Amin v Joanes and Another (Civil Case No. 159 of 1938) [1938] EACA 183 (1 January 1938)

# ORIGINAL CIVIL

#### Before THACKER J.

## VAGHJIBHAI NARANBHAI AMIN through his Attorney, D. M. RAWAL. Plaintiff ν.

## 1. C. F. JOANES, 2. C. S. RODRIGUES, Defendants Civil Case No. 159 of 1938

Money lending—Memorandum of Contract—Date of loan—Expression of rate of interest—Limitation—Acknowledgment of liability and undertaking to "try our best to liquidate the loan" whether sufficient undertaking to repay—Moneylenders Ordinance, 1932, sections 10 $(2)$ and 17 $(1)$ .

Plaintiff, a registered moneylender on 14th September, 1938, sued the defendants for the balance of interest and principal due on a moneylending contract dated 2nd December, 1936. The memorandum of the contract did not state the date on which the loan was made and the interest payable was stated as at $2\frac{1}{2}$ per cent per month and not in terms of a rate per centum per annum. Defendants by letter dated 15th September, 1937, wrote to the plaintiff as follows: —

"We hereby confirm that we still owe you the sum of Sh. 2,000 (two thousand) borrowed by us on the 2nd December, 1936.

Interest due on this loan has been paid to you up to and including the 31st August, 1937. We undertake and assure you that we will try our best to liquidate the loan of Sh. 2,000 granted by you to us in due course.'

Held $(13-10-39)$ .—(1) The contract was unenforceable in that the memorandum of the contract did not state the date on which the loan was made;

(2) (Semble) The memorandum was unenforceable in that it failed to state the interest payable thereunder in terms of a rate per centum per annum:

(3) That the letter of the 15th September, 1937, was merely a conditional undertaking which fell short of the requirements of section 17 of the Ordinance;

(4) That the fact that the letter disclosed the date of the loan did not cure the failure of the memorandum to disclose such date.

$\mathcal{O}(\log n)$

Jamal Sunderji Mitha c. M. Khatau Khimji (4 E. A. C. A. 13) followed. *Watson v. Yates* (11 Bom. 580) applied.

Watson v. Yates, 11 Bom. 580, applied.

Amin for the Plaintiff.

Archer for the Defendants.

JUDGMENT.—This is an action to recover Sh. 2,625 being money said to be due under a moneylender's contract dated 2nd December, 1936, to the plaintiff who is, it is common ground, a moneylender in terms of the Moneylenders Ordinance, 1932. By consent of the parties no evidence has been called in the action and three questions of law have been submitted to the Court for decision. These three questions arise out of objections taken by Mr. Archer for the defendants and are as follows: First, the date of the loan not being stated in the contract is the contract enforceable? Secondly, is the rate of interest properly stated in accordance with the Ordinance and if not is the contract enforceable? Thirdly, is the acknowledgment dated 15th September, 1937, bad in law? I ought to mention that both

Advocates have asked me to give a decision on all three points even though one of them be decided against the plaintiff.

The section of the Moneylenders Ordinance relevant to the first two objections is section 10 which reads as follows: -

"10. (1) No contract for the repayment by a borrower of money lent to him or to any agent on his behalf by a moneylender after the commencement of this Ordinance or for the payment by him of interest on money so lent, and no security given by the borrower or by any such agent as aforesaid in respect of any such contract shall be enforceable, unless a note or memorandum in writing of the contract be made and signed personally by the borrower, and unless a copy thereof be delivered or sent to the borrower within seven days of the making of the contract; and no such contract or security shall be enforceable if it is proved that the note or memorandum aforesaid was not signed by the borrower before the money was lent or before the security was given, as the case may be.

(2) The note or memorandum aforesaid shall contain all the terms of the contract, and in particular shall show the date on which the loan is made, the amount of the principal of the loan, and either the interest charged on the loan expressed in terms of a rate per centum per annum, or the rate per centum per annum represented by the interest charged as calculated inaccordance with the provisions of the Schedule to this Ordinance." This section is similar to section 6 of the English Moneylenders

Act. 1927. Looking at the contract in this case dated 2nd December, 1936,

it is quite clear that it is not stated thereon when the loan of Sh. 2,000 was made, and looking solely at that contract the loan may have been made before the date of the contract, at the same time, or after it. In my judgment a moneylending contract which does not fulfil the material requirements of section 10 of the Ordinance of 1932 will not be enforceable. On a reading of the whole of section 10 supra-and I think that the whole section has to be read together, in other words sub-section (2) ought not to be divorced from sub-section $(1)$ —the requirements contained in sub-sections $(1)$ and (2) are absolute and failure to observe them will render the contract unenforceable. The moneylender may make some slight error or omission which constitutes a variation from the requirements of the section and in such an event the true test appears to be whether the error or omission is a material variation from the requirements of the section. If the answer is in the affirmative, that is, the error or omission is material, then the contract will be unenforceable but not otherwise. The materiality of any such variation is a question of law for the Judge. The question of whether or not the borrower has actually been or is likely to be prejudiced by any variation is not a proper matter for consideration for section 10 supra is concerned solely with the form of the moneylenders contract and not with its effects. The date of the loan is a material part of the contract and as that does not appear on this contract before me I have no doubt that the omission is such a material omission as renders the contract unenforceable. In support of this ruling I would cite the case of Jamal Sunderji Mitha v. M. Khatau Khimji, 4 E. A. C. A. 13, which was a case which came before Lucie-Smith, J. and thereafter before the Court of Appeal for Eastern Africa. Exactly the same point was successfully taken in that case as has been taken in this

case, namely, that the contract was unenforceable as the note or memorandum did not show the date on which the loan was made. In that case also reference is made to the case of Parkfield Trust Ltd. v. Curtis (1934) 1 K. B. at page 685. The words of Lord Hamworth in that case are in point, namely:-

"The Moneylenders Act is a very stringent Act, and it invades the freedom of contract between lenders and borrowers and prevents such a contract from being made otherwise than in certain terms."

Again Lord Hanworth says later on: -

"As I have pointed out already, the Act is intended to be exacting, and this compels us to read sec. 6, sub-sec. 2, precisely as it stands."

The case of Gaskell Ltd. v. Askwith 45 T. L. R. 566 is also relevant. In that case it was held that if the memorandum required by section 6 of the Moneylenders Act 1927 states the date of the loan incorrectly the contract is unenforceable even although the inaccuracy has caused no deception and is due merely to a clerical error. $A$ fortiori it would seem to me that if the date of the loan is not stated at all then the contract is unenforceable.

My attention has been drawn to a recent case, T. B. Lobo against E. Alibhai which came before the learned Chief Justice, but it would seem to me that that decision is distinguishable from the decision in Jamal Sunderji Mitha against Khatau Khimji and Parkfield Trust Ltd. against Curtis. The learned Chief Justice was then asked to put a proper construction on certain facts which facts are not similar to those in this case.

Mr. Amin for the plaintiff has cited certain authorities on the interpretation of statutes but while these are undoubtedly of interest they cannot be as much in point as the decisions which I have cited with regard to the interpretation of this particular section 10 of the Moneylenders Ordinance, 1932. Furthermore, I cannot accept Mr. Amin's argument that if the date of the loan is not shown the contract is still enforceable and that the Court may reopen the matter and endeavour to find out what the date is, or further that unless it appears that the loan was made before the contract it is enforceable and that section 10 does not apply. As has been said more than once this is a very stringent Act and unless the stringent conditions of section 10 are complied with the contract is not enforceable. The decisions I have referred to upon this very point are clear and unequivocal and entirely cover the first objection that has been taken.

Mr. Amin has also endeavoured to argue that if it is impossible to support an illegal part of a contract the remainder which is legal is enforceable. However, if one looks at the very recent case of Cohen v. J. Lester, Ltd., 108 L. J. K. B. 276, it will be seen that it is. not so much in interpreting section 10 a question of illegality as of unenforceability and it is sufficient to quote from Tucker, J. as follows:

"The fact that, under section 6, the contract and security are unenforceable, and not void or illegal, is manifest from the words of Sir Wilfred Green, M. R. in Chetwynd's Estate, In re Dunn Trust, Ltd. v. Brown (106 L. J. Ch. at p. 331; (1938) Ch., at p. 16)."

Mr. Amin, I ought to point out, has made the point that as the letter of 15th September, 1937, shows the date of the loan, the Court ought to read this letter in conjunction with the contract itself. In my judgment the Court cannot do that. The contract itself must contain all the requirements laid down by section 10. For these reasons I hold that the omission to state the date of the loan in the contract is a material omission and that the contract dated 2nd December, 1936, is therefore unenforceable.

The second objection taken is that the contract does not disclose the rate per centum per annum. The contract merely states "Terms of payment of interest—monthly". Mr. Archer has pointed out quite rightly that some months have thirty-one days, some thirty, and that February has sometimes twenty-eight days and occasionally twentynine, therefore it is not possible to find out what the rate per centum per annum exactly is from a mere statement in the contract that the interest is to be paid monthly. Mr. Amin has replied to this objection saying that it is quite simple to multiply the rate of interest which is admittedly $2\frac{1}{2}$ per cent per month by twelve in order to arrive at the annual rate of interest. It would appear that there is at first sight something to be said for Mr. Amin's argument while at the same time Mr. Archer's objection is not altogether without importance. If it were necessary to come to a decision on this point alone in order to decide the action I should be inclined to the view. though not however without some doubt, that this variation is a material variation and that the rate of interest must be stated in terms of a rate per centum per annum or otherwise in accordance with the Schedule to the Ordinance and that no other method is permissible.

As to the third objection, namely, that the acknowledgment dated 15th September, 1937, does not comply with the Ordinance, here again this is a somewhat difficult question. Before the action was filed admittedly more than twelve months had elapsed since the date on which the cause of action accrued which is shown by the above letter to have been 2nd December, 1936, and the action will be barred unless the plaintiff can rely on this letter. Section 17 (1) of the Moneylenders Ordinance, 1932, and the proviso to this section, read .as follows: -

"17. (1) No proceedings shall lie for the recovery by a moneylender of any money lent by him after the commencement of this Ordinance or of any interest in respect thereof, or for the enforcement of any agreement made or security taken after the commencement of this Ordinance in respect of any loan made by him, unless the proceedings are commenced before the expiration of twelve months from the date on which the cause of action accrued: Provided that-

(a) if during the period of twelve months aforesaid or at any time within any subsequent period during which proceedings may by virtue of this proviso be brought, the debtor acknowledges in writing the amount due and gives a written undertaking to the moneylender to pay that amount, proceedings for the recovery of the amount due may be brought at any time within a period of twelve months from the date of the acknowledgment and undertaking;"

By this proviso there is required to be an acknowledgment in writing as well as a written undertaking to the moneylender to pay the amount under the contract. In other words it is not sufficient

merely to have an acknowledgment without an undertaking. The letter of 15th September, 1937, reads as follows: $-$

## "To: V. N. Amin, Esq., Nairobi.

Sir,

We hereby confirm that we still owe you the sum of Sh. 2,000 (two thousand) borrowed by us on the 2nd December, 1936.

Interest due on this loan has been paid to you up to and including the 31st August, 1937. We undertake and assure you that we will try our best to liquidate the loan of Sh. 2,000 granted by you to us in due course.

Allow us to mention that we are very grateful to you for allowing us ample time for liquidating the loan.

#### Yours faithfully,

C. P. Joanes.

C. F. Joanes.

C. S. Rodrigues."

The plaintiff says that as the action was filed on the 14th September, 1938, that is, within one year from the letter of the 15th September, 1937, the action is not barred. This letter contains an unequivocal acknowledgment of the debt but the question is whether the undertaking is an unequivocal undertaking to repay the loan as I consider it must be if it is to comply with the proviso (supra). In this connexion the case of *Watson v. Yates*, 11 Bombay, 580, is relevant. In that case the defendant after his debt had become barred by limitation wrote as follows to his creditor in reply to a demand for payment: "I bear the matter in mind, and will do my utmost to repay this money as soon as I possibly can." It was held that this promise by the defendant was only a conditional promise, that is, to pay when he was able. It seems to me that the undertaking in this document of 15th September, 1937, is very similar. The words are: "We undertake and assure you that we will try our best to liquidate the loan of Sh. 2,000 granted by you to us in due course". If the words "we undertake" were not accompanied by the words "and assure you that we will try our best" I should construe it as an absolute undertaking and not conditional, but the later words weaken the effect of the words "we undertake" and the document becomes in my judgment merely a conditional undertaking which falls short of the requirements of section 17 of the Moneylenders Ordinance, 1932.

I hold therefore that this third objection of Mr. Archer's must be sustained and that the action must fail on this ground also.

The case of Temperance Loan Fund Ltd. v. Rose and Another $(1932)$ 2 K. B., at page 522, decided as follows: —

"If the transaction between a moneylender and a borrower is unenforceable against the borrower by reason of non-compliance by the moneylender with the requirements of section $6$ for example, by the omission from the memorandum of the date on which the loan was made—it is equally unenforceable against a person who has guaranteed the payment of the debt."

For these reasons judgment must be given for the defendants with costs.