COURT OF APPEAL.
G. P. S. DE SILVA, J. (President, C/A) AND GOONEWARDENA. J.
A. 337/76 (F).
C. GALLE 2503/MB.
NOVEMBER 24 AND 27, 1986.
Mortgage suit-Money Lending Ordinance s. 8-Professional money lender-Failure tokeep books of accounts-Business-Inadvertence.
Where the defence to a suit on a mortgage bond was that the plaintiff was carrying onthe business of money lending but failed to keep regular books of accounts and theaction was therefore not maintainable-
Being a money lender is distinguishable from being a person who is carrying on thebusiness of money lending.
Where the plaintiff had lent money to several persons on interest over a longperiod, the fact that the clientele was limited to persons well known to the plaintiffcannot detract from the fact that he was a professional money lender because noprudent money lender would give money to unknown persons.
The variety of the security taken, namely mortgage bonds, promissory notes andcheques is typical of the transactions of a professional money lender.
There must be more than occasional and disconnected loans. There must be abusiness of money lending and the word 'business' imports the notion of system,repetition and continuity. The line of demarcation cannot be defined with closeness orindicated by any specific formula. Each case must depend on its own peculiar features.
The conduct of the plaintiff cannot amount to ''inadvertence" under s.8(2) of theMoney Lending Ordinance. A mistaken view of the law cannot in the circumstancesamount to inadvertence.
Cases referred to:
Utchfield v. Dreyfus –  1KB 584. 589.
Edgelow v. Mac Etwee – (1918) 118 Law Times 177.
Perera v. Amarasena – (1971) 74 NLR 545.
APPEAL from judgment of the District Judge of Galle.
N. R. M. Daluwatte. P C. with Miss K Gabadage and Miss Nandadasa forplaintiff-appellant.
Dr H. W Jayewardene. Q.C. with L C. Seneviratne, Miss T. Keenavinna and MissWattage for defendant-respondents.
Cur. adv. vult.
January 30. 1987.
G. P. S. DE SILVA, J. (President, C/A)
The plaintiff sued the 1 st defendant for the recovery of the principalsum and interest due on two mortgage bonds marked "A" and "C" andfiled of record. On mortgage bond "A" dated 22nd April 1960. hesought to recover a sum of Rs. 1 7,000 as principal and interest from22.12.65, and bn mortgage bond "C" dated 29.03.69, a sum ofRs. 19,000 as principal and interest from the date of the mortgagebond. He further prayed for a hypothecary decree in respect of theproperty which was the subject matter of the mortgage.
The 1 st defendant in his amended answer pleaded inter alia that theplaintiff was carrying on the business of money lending and as he hadfailed to keep regular books of accounts he was not entitled tomaintain the action by reason of the provisions of section 8 of theMoney Lending Ordinance. After trial, the District Judge held that theplaintiff was a professional money lender who had failed to keepregular books of accounts and dismissed the action. Hence this appealpreferred by the plaintiff.
The principal submission of Mr. Daluwatte, counsel for theplaintiff-appellant, was that the District Judge was in error when heheld that the plaintiff was carrying on the business of money lendingwithin the meaning of section 8 of the Money Lending Ordinance.Counsel contended that all that the evidence showed was that theplaintiff on occasions lent money to persons well known to him whowere in financial distress and that the facts certainly did not warrantthe inference that he was carrying on the business of money lending.He urged that there was a distinction between merely lending moneyto persons well known to the lender and a person who carries on thebusiness of money lending, a distinction which, counsel complained,had been overlooked by the District Judge.
With this submission, I am afraid, I cannot agree. It is not in disputethat the plaintiff, in partnership with his wife, carried on a tailoringestablishment and a textile business in Main Street, Galle. He admittedin cross-examination that since 1950 he lent money to his customersand persons known to him on mortgage bonds, promissory notes andcheques. This was done in his place of business in Main Street. He lentmoney not only in his own name but also in the name of his wife andchildren. The interest he derived was used for his tailoring and textilebusiness. To the specific question "you in fact lend money oninterest", his answer was in the affirmative. Having regard to theparticular context in which this question was asked and the answergiven, it seems to me that the District Judge was right in relying on itas an admission which tends to show that he was more than a meremoney lender but rather was carrying on the business of moneylending. The fact that he said that he lent money only to persons wellknown to him does not carry his case any further, for no prudentmoney lender would give money to unknown persons. On theother hand, as submitted by Dr. Jayewardene for thedefendant-respondent, the variety of the security he obtained, namelymortgage bonds, promissory notes and cheques, is typical of thetransactions of a professional money lender. It is worthy of note that itis not the plaintiff’s case that he lent money only to his close friendsand relatives.
In support of his case the 1 st defendant produced several mortgagebonds marked D1 to D26 which clearly established that from 1950 to1964 the plaintiff, his wife and his son had lent money on interest tovarious persons. These mortgage bonds were attested by one notary,a fact which was emphasised by Dr. Jayewardene. Besides lendingmoney on mortgage bonds, there was documentary evidence to showthat he lent money in 1968 and 1969 on promissory notes andcheques-vide P2, P3, P5 & P6.
What is more, the plaintiff produced his book of accounts markedP14 and a printed receipt book with his name and address markedP15. In P14 there is an index which gives the names of 19 persons towhom he has lent money. It shows money lent to different personsfrom 1964 and the interest received over the years up to 1974. P15sets out the interest received on loans from 1 963 to 1 968. On ascrutiny of P14 and P15 it is difficult to resist the conclusion that the
plaintiff was one who had over a long period of time lent money toseveral persons on interest. The plaintiff's own documents tend torebut the suggestion of occasional and isolated money lendingtransactions.
Undoubtedly, the question whether a person "carries on thebusiness of money lending" within the meaning of section 8 of theMoney Lending Ordinance is primarily a question of fact. Farwell, J. inLitchfield v. Dreyfus (1) observed:
"But not every man who lends money at interest carries on thebusiness of money lending. Speaking generally a man who carrieson a money lending business is one who is ready and willing to lendto all and sundry, provided they are, from his point of view, eligible. Ido not of course mean that a money lender can evade the Act bylimiting his clientele to those whom he chooses to designate as'friends' or otherwise: it is a question of fact in each case."
Dealing with the attributes of a money lender. Me Cardie, J. inEdgelow v. Mac Elwee (2) expressed himself thus:
"A man does not become a money lender by reason of occasionalloans to relations, friends or acquaintances, whether interest becharged or not. Charity and kindliness are not the basis of usury. Nordoes a man become a money lender merely because he may uponone or several isolated occasions lend money to a stranger. Theremust be more than occasional and disconnected loans. There mustbe a business of money lending and the word 'business' imports thenotion of system, repetition and continuity. The line of demarcationcannot be defined with closeness or indicated by any specificformula. Each case must depend on its own peculiarfeatures"
On a consideration of the admissions of the plaintiff and thedocuments referred to above, it seems to me that the requisite"system, repetition and continuity" in the transactions has beenestablished. I therefore find myself unable to say that the DistrictJudge was wrong in holding that the plaintiff carried on the business ofmoney lending.
It was not contended before us that P14 was a book of accountsregularly kept in the manner contemplated by section 8 of the MoneyLending Ordinance. Indeed, Mr. Daluwatte very properly concededthat P14 is not a book of accounts which falls within the statutoryprovisions. He, however, sought relief against the "default" on theground of "inadvertence"-vide section 8(2) of the Money LendingOrdinance. The "inadvertence" relied on by counsel was that until thedecision of Weeramantry, J. in Perera v. Amarasena (3), the view thatprevailed was that mortgages were excluded from the purview of theMoney Lending Ordinance. A mistaken view of the law, as contendedfor by counsel, cannot, in the circumstances of this case, amount to"inadvertence" within the meaning of section 8(2) of the Ordinance. Itwas the duty of the plaintiff who carried on the business of moneylending to observe the relevant provisions of the law.
Finally, it is right to add that in the course of the hearing before us,Mr. Daluwatte argued that at the stage the bond marked "C" wasexecuted, the plaintiff had ceased to be a professional money lenderfor the reason that, that bond was executed in March 1969 whereasthe last bond executed prior to March 1969 was 26 of August 1964.Counsel based his submission on the intervening period of five yearsduring which no mortgage bonds were executed. In my view, thisargument is not tenable having regard to the entire course of conductof the plaintiff over the years, and in particular the money lent on thepromissory notes P2 and P3 in 1968 and on the cheques P5 and P6 in1969.
I would accordingly hold that the finding of the District Judge isreasonable and accords with the evidence. The appeal must thereforefail and is dismissed with costs fixed at Rs. 210.
GOONEWARDENA, J. – I agree.Appeal dismissed.