AUSTRALIAN JOINT STOCK BANK . CROUDACE AND OTHERS. 1899. Municipalities Act, ss. 141, 158-Municipal corporation - Power to borrow -Over- November 14. draft-Liability of guarantor-Practice-New trial-Cross rule. A municipal council has power to borrow and to incur debts as necessarily incidental to the carrying on of its ordinary business. The plaintiffs advanced money to a municipal corporation upon an overdraft which was guaranteed by the defendants. Held, that even if the corporation had no legal power to borrow the money, still the defendants were liable on their guarantee. The plaintiffs moved to set aside a verdict found for the deferdants. Held, that the defendants were entitled to raise any point which would entitle them to retain the verdict without obtaining a cross rule. NEW TRIAL MOTION. Action upon a guarantee given by the defendant Croudace and six other defendants. The terms of the guarantee, which was a general letter of guarantee addressed to the plaintiff's manager at Lambton, and dated 1st March, 1892, were that "In consideration of the A.J.S. Bank making such advances as you may from time to time think proper to the Lambton Municipal Council, either by discounting for them bills of exchange, or promissory notes, or by allowing them to overdraw their account with your bank or otherwise in the ordinary course of banking business, we jointly and severally hereby guarantee (to the extent of 9001.) the payment of the said principal to the A.J.S. Bank (on receiving written request, &c.) of the amount or balance which shall, on the date of our receiving such request for payment, be owing by the said principal, or for which the said principal shall then be liable to the said bank for principal moneys, interest, &c." The guarantee was signed "Joseph Palmer, Mayor," and then followed the signatures of the other defendants without any addition or description. The corporation seal was not attached to it. Pleas―(1) non-assumpsit; (2) on equitable grounds, that the defendants signed the agreement as and being the mayor and aldermen of the Lambton Municipal Council, and that the agree The C.J. Stephen J. and Owen J 1899. ment was made and signed for and on behalf of the said council A.J.S. BANK and not otherwise, and was intended by both parties to bind only the council, and not the defendants, and was made on that understanding, and that it was made in the form stated in the declaration by the mistake of both parties; (3) that no moneys were advanced to the municipal council, as alleged; (4) that neither the balance claimed in the declaration, nor any sum whatever, became due from the municipal council to the plaintiffs as alleged. The guarantee sued upon was substituted for a previous one owing to changes in the personnel of the council, and when it was given there was an existing overdraft of nearly 900l. The previous guarantee was for 500l. The amount owing by the council to the bank when the present action was brought was 1,208l. 58. 3d. At the trial, before Owen, J., in August, 1899, the plaintiff's gave evidence that the money advanced under the guarantee had been spent "for the purposes of the municipality." Counsel for the defendants proved that the provisions of s. 158 of the Municipalities Act of 1897 (s. 190 of the Act of 1867) had not been complied with in obtaining the loan, and moved for a nonsuit on that ground. The Judge refused to non-suit. The defendants gave evidence in support of the second plea, and the plaintiffs in reply put in the correspondence which had taken place, and called the manager who took the guarantee, who contradicted the defendants' evidence on this point. The jury found a verdict for the defendants. The plaintiffs now moved to make absolute a rule nisi for a new trial on the grounds (1) that the verdict was against evidence, and (2) that the evidence relating to the second plea was not of the clear and satisfactory nature required by a Court of Equity to establish the defence of mutual mistake. Want, Q.C., and C. B. Stephen, for the plaintiffs, referred to Story's Equity Jurisprudence, § 156: Haymen v. Gover (1). They were stopped. Sly (Millard with him) shewed cause. The provisions of s. 158 of the Municipalities Act not having been complied with, no (1) 25 L.T. N.S. 903. debt was owing by the council to the plaintiffs within the terms 1899. of the guarantee: In re the Municipal District of Lambton (1). A.J.S. BANK v. Want, Q.C. My learned friend cannot argue this point. He CROUDACE. has no cross rule upon the point. Sly. I moved for a non-suit upon this ground, and I am at liberty to shew any ground that would entitle me to retain the verdict. THE CHIEF JUSTICE. We think the point is open to Dr. Sly. Sly. The agreement guarantees moneys "owing by" the principal, or for which he is "liable," that is to say, for moneys which are recoverable. If the money cannot be recovered by the plaintiff against the defendants, there is no debt to guarantee. The Lambton Council had no power to borrow the money which was guaranteed. Being a corporation created under the Municipalities Act, their power to borrow must be ascertained solely by a reference to the scope and provisions of the Act. To find out what are the powers of a corporation created by statute "you must look at the statute only, because there, and there alone, is found the definition of this new creature": Baroness Wenlock v. River Dee Co. (2) The Court cannot imply that a municipality has a general power to borrow, inerely because it would be convenient, or from the way that business is carried on in fact. It may be that the statutory power conferred is insufficient. for the needs of the corporation. A municipality could only require to borrow for two purposes (1) to pay its current expenses, or (2) for permanent improvements. But by s. 141 rates may be assessed and levied to meet the current expenses, making and repairing of roads, etc., " and any other expenses necessary in carrying into effect the provisions of this Act." And by ss. 143-145 special rates may be levied to meet expenses in connection with water and sewerage, lighting, and education. If, therefore, this money was used for expenses of this nature, the council had no power to borrow it, but should have defrayed the expenses from the rates. A council is not bound to repair its (1) 17 N.S.W. L.R. 187; 13 W.N. 72. (2) 36 Ch. D. at 685; 10 App. Cas. at 362. roads if it has no money available: Bourke v. Municipal A.J.S. BANK Council of Sydney (1). 1899. V. CROUDACE. Secondly, if the money was wanted for permanent improvements the council had no power to borrow except in strict accordance with the provisions of s. 158, and it is admitted that that section was not complied with in any particular. He also referred to Chambers v. Manchester and Milford Railway Co. (2); Cunliffe, Brooks & Co. v. Blackburn Benefit Society (3). Want, Q.C., in reply. Power to borrow is necessarily incidental to the purposes for which municipalities are created. They must incur certain liabilities which may have to be paid before the rates are available, so that the argument comes to this,-that a municipal council cannot incur a debt; but must pay its way as it goes. The Act nowhere forbids borrowing, and the safeguards provided by s. 158 only apply where the council pledges as security its property or revenues. Here they got credit on a private guarantee. The guarantors may be liable, even though the principal is not. Even if the debt is not recoverable against the council, the plaintiffs are entitled to the benefit of their security against the defendants. That was held in Cunliffe, Brooks & Co. v. Blackburn Benefit Society (4). The money was borrowed to pay creditors, and the plaintiffs are entitled to claim as assignees of the creditors they paid off. See Blackburn Building Society v. Cunliffe, Brooks & Co. (5). The debt was here already incurred, and the transaction was merely a shifting of the liability. See also Yorkshire Railway Wagon Co. v. Maclure (6); Bryce on Ultra Vires, 2nd ed. 247; In re The German Mining Co. (7). THE CHIEF JUSTICE. I am of opinion that the rule must be made absolute upon the ground that the verdict is against evidence. The defendants set up as a defence that although they signed the guarantee, they did so under a mistake as to their personal liability upon it, and under the impression that it was a mere matter of form. Upon this subject evidence was given at the (1) 16 N.S.W. L.R. 84; 11 W.N. 187. (3) 9 App. Cas. 857. (4) 9 App. Cas. at 866. (7) 4 De G. M. & G. 19. V. The C.J. trial, and a considerable amount of correspondence was put 1899. in, which took place between the parties before the plaintiffs, A.J.S. BANK who appear to have exercised much patience in the matter, CROUDACE. determined to take action. (His Honour read portions of the correspondence.) That correspondence shews clearly that all along the defendants understood perfectly well what their liability was, and in view of what took place, I cannot understand how the jury brought in the verdict which they did. Looking at the documents in the case the verdict of the jury was so unreasonable, I may say so absurd, that it cannot be allowed to stand for one moment. It has, however, been argued for the defendants, as a ground upon which they are entitled to retain their verdict, that a municipal corporation has no power to borrow, except that conferred by s. 158 of the Municipalities Act with regard to permanent improvements. It has already been decided in this Court that a municipality can only avail itself of the powers conferred by that section by a strict compliance with the provisions and safeguards of the Act. But Dr. Sly's contention now is, that outside of the express provisions of the Act a municipal corporation has no power whatever to borrow money, and that for its current expenses of all kinds it must rely solely upon its rates. In the present case the money was borrowed from the plaintiff's upon an overdraft which was guaranteed by the defendants, and on which the money was advanced to the municipality from time to time as it was required. I am of opinion that a municipal corporation has, and must have, power to borrow so as to enable it to carry on its current business. A municipality must employ servants, who must, under the Act, be paid by salaries or wages, and not by fees (s. 126). It must employ a town clerk and other officers, it must einploy workmen to clean its streets and perform other similar duties; it must, if it possesses no town hall, incur liability for rent of premises in which to carry on its business. All these matters must be paid for, and in many cases must be paid for before the rates can possibly be assessed and collected. In the case of a new municipality, many liabilities must necessarily be incurred before the rates can be available. How then can these |