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Local Authorities

act, treasurer, bank, board, authority, drawn and cheques

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LOCAL AUTHORITIES. Bankers are often appointed to be treasurers for Local Authorities. The banking account should be in the treasurer's name, e.g. " John Brown, Treasurer of the Guardians of the Poor of Kingmoor Union," and the orders for payment should be drawn by the Local Authority upon the treasurer, and not upon the bank where he keeps the account.

The Bills of Exchange Act, 1882, Section 73, defines a cheque as " a bill of exchange drawn on a banker payable on demand," but as these orders are drawn upon the treasurer as an individual it would appear that they are not cheques. and, therefore. that the protection afforded by Section 60 of the Bills of Exchange Act. 1882. to the paying banker against forged indorsements does not extend to them ; and further that, not being cheques, they cannot be validly crossed. Some authorities, however, consider that the orders though drawn, in form, upon the treasurer, are practically drawn upon the bank where he keeps his account. If this is the correct view, then they come within the provisions of the Bills of Exchange Act. In the case of Halifax Union v. heelwright (1875, L.R. 10 Ex. 183), where the treasurer had paid orders bearing forged indorsements, it was held that the bank was protected by Section 19 of the Stamp Act, 1S53. (See that Section under DRAFT ON DEMAND.) The orders are, like cheques, subject to the tamp duty of one penny (Section 32, Stamp Act, 18911, except in the case of orders drawn by the Guardians of the Poor.

In cases where the Finance Committee send to the banker or treasurer a list of the persons to whom orders have been issued, and to whom payments are to be made upon presentation of the orders, ordering the treasurer to make such payments, the Board of Inland Revenue state that a penny stamp is required in respect of each payee's name upon the list. (See the Alinute of the Board, under article CHEQuE.) In E. J. Naldrett's lecture on Local Government Author ities (see " Journal of the Institute of Bankers," vol. 26, p. 177), it is stated that a resolution in the following form is not regarded by the Inland Revenue Authorities as being subject to the above-mentioned stamp duty : "That a statement of the following accounts be signed by three members of the Finance Committee present at this meeting and countersigned by the town clerk, and be transmitted to the treasurer with an order to pay cheques for the amounts specified in such statement, on such cheques being presented to him."

With respect to the borrowing powers of a Local Authority, it is necessary to ascertain from the statute, under which the power in any particular case is regulated, whether the sanction of the Local Government Board or other Government Department is necessary before the power to borrow can be exercised, and, if the Authority has the necessary statutory power, upon what particular fund, or rate, security must be given.

If an Authority, without power or sanction to borrow, overdraws the bank account, the interest upon such overdraft (if not regarded by the banker as being covered by the interest upon the credit balance at other times) will not be a legal charge against the Authority, and may be disallowed by the Government Auditor. The Local Govern ment Board have power, however, to allow a sum, properly disallowed by the Auditors, if in the opinion of the Board it is equitable that such allowance should be remitted.

It should be noted that money borrowed under the provisions of any particular Act must be secured in accordance with that Act. In Rex v. Locke, ex parte Bridges (1910, 2 K. B. 201) where a Corporation (under the provi sionsof the Public Health Act, 1875) borrowed money from a bank without giving proper security and the interest was surcharged by the Auditor because the security had not been given, Lord Alverstone said : " If the transaction objected to was merely the pay ment of interest upon some temporary loan obtained for temporary purposes until other money—as, for instance, rates or moneys agreed to be advanced—were in fact re ceived, we agree that it might not be neces sary under such circumstances for the local authority to give security." It was held, however, that the case appeared to be " an exercise of borrowing powers for the purpose of permanent loans to be repaid by instal ments." The consent of the Local Govern ment Board " does not merely involve the consent to the loan, but an approval of the way in which the loan is to be secured according to the Act of Parliament under which the securities are issued." The pay ment of interest to the bank in respect of the loans made by the bank, for which no security had been issued, was held not to be a legal payment.

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