Local Authorities (Miscellaneous Provisions) Act, 1936

Validation of borrowing by local authorities in certain cases.

2.—(1) Whenever a body of persons, who are not lawfully constituted as a local authority but are acting as or purporting to be such local authority, borrows money in purported exercise of the statutory powers of such local authority from a lender who lends such money in good faith and without notice that such body of persons are not lawfully constituted as such local authority, the following provisions shall have effect in favour of such lender or any person claiming through or under him as against such local authority, that is to say:—

(a) such body of persons shall be deemed, for the purposes of the transaction consisting of such borrowing and lending, to have been lawfully constituted as such local authority, and accordingly such local authority shall be liable for the repayment of the money so borrowed and lent and the payment of interest thereon in accordance with the terms on which such money was so borrowed and lent to the same extent (if any) as such local authority would have been so liable if such body of persons had in fact been lawfully constituted as such local authority;

(b) every mortgage or other security given by such body of persons and purporting to be given by such local authority to such lender for securing the repayment of such money and the payment of the interest thereon shall, in the hands of such lender or any person claiming through or under him, be valid and enforceable against such local authority to the same extent (if any) as such mortgage or other security would have been so valid and enforceable if such body or persons had in fact been lawfully constituted as such local authority;

(c) no part of the transaction consisting of such borrowing and lending shall be invalid or capable of being questioned on the ground that such body of persons was not lawfully constituted as such local authority.

(2) Whenever a local authority borrows or is deemed by the foregoing sub-section of this section to borrow money under or in purported exercise of its statutory powers from a lender who lends such money in good faith, the following provisons shall have effect in favour of such lender or any person claiming through or under him as against such local authority, that is to say:—

(a) neither such borrowing and lending nor any mortgage or other security given or purported to be given by such local authority to such lender for securing the repayment of such money and the payment of the interest thereon shall be invalidated or questioned on account of any illegality or irregularity in the constitution of such local authority or the election of any of the members thereof;

(b) such lender shall not be concerned to inquire whether the purpose for which such money is borrowed by such local authority is or is not a purpose for which such local authority is authorised by law to borrow money or whether such money does or does not exceed in amount any limit on borrowing by such local authority, and such lender shall not be prejudiced or affected by the fact (if it exists) that such purpose is, in whole or in part, not so authorised or that such money exceeds in amount any such limit;

(c) such lender shall not be concerned to inquire whether any meeting of such local authority was or was not properly convened or constituted, or whether any particular notice to the members of such local authority was or was not duly given, or whether the proceedings at any meeting of such local authority were or were not legal and regular;

(d) where such local authority could not lawfully borrow such money without the sanction or the consent of the Minister, and such sanction or consent (as the case may be) was given or purported to be given by the Minister, such lender shall not be concerned to inquire whether any statutory condition precedent to the giving of such sanction or consent was or was not duly complied with, and such lender shall not be prejudiced or affected by the fact (if it exists) that any such condition precedent was not complied with by the person (whether the Minister, such local authority, or any other person) charged with the duty of complying therewith;

(e) such lender shall not be concerned to see to the application of such money by such local authority or be prejudiced or affected by any misapplication of such money or any part thereof by such local authority or any of its officers.

(3) This section shall be deemed to have come into operation on and to have had effect as on and from the 6th day of December, 1922, and shall accordingly apply and be deemed always to have applied to transactions commenced after that date and before the passing of this Act (whether completed before or pending at such passing) as well as to transactions commenced after the passing of this Act.