Nasiban v Totaram [1963] FJLawRp 6; [1963] 9 FLR 1 (30 November 1963)

Moneylending-unenforceable security-appropriation of payments towards reduction of-Moneylenders Ordinance (Cap. 207) s. 16 (1).

Before the respondent became a registered moneylender he guaranteed payment of two promissory notes for the appellant and was called upon to pay them after he so registered. The respondent also, while registered as a moneylender, took a Bill of Sale and Crop Lien from the appellant to secure repayment of certain moneys, but these did not include the moneys owing in respect of the guarantee. The Bill of Sale and Crop Lien were declared unenforceable in other proceedings. There was a running account of receipts and payments between the appellant and the respondent.

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Held.-(1) In default of any agreement to the contrary the respondent was required to appropriate the payments received, to the appellant's earliest liability which was the amount due under the Bill of Sale and Crop Lien.

(2) That the respondent was required to make such an appropriation notwithstanding that the Bill of Sale and Crop Lien were subsequently held to be unenforceable.

This is an appeal from the Magistrate, First Class, Ba in his Civil Case No. 100 of 1962. In the lower Court the respondent, as plaintiff sued the appellant, as defendant, for the sum of £274 6s. 9d. being the total of five payments made by him pursuant to two promissory notes given by the appellant as maker and guaranteed by him and which amounts he was called upon to pay under that guarantee, default having been made by the appellant.

A number of defences were raised by the appellant in the Court below which arose out of the fact that the respondent had for some years been what is known as the" financier" of the appellant's husband, and after his death of the appellant. These lending transactions culminated in a settlement of account and further advances after the respondent became registered as a moneylender. On 27th February, 1958, the appellant executed in favour of the respondent a Bill of Sale and Crop Lien for £799. Before this the respondent had guaranteed the promissory notes for the appellant but at the time of the execution of the Bill of Sale and Crop Lien he had not been called on to make any payments pursuant to his guarantee. The learned trial Magistrate found as a fact that the moneys guaranteed under the two promissory notes were not included in the amount secured by the Bill of Sale and Crop Lien a finding not challenged on appeal.

The learned trial Magistrate also found that on 23rd February, 1957, the date on which the respondent guaranteed payment of the two promissory notes, he was not registered as a moneylender, and that although he was later registered as one, the provisions of the Moneylenders' Ordinance did not apply to this transaction. This finding also has not been challenged on appeal.

The Bill of Sale and Crop Lien dated 27th February, 1958, were the subject of litigation in Supreme Court Civil Action No. 169 of 1959, when they were declared to be unenforceable for the reason that the moneylenders' contract did not set out all the terms of the transaction and the securities were ordered to be delivered up for cancellation. This judgment was dated 6th October, 1961. The learned trial Magistrate, however, does not appear to have dealt with a defence arising out of these facts set out in the statement of defence in these terms-

"(4) In any event and in the alternative, I claim that if the debt under the Bill of Sale and Crop Lien made between the parties on the 27th day of February, 1958, is unenforceable, then all payments received by the plaintiff on account of the defendant's farm must be appropriated towards any other debt due and owing. I therefore claim that this debt has been paid and satisfied."

This defence was repeated in amplified form in the grounds of appeal as follows:-

"(1) The learned trial Magistrate erred in not holding that the amount paid by the plaintiff under the guarantee had been paid and satisfied by reasons of moneys collected by the plaintiff from the Colonial Sugar Refining Co. Ltd.

(2) The learned trial Magistrate erred in not holding that the payments under the guarantee were part of a continuous account between the plaintiff and the defendant, which said account had been declared to be unenforceable between the parties.

(3) The learned trial Magistrate erred in not holding that any payments received from the Colonial Sugar Refining Co. Ltd. under the Crop Lien could not be appropriated to discharge the unenforceable debt of £799 and ought to have been appropriated firstly towards payment of guarantee debt."

As counsel for the appellant pointed out there is only one issue for decision, that is to say was the respondent entitled to appropriate towards payment of the appellant's indebtedness under the Bill of Sale and Crop Lien, which was later held to be unenforceable, moneys received by him in preference to the appellant's legal and enforceable liability to him in respect of the moneys he has now claimed.For the purpose of considering this issue the only relevant facts are these, which can be put in the form of receipts and payments-

1958-				£	s.		d.		£		s.		d.
Feb.	27	To security ..	..	799	0		0
Sept.	30	" payment P.N.	..	25	0		0
Dec.	9	" payment P.N.	..	60	0		0
Dec.	31	" interest	..	79	17		8
1959-
Feb.	12	To payment P.N.	..	59	10		0
May	25	" payment P.N.	..	75	0		0
May	31	" interest	..	48	17		11
June	23	" payment P.N.	..	54	16		9
July	15	" interest	..	16	3		6
1958-
May	16	By C.S.R.	..	..					121		17		10
Sept.	4	" C.S.R.	..	..					27		17		10
Oct.	30	" C.S.R.	..	..					7		3		1
1959-
May	..	By C.S.R.	..	..					33		18		7
1960-
Jan	29	By C.S.R.	..	..					488		19		5

				£1,218		5		10		£679		16		9

These figures make it obvious that if the respondent was entitled to apply moneys received towards repayment of the moneys secured under the Bill of Sale and Crop Lien he was entitled to judgment for the amount he claimed in the Court below.

Counsel for the appellant has contended that this was a "running account " between the respondent and the appellant. I would agree that the transactions between them would appear to indicate this to be so. This contention, however, is of no help to the appellant. The law on this question is clear. Halsbury's Laws of England 3rd Ed. Vol. VIII at para. 367 sets it out in these words-

"Prima facie, the right of appropriation by the creditor does not arise in the case of an account current, that is to say, where there is one entire account into which all receipts and payments are carried in order of date, so that all sums paid in form one blended fund (d). In such a case the presumption is that the first item on the debit side of the account is intended to be discharged or reduced by the first item on the credit side, and that the various items are appropriated in the order in which the receipts and payments are set against each other in the account (e).

This presumption, however, may be rebutted by evidence of an agreement to the contrary or of circumstances from which a contrary intention is to be inferred."

I can find no evidence on the record of any agreement to the contrary. It would appear therefore that the respondent, in default of appropriation, was required to appropriate the payments received to repayment of the appellant's earliest liability that is the liability for the amount due under the Bill of Sale and Crop Lien.

Counsel's second contention is that the respondent was under a liability to appropriate the first payments received by him, after he had been called on to pay and had paid moneys pursuant to his guarantee, in discharge of this part of the appellant's liability and not in discharge of that part which was unenforceable. He relied on the case of Kasumu v. Baba-Egbe [1956 ] 3 All E.R. 266. I find nothing in that authority to support the appellant's contention. It goes no further than to support the proposition that if a contract by a moneylender is unenforceable the borrower is entitled to the return of his security as of right and without being put on terms. Halsbury at paragraph 368 sets out the law as to appropriation by a creditor as follows-

"A creditor can appropriate a payment to a debt which is barred by lapse of time, or which is unenforceable because of some formal defect in the contract upon which it arises (p), but not to a debt which is illegal or to a claim which does not constitute a legal or equitable demand (q)."

Section 16 (1) of the Moneylenders' Ordinance (Cap. 207) provides that no contract for the repayment by a borrower shall be enforceable unless a note or memorandum in writing be signed by the parties. The Ordinance does not make such a contract illegal. It would appear therefore that on the authorities the respondent was entitled to appropriate such moneys as came into his hands towards repayment of the moneys due to him under the Bill of Sale and Crop Lien although this security was subsequently held to be unenforceable.

Fiji Law Reports

Nasiban v Totaram [1963] FJLawRp 6; [1963] 9 FLR 1 (30 November 1963)