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Present : Fisher C.J. and Drieberg J.
WEEBAPAH v* WIGGIN et al28—D. C. Colombo, 27,743.
Promissory note—Sale of ear on hire, purchase system—Note given toguarantor—Marginal entries—Ordinance No. 2 of 1918, s. 10.
Where A purchased a car from G on the hire purchase systemthrough a motor car agent, B> and B, in order to help A to enterinto the hire purchase contract with C, agreed to pay to C, on A’sbehalf, the initial! payment and the first three instalments, andtook from A a promissory note for the amount of these pay-ments,—
Held, this was not a transaction to which the Honey LendingOrdinance applied.
HE plaintiff sued the defendants, husband and wife, on apromissory note to recover a sum of Bs. 3,332.98. The
second defendant entered into a purchase hire ^agreement for thepurchase of a car from the Auto Supply Company according to whichthe second defendant was to make an initial payment of Bs. 2,283,33and thereafter eleven payments of Bs. 452.52 each. The seconddefendant was unable to make the payments and the plaintiff onbehalf of the second defendant agreed to pay the Auto SupplyCompany the initial payment, and the first three instalments.The second defendant and his wife' gave the promissory note suedupon to cover the amount of the instalments.
The learned District Judge held that the promissory note wasnot enforceable as it had failed to conform to requirements ofsection 10 (2) of the Money Lending Ordinance.
H. V. Perera (with him Choksy), for plaintiff, appellant.
H. E. Garvin, for first defendant, respondent.
September 5, 1929. Drieberg J.—
The position of the parties to this note is clear when the factsconcerning the sale of the car are stated.
The car was sold by the appellant, not to the second defendant,but to the Auto Supply Company, who paid him its price, Bs. 6,850.The second defendant entered into a purchase hire agreement withthe Auto Supply Company by which the second defendant was tomake an initial payment of Bs. 2,283.33 and thereafter elevenpayments of Bs. 452.52; if the second defendant made all these
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payments, amounting to Rs. 7,261.05, he would have becomeentitled to the car. The second defendant was not able to make theinitial payment to .the Auto Supply Company and the instalmentswhich fell due thereafter; the appellant, who wais interested inhelping the second defendant, to enter into the purchase hireagreement with the Auto Supply Company, for on this dependedthe company completing the purchase of the car and paying him theprice, agreed to pay to the Auto Supply Company on behalf of thesecond defendant the initial payment of Rs. 2,283.33 and the firstthree instalments amounting to Rs. 1,357.56. The appellant tookover a Buick car of the second defendant for Rs. 1,002.50, and thusthe second defendant then had to repay to the appellant, a sumof Rs. 2,638.39.
On January 12 the second defendant and his wife, the firstdefendant, gave the appellant the promissory note sued on, forRs. 3,332.98 payable on April 12, the difference being made up ofRs. 190.25 insurance of the car, Rs. 10 registration fee paid by theappellant, Rs. 324.34 value of accessories sold to the second defend-ant, and Rs. 170 for interest and discounting fees. On January18 the second defendant entered into the purchase hire agreement,D 1, with the Auto Supply Company.
The appellant paid to the Auto Supply Company the initialpayment of Rs. 2,283.33 and on February 1 the second defendantgave the appellant in part repayment a cheque for Rs. 300 whichwas to be presented on February 23; in the meantime, on February18, the first instalment of Rs. 452.52 fell due and was paid by theappellant, who told the second defendant that unless the chequewas met he would not pay further instalments. The cheque wasdishonoured. The appellant says that the second defendant thenagreed to pay the further instalments himself.
The appellant has sued for the full amount of the note, buthe should have limited his claim to Rs. 2,427.94, for he did notpay the second and third instalments, which amount to Rs. 005.04.At the trial the appellant agreed so to limit his claim.
These are the facts substantially as found by she trial Judge,and on them the appellant is entitled to succeed. His actionhas, however, been dismissed on the ground that on the marginof the note he entered under the heading “ Capital sum borrowedRs. 3,332.98. The learned District Judge held that the statementwas false, the initial payment and the three instalments not havingbeen paid at that date, and that the promissory note was notenforceable by reason of the provision in section 10 (2) of theMoney Lending Ordinance, No. 2 of 1918.
Even if this is a money lending transaction I do not think it isone in which the note was taken for the security of the loan ofmoney. I have doubts whether it falls within section 10, for there
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was no sum borrowed which could have been stated on the margin i9j».
of the note when it was made. The note was taken not as security
for money lent but for money to be paid for and on behalf of the DaIJm8
second defendant. It has, however, been held in Bamen Ghetty v. '
Benganathan Pillai 1 that a note taken to secure future advances WtewijjfinV'is subject to the provisions of section 10; the judgment of thelower Court, which was affirmed in appeal, was that in such a casethe statement on the margin should be that no money was lent.
That case however was one of an ordinary transaction of moneylending by a Chetty firm, the note having been taken by the plaintifffor money to be lent to the defendant.
The Ordinance applies only to money lending transactions.
The preamble states that it was enacted “ as it was necessarythat provision should be made for the better regulation of moneylending transaction. ” When the note is not given in such atransaction the Ordinance has no application, Sanitamby v. Nogan. 2
Caldera v. Zainudeen 3 was a case of a note given by a memberof a cheetu club to the manager of it to secure payment of futurecontributions. On the margin was entered as borrowed the sumsso due and to be paid. De Sampavo J. held that though thisentry was fictitious the note was not taken as security for a Joan,that section 10 presupposes a “ loan ” or a “ lender, ” and that asthere was no borrowing the note did not fall under section 10.
In the present case, of the amount for which the note was madea sum of Rs. 694 was due by the second defendant for matters suchas insurance of the car and price.of accessories which were in nosense loans. As regards the amount due to the Auto SupplyCompany, the agreement by the appellant to pay this was inno sense a money lending transaction, but. was purely a businessor trade arrangement. The only reason the appellant had foragreeing to pay the initial payment was to enable him to facilitatethe sale of the car to the Auto Supply Company and obtain fromthem its price. The position is almost the same as if the appellanthad guaranteed to the Auto Supply Company the payment of theinitial sum and the first three instalments. I assume that if thesecond defendant found himself in a position to make these paymentshimself and was prepared to do so, the appellant would have beenpleased to be relieved of the necessity of making the paymentshimself.
The appeal is entitled' to succeed. Judgment will be enteredfor the appellant for the sum of Rs. 2,427.94 with interest andnoting fee as found to be due by the Judge and for costs. The firstdefendant will pay to the appellant the costs of this appeal.
>(7927) 28 N. L. R. 339.2 (1923) 26 N. L. R. 211.
3 24 N. L. R. 244.
The second defendant did not contest this action and judgmentwas entered against him for the full amount claimed. It wasadmitted that judgment should not have been entered ior that sum,but should have been for the lower sum, for which we have allowedjudgment against the first defendant. Mr. Perera, however, agreedto restrict the amount he would claim under that judgment to thesum of Bs. 2,427.94 and interest.
Fisher C.J.—I agree.