facts make such a course desirable, and the Public Trustee's interpretation of the different statutory provisions referred to by him render it necessary that I should deal with the questions of law more fully than I otherwise would have felt obliged to do. 2. The facts seem to be as follows : On the 28th July, 1920, the Public Trust Office Board, after special valuation had been obtained on the 10th July valuing the property at £2,593, authorized an advance thereon to one E. C. Barleyman of the sum of £1,300, secured on the land and improvements. The loan was duly advanced, and a mortgage given by Mr. Barleyman. In October, 1920, the property was transferred to Christina Taylor Imlah. The loan fell due for repayment on the 24th August, 1925, but the Public Trustee advised Mrs. Imlah, who had bought the property, that he was prepared to consider a renewal of the same, subject to a special Government valuation. This was obtained from the same valuer as had made the valuation in 1920. He valued the jiroperty at £2,123. This would, under section 34 (c) of the Public Trust Office Act, have authorized an advance of £1,273. The Investment Board of the Public Trust Office approved a renewal of the mortgage without repayment of any portion of the £1,300, on the Ist April, 1925. The original mortgagor refused, however, to consent to a renewal of the mortgage, and the old mortgage was released and a new mortgage executed. This is, in effect, a repayment of the £1,300 by Mr. Barleyman, and an advance of £1,300 to Mrs. Imlah. 3. It seems, therefore, that the Public Trustee in his letter of the 14th instant is mistaken in stating that there was merely an extension of an existing mortgage. There was a new mortgage, by a new mortgagor, at a. different rate of interest, although secured on the same property. He is also mistaken in stating that the reduction in value was due to a general revision of the values of the district. His implications that the Board relied on the valuation made in 1920 to justify this excess advance, and that business considerations required it, are not supported by any evidence on the file, and are, I think, not warranted. 4. I have already stated that, in my opinion, his view of the law, as stated in his memorandum of the 13th ultimo, is erroneous, and he now, apparently, acquiesces in that view. Ido not think, however, that any of the provisions now referred to by him support or justify the action of the Board. The concluding words of section 34 (c), " approved by the Board," mean " approved by the Board for the purpose of the advance." There is no evidence on the file that the Board relied on the valuation made five years before, and preferred it to the special valuation made for the purpose of considering this loan. Such an assumption is inconsistent with the Public Trustee's letter of the 13th ultimo. Moreover, if the Board had relied on such a valuation this course would have been open to severe criticism. Indeed, it seems that such a course would be incapable of justification. 5. Section 20 (j) of the Public Trust Office Amendment Act, 1921, does not authorize any transaction of this kind. This is not a renewal, extension, or variation of a mortgage. Even if it were, it remained subject to section 34 (c) of the principal Act. To exempt any mortgage from the provisions of that subsection would require the clearest language. As section 20 (j) does not expressly refer to the amount of the mortgage, it does not take a renewal out of the terms of subsection 34 (c). The subsection will be read in such a way as to best effect the purpose for which it was intended. To read it as restricted to advances made other than by way of renewal would so limit and impair its efficiency and be so inconsistent with its intention that I do not think it is possible to read it in such a manner. There may be cases where it is necessary for business reasons to postpone for a time the reduction of the amount of an overdue mortgage where it exceeds the prescribed proportion. The difference between such a case and the advance of an excess sum for five years is obvious. 6. Section 15 of the Finance Act, 1924 applies only where an advance is made for the purpose therein mentioned and from the funds therein mentioned. There is on the file no suggestion that this further advance of £27 was authorized for that purpose, and it is clear, I think, from the Public Trustee's memorandum of the 13th ultimo, the file, and the circumstances of the loan, that the excess sum was not advanced under the authority of this section. 7. I think I should record my protest against the terms of the Public Trustee's list memorandum to you. I should be sorry|to think any one holding the responsible position of Public Trustee would be intentionally discourteous to ;other senior officers of the Service, yet the language of his memorandum, to the opinions of both yourself and myself, seems capable of this construction. I should be glad if you would convey my opinion on this point, as well as on the purely legal questions, to the Public Trustee. The files are returned to you herewith. Arthur Fair, Solicitor-General.