Prasad v Singh [1996] FJHC 152; Hbc0033j.92b (6 November 1996)

IN THE HIGH COURT OF FIJI
(AT LABASA)

CIVIL ACTION NO. 33 OF 1992

BETWEEN:

AMRIT PRASAD
(f/n Shiu Prasad)
Plaintiff

and

SOHAN SINGH
(f/n Jora Singh)
Defendant

V.P. Ram for the Plaintiff
A. Sen for the Defendant

JUDGMENT

The Plaintiff is a farmer and the Defendant is a licensed money lender.

In 1992 the Defendant instituted proceedings in the Labasa Magistrates Court against the Plaintiff seeking recovery of a sum of money totalling $13,500 said to be owing to him under three promissory notes. What would have been a relatively simple issue was complicated by the existence of a crop lien registered on 11 September 1990. The Defendant maintained that the sum claimed by him was secured by the lien but the Plaintiff denied this. His case was that the whole sum secured by the crop lien was a totally different sum from the sums claimed by the Defendant and that it had been repaid. In these circumstances the lien should have been discharged by the Defendant as agreed between the parties at the time of repayment. The Plaintiff denied that he had ever borrowed any sums from the Defendant and in particular denied having borrowed the sums claimed. He maintained that the Defendant had wrongly received sums paid to him under the lien during the period between the full repayment of the first sum and 30 August 1995, the date upon which the lien expired by operation of law (see Crop Liens Act - Cap 226 - Section 6 (a)).

In October 1992 the Plaintiff commenced proceedings in this Court. He sought a Declaration that the lien was a nullity and an Order for the return of money paid to the Defendant under it. Alternatively he sought a Declaration that he owed no further sums to the Defendant. He further sought an account of all the financial transactions between the parties and damages.

On 17 April 1996 a pre-trial conference was held and the full minutes of the conference are to be found in the trial book. The two central issues between the parties are:-

(i) the validity of the three promissory notes dated 12 December 1990, 21 January 1991, and 7 May 1991; and

(ii) the validity of the crop lien.

Both parties gave evidence. In addition the Plaintiff called one witness, Jayanti Lal, a neighbour while the Defendant called Raman Singh M.P. a Labasa solicitor. An agreed bundle of documents was tendered as Exhibit A.

The Plaintiff told me that in 1988 his father had transferred some land to him. The Defendant had then approached him and told him that his father owed him money. Sometime later he had gone to Mr. Singh's office with the Defendant where he had executed a crop lien. This lien was in respect of the sum owed by his father ($5,700) plus $2,600 pre-calculated interest for the period of 5 years totalling in all $8,300. He told me that he had later repaid the $8,300 in full. He did not remember when this had taken place but it was before the proceedings were commenced the Magistrates Court. He had collected the money together gradually by selling fish, goats, chickens, cattle and cane. He kept it in a tin box which was buried under his bed and when he had gathered enough together he had paid it all off in one go, in cash. The Defendant had then promised to discharge the lien but had not kept his promise.

As for the promissory notes he simply denied that he had ever signed them upon receipt of loans. The only dealings he had had with the Defendant apart from the creation of the crop lien were when he had gone to the Defendant's house and had had groceries from him. The Plaintiff told me that the Defendant ran a shop from his home. On about 10 or so occasions when he had "got stuck" (apparently this is Labasa jargon for running short of money) he had gone to the Defendant who had supplied him with groceries. But this had only happened before he had paid off the $8,300 owed under the crop lien and although he had signed pieces of paper when he had taken the groceries he had understood at the time that he was merely signing an invoice or receipt for them. He certainly had not understood that he was signing promissory notes for loans. Although he confirmed that the three promissory notes in question bore his signature he explained that he could not read or speak English.

The Defendant's account was predictably entirely different. His case was that the crop lien had nothing whatever to do with the Plaintiff's father who had not owed him anything. The Plaintiff had borrowed $8,300 and had agreed to grant him a crop lien as additional security. He agreed that the sum owed under the crop lien had been paid off but two days later the Plaintiff had borrowed a further sum of $11,650 which was represented by the first disputed promissory note. Later he had borrowed on the second and third disputed promissory notes. In view of the fact that the Plaintiff had continued to owe him money he had not discharged the crop lien although it had now expired by effluxion of time.

The evidence of both parties presented severe difficulties. The first problem for the Plaintiff was the existence of the three promissory notes in question (Exhibit F) which he admitted he had signed but which he asserted he had only signed under the impression that they were something else. He maintained that he could not read English and could not recognise figures. He told me that he could not read four pink carbons of promissory notes (sums conceded by the Defendant to have been repaid - Exhibits B, C, D and E) which he claimed had been handed to him by the Defendant all at one time when he had gone to take groceries. But in cross-examination the Plaintiff admitted having been educated to class 7 and admitted being able to read Hindustani. He also admitted that he could read numbers. He admitted that when the four pink carbons had been given to him he had told the Defendant that he was "doing the wrong thing" which clearly suggests that he knew that the pink carbons were not invoices for groceries but were in fact in two cases promissory notes for large sums of money.

There were other major inconsistencies in the Plaintiff's evidence. In examination in chief he admitted signing a piece of paper for $5,600 after the Defendant had approached him following the transfer of the land to him in February 1988 yet in cross-examination he both denied and then admitted signing a document in 1988. I suspect that this was the 4th pink carbon number 09, Exhibit B but it is not necessary to decide this point. He said that he had not dealt with the Defendant prior to 1990 but then shifted his ground to say that he could not remember whether he had done so or not.

He first said that he could not remember how much he had repaid to the Defendant in 1990 but later said that he had gone to the Defendant with precisely $8,306 being made up of $8,300 to be repaid and $6 for his bus fare. He said that the Defendant had made some calculations on a calculator when he had repaid the loan but was unable to say what the Defendant could possibly have been calculating given that his case was that he simply paid off exactly what was owed on the crop lien namely the $8,300. That the date of repayment was 10 December 1990 (see Exhibit A page 17) was not challenged and the Plaintiff maintained that he had not dealt with the Defendant at all after this repayment. But the evidence of his own witness was that it was in 1993, fully three years after the repayment, that he had gone to the Defendant's house with the Plaintiff to collect groceries.

I was not all impressed with the Plaintiff's evidence. I did not find him to be a witness of truth. I do not believe that he cannot read at least sufficient English to be able to distinguish a promissory notes for thousands of dollars from a receipt for a small amount of groceries. I do not find that section 95 of the Bills of Exchange Act (Cap 227) applies to the facts of this case. I do not believe that the Plaintiff cannot recognise numbers: such a proposition is in my view unsustainable when it is borne in mind that the Plaintiff has sufficient intelligence to read Hindustani and attended school for 7 years. I find as a fact that the execution of the crop lien followed the taking of a loan for $8,300 on 23 July 1990 (Exhibit F No. 19). I reject the explanation that the $8,300 represented a loan by the Plaintiff's father plus pre-calculated interest, a proposition which, apart from anything else depends on the assumption of an inherently unlikely interest rate of 9.1228%. I also find as a fact that having repaid this amount together with a second amount of $900 (Exhibit F No. 20) on 10 December 1990 the Plaintiff borrowed a further sum of $11,650 on 12 December 1990 (Exhibit H No. 13), $500 on 21 January 1991 (Exhibit H No. 17) $1,200 on 7 May 1991 (Exhibit J No. 07). These findings do not go so far as to dispose of the first question namely the validity of the three promissory notes and I will have to return to that question later. First, however, it is necessary to consider the evidence given by the Defendant.

The Defendant's evidence also presents severe problems. There were a number of inconsistencies. Although the Defendant first denied having a grocery shop in his house it emerged in cross-examination that the basis of the denial was not that groceries were not sold from the premises occupied by him but that the grocery business was his, he being merely one of the partners. I found this distinction to be disingenuous to say the least. In examination in chief the Defendant denied that the Plaintiff's father had borrowed money from him yet the next day in cross examination he admitted that the Plaintiff's father had had an account with him albeit one that was paid off in full in 1985.

The second area of difficulty was the crop lien. Mr. Singh told me that, somewhat surprisingly, only two original copies of the lien were made. The first was given to the Defendant and became Exhibit G. The second was lodged with the Registrar of Titles and a certified true copy of this document was exhibited as Exhibit K. The Plaintiff was not given a copy. A photocopy was also produced as Exhibit A Page 13 which the Defendant told me he had himself made of the original Exhibit G. Careful examination of page 13 and Exhibit G showed that this assertion could not possibly be true. For example, the date "11 September 1990" in the registration box on the bottom left hand side of the first page is on the line in page 13 and well above it in Exhibit G. There is no folio number on Exhibit G at the top right hand side of the first page whereas on page 13 the number 2654 appears. The figure $8,300 in paragraph 2 is in a different position in relation to the printed dollar sign in both documents. The words "Dean and Company" appear in Exhibit G bottom right hand side but not on page 13. Faced with these differences the Defendant blamed the photocopier which he said had left things out or changed their positions. This was an absurd explanation which I reject.

The third difficulty facing the Defendant is the date of registration of the crop lien. Each crop lien (Exhibits G and K) bears three dates. The dates "29th" August 1995 on the first page both appear to have been altered. The dates of the jurats also appeared to have been altered. The date on the bottom left hand side of Exhibit G has clearly been altered from "20th" to "30th". The corresponding date on Exhibit K still reads "20th". Why was this done? As pointed out by Mr. Ram Section 10 of the Crop Liens Act requires registration of a crop lien within 21 days. If the lien was executed on 29 August then it was registered in time. If it was executed on 20 August then it was not.

The most serious difficulty faced by the Defendant was his attempt to explain the interest rate which he charged on his lending. Despite the clearest evidence to the contrary extracted by him from his own books and set out at page 18 of Exhibit A the Defendant denied that he was charging compound interest. His explanation of how the interest rate on a debt of $12,063 was calculated at $1,150 was quite incomprehensible despite all Mr. Sen's efforts at elucidation. The Defendant claimed only ever to charge 10% per annum saying that this was by mutual oral agreement despite the fact that promissory note Exhibit H page 13 is clearly endorsed "interest 10% per mounth" (sic), that promissory note Exhibit H page 17 is endorsed "interest 12½% per mounth", that promissory note Exhibit J page 7 is endorsed "interest 12½% per year" and that all three promissory notes comprising Exhibit F are also endorsed "12½% per mounth". The Defendant's attempt to explain how the different amounts came to be endorsed on the promissory notes was quite bizarre. He first claimed to have filled in the interest rates in advance on the blank promissory notes, book by book. Then he said he had filled them in after the promissory notes had been issued and signed, in one case five months after. His third explanation was that he had filled them in three or four pages at a time in advance. But how he knew what rate to fill in in advance before he knew who he would be lending to if indeed the only two reasons for varying the interest rate were the repayment period and the good standing of the borrower he was quite unable to explain in any manner that made any sense at all.

Having heard and seen the Plaintiff and the Defendant and examined the exhibits I find the truth to be as follows. The Plaintiff borrowed $8,300 from the Defendant and by way of additional security executed the Crop Lien. On 10 December 1990 he repaid the total amount which he then owed the Defendant. Two days later he borrowed $11,650 which he has not repaid. He has not repaid another sum of $500 borrowed on 21 January 1991 and he has not repaid yet another sum of $1,200 borrowed on 7 May 1991.

So far as the Defendant is concerned I am not satisfied that the three promissory notes in issue clearly bore on their face at the time of their making the rate of interest percent per annum payable on them and thereby complied with the requirements of Section 16 (3) (c) of the Moneylenders Act. I am satisfied that all three rates of interest which the promissory notes now bear exceed the limit imposed by Section 22 (1) and are accordingly excessive. I am also satisfied that in the case of the two promissory notes bearing a monthly rate of interest such interest was compound interest, violate Section 17 of the Act and were to that extent illegal. The amounts loaned to the Plaintiff under these three promissory notes are, in my judgment, irrecoverable (see generally Ram Autar v Penaia Rokovuni FCA Reps 65/99 and Karnail Singh v Gaholi FCA Reps 69/33).

There remains the question of the crop lien and the monies received by the Defendant under it. Having considered the Defendant's evidence and the alterations made I am satisfied that the crop lien was in fact executed on 20th August and not on 29th. It follows that the crop lien was registered out of time. Mr. Ram submitted that it was therefore invalid. He also suggested that it was void for past consideration.

While I agree that a crop lien is a form of contract I do not think that the mere fact that the Plaintiff had already incurred the debt to the Defendant at the time that it was executed means that the consideration was passed. I heard no direct oral evidence on the matter but the two promissory notes for $8,300 and for $900 (Exhibit F Nos. 19 and 20) pre-date the crop lien by a matter of weeks. Both these promissory notes were repayable on demand. I think the reality was that in agreeing to accept the crop lien in his favour the Defendant was forbearing to request repayment for the debt during the life time of the lien and accordingly there was good consideration (see Chitty on Contracts 24th Edition Paragraph 163 et seq.).

I am also unconvinced that the crop lien was void for want of registration, at least as between the parties. A crop lien is a very special type of agreement. Although it is by nature a type of bill of sale the Bills of Sale Act (Cap 225) does not apply to it (Crop Liens Act - Section 9). Although a crop lien is not an interest in land (it is an interest in crops growing on the land) it effectively runs with the land for the period of its duration (Crop Liens Act - Section 4). As has been seen it is an agreement which must be registered but not being an interest in land does not fall within the provisions of Section 37 of the Land Transfer Act (Cap 131). In these circumstances I am of the view that the crop lien as between the parties was a valid contract (see Otago Harbour Board v Spedding NZLR 4 SC 272 and Mathieson v The Mercantile Finance and Agency Co Ltd [1891] VicLawRp 57; (1891) 17 VLR 271; 12 ALT 220).

In the outcome the losses and gains in this matter will lie where they have fallen. I hold that sums paid to the Defendant under the authority of the crop lien were properly paid to him under a valid subsisting contract to repay debts due or becoming due during the currency of the lien. Sums not also covered by the crop lien and not repaid during its lifetime will remain unpaid. To that extent only there will be judgment for the Plaintiff.

M.D. Scott
JUDGE

6 November 1996

HBC0033J.92B