Mr. A. Sen for the Appellant
Mr. A. Kohli for the Respondent n>
JUDGMENT
This is an appeal against the judgment of the Labasa Magistrate Court delivered on 2nd May 1997 in which the learned trial magistrate in a two-page judgment ruled:
"... that the plaintiff's claim is unenforceable and the Action is dismissed with costs to the defendant."
The sole ground of appeal advanced by the appellant (the plaintiff in the Magistrate Court) is:
"The Learned Trial Magistrate erred in Law and in fact in dismissing the claim of the Plaintiff."
The plaintiff/appellant's claim was endorsed on the Writ as follows:
"THE PLAINTIFF CLAIMS to recover from the defendant the sum of $1,870.00 (ONE THOUSAND EIGHT HUNDRED AND SEVENTY DOLLARS) being
the balance amount due and owing by the defendant to the plaintiff under Promissory Note numbers as follows together with interest
of 12.5 per centum per annum from 2.1.91 to 30.6.93
1. PN No. 20 dated the 31.07.1990 for $950.00
2. PN No. 36 dated the 17.10.1990 for $200.00
3. PN No. 18 dated the 21.01.1991 for $250.00
4. PN No. 3 dated the 2.04 1991 for $200.00
5. PN No. 5 dated the 12.06.1991 for $200.00
INTEREST ADDED $350.00
-----------
PAID $280.00
BALANCE AMOUNT &nbssp;&nnbsp;&nsp; &nsp; &nbssp; &&nsp;;&nsp; &nbp; &nnbp;&&nbp;; $1,8701,870.00-GB">
========
WHEREAS demand for payment has been made but not met and the Plaintiff further claims the costs of this action."
In the absence of any background information or underlying facts the claim appears to be based purely and simply upon what the plaintiff
claims are 'promissory notes' that are 'due and owing'. (cf. a claim on a dishonoured cheque). No mention is made of any monies having been 'lent or advanced' to anyone as one might expect in an action to recover borrowings. Nor for that matter, does the plaintiff describe himself as a 'Licensed Moneylender' anywhere in the Writ.
The defendant/respondent's equally short Statement of Defence reads in its material parts:
"1. THAT the Defendant denies being indebted to the Plaintiff.
2. THAT the Defendant is unaware of any promissory notes executed by her.
3. THAT no moneys were advanced to her."
It is noteworthy that the defendant who was the wife of SURESH CHAND, and who was sued in her capacity as 'the Administratrix of the estate of SURESH CHAND', neither pleaded or raised the provisions of the Moneylender's Act in her defence. Furthermore she incorrectly denied any personal knowledge or liability for the amount claimed by the Plaintiff. I
say 'incorrectly' because she was not sued in her personal capacity as a 'femme sole' and it should have been obvious to her legal advisors that the claim was not against Bimla Wati personally, but against the 'Estate' of her late husband of which she was undeniably the 'Administratrix'.
Be that as it may, the appellant gave evidence before the trial magistrate in which he described himself as a 'LICENSED MONEYLENDER'. He further testified that he 'used to lend money to Suresh Chand' and 'as security (Suresh Chand) executed the promissory notes' which the appellant identified and produced as Court Exhibits 1 to 5.
In cross-examination whilst confirming that the interest rate in three (3) of the promissory notes namely, Exhibits 3, 4 & 5 reads: '12 1/2% per Mounth', the appellant nevertheless explained: "but I charged him only 10% per annum." He admitted however that he 'had no dealings personally with Bimla Wati'. Thereafter the plaintiff's case was closed.
It is somewhat unfortunate that defence counsel, despite what he plainly intended to argue in his written submissions, did not see fit to cross-examine the plaintiff as to the various legal and evidential requirements of the Moneylenders Act (Cap. 234) and this failure to do so was subject to much criticism and adverse comment from counsel for the appellant.
The respondent for her part, called no evidence and other than her largely irrelevant Statement of Defence, relied almost entirely on a four (4) page written submission presented by her counsel to the trial magistrate and included in the record as pp.31 to 39.
The submission is divided into four (4) sub-headings respectively entitled: (1) MONEYLENDERS ACT; (2) PROMISSORY NOTES; (3) STAMP DUTY ON PROMISSORY NOTE and (4) CLAIM FOR INTEREST.
Under (1) Counsel raised issues of non-compliance with the statutory requires of Sections 16(1) & 21 of the Moneylenders Act (Cap. 234) and submitted that the lending contracts evidenced by the 'promissory notes' were 'unenforceable'. As for (2) counsel referred to the statutory definition of a 'promissory note' to be found in Section 88(1) of the Bill of Exchange Act (Cap. 227) and submitted that 'none' of the documentary exhibits tendered by the plaintiff were, by definition, 'promissory notes' in so far as they all lacked various essential characteristics and "... therefore cannot speak by itself".
Counsel also '... noted that the Plaintiff did not plead that he was claiming as a moneylender. This fact emerged in his evidence. Therefore the
Defendant was not forewarned to plead the defence of failure to comply with the Moneylenders Act'.
In his judgment the learned trial magistrate firstly, upheld defence counsel's submissions under (2) above and ruled that the documentary exhibits tendered by the plaintiff were not 'promissory notes'. No complaint was made of that finding on appeal. The trial magistrate then proceeded, quite improperly in Counsel for the appellant's
view, to deal with the case as though it was a claim by a 'licensed moneylender' to recover monies lent and advanced.
Such criticism is neither warranted or well-founded. In the first place, the documentary exhibits although incorrectly described as 'promissory notes' referred to the parties as 'LENDER' and 'BORROWER' in three (3) instances (Exs. 1, 2 & 5) and in the remaining two (2) instances (Exs. 3 & 4) actually described the appellant as '(Moneylender)', and on the face-of-it, clearly evidenced moneylending transactions. Secondly, all exhibits prescribed an 'interest rate' and Section 3 of the Moneylenders Act which the trial magistrate was obliged to judicially notice [viz: Section 4 of the Interpretation Act (Cap. 7)], presumes that such a lender is a 'moneylender until the contrary be proved'.
Furthermore in Deo Verma Singh v. Ram Sarup 8 F.L.R. 107 which dealt with a cancelled promissory note, Hammet P.J. in upholding the moneylender's claim and in categorising the borrower's argument that a cancelled promissory note ceased to be a
sufficient note or memorandum as neither 'logical or sound', held:
"A promissory note, containing in the body thereof all the terms of the contract (viz 'the date of the loan'; 'the principal' and 'the rate of interest') and countersigned by the lender (as in Exs. 1 to 5 in this case), is a sufficient note or memorandum of a moneylending contract under Section 16(4) of the Moneylenders Ordinance."
Needless to say in the face of the evidence and the statutory presumption, the learned trial magistrate was entitled, indeed obliged,
to deal with the case as a claim to recover monies borrowed under moneylending transactions.
In this latter regard the learned trial magistrate without setting out the relevant provisions of the Moneylenders Act (Cap. 234) said (at p.45 of the record):
"The matter is covered by Section 16 of the Moneylenders Act. Subsection (4) which deals specifically with promissory notes. If they are held to be promissory notes then there is no evidence
before the court that copies authenticated by the plaintiff were delivered to the maker before the money was lent or indeed at any
time. If the documents are held to be not promissory notes and the transactions were straight out loans, again the plaintiff has
not complied with Section 16 for there never was in existence a note or memorandum of the contract."
and later he said (at p.47):
"I also note that the plaintiff did not produce a statement of his account as prescribed by Section 19 of the Act. Section 21
of the Act requires a moneylender who institutes proceeding for recovery of any money to produce a statement of such act and in practice
this is invariably attached to the Writ of Summons."
From the above extracts it may be discerned that the grounds or basics upon which the trial magistrate ruled that the appellants 'promissory notes' were unenforceable were as follows (in judgment order):
(1) non-delivery to the borrower of an authenticated copy of the promissory notes;
(2) non-existence of a note or memorandum of the moneylending contract; and
(3) failure by the lender to produce a Statement of Account.
Before dealing with these grounds however it is necessary to say something about the nature and form of the proceedings conducted
before the Magistrate Court.
At the outset if I may say so, the unfortunate and confusing state of affairs in the Magistrate Court arose as a direct result of
the form and manner in which the appellant pleaded and prosecuted his claim. Quite clearly it should have included an 'alternative claim' for monies lent and advanced by a licensed moneylender or, at the very least, have made it plain that the claim related to moneylending
transactions.
It is doubly unfortunate that neither during or after the appellant's evidence and before he had closed his case, did the trial magistrate
see fit to order, pursuant to Order IX r.2, 4 & 5 of the Magistrate Court Rules, that the pleadings be amended to properly reflect the above-mentioned 'alternative claim', more so as his judgment subsequently reflects, he was minded to deal with the plaintiff's case as if the 'alternative claim' had in fact been pleaded and/or was being defended on the basis that such claim was comprised of unenforceable moneylending transactions.
In the result counsel for the appellant complains that his client had no forewarning that the Moneylenders Act would be invoked and was therefore denied the opportunity of adducing the necessary evidence to support the 'alternative claim' which was first dealt with in defence counsel's written submissions and then later in the trial magistrate's judgment.
In a not entirely dissimilar case to the present namely, Bhagat Singh v. Mahendra Singh and Anor. 16 F.L.R. 139 in which there was no evidence of actual contravention of the mandatory requirements of Section 16 of the Moneylenders Act, Moti Tikaram P.J. (as he then was) in upholding the moneylender's claim on appeal despite the borrower specifically pleading the provisions of the Act said at p.143:
"... this is a case where the defendants are endeavouring to defeat a legitimate claim on a technical ground ... and the mere
failure to adduce specific evidence in relation to the matter in dispute can be partly attributed to the defence itself.
The object of all legal proceedings is to do justice between parties within the meaning of the law. In my view to allow the defendants
to take advantage of the situation in this case would be to defeat the fundamental object of law and justice especially as in this
case where there is no evidence that in fact the provisions of law were contravened."
A fortiori where neither the plaintiff or the defendant has raised the provisions of the Moneylenders Act either in their pleadings or cross-examination.
In this case the fact that the appellant's notes are not by definition 'promissory notes' and therefore do not satisfy the first requirement of Section 16(4) of the Moneylenders Act does not therefore inevitably mean that such documents cannot be treated as the 'note or memorandum in writing of the contract' required in terms of Section 16(1) provided that they also comply with the requirements of Section 16(3).
I am fortified in my view by the dictum of Gould J.A. in Ram Autar and Anor. v. Penaia Rokovuni 11 F.L.R. 226 when he said at p.234:
"I am unable to share the view that the same document may not function as both memorandum and contract. The memorandum may well
be the only writing, and is required by law to contain all the terms of the contract and to be signed by the parties."
and later, on the same page his lordship said:
"I think, therefore, that a memorandum under the section could embody the whole contract, including the promise to repay, express
or implied."
In the light of the foregoing I cannot agree with the trial magistrate's assumption that a promissory note that fails to satisfy the
requirements of Section 88 of the Bills of Exchange Act cannot be accepted as a 'note or memorandum of the contract' as required by Section 16 of the Moneylenders Act. Clearly in my view it can be.
What's more in Mahadeo Singh v. Chandar Singh 16 F.C.A. 155 the Fiji Court of Appeal held:
"3. The initial onus upon ... a moneylender to show that the transactions complied with Section 16 of the Moneylenders Ordinance, was prima facie discharged by the production of the three memorandum of the contracts; the evidential onus
then fell upon the appellant."
The memorandum in that case did however comply with the requirements in writing of Sections 16(1) and (3) of the Moneylenders Act.
The same cannot be said of the appellant's exhibits in this case under appeal. For instance, none of the exhibits distinctly sets
out "(a) rate of interest per centum per annum" and in three (3) instances (Exs. 3, 4 & 5) the interest rate is actually - '12 1/2 per month'.
Such a monthly interest rate does not strictly comply with the statutory requirements of Section 16(3)(c) of the Moneylenders Act, but, more seriously, such an interest rate was recently described by the Fiji Court of Appeal in a case concerning the appellant namely, Sohan Singh v. Amrit Prasad Civil Appeal No. 6 of 1996 (unreported) at p.6, as one where '... compound interest was charged contrary to Section 17 of the Moneylenders Act' and thereby rendered the contract 'illegal'.
I have not overlooked the appellant's unchallenged testimony that he charged the borrower 'in all cases interest at the rate of 10% per annum'. But if that evidence is accepted as reflecting the true position then quite plainly the appellant's exhibits do not contain or 'disclose all the terms of the contract' and are again in breach of Section 16.
As was said by Tompkins J.A. in Mahadeo's case (op. cit) at p.163:
"The whole scheme of the Moneylenders Act is that the borrower shall be protected from exploitation by a moneylender. Hence Section 16 provides that a memorandum showing the
whole of the terms of the contract shall be signed by both parties and a copy held by both parties. Thus the borrower goes into the
contract with his eyes open. The moneylender cannot vary the written contract by increasing (or decreasing) the rate of interest or by ... varying the terms of the existing loan without making further memoranda to comply with Section 16."
The appeal is accordingly dismissed with costs to the respondent.
D.V. Fatiaki
JUDGE
At Suva,
24th October, 1997.
Hba0009j.97b
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