Ram and Son v Singh and Another (C.A. 17/1934.) [1935] EACA 42 (1 January 1935)

## COURT OF APPEAL FOR EASTERN AFRICA.

Before SIR JOSEPH SHERIDAN, P.; ABRAHAMS, C. J. (Tanganyika) and Law, C. J. (Zanzibar).

NAUHRIA RAM & SON, Appellants (Original Plaintiffs)

## 1. DEWA SINGH; 2. NIKA SINGH, Respondents,

(Original Defendants).

C. A. $17/1934$ .

Moneylender-Loan on chattels mortgage-Memorandum in writing—Particulars given in security—No separate document-Moneylenders Ordinance, 1932, section 2, 10.

Action for money lent.

In consideration of a Chattels Mortgage, dated 21st June 1933, and duly registered as a Bill of Sale, the plaintiffs advanced to the first defendant the sum of Sh. 10,000. By a contract of guarantee, dated the 26th June, 1933, the second defendant guaranteed the due performance of the covenants conditions and stipulations to be performed by the first defendant under the said Chattels Mortgage. Default having been made in the payment of instalments and interest under the mortgage the chattels assigned were seized and sold by the plaintiffs for a sum less by Sh. $4,892/71$ than the amount due to them. They brought the present action to recover this balance.

The first defendant pleaded (inter alia) that the plaintiffs were moneyleaders and that, when the loan of Sh. 10,000 was made, no note or memorandum in writing of the contract was made or signed as required by secti n 10 (i) of the Moneylenders Ordinance, 1932.

In the first paragraph of the Plaint the plaintiffs described themselves as "Moneylenders carrying on business in Nairobi". There was no note or memorandum of the transaction other than the Chattels Mortgage itself.

HORNE, J. dismissed the action; the plaintiffs appealed.

$Held$ (15-2-35).—Affirming the decision of the Supreme Court: (1) that, where a loan on the security of a chattels mortgage is made by a person who carries on the business of money-lending, such person is a moneylender and does not come within the exception contained in section 2 $(1)$ $(b)$ .

(2) That the note or memorandum of the contract must be a writing separate from any security given in connection with the loan.

Phadke (Maini with him) for the Appellants.

Though the appellants are registered moneylenders; that does not necessarily make this a moneylending transaction; section 2 (1) (b) of the Ordinance is not found in the English Act.

If the security itself contains all the details of the transaction that is enough: Simmons v. Russell Financiers, Ltd. (1934, 2 K. B. D. 487), Temperance Loan Fund v. Rose (1932, 2 K. B. D. 522). Two documents are not necessary. HORNE, J. said that the mortgage did not set out the date of the loan, Gaskell Ltd. $v$ . Askwith (45 T. L. R. 566); but this case is explained in Temperance Loan Fund v. Rose at p. 526; see also Sherwood v. Deeley (47 T. L. R. 419).

## Modera for First Respondent.

It is a question of fact whether a man is a moneylender or not, the appellant has pleaded that he is; Newman v. Oughton $(27)$ T. L. R. 254), Newton v. Pyke (25 T. L. R. 127). Where there is a security for the loan there must be two documents: Simmons v. Russell Financiers Ltd.; Gaskell v. Askwith; Eldridge and Morris v. Taylor (47 T. L. R. 516); Morarji Tricumdass v. Official Assignec (1934 1 E. A. L. R. 175).

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Figgis, K. C., for second respondent.

Phadke replied.

SIR JOSEPH SHERIDAN, P.—It has been argued for the appellant that in so far as the transaction in this case is concerned he is not a moneylender within the definition of "moneylender" in section 2 of the Moneylenders Ordinance, 1932, and that even if he is the provisions of section 10 of the Ordinance have been complied with, with the result that the appeal should succeed. The appellants-plaintiffs describe themselves in the plaint as moneylenders carrying on business in Nairobi, some indication that they regarded the transaction in respect of which they were suing as of a moneylending nature. Counsel for the appellants has argued that in regard to the transaction they are excluded from the Ordinance by reason that they come within the exception in section 2 (b) reading: "Any person bona fide carrying on the business of banking or insurance or lending money on chattels transfer or on mortgage or charge of immovable property or bona fide carrying on any business not having for its primary object the lending of money, in the course of which and for the purposes whereof he lends money"; Mr. Phadke has contended that it is the transaction, which was one of lending money on a chattels mortgage that has to be looked at in determining the point. I do not agree. What has to be looked at is whether the person who lends the money has done so in the course of carrying on his business as a moneylendor. Lending money on a chattels mortgage is one of the means adopted by moneylenders, and the clear intention of the section as I read it is that while loans made

in such a fashion may be made by persons who are not moneylenders and who consequently are not affected by the Ordinance, where the loan is made by a person carrying on the business of a moneylender, a business to use the words of the section "having for its primary object the lending of money", there can be no doubt that the person is a moneylender and as such subject to the provisions of the Ordinance. Being a moneylender the question is whether the provisions of section 10 have been complied with. The section reads:-

(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 in accordance with the provisions of the Schedule to this Ordinance.

There is no note or memorandum in writing of the contract in the shape of a separate document, but Mr. Phadke has argued that a separate document is unnecessary if the security itself sets forth the particulars required by the section; he has been unable to refer us to any case in which there was but a single document. The concluding words of sub-section 1 are clear that the signing of a separate document by the borrower before the lending of the money or the giving of the security is an essential. $\quad \ \ \textbf{But}$ even if Mr. Phadke's argument were accepted he is faced with the difficulty that the security does not show the date on which the loan was made, an omission which constitutes a fatal defect. I would dismiss the appeal with costs.

ABRAHAMS, C. J.—I agree. It has been argued for the appellant that the transaction which is the subject of these proceedings is excluded from the operation of the Monevlenders Ordinance by virtue of the provisions of section $2(1)(b)$ thereof. But those

provisions can only apply if the moneylending transaction concerned has been carried out as part of a bona fide business of lending money on the particular kind of security involved in this There has been no attempt to contend that the transaction. appellant was engaged in such a business, and if such a contention had been put forward it would then have been necessary further to prove that the business was bona fide, which I take to mean separate from a general business of moneylending; and I do not see how a person who is, as the appellant confessedly is, a moneylender in a general way, that is to say who lends money on whatever kind of security happens to be convenient in respect to the particular loan concerned, can sincerely say that he carries on a separate business of lending money on a specific kind of security.

I am also of the opinion that the appellant cannot escape from the requirements of section 10 of the Ordinance. The concluding words of sub-section $(1)$ of that section clearly show that the note or memorandum of the contract must be a writing separate from any security given in connection with the loan. Even if the appellant's submission be granted and it were held by this Court that the instrument creating the security is a note or memorandum, I am quite satisfied that the date of the loan has not been shown in the document as required by sub-section (2). It is contended for the appellant that the words "the date on which the loan is made" actually mean the date on which the arrangement is made for a loan. A similar argument was advanced in Gaskell v. Askwith (45 T. L. R. 566) and it appears to me that in that case HUMPHREYS J. held that the relevant expression meant the date when the money was actually advanced, and that was most certainly the construction placed on the expression by SCRUTTON, L. J. who said in Temperance Loan Fund v. Rose (1932 2 K. B. 522) at p. 528: "The Act requires ... that the note or memorandum must show the date on which the loan was made. On the facts I have stated the note or memorandum should show either the date when the original cheque was given, namely January 30th, 1929, or if the loan is to be treated as made not on that date but on July 30th, by the transaction of paying off the old loan and starting a new loan it should show that date".

Finally, even if I could accept the last contention of the appellant I certainly cannot accept that the date of the arrangement for the loan is shown by necessary inference. It is a probable inference only, and not a necessary inference that because the interest first becomes payable on 21st June, 1934, the arrangement was made on that date. It is open to lender and borrower to make any agreement they like as to when payments of interest shall be made. I would dismiss this appeal with costs here and in the Supreme Court.

LAW, C. J.—The principal points which emerge in this case $are :=$

(a) Whether section 2 (1) (b) of the Moneylenders Ordinance 1392 (No. 15 of 1932) takes appellants out of the operation of the Ordinance.

(b) Whether section 10 thereof has been complied with by appellants.

With regard to section $2(1)(b)$ this must be considered as originally enacted, because the transaction in question was entered into before the amending Ordinance No. 44 of 1933 came into force. In their plaint, appellants describe themselves as moneylenders. The transaction was a loan of money by way of chattelsmortgage. If such a type of loan does not fall within section $2(1)(b)$ then the appellants are subject to the general provisions of the Ordinance. If, however, it is to be brought within that exception, then it must be considered whether the appellants were, at the time in question, bona fide carrying on the business of moneylending on mortgages. The answer to this must be in the negative, because, by their own pleading, appellants are general moneylenders. Nor have they pleaded that their business is bona fide confined to-lending money on mortgages, which, in my view, they would have had to do in order to bring themselves within section 2 (1) (b). In my opinion, therefore, appellants are not exempted from complying with the requirements of the Ordinance.

With regard to section 10, it is admitted that Exhibit A was executed on the 21st June, 1933, and the money lent was paid by cheque (Exhibit C) on the 26th June, 1933. If Exhibit A be regarded as the note or memorandum of the contract, as argued on behalf of appellants, it failed to specify the date on which the loan was made, inasmuch as it specified (if it can be assumed that it did so specify) that the money was lent on a particular date whereas it was, in truth and in fact, lent on another date. This is not a case where the wrong date was inserted through inadvertance; a curable mistake as in Sherwood v. Deeley and Wife (1931, 47 T. L. R. p. 419). It is imperative that the correct date should be specified; Gaskell Ltd. v. Askwith (1929, 45 T. L. R., p. 566). If Exhibit A, however, be regarded as the contract or security, then no note or memorandum was furnished, as required by the section. Whichever view be taken regarding Exhibit $A$ , it is obvious that only one document existed, whereas two separate writings are necessary under the English Law; Tricumdass v. Official Assignee (1934 1. E. A. L. R., 175). Section 10 is a counterpart of section 6 of the English Moneylenders Act, 1927. In this last quoted case, particular care was taken to invite attention to the Zanzibar law on the subject, where the relevant section does not follow exactly the English section.

For the foregoing reasons, I would agree that the contract between the parties relating to this loan is unenforceable and would dismiss this appeal with costs.

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A further point was dealt with by the trial Judge, namely,<br>regarding the prematurity of appellants' suit. In view of the<br>finding that the contract is unenforceable it is not necessary<br>to consider this further point.