Orakpo v Manson Investments Ltd

JurisdictionUK Non-devolved
JudgeLord Diplock,Viscount Dilhorne,Lord Salmon,Lord Edmund-Davies,Lord Keith of Kinkel
Judgment Date06 July 1977
Judgment citation (vLex)[1977] UKHL J0706-1
Date06 July 1977
CourtHouse of Lords
Orakpo
(Respondent)
and
Manson Investments Limited
(Appellants)

[1977] UKHL J0706-1

Lord Diplock

Viscount Dilhorne

Lord Salmon

Lord Edmund-Davies

Lord Keith of Kinkel

House of Lords

Upon Report from the Appellate Committee, to whom was referred the Cause Orakpo against Manson Investments Limited, That the Committee had heard Counsel, as well on Wednesday the 4th, as on Thursday the 5th and Monday the 9th, days of May last, upon the Petition and Appeal of Manson Investments Limited of Henrietta House, 9 Henrietta Place, London W.1, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 3d of December 1976, so far as therein stated to be appealed against, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; and Ikechukwu Ifoloma Orakpo appearing on his own behalf as the Respondent to the said Appeal, he having lodged a Case in answer to the said Appeal, but not being called upon; and due consideration being had of what was offered for the said Appellants:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled. That the said Order of Her Majesty's Court of Appeal of the 3d day of December 1976, in part complained of in the said Appeal, be, and the same is hereby Affirmed except as to Costs, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondent two thirds of the Costs incurred by him in the Court of Appeal, and also the Costs incurred by him in respect of the said Appeal to this House. the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments.

Lord Diplock

My Lords,

1

The Moneylenders Acts 1900 to 1927, which are to be construed as one Act, were designed to protect unsophisticated borrowers from being over-reached by unscrupulous moneylenders. As the present case shows, however, they are capable of being used by unscrupulous borrowers to avoid paying their just debts to moneylenders who, in the words of the learned judge referring to the appellants in the instant case, did not do "anything which was not perfectly straightforward, agreed in advance and perfectly understood by the borrower, who � is well able to look after himself in these matters".

2

There are three main ways in which borrowers from licensed moneylenders such as the appellants are protected by the Moneylenders Acts 1900 to 1927: unconscionable bargains may be reopened by the court; the full terms of the contract must be set down in writing signed by the borrower before the loan is made; and a twelve months limitation period applies to moneylenders' actions.

3

1. The provision for reopening unconscionable bargains ante-dates the other two protective measures, and is to be found in section 1 of the Moneylenders Act 1900 which provides that�

"where proceedings are taken in any court by a moneylender for the recovery of any money lent � or the enforcement of any agreement or security made or taken � in respect of money lent",

4

the court may relieve the borrower of his liability for any amount which the court regards as excessive and

"may re-open the tranaction � and may set aside, either wholly or in part � any security given or agreement made in respect of money lent by the moneylender".

5

2. The necessity for a written memorandum of all the terms of the contract was imposed by section 6 of the Moneylenders Act 1927 which provides that�

"No contract for the repayment by a borrower of money lent to him � by a moneylender � or for the payment by him of interest on money so lent and no security given by the borrower � in respect of any such contract shall be enforceable"

6

unless a note or memorandum in writing containing

"all the terms of the contract"

7

was signed by the borrower before the money was lent or before the security was given.

8

3. The twelve months limitation period was created by section 13 (1) of the Moneylenders Act 1927, which provides that�

"No proceedings shall lie for the recovery by a moneylender of any money lent by him � or of any interest in respect thereof, or for the enforcement of any agreement made or security taken � 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".

9

It is to be observed that section 13 of the Moneylenders Act 1927 reflects the language of section 1 of the Act of 1900 in drawing a distinction between proceedings for the recovery of money lent and proceedings for the enforcement of any agreement or security in respect of money lent. So do the other sections 10 and 11 of the Act of 1927 which refer to legal proceedings by a moneylender.

10

Again, section 6 of the Moneylenders Act 1927, which deals with enforceability, draws a similar distinction between the contract for the repayment by the borrower of money lent and interest and any security given by the borrower in respect of such contract. While it is true that to proceed to enforce a security which is held for money lent provides a means by which that money may be recovered and in some contexts such proceedings might be capable of falling within the description "proceedings for the recovery of money lent"; but in the context of section 13 which refers specifically both to proceedings for the recovery of money lent and to proceedings for the enforcement of a security I do not find it possible to construe the former phrase so widely as to include the kind of proceedings referred to in the latter. To do so would be to render otiose any reference in the section to proceedings for the enforcement of any security.

11

The instant case is concerned with proceedings which on the face of them were proceedings by a money lender for the enforcement of a security.

12

The circumstances are set out in detail in the judgments of the Court of Appeal ( [1977] 1 All E.R. 666).

13

In brief, on various dates in 1972 and 1973 the respondent ("the borrower") entered into eight contracts of loan with the appellants ("the lenders"). The purpose of each of these contracts was to enable him to acquire a good freehold or long leasehold title to eight different dwelling-houses which he proposed to convert for multiple occupation. Each loan was to be secured by a first legal charge in favour of the lenders upon the property in respect of which the loan was made. In two cases the money was required to pay upon completion the purchase price of houses which the borrower had contracted to purchase. In other cases it was required to pay off prior legal or equitable charges on the property. In respect of each of the contracts of loan it was the common intention of both parties that the money lent should be so applied, and to ensure this, completion of the various transactions by which the title of the borrower to the perfected and the new legal charges in favour of the lenders executed were carried out on behalf of both parties by their solicitors pursuant to instructions and undertakings of which the details are to be found in the judgments of the Court of Appeal. Each loan was applied to its intended purpose; the borrower acquired legal title to the properties and the legal charges in favour of the lenders, as mortgagees, were duly executed.

14

Through inadvertence, however, the written memorandum of the contract left out one of its terms, of which, however, the borrower was well aware and had expressly consented to. Nevertheless, under section 6 of the Moneylenders Act 1927 this omission as is now conceded by the lenders made the contracts for the repayment of the loans and the legal charges in respect of the loans unenforceable. The borrower who had fallen behind in his interest payments brought an action for a declaration that each of the contracts was unenforceable, and for an injunction restraining the lenders from taking steps to sell or otherwise dispose of the properties subject to the legal charges. The lenders counterclaimed as alternative remedies either (1) repayment of the loans and interest or (2) a declaration that they were entitled to a lien upon the properties for such part of the money lent as was applied to defray the purchase price or to redeem prior charges affecting the properties in question.

15

The case was tried by Walton J. who held that the written memorandum did not contain all the terms of the contracts and that accordingly both the contracts and the legal charges were unenforcable. Nevertheless, upon the counterclaim, he held that this was governed by the decision of the Court of Appeal in Congresbury Motors Ltd. v. Anglo-Belge Finance Co. Ltd. [1971] 1 Ch. 81 and that to the extent that the monies lent had been applied to defray the purchase price or to pay off prior charges affecting the properties, the lenders were entitled by subrogation to the security represented by the previously existing unpaid vendor's liens and equitable charges. He accordingly declared that the lenders were entitled to such liens and to such equitable charges and ordered that the properties be sold to enable the securities to be realised. The borrower appealed against the judgment against him on the counterclaim. The Court of Appeal, which was also bound by the Congresbury Motors case, allowed the borrower's appeal upon the ground that the counterclaim was time-barred under section 13 of the Moneylenders Act 1927. They held, correctly in my view, that the cause of action in respect of the alleged...

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