Khan v Golechha International Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BRIDGE,LORD JUSTICE BRIGHTMAN,LORD JUSTICE CUMMING-BRUCE |
| Judgment Date | 08 February 1980 |
| Judgment citation (vLex) | [1980] EWCA Civ J0208-1 |
| Date | 08 February 1980 |
| Court | Court of Appeal (Civil Division) |
[1980] EWCA Civ J0208-1
Lord Justice Bridge
Lord Justice Cumming-Bruce and
Lord Justice Brightman
In The Supreme Court of Judicature
Court of Appeal
Chancery Division
MR. ELLIS MEYER (instructed by Messrs. Stuart Hunt & Co. of Croydon) appeared on behalf of the Appellants.
MR. T. CULLEN, Q. C. and MR. POWELL-JONES (instructed by Syed A. Rafique, Esq. of London) appeared on behalf of the Respondent.
I will ask Lord Justice Brightman to deliver the first judgment.
This is an appeal from a judgment of Mr. Justice Vinelott given on 7th March last year. He decided that a loan made by the defendants, Goleccha International Ltd., a licensed moneylender, to the plaintiff, Mr. Mohammed Goffer Khan, was statute barred under section 13 of the Moneylenders Act 1927.
Subsection (1) provides that:
"No proceedings shall lie for the recovery by a moneylender of any money lent by him after the commencement of this Act or of any interest in respect thereof, or for the enforcement of any agreement made or security taken after the commencement of this Act in respect of any loan made by him, unless the proceedings are commenced before the expiration of twelve months from the date on which the cause of action accrued."
The important words are "money lent". It is common ground that there was a debt outstanding which was owed by Mr. Khan to the company. The principal points at issue are whether that debt comes within the words "money lent "; alternatively, whether it is now open to the plaintiff (respondent to the appeal) to assert that it was "money lent".
The facts are admirably set out in the judgment of Mr. Justice Vinelott and for present purposes I can restate them quite shortly. On 18th December 1972 a sale agreement was made between the company as vendors and Mr. Khan as purchaser. The agreement related to the sale of a house at Greenwich. The purchase price was £8,000. Completion was to take place in January. The property was sold subject to the National Conditions of Sale. Clause 9 provided that:
"the Vendor shall at completion advance the sum of £8,000 upon the terms of the attached charge."
I shall refer to that later. Completion took place on 22nd January.
The form of the sale agreement was such that in the normal course of events completion would take place by the following steps, either simultaneously or in sequence. The first thing that had to be done was the signing of a memorandum of contract to comply with section 6 of the Moneylenders Act on the assumption, which the parties then made, that this was a moneylending transaction. So far as I need read it, subsection (1) of section 6 provides that:
"No contract for the repayment by a borrower of money lent to him or to any agent on his behalf by a moneylender after the commencement of this Act or for the payment by him of interest on money so lent and no security given by the borrower or by any such agent as aforesaid in respect of any such contract shall be enforceable, unless a note or memorandum in writing of the contract be made……" etc.
The next step logically was for the sum of £8,000 to be paid by the vendor to the purchaser pursuant to clause 9. The third step would be payment of the £8,000 purchase price to the vendor pursuant to the National Conditions of Sale. The fourth step would be the execution of the legal charge pursuant to the clause of the sale agreement which I have read. Next, the execution of a conveyance of the property in the form of a registered transfer as this was registered land. Lastly, the purchaser, being at this stage the owner, would execute a legal charge in favour of the vendor pursuant to clause 9.
Those steps were taken. The sum of £8,000 was advanced by the company to Mr. Khan by a cheque drawn in his favour. The £8,000 purchase money was paid by Mr. Khan by his specially endorsing that cheque in favour of the company'ssolicitor, who clearly had authority from the company to accept the money. In due course, presumably, after the solicitors' costs had been paid, the solicitors specially endorsed that same cheque to the company. We know it was not in fact passed through the company's banking account, because that was unnecessary.
I will say a brief word about the memorandum of contract of loan. This stated that the £8,000 was advanced to Mr. Khan as a loan and that it should be re-paid by instalments over a period of, I think, about four years. It was also provided that the principal should be repaid on demand if default should be made in the payment of any instalment. The accompanying legal charge provided that, if the borrower should repay the principal sum by weekly inst laments and so long as he should perform his other obligations, the company would accept such weekly payments of principal without payment of any interest and would not enforce the security thereby constituted.
Mr. Khan defaulted before the year was out. So far as we know, the company did not seek to enforce the security before Mr. Khan began proceedings in the Queen's Bench Division in 1974. He sued the company to set aside the contract of loan and the legal charge. His claim was that the memorandum of contract of loan did not satisfy the requirements of sect ion 6 of the Moneylenders Act. The company defended the action. The company argued that section 6 was satisfied. The company also alleged that the transaction was outside section 6 because the sum secured by the contract and by the legal charge was not "money lent".
So there were two issues which logically fell to be decided in this order. First, did the company make a loan of£8,000. If so, with the result that the Moneylenders Act applied, did the memorandum of contract of loan satisfy section 6?
The matter came to trial before Mr. Justice Thompson. He decided the first issue - loan or no loan - against the company but the second issue in its favour. Mr. Khan was not satisfied. He appealed. We have not got the Notice of Appeal before us but I think that does not matter. What we have got is the respondents' notice which was served by the company. Although the company had won on what was the principal issue before Mr. Justice Thompson, it appreciated that the Moneylenders Act is a somewhat dangerous jungle and that it would be wise to go to the Court of Appeal with more than one string to its bow. I will read the respondents' notice where two further issues were raised:
"(a) That the Learned Judge ought to have accepted the submission of the Respondents and ruled that the transaction in respect of which this action was brought was not a moneylending transaction or in any event was not a transaction arising out of the Respondents' business of moneylending and was consequently outside the scope of the Moneylenders Act 1900 to 1927.
(b) That the Respondents had a lien on the property mortgaged to or charged in their favour as unpaid vendors."
In the event the appeal was not heard. It was dismissed by consent. Mr. Khan on advice threw in his hand. His advisers took the view that, even if he succeeded on the section 6 issue, nevertheless he would lose on both the issues raised in the respondents' notice, each of which, if. decided against him, would be fatal - one issue to a great an extent than the other. So the appeal was dismissed by consent.
There is a transcript of whtwhat occurred before this court when invited to make that order. Counsel told the courtthat the best he could expect would be a Pyrrhic victory, and on being asked for elucidation, he said this:
"I might have been able to persuade your Lordships that the document did not comply with the Act, but I would not have been able to argue that he was not entitled in any event to a lien on the property or the amount outstanding. The thing that really clinches it from my point of view is that my learned friend yesterday referred me to a Revenue case in which the analogy for these purposes was total, and it makes it clear that the point I would have to argue in front of your Lordships on the Respondents' Notice is not sustainable."
In case it might be thought that counsel for the respondent had been pulling wool over the eyes of counsel for the appellant (who was not counsel appearing before us) we were told (and I accept) that all that had happened was that the respondents' counsel had, in the course of normal pre-trial courtesies, handed to the appellant's counsel a list of the authorities which he intended to have by him in court. There is no dispute that the Revenue case referred to was Ramsden v. Commissioners of Inland Revenue (1937) Tax Cases, 619. It deals with the complicated provisions of section 412 of the previous Income Tax Act and concerned a running account between a company and a director. It was a case in which the court held that purchase money allowed to remain outstanding by the vendor is not per se properly described as "on loan" to the purchaser.
There the matter rested until the summer of 1977 when Mr. Khan again took up cudgels to escape from his obligations. This time he launched a new attack. He claimed that the debt was statute barred by section 13 of the Moneylenders Act which, as I have pointed out, contains a twelve month time limit. The claim involved two main issues. Whet her the relevant indebtedness arose from a moneylending transaction and, if so, whether the twelve months period had elapsed.
There is one paragraph of the defence to which I should refer, paragraph 8. I think it better to read it all:
"The Defendants state that at the hearing of an Appeal from the judgment of the Honourable Mr. Justice Thompson in proceedings between the same parties…. the Plaintiff through Counsel conceded that the transaction in question was neither a loan nor...
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