[1935] EACA 105

## COURT OF APPEAL FOR EASTERN AFRICA.

Before SIR JOSEPH SHERIDAN, C. J. (Kenya); HALL, C. J. (Uganda) and LUCIE-SMITH, J. (Kenya).

## SAYEED BIN MBARAK SHIKELEY, Appellant (Original Plaintiff)

ZAYANA BINTI ALI BIN ABDULLA. Respondent (Original Defendant). Civil Appeal No. 10/1935.

Moneylender-Unregistered-Bona fide carrying on business of lending money on Mortgage-Moneylenders Ordinance, 1932-1933, section 2 $(1)$ $(b)$ .

The appellant, who was described in the plaint as a landlord, sued the respondent to recover three sums of money the repayment of which was secured by a registered charge in respect of each upon Plot 89, section II, comprised in Certificate of Ownership No. 2499. The first charge was executed on 4-7-1934 for Sh. 1,725 payable on 4-1-1935 with interest at 24 per cent per month from that date, the second was executed on 7-8-1934 for Sh. 160 payable on 7-2-1935 with like interest, and the third was executed on 14-8-1934 for Sh. 1,725 payable on 14-2-1935 with like interest.

The respondent pleaded (inter alia) that the appellant was an unregistered moneylender and that the contract was void under the Moneylenders Ordinance, 1932.

The appellant in his evidence admitted that he had had other money lending transactions, that in 1933-34 he lent money on mortgage four or five times. He said: "If one wants money on mortgage I lend, it is my job". He stated that he had an income of Sh. 500 to Sh. 600 per month from landed property, and that this exceeded what he received by way of interest on loans. He was not engaged in any other business.

The trial Judge held that, though the facts disclosed something more than occasional and disconnected loans, there was no bona fide business to bring the appellant within the exception contained in section $2(1)(b)$ , and he dismissed the action.

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Held (12-8-35).-That the appellant was a person bona fide carrying on the business of lending money on mortgage or charges of immovable property and therefore came within the exception. (Appeal allowed.)

Budhdeo, for the appellant.—The only point raised by the appeal is whether the appellant is a moneylender as defined by the Ordinance. I say these were isolated transactions: if the Court is against me on this then the appellant comes within the exception. (He referred to Nauhria Ram v. Dewa Singh (2 E. A. L. R. Part 1, 42), Quinn v. Leathem (1901 A. C. 495), National Phonograph Co. v. Edison Bell Co. (1908 1 Ch. 335, at p. 349), Halsbury 21 p. 42).

Ross, for the respondent.—The appellant is carrying on business as a moneylender. There were four separate advances within a period of a few weeks: the rate of interest shows that these were not investments. Stone and Meston on Moneylenders, 2nd Ed. pp. 3, 9, 10; Furber v. Fieldings (23 T. L. R. 362). The argument for the appellant would make the Ordinance a nullity, the section should not be so construed: Maxwell on Statutes. 7th Ed. 171; Lester v. Torrens (2 Q. B. D. 403); R. v. Kent JJ. (24 Q. B. D. 181); Newton v. Puke (25 T. L. R. 127).

Budhdeo in reply.

SIR JOSEPH SHERIDAN, P.-I have very little to say in this case for the reason that I was a member of the Court deciding the case of Nauhria Ram and Son v. Dewa Singh (2 E. A. L. R. Part 1, 42), in which the Court were of the opinion that had the plaintiff been bona fide carrying on the business of lending money on chattels transfer or on mortgage or charges of immovable property and not a general money lending business he would not require to be registered (vide the Judgment of ABRAHAMS, C. J. at pages 44 and 45) in which he says: "It has been argued for the appellant that the transaction which is the subject of these proceedings is excluded from the operation of the Moneylenders 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 transaction. There has been no attempt to contend that the 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 carried on a separate business of lending money on a specific kind of security."

The learned trial Judge has referred to the following passage from my judgment at pages 43 and 44: "What has to be looked at is whether the person who lends the money has done so in course of carrying on his business as a moneylender. 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". That passage had particular reference to the facts of the case in which the plaintiff had pleaded that he was a moneylender carrying on business in Nairobi and to the defence raised by Mr. Phadke that the moneylending transaction under the consideration was a loan on a chattels mortgage and that the kind of security on which the loan was made and not the business in the course of which the loan was made should be looked at in ascertaining whether the plaintiff was a moneylender within the meaning of the Ordinance. In the passage quoted I make it clear that the business carried on and not the particular loan transaction is the criterion. In the present case there is no pleading that the plaintiff is carrying on the business of a moneylender. He describes himself as a landlord and the evidence is that his moneylending transactions were confined to lending money on mortgage. This being the case in my opinion he comes within the exemption in section $2(1)(b)$ as a person bona fide carrying on the business of lending money on chattels transfer or on mortgage or charges of immovable property. I would allow the appeal with costs and remit the case to MR. JUSTICE HORNE for decision on the other issues raised by the pleadings—the costs in the Supreme Court to abide the result. Should, however, MR. JUSTICE HORNE express the opinion that at this date he has not the facts or the arguments sufficiently before his mind to give judgment, then counsel are agreed that the case be listed before MR. JUSTICE LUCIE-SMITH on condition that no further witnesses be called, that the evidence already taken be read over to the witnesses, that he be at liberty to question such witnesses as he thinks fit (including questions suggested by counsel which he may consider proper to put) and that thereafter counsel be at liberty to address the Court.

HALL, C. J.-In this case, one of the defences raised was that plaintiff was an unregistered moneylender and, accordingly, any contract of loan under which he alleged he was entitled to the repayment of money lent was void under the Moneylenders Ordinance of Kenya, No. 45/32, as amended by Ordinance No. 44 of 1933.

The learned trial Judge found that plaintiff was an unregistered moneylender and, accordingly, dismissed the suit with In view of his finding, it became unnecessary for him costs. to consider the other defences raised.

The suit was in respect of three charges for various sums on one plot of land. The charges were all executed within a period of about six weeks in 1934, and the interest charged was 30 per cent in all cases.

Apart from the facts of the case, as found for the purpose of the moneylending plea and set out supra, there was little evidence as to this phase of the case. In cross-examination, plaintiff said: "If one wants money on mortgage I lend. It is my job." And, in re-examination: "I have not in 1933-34 lent money except on mortgage, I lent approximately four or five times. I get more income from rents than interest. I get Sh. 500 to Sh. 600 per month as rents." The only other evidence on this point is that of the clerk to Mr. Patel, advocate, who said: "Plaintiff is a landlord and lends money on mortgage."

It is now necessary for the sake of clarity, to set out the definition of "moneylender" as contained in section $2$ (1) of the Ordinance already referred to: $-$

" 'Moneylender' includes every person whose business is that of moneylending or who advertises or announces himself or holds himself out in any way as carrying on that business, but shall not include:-

- (a) any pawnbroker in respect of business carried on by him in accordance with the provisions of any Ordinance for the time being in force in relation to pawnbrokers, or - (b) 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."

The exception (b) supra, in effect, says, so far as this case is concerned, that a person is not a moneylender within the meaning of the Ordinance, if he bona fide carries on the business of lending money on mortgage. What then is the meaning of "bona fide" and what is the meaning of "carrying on business"?

As regards "bona fide", I respectfully agree with the dictum of ABRAHAMS, C. J. in Nauhria Ram and Son v. Dewa Singh and another (2 E. A. L. R. part 1, 42 at p. 45) that the words "bona fide" include carrying on one of the businesses mentioned in the exception quite separately from a general business of moneylending.

As regards the words "carrying on the business", these words must, in my opinion, mean that there is some consistency or continuity in the operations, which are carried on for the purpose of profit, and would not include isolated acts nor the acts of a private investor who preferred lending on mortgage to other forms of security. There must be some suggestion of doing a trade in this form of moneylending.

As JESSEL, M. R. said in Smith v. Anderson (15 Ch. D. 258): "So, in the ordinary case of investments, a man who has money to invest, the object being to obtain his income, invests his money and may occasionally sell the investments and buy others, but he is not carrying on a business."

If, therefore, it was shown that a person made a business of lending money only on mortgage or on the other forms of security contained within the exception and not, e.g. on notes of hand as well, then, in my view, whatever the Legislature may have intended, he comes within the exception and is not a moneylender within the meaning of the definition.

It has been suggested that to read the Ordinance as if there could be an obvious moneylender within the exception $(b)$ would render the Ordinance an absurdity and a more reasonable construction must, therefore, be placed on the exception; but I cannot agree, for, obviously, there are forms of moneylending other than those contained within the exception and, further, if a person makes a business of lending on security other than those indicated in the exception as well as those within it, he also would be within the definition of moneylender under the Ordin- $\mathbf{ance}^{\top}$

As regards the present case, there is, in my view, sufficient evidence to show that plaintiff was carrying on the business of lending money on mortgage only and, as such, he comes within the exception. In my opinion, therefore, the appeal should be allowed with costs of this appeal, and the case sent back to the Court below for consideration of the other defences raised. The costs of the first hearing to abide the event of the second hearing. As regards the procedure to be adopted on the sending back. I agree with the learned President.

LUCIE-SMITH, J.-In my opinion this appeal must be allowed. From the evidence the learned Judge has found that the business (or one of the businesses) of the plaintiff is that of lending money. There is, however, to my mind, no evidence on which one can deprive the defendant of the sanctuary of exception (b) as amended. The evidence goes to show that in the past two years the plaintiff has had some four or five loan transactions all of which were secured by mortgages. On the face of it those transactions were prima facie bona fide and there has been no attempt by the defendant to prove otherwise. Though the Ordinance cannot be said to be penal, it is undoubtedly restrictive and must, I think, be interpreted as far as possible in favour of the persons who may suffer by reason of

its provisions. As the learned trial Judge pointed out in his judgment, McCARDIE J. in Edgelow v. MacElwee (1918 1 K. B. $205$ ) stated: "Nor does a man become a moneylender merely because he may upon one or several isolated occasions lend money to a stranger." In this case, however, the learned Judge has found that these transactions which have come to light are not "isolated transactions" but that the plaintiff was a person whose business was that of moneylending. That being so, we must then examine as to how that business was carried on. So far as I can see the transactions which have been held to constitute. the business of moneylending were bona fide within the meaning of the exception laid down in section 2 $(1)$ $(b)$ as amended—and money lent on mortgage.

I would allow the appeal with costs in this Court and would order that the case be returned to the lower Court for trial of the other issues raised in the pleadings.

Note.-See President's order as to re-hearing.