Ossaji v Stephens (Civil Suit No. 343 of 1955) [1956] EACA 1 (1 January 1956)

### ORIGINAL CIVIL

## Before MACDUFF, J.

#### ABDULLA SULEMANJI OSSAJI, Plaintiff

# HARRY CLAPHAM STEPHENS, Defendant

## Civil Suit No. 343 of 1955 (Mombasa Registry)

Africans—Credit control—Charge over land granted by African to non-African and registered—Registration of Titles Ordinance, Cap. 160, section 46—Indian Transfer of Property Act, 1882, section 58—Whether charge a simple mortgage—Credit to Africans (Control) Ordinance, Cap. 104, section 2 (1) $(b)$ -Whether contract enforceable.

The defendant, who was an African, was the registered proprietor of a piece of land situated at Maweni Kisauni in the Province of Seyidie. On 4th July, 1952, the defendant executed a charge over his land in favour of the plaintiff, who was a non-African. The charge was in the form presented by Schedule $J(1)$ of the Registration of Titles Ordinance, Cap. 160 to secure repayment of an advance of Sh. 12,000 and interest thereon. The principal sum was repayable on 3rd July, 1953, but not repaid nor had interest been paid since 1st January, 1954. The plaintiff sued in 1955 for judgment for the amount of the principal sum and interest due to him and for an order for the sale of the piece of land charged, if the defendant failed to pay within a time to be fixed by the Court. As a sole defence, the defendant pleaded that the Court had no jurisdiction nor was the contract enforceable because of the provisions of the Credit to Africans (Control) Ordinance, Cap. 104, section 2 (1) $(b)$ .

Held (29-5-56).—(1) The charge was a simple mortgage as defined by section 58 of the applied Indian Transfer of Property Act, 1882.

(2) By default of payment the defendant did not lose any right to redeem the<br>property, because under the charge the ownership of the land had remained vested<br>in him and had not passed to the plaintiff. If the default conti charged might be sold to answer the amount in the charge but the land charged did not pass to the chargee nor had it ever been vested in him.

(3) A charge under the Registration of Titles Ordinance, Cap. 160, is outside the scope of section 2 (1) (b) of the Credit to Africans (Control) Ordinance, Cap. 104.

Referred to: Halsbury, Laws of England, 2nd edn., Vol. 23, 227.

C. A. Patel for plaintiff.

O'Brien Kelly for defendant.

JUDGMENT.—The defendant is an African and is the registered proprietor of a piece of land situate in the Province of Seyidie at Maweni Kisauni containing 5.32 acres and being all the land contained in Certificate of Ownership No. 3090, Coast Registry, Mombasa. On 4th July, 1952 the defendant executed a charge over the said land in the form prescribed by the Registration of Titles Ordinance (Cap. 160) in favour of the plaintiff to secure repayment of the principal sum of Sh. 12,000 advanced by the plaintiff and interest thereon as in the said charge provided. The plaintiff alleges and the defendant admits that the principal sum was repayable on 3rd July, 1953 and it has not been repaid nor has interest thereon been paid from 1st January, 1954. The plaintiff accordingly asks for judgment for the amount due to him and an order for sale of the piece of land charged if the defendant fails to pay within a time to be fixed by the Court.

The sole defence is set out in the defendant's defence as follows:-

"5. The defendant maintains that (as pleaded in the plaint and admitted in this defence) the plaintiff is a non-African and that he (the defendant) is an African within the meaning of section 2 of the Credit to Africans

(Control) Ordinance, Chapter 104, Laws of Kenya, and that the transactions pleaded in paragraphs 3, 4 and 5 of the plaint were not duly approved and attested by an Attesting Officer within the meaning of that Ordinance and that in consequence this honourable Court has no jurisdiction to entertain the plaintiff's claim and that the plaintiff has in law no right against him as that he (the defendant) is not a person exempted or excluded from the provisions of the said Credit to Africans (Control) Ordinance."

The only question at issue, therefore, is whether the present transaction comes within the scope of section 2 (1) (b) of the Credit to Africans (Control) Ordinance (Cap. 104) which reads: $-$

- "2. (1) Subject to the provisions of this Ordinance— - (b) where any non-African enters into a contract with an African, whether by way of chattels transfer, mortgage, charge, or any other contract, whether of a like nature to the foregoing or not, under the terms of which if the African fails to pay or to repay to any non-African any sum of money, the African will be required to return or deliver to any non-African any chattel, or to lose his right to redeem any property of which, under the terms of the contract, the ownership will, on the African's failure so to pay or to repay, pass to or remain vested in such non-African, then, if any such chattel or property is of a value in excess of Sh. 2,000, such non-African shall not enforce any remedy, which he may otherwise have, either in law or in equity, or both, in respect of such contract, and no court shall entertain any suit for the enforcement of any such contract, unless such contract is in writing and duly approved and attested by an Attesting Officer:"

The proviso to this paragraph admittedly does not apply, and it is admitted that there is no approval or attestation by an Attesting Officer. If, then, the present transaction comes within the scope of section $2(1)(b)$ this Court cannot entertain the present suit. If it does not, the plaintiff is entitled to the reliefs prayed.

It is contended for the defendant that the document in this case is a charge within the meaning of the section. It is argued that it is a charge under the Registration of Titles Ordinance and has been drawn following the form of charge— $J(1)$ in the Schedule to that Ordinance. By virtue of the provisions of the second paragraph of section 46 of the Registration of Titles Ordinance:

"46. Such charge when registered shall (subject to any provisions to the contrary therein contained) render subject to the security thereof the same property as would have been affected by a legal mortgage had the lands comprised in the charge not been registered under this Ordinance and had the transaction been effected by a legal mortgage instead of by such charge."

The effect of this provision Mr. O'Brien Kelly argues is to invest in the chargee all the rights of a mortgagee under a legal mortgage, and a legal mortgage he contends, in English law, amounts to a conveyance of the property mortgaged to the mortgagee, the mortgagor having a right of redemption only.

At the time the Registration of Titles Ordinance was enacted the Indian Transfer of Property Act was in force in this Colony as it still is, and in my' opinion it is in the light of that Act that we must interpret the words "render" subject to the security thereof the same property as would have been affected by a legal mortgage". The expression "legal" in respect of a mortgage is used in

contradistinction to the expression "equitable" (Halsbury 2nd Edition, Vol. 23, p. 227). The types of legal mortgage are set out in section 58 of the Indian Transfer of Property Act to be as follows: -

- "58 (b) Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee. - (c) Where the mortgagor ostensibly sells the mortgaged property—

on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute; or

on condition that on such payment being made the sale shall become void: or

on condition that on such payment being made the buyer shall transfer the property to the seller;

the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale;

(Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale:).

- (d) Where the mortgagor delivers possession (or expressly or by implication binds himself to deliver possession) of the mortgaged property to the mortgagee, and authorizes him to retain such possession until payment of the mortgage-money, and to receive the rents and profits accruing from the property (or any part of such rents and profits and to appropriate the same) in lieu of interest, or in payment of the mortgage-money, or partly in lieu of interest (or) partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee. - (e) Where the mortgagor binds himself to repay the mortgage-money on a $\alpha$ certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will retransfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage."

Mr. O'Brien Kelly contends that a charge under the Registration of Titles Ordinance implies the provisions attachable to an "English mortgage" under the above section. Mr. Patel, on the other hand, contends that such a charge comes only within the scope of the definition of a "simple mortgage". With this latter contention I agree.

Referring now to the words in section 2 (1) (b) of the Credit to Africans (Control) Ordinance, if the African fails to repay any sum of money under this charge, will he lose his right to redeem any property of which, under the terms of the contract, the ownership will... pass to or remain vested in such non-African? I do not think he will. If he continues to fail to repay the principal sum and interest, the property charged may be sold to answer the amount of the charge, but the property charged will not pass to the chargee, nor has it ever been vested in him. Accordingly, in my opinion, a charge under the Registration of Titles Ordinance, is outside the scope of section 2 (1) $(b)$ of the Credit to Africans (Control) Ordinance.

Judgment will be for the plaintiff, as prayed, with the addition that the defendant is to have three months from the date of service on him of the preliminary decree in this suit to pay the decretal amount.