Baali and Another v Batwahsaff (C.C. No. 21 / 1936 (Mombasa)) [1936] EACA 146 (1 January 1936)

### ORIGINAL CIVIL

### Before LUCIE-SMITH, J.

# HAMED BIN AWATHI BAALI AND ANOTHER, Plaintiffs

### $\nu$ .

# HAMED BIN SAID BATWAHSAFF, Defendant C. C. No. 21/1936 (Mombasa)

## Stock Traders' Licences—Effect of trading without a licence—Account stated—Laws of Kenya, Cap. 59.

A., a stock trader had various transactions with B. During the period covered by these transactions A. was not licensed under the Ordinance.

Held (30-10-36).—That A. could not recover the amount owed by B. either on the original contract or on an account stated.

The plaintiffs, stock traders, between 25-2-35 and 20-4-35 purported to effect four sales of stock to the value of Sh. 2,313/50 with the defendant and had received the amount of Sh. 581/90 from the defendant in part payment leaving a balance of Sh. 1,731/60.

On 7-7-35 the defendant by an account stated declared himself indebted to the plaintiffs in the sum of Sh. 1,731/60 which he undertook to repay by monthly instalments. The plaintiffs' stock trading licence for the year 1934 expired on the 31st December, 1934, and they did not take out such a licence for the year 1935 until 25-4-35.

Plaintiffs sued the defendant for Sh. 1,531/60 being balance due on the said account stated.

#### Patel for plaintiffs.

Inamdar for the defendant.—As plaintiffs were not licensed stock traders at the time of the transactions, the contracts were void and they cannot recover: Indian Contract Act, section 23. The Stock Traders' Ordinance (Cap. 59) is not purely a revenue Ordinance and section 4 is definite and prohibitive.

The account stated is merely in substitution of the original transaction which was illegal: 1935 All India Law Reports p. 748.

He also referred to Langton v. Hughes (105 E. R. 222) and Antao v. Overman and Co. Civ. App. No. 31/26 (unreported).

Patel.—Chapter 59 is purely a Revenue Ordinance and it is indexed under the heading of Revenue. The Ordinance does not avoid the transactions, it merely imposes a penalty for breach of its provisions. The penalty is only imposed once. The transactions are not prohibited.

### *Inamdar* replied.

JUDGMENT.-In this case the plaintiffs sue the defendant for the sum of Sh. 1531/60 being the balance of an account stated in respect of certain dealings between the parties in the sale and purchase of goats.

The plaintiffs have produced their account book which shows sales of various lots of goats to the defendant, the first of such sales being on 26-4-34 and the last on 20-4-35.

One or other of the plaintiffs held a Stock Traders' Licence under Cap. 59, which licences covered the following periods: -

23rd January, 1932, to 31st December, 1932.

24th February, 1933, to 31st December, 1933.

2nd August, 1934, to 31st December, 1934.

25th April, 1935, to 31st December, 1935, and

18th February, 1936, to 30th June, 1936.

A study of the accounts produced makes it quite clear that the system of trading between the parties was as follows: -

The defendant would buy a lot of goats and then pay for such lot by instalments of various amounts and the plaintiffs would appropriate such instalments to payment of the lot carrying forward any balance of an instalment to the next lot. For example on 26-4-34 the defendant bought a lot of 132 goats at Sh. 3 per head, viz. Sh. 396. Between 1-5-34 and 1-7-34 the defendant paid the plaintiffs nine instalments aggregating Sh. 397 which was appropriated (with an error of Sh. 1) in payment of the lot purchased on $26-4-34$ .

Again on 29-6-34, the defendant purchased a lot of 101 goats at Sh. 3/75, viz. Sh. 379/75. This lot was paid for in three instalments on 8-7-34, 15-7-34 and 19-7-34.

On the latter date the plaintiffs were paid Sh. 93/75 of which Sh. $49/75$ was appropriated by them to payment of the final instalment owing on the lot sold on 29-6-34 and the balance of Sh. 44 carried to the credit of the next transaction that of the lot of 65 goats sold on 14-7-34.

This system was carried on right through and each lot in turn was paid for up to and including the lot of 83 goats bought by the defendant on 11-2-35 and finally paid for on 10-4-35. That being so, I find that all the transactions between the parties from the purchase of 26-4-34 to the purchase of $11-2-35$ were finally settled by payment on 10-4-35 and need not be further considered.

On 25-2-35 the defendant bought a lot of 105 goats for Sh. 682/50 in respect of which up to 25-5-35 he had paid a sum of Sh. 581/90 leaving a debit balance against him of Sh. $100/60$ . On 3-3-35 he bought another lot for Sh. 441 and on 8th and 20th April, 1935, two more lots at Sh. 595 each leaving a total balance against him of Sh. $1,731/60$ . It is to be borne in mind that at the time these last four transactions were entered into, the plaintiffs had not taken out any Stock Traders' licence for 1935. On 7-7-35 the defendant gave the plaintiffs the document Exhibit S. A. 2. The defendant states that he signed this document on the understanding that accounts between the parties were to be gone into subsequently but he admits in his evidence that the plaintiffs mentioned the amount owing as Sh. 1.731/60 while Abdul Karim says that he wrote S. A. 2 on the instructions of the plaintiffs and the defendant and that he read the document to the defendant before he signed it and that "the defendant

agreed to the amount of Sh. 1,731/60, he told me the amount and I wrote it." On the evidence, I find that the defendant was at the time of signing S. A. 2 fully conversant with its contents and well understood what he was signing. S. A. 2 therefore is in the nature of an "Account Stated."

We will now deal with the defence raised under Cap. 59 and section 23 of the Indian Contract Act. Section 4 of Cap. 59 reads as follows: "No person shall carry on the trade or business of a stock trader without a licence whether as principal partner or agent, etc."

On the plaintiffs' own showing they were partners in a stock trading business.

Section 7 of the Ordinance provides for penalties for contravention of any of the provisions of the Ordinance, such penalties being a fine not exceeding £100 or imprisonment of either description for a term not exceeding six months or both fine and imprisonment.

Mr. Patel for the plaintiffs has argued that infringement of Cap. 59 does not deprive the plaintiffs of their right to recover in respect of stock trading transactions as Cap. 59 is purely a revenue measure. In support of this contention, he referred to the heading of "Revenue" in the table of contents to the Revised Edition of the Laws under which heading the Stock Traders' Licence Ordinance appears.

The argument is ingenious, but I hardly think that the Court will decide the nature of an Ordinance from the position in which such Ordinance happens to appear in an index; the Court must undoubtedly look at the Ordinance itself before coming to a decision.

Section 4 is definite and forbids under penalty any persons (with two exceptions) from carrying on the trade or business of a stock trader without a licence. Section 6 is to be noted in that it gives any police officer, administrative officer or stock inspector, authority to demand inspection of any licence issued under the Ordinance while section 7 imposes penalties for breaches of the Ordinance.

The general rule is that every contract made for anything prohibited by a statute is void, though the statute only inflicts a penalty; Bartlett v. Vinor (90 E. R. 750).

There can be, I think, little doubt that Cap. 59 was enacted for many other purposes than the mere collection of revenue.

To my mind public policy and the protection of the public are involved in the provisions of the Ordinance to as great an extent (if not a greater) as the question of revenue.

In Cope v. Rowlands (150 E. R. 707) it was stated that "it is perfectly settled that where a contract which the plaintiff seeks to enforce, be it express or implied, is expressly or by implication forbidden by the common or statute law, no court will lend its assistance to give it effect. It is equally clear that a contract is void if prohibited by a statute, though the statute inflicts a penalty only, because such a penalty implies a prohibition, and it may be safely laid down, notwithstanding some dicta apparently to the contrary, that if the contract be rendered illegal, it can make no difference, in point of law.

whether the statute which makes it so has in view the protection of the revenue, or any other object. The sole question is whether the statute means to prohibit the contract."

In Langton v. Hughes (105 E. R. 222) Lord Ellenborough laid it down that what is done in contravention of the provisions of an Act of Parliament, cannot be made the subject matter of an action.

The whole subject is exhaustively dealt with in the judgment of M'Cardie, J. in Brightman and Co., v. Tate (1919 1 K. B. 463).

In view of the above I find that the plaintiffs are debarred from recovering under the contract and we must now consider whether they can recover on the "Account Stated."

It is stated in Chitty on Contracts (17th Ed.) p. 82 "But where it can be shown that the original debt is absolutely void, as being founded on an illegal or immoral consideration—or where it is made void by statute, as by the statutes against gaming—then evidence is not admissible to prove an account stated. And if, in an action on a solicitor's bill, the plaintiff fails on the claim for work and labour, because no bill has been delivered, he cannot recover on an account stated, although he prove that the charges were assented to by his client."

In Cocking v. Ward (135 E. R. 781) although it was held that the plaintiff could recover on an account stated though such account stated arose out of an unenforceable contract, Tindal, C. J. in giving the judgment of the Court says, at p. 786, "The principle (set out in that part of the judgment) may not, perhaps, be applicable to cases where it can be shown the original debt is absolutely void from any illegal or immoral consideration or where it is made void by any statute, as by those against usury or gaming:"

In the present case our law says that a person shall not carry on the trade or business of a stock trader without a licence and I am of opinion that he cannot avoid that definite prohibition by resorting to an account stated arising out of the prohibited transaction.

There will be judgment for the defendant with costs.

Note.—The Objects and Reasons of Cap. 59 were as follows:—

"The purpose of the above Bill is twofold—Firstly, to raise some additional revenue, and, secondly, to keep some control by means of licences over stock trading, which at present is largely in the hands of Somalis."