P. A. PERERA, Appellant, and H. A. D. AMARASENA, Respondent

129-NLR-NLR-V-74-P.-A.-PERERA-Appellant-and-H.-A.-D.-AMARASENA-Respondent.pdf


WEERAM.AXTRY, J.—Pcrcro v. Amorascna
545
1971 Present : V/eeramantry, J., and Thamotheram, J.
P. A. PERERA, Appellant, and H. A. D. AMARASENA, RespondentS. C. J39jG/(F)—D. O. Gampaha, 1301S/M
Money Lending Ordinance {Cap. SO)—Sections S and 0—Applicability to mortgagetransactions—-Mortgage Act (Cap. SO), s. 2—“Hypothecary action”—Inapplicability of maxim gcncralio specialibus non dcrogant.
Mortgages are not excluded from the scope of the Money Lending Ordinance.Accordingly, a professional money lender who lends money upon mortgagebonds is not ent-illcd to enforce his claim on a mortgage bond if ho hasfailed to keep regular books of account as required by section S of tho MoneyLending Ordinance. In such a cose the money-lender cannot rely on the maximgcncralia specialibus non derogant to contend that tho general provisions oftho Money Lending Ordinance should not be permit ted to supersede tho spociolstatutory provisions in tho Mortgage Act regarding mortgages.
-A-PPEAE front a judgment of the District Court, Gampaha.Frederick JV. Obeyesekere, for the defendant-appellant.
J. W. Suba-singhe, for the plaintiff-respondent.
Cur. adv. vult.
July 3, 1971. Weeramantry, J.—
This appeal involves the simple but important question whether thoprovisions of sections 8 and 9 of the Money Lending Ordinance applyto a person who lends money upon mortgage bonds.,
. The plaintiff lent to the defendant upon the bond put in suit a sum of.Rs. 1,000 with interest at 16 per cent per annum. He seeks in thisaction to recover a sum of Rs. 1,SOO being the amount of the principaland the accrued interest. The defendant in his answer takes up theposition that the plaintiff is a.professional money lender and that he isnot entitled to enforce his claim as lie has failed to comply with therequirements of the Ordinance relating to the keeping of books ofaccount.
The learned District Judge has held that the plaintiff has advancedmoney on several mortgage bonds but has taken the view that mortgagebonds are governed by the Mortgage Act and not by the Money LendingOrdinance. He has also held that even if the plaintiff carries on thebusiness of money lending he would be entitled to relief under thoproviso to section 8 (2) of the Money Lending Ordinance.
Counsel have not been able .to cite to me any decision of this courtdirectly discussing this subject. In Sinnapillai v. Veeragalhy 1 it would
1 (1937) 39 N. L. B. 321.
646
WEERASIANTRY, J.—Ptrcra v. Amarasena
indeed appear that the court proceeded on the assumption that the MoneyLending Ordinance" was applicable to a person who lent money uponmortgage bonds, for the court has closely examined the provisions ofsection 8 of the Money Lending Ordinance in the context of a claimbased upon a mortgage bond. However the court would not appearto have given its mind specifically to the question that has been raisedin the present case.
There is on the other hand a decision of this court in Gunatilake v.de Soysa1 assuming that .inasmuch as a mortgage bond is not a^proceeding under the Money Lending Ordinance, the plaintiff canrecover interest at the agreed rate provided the interest recovered doesnot exceed the principal, i'he point now taken does not appear to havebeen urged before the court in that case, and a perusal of that judgmentwould appear to indicate that in that case likewise the court did notgive its mind to the question now under consideration.
A decision cited in the course of the argument was that of BertramC.J. in Samithamby v. Nogan 2. This was a case concerning a promissorynote given for the value of paddy supplied and it was held that the MoneyLending Ordinance did not apply to such a transaction. The basis ofthis decision was that that was not a money lending transaction but atransaction arising out of advances of seed paddy. That case not beingone of a loan and the Ordinance being therefore inapplicable in anyevent, this decision need detain us no longer.
In the result it would appear that this question must be viewed asone of first impression, and this indeed is what counsel have invited meto do.
The Money Lending Ordinance was enacted in the year 1918. Bythat date legislation on the question of mortgages was already uponour Statute book. Although this legislation was not of the comprehensivenature of the present Mortgage Act or even of the Mortgage Ordinanceof 1927, the legislature had in fact given its attention to the subject ofmortgage in provisions going as far back as Ordinance No. 21 of 1871and Ordinance No. 8 of 1871. Moreover, quite apart from legislation,the mortgage was a well-known institution in our common law, beingone of the important types of contract known to the Roman Dutchlaw.
It seems unlikely therefore that, had it been the intention of the legisla-ture to exclude mortgages from the scope of the Money Lending Ordinance,it would not have done so in express terms. There is no indicationwhatsoever in the Ordinance to that effect. The Ordinance in factspecifically excludes certain classes of transaction from the operation ofsection 2, and among the classes so exempted are those of banks andpawn brokers. The question of exclusion from the operation of theOrdinance having been thus clearly before the legislature, it is unlikely
(1951) 45 C. L. TV. 43.
(1924) 26 N. L. R. 217.
WEERAMANTRY, J.—Perera v. Amarasena
547
that a category as important as that of mortgage, so common in Ceylon,should have passed without mention had that been intended.
The provisions of the Money Lending Ordinance seem to suggestthat all transactions involving the lending of money, other than thoseexpressly exempted, are brought within its purview. To refer againto section 2, this section permits the court where, inter alia, the transac-tion is harsh and unconscionable or substantially unfair, to reopen thetransaction and check the account between the lender and the person6ued. In such account all previous transactions may be gone into andeven settled accounts reopened. There i3 nothing excluding mortgagetransactions from such an accounting, and indeed the same sectionexpressly authorises the court upon such an accounting to set asideeither wholly or in part, or revise or alter any security given oragreement made in respect of money lent.
Section 2 would not in fact appear to be workable as an instrument forachieving equity and fairplay upon an overall view of all transactionsbetween the parties, unless mortgage transactions as well may be broughtinto the accounting. The equity sought to be achieved by the’ section -is an equity which, it need scarcely be observed, protects not only theborrower but also the lender, for the courts would see that the sectionis not so used that the borrower becomes the oppressor1. In order to doso the court must necessarily have a conspectus of all transactions between-the parties.
Again, section 8 speaks generally of persons carrying on money lendingbusiness. Money lending business is not restricted in any way to anyone type of transaction, nor are any of the well-known species of moneylending transactions left out of this section. Mortgages are indeedone of the best known methods of lending money. The mere fact thatmoney is lent in the one case upon a promissory note and in the othercase upon a mortgage bond affords no justification for holding that theone case comes within the scope of the Ordinance and the other does not.The man who habitually lends money on either type of transaction isequally a money lender, and if it were the policy of the Legislature toplace certain checks upon his activities by section 8 it would not appearto be reasonable to remove those checks merely because the transactionIs one of mortgage.
Furthermore, although the lending of money may be incidental tosome other business carried on, it would appear from the decision inPerera v. Jafferjee Brothers 2 that the transaction is none the less oneof money lending.
To view'the matter from another angle, the fact that the MortgageAct contains special provisions dealing with mortgage transactions nomore makes the Money Lending Ordinance inapplicable to such transac-tions than the fact that cheques are dealt with by the Bills of Exchange
1 See Kusumu v. Baba Egbe, (1056) 3 All E. B. 266 at 270.
'* S. O. 106/62 and 116164 Inly. D. C. Colombo 6252 MB.
548WBERAMANTJRY, J.—Perera v. Amarascna
Ordinance removes such instruments from the applicability of the MoneyLending Ordinance. The fact that detailed provisions regarding themanner of execution, enforcement and effects of each type of instrumentare specifically contained in Ordinances dealing especially ■with suchinstruments, does not mean that so far as they concern transactions ofmoney lending, they fall outside the ambit of an Ordinance which dealswithout restriction with all types of money lending transactions.
The learned District Judge has been of the view that because mortgagebonds themselves contain the required particulars, no books of accountwould be necessary regarding such transactions. I do not consider thisto be a correct view of the matter. If a person lends money upon pro-missory notes and sues upon them, the sum borrowed and the interestlevied would equally appear upon the face of the document sued upon,but it seems clear that the Legislature requires other records over andabove the information appearing upon the face of the document, wherethe lending is by a.professional money lender. The need for such extrachecks is self-evident where the court is required to form a conclusionregarding the regularity of these transactions and the fairness of suchtransactions in their totality. •
In the absence therefore of express words of exemption in the Statutetaking the lending of money upon mortgage bonds outside the operationof the Ordinance I consider that effect must be given to the terms of theOrdinance as they stand. It would not be permissible to take awayfrom the operation of the Ordinance an entire category of moneylending transactions of considerable importance unless there is express. warrant in the Statute for doing so. .
Counsel have referred me in this connection to the debates in theLegislative Council on March 1st 191S when the Money Lending Ordinancewas passed. There would appear to be no reference to mortgage transac-tions as being exempt from the scope of the Ordinance. Xor again isthere any mention of mortgage transactions in the report of 23rd FebruaryI91S of the Select Committee to which the Money Lending Bill had beenreferred prior to its being passed. That Select Committee includedamong others Sir Anton Bertram the Attorney General, Sir PonnambaJaml-tnmanathan and Mr. K. Balasingham and although these distinguishedlawyers have made many comments in regard to the Bill there is notthe slightest reference to mortgage transactions as being exempt fromits scope.
There is nothing novel in the notion that a mortgage transaction,involving as it docs a loan of money to the mortgagor, is a transactionof money lending. This view receives support from decisions not onlyin this but in other jurisdictions as well.
A recent decision of this court to be noted in this connection is thatin Perera v. Ja/ferjee Bros.1 where the contracts sued upon -were mortgages1 S. O. 106/62 and 116164 Inly. D. C. Colombo 6252 MB.
WEERAMANTRY, J.—Perera v. Amarasena
549
of land. The principal defence taken was that the plaintiff firm hadmade defaults in furnishing to theRegistrarofBusinessNames a statementof particulars in accordance with the requirements of the Ordinance.The default alleged was that the plaintiff firm carried on the business ofmoney lending but failed to specify the lending of money as one of thebusinesses which the firm carried on. The assumption throughout thatcase was that a mortgage transaction was one of money lending, thiscourt observing that “The two mortgage bonds are in terms agreementsfor loans of money to be made from time to time upon the security ofhypothecations of immovable property”. This court held that thetransactions betw een the parties {that is the mortgage transactions suedupon as w’ell as other transactions) showed that the plaintiff carried onthe business of money lending and that the business of money lendingshould have been declared under the Business Names Ordinance.
There is, from other jurisdictions, the decision of the Privy Councilin appeal from the Supreme Court of Nigeria in Kasumu v. Baba-Egbc hThat was a case of the mortgage of immovable property in Lagos whichwas treated as a money lending transaction for the purpose of. section19 of the Nigerian Money Lenders Ordinance.
Likewise the Indian courts have held that dues of a mortgage on thebasis of a mortgage transaction satisfying certain conditions stipulatedby the Act, are loans witliin the definition given in the Money Lenders’Act.I 2
It has been argued on behalf of the plain tiff-respondent that a mortgageaction is an action of a dual nature—an action upon the hypothecaryclaim and an action for the money due—and that thercforesomuchoftherelief sought as relates to the hypothecary ciaim does not come withinthe ambit of the Money Lending Ordinance. In this connection wehave been referred to the definition of a hypothecary action in section2 of the Mortgage Ordinance wherein a hypothecary action is definedas an action to obtain an order declaring the mortgaged property to bebound and executable for the payment of the moneys due upon themortgage and to enforce such payment by a- judicial sale of the mortgagedproperty. This part of the relief sought in an action upon a mortgagebond is therefore said to be independent of and distinct from the moneyclaim.
I do not think it is possible to compartmentalise the hypothecary
claim in this w'ay. The mortgage is always the subsidiary obligation,
for hypothecation of property is accessory to some principal obligation3which may take one of many forms, sucli as downy, sale, letting, surety-ship or lending of money4. As Maasdorp observes5 “the original obliga-tion may be any obligation whatsoever, which in case of non-fulfilment,
4(1956) 3 AU E.R. 266.
See Gurunntha Ttao v. Dasaralhy, (1953) A.I.It. Orissa 33S at 343, andReclamoni Sabu v. Kcthrabasu Sabu, (1954) A.I.It. Orissa 36.
Wille, Mortgage and Pledge, p. 7.(1920 edn.1
ibid p. S.
vol. 2, p. 234.
850
WEERAMANTItY, J.—Percra v. Amarasena
is capable of being converted into a money value by means of a claimfor compensation, but as a general rule it is a money debt”.
There is then a principal obligation, arising in this case from thelending of money, which lies behind and supports the mortgage, andin examining the applicability to the entire transaction, of the MoneyLending Ordinance, we cannot lose sight of this fact.
Moreover section S (2) of the Money Lending Ordinance states thata person failing to comply with the requirements of section 8 shall notbe entitled to enforce any claim in respect of any transaction in relationto which the default shall have been made. Consequently both thehj’pothecary claim and the money claim, arising as they do, from atransaction in relation to which the default has been made, arc therebyaffected.
Similar phraseology appearing in section 13 (1) of the English MoneyLenders’Act of 1927 was considered by the Court of Appeal in lie Martin’sMortgaga Trusts C A- 31 3/atthews, Ltd. v. 3Iarsden Building Society1.That section prohibited the institution, unless before the expirationof twelve months from accrual of cause of action, of proceedings by amoney lender for the enforcement of any claim made or security takenin respect of any loan made by him. The Court had little difficulty infinding that this wide language covered an assertion of the rights of amoney lender under a mortgage taken by him to secure a loan of money.The court endorsed the trial judge’s view that although the applicationwas in form an application by the plaintiffs for execution of the statutorytrust (which, in English law, results from the mortgage by virtue ofsection 105 of the Law of Property Act 1925) still they were neverthelessproceedings for the enforcement of security consisting of the mortgage,within the meaning of section 13 (1) of the Money Lenders’ Act, 1927.
The more recent case of Kasumu v. Baba-Egbe, already referred to,is even more in point. The Nigerian Ordinance there under considerationby the Privy Council also contained the phraseology that the personin default shall not be entitled to enforce any claim in respect of anytransaction. Their Lordships observed that these words of deprivationare very widely drawn and that they should not be confined even tothe assertion of rights by means of or in the course of legal proceedings.
It was held that even the performance of such acts in the law as theexercise of a right of sale over property mortgaged or charged, or theretention or taking possession of such property in assertion of the claim.to repayment, is also precluded.
– I do not think therefore that the circumstance that the relief soughtupon a mortgage bond is twofold suffices to take the hypothccaty claimoutside the operation of the Money Lending Ordinance.
Learned Counsel for the plaintiff-respondent lias laid much stress uponthe maxim generali-a, specialibus non chroyant and has submitted thatwhere there i3 special statutory provision relating to mortgages, the1 (1051) 1 All E. 11., p. 1053.
WEER AMAXTRY, J.—Perera v. A marasenn
551
general provisions of the Money Lending Ordinance should not be per-mitted to supersede those special statutory provisions. However, forreasons which I have already indicated I do not think there i3 anylimitation upon the wide words in the Money Lending Ordinance so asto exclude from its purview money lending transactions which areassociated also with the taking of a mortgage bond. Furthermore thereis not in any event any conflict between the provisions of the twoStatutes.
For all these reasons I see no ground of principle justifj'ing theexemption of mortgage transactions from the scope of the Ordinance.Indeed it would defeat the policy of the Ordinance if mortgagetransactions which arc one of the commonest forms of money lendingtransactions in this country, should be excluded from the scope ofthe Money Lending Ordinance.
The next question is whether the evidence proves a sufficient numberof transactions to establish that the plaintiff is a professional moneylender.
In the present case the learned trial judge lias held that the plaintiffhas advanced money on several mortgage bonds. The plaintiff, who isa mechanic in the Railway workshop, at first denied that he had lentmoney to any persons other than the defendant. Under cross-examinationhowever he was constrained to admit, when details were put to him,that he had lent sums upon mortgages to other persons as well. Headmitted having lent Rs. 1,000 upon a mortgage to one Don Daniel.Although he denied having lent money to one Agnes cle Silva, a mortgagebond was produced marked D1 showing that Rs. 1,000 had been advancedto her. A loan of Rs. 2,500 to one Abraham Perera was proved by D2,a loan of Rs. 500 to one Obias by D4, a loan of Rs. 1,000 to one LaurieNona by D5, a loan of Rs. 1,000 to Elaris Perera upon D7. The loanto Don.Daniel was proved also by the bond D3. Although objectionwas taken to the production of these documents and an undertakingwas given to prove them, learned counsel for the plaintiff later statedthat he was prepared to admit all theso documents without formalproof.
It has been submitted on behalf of the plaintiff-respondent that thetransactions in evidence in the present case are in any event not sufficientto establish systematic money lending. In support of tiffs contentionI have been referred to the judgment in Perera v. Sally1 where Poj'serS. P. J. held that evidence of nine promissory notes was not sufficientto establish that the deceased was a professional money lender. Howeverthero would appear to have been certain circumstances in that casearising from the evidence of the alleged money lender’s widow, whichsatisfied the court that despite the number of transactions the deceasedwas not in fact carrying on the business of money lending. As Po3'serS. P. J. observed, although various decisions had been cited before
1(1531) 16 Ceylon Law Bee. 164.
552
WEERAMANTRY,' J.—Perera v. Amarasena
him, this was not a matter which could be decided by authority. Heobserved further that the evidence in each case must decide whetherthe person suing is a professional money lender or not.
Having regard to the principle enunciated in this very decision Iwould have no hesitation in holding upon the facts of the present casethat the plaintiff is a professional money lender. The transactions aresufficiently frequent and the attempt to conceal them sufficientlydishonest to rebut- any suggestion that the plaintiff was not carrying on.the business of money lending. The plaintiff’s false denials at thecommencement of his cross-examination have indeed deprived him ofany vestige of a claim to the Court’s sympathetic consideration.
In view of the conclusions I have reached, this is scarcely a matterfor the applicability of the proviso to section S (2) of the Money LendingOrdinance.
In the result I conclude that section S of the Money Lending Ordinanceapplies to the plaintiff and that in view of his failure to keep regularbooks of account he is not entitled to enforce his claim. I therefore setaside the judgment and order of the learned District Judge and dismissthe plaintiff’s action with costs both here and in the Court below.
Thamothebam, J.—I agree.
Appeal alloiced.