United Dominions Trust Ltd v Kirkwood

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE DIPLOCK
Judgment Date24 Feb 1966
Judgment citation (vLex)[1966] EWCA Civ J0224-4

[1966] EWCA Civ J0224-4

In The Supreme Court of Judicature

Court of Appeal

From Mr Justice Mocatta

Before

The Master of the Rolls

(Lord Denning)

Lord Justice Harman and

Lord Justice Diplock

United Dominions Trust Limited
Plaintiffs Respondents
and
Kirkwood
Defendant Appellant

MR PETER FOSTER, Q.C. and MR P.A. FERNS (instructed by Messrs Beachcroft & Co., Agents for Messrs Hough, Halton & Soal, Carlisle) appeared as Counsel for the Appellant.

MR DESMOND ACKNER, Q.C. and MR J.M. RANKIN (instructed by Messrs Edwin Coe & Calder Woods) appeared as Counsel for the Respondents.

THE MASTER OF THE ROLLS
1

Lonsdale Motors Limited. is a private company which ran a garage business in Carlisle. Mr Kirkwood wag the managing director. He and his wife held all the shares.

2

United Dominions Trust Limited. is a large public company which describes itself as "bankers" carrying on business at United Dominions House, Eastcheap in the City of London. It is an important financial house. It lends big sums of money to various people. It has a high standing and includes the Bank of England amongst its shareholders. I will call it U.D.T. It also owns all the shares in a wholly-owned subsidiary called United dominions Trust (Commercial) Limited., which does a lot of financing of hire purchase transactions. I will call it "Commercial". These two companies have branches in several towns in this country where a single branch manager acts on behalf of both companies from one single address. In Carlisle they have such a branch.

3

In 1961 Lonsdale Motors Limited. desired to buy cars to put in their showroom for sale, but they had not got the money for the purpose. So they went to the branch manager at Carlisle and borrowed it from U.D.T. As security for repayment, they gave bills of exchange in favour of U.D.T. The loans were called "stocking loans". Lonsdale Motors also disposed of cars to customers who wanted hire purchase terms. Lonsdale Motors went again to the branch manager. He agreed to buy the cars on behalf of Commercial and then Commercial let them out on hire purchase terms to the customer. Lonsdale Motors invoiced the cars to Commercial and got cash for them.

4

This case arises out of stocking loans for £5,000. U.D.T. lent £5,000 to Lonsdale Motors Limited. and in return Lonsdale Motors accepted five bills of exchange, each for £1,000 drawn on them by U.D.T. Mr Kirkwood endorsed them. The bills were not met on presentation. U.D.T. gave notice of dishonour to Mr Kirkwood. Lonsdale Motors Limited. went into liquidation. U.D.T. now sue Mr Kirkwood as indorsee. He has no defence whatever except that he has raised the Moneylenders Act. He says that U.D.T.are unregistered money lenders and, therefore, cannot recover. U.D.T. say that they are not moneylenders but bankers. That is the only alternative. U.D.T. are either moneylenders or bankers. There is no middle course. If they are bankers, they can recover the £5,000 from Mr Kirkwood. If they are moneylenders, they can recover nothing.

5

In order to determine this issue, I think it convenient to consider first the law.

6

BURDEN OF PROOF

7

Section 6 of the Moneylenders Act 1900 says that "The expression 'moneylender' in this Act shall include every person whose business is that of moneylending …but shall not include… (d) any person bona fide carrying on the business of banking". The structure of the section clearly suggests that every person whose business is that of moneylending is to be regarded as a moneylender unless he can bring himself within one of the specified exceptions. It was so construed by Lord Justice Fletcher Noulton in Nash v. Layton, 1911, 2 Chancery at p. 79, who said that a Judge would have to direct the jury that "they must find he is a moneylender unless he came within one of the specified exceptions". Similarly, Mr Justice McCardie in Edgelow v. MacElwee, 1918, 1 King's Bench at p. 206, said that if it appears that a "business of moneylending is carried on, the requisites of the definition in Section 6 are fulfilled and the question arises whether this falls within the exceptions indicated in that section". Likewise Mr Justice Cairns in North Central Wagon, Finance Co. v. Brailsford, 1962, I Weekly Law Reports at p. 1294, said that: "It was for the plaintiffs to show that they fell within the exception in Section 6(d) and they have not established this". I am of the same opinion as those learned Judges and hold that once the opening words of Section 6 are satisfied, the burden is on the person to bring himself within the exception on which he relies. The facts are within the knowledge of the lender and not the borrower, and he should prove them. He who affirms must prove.

8

In the present case the plaintiffs sued as holders of five bills of exchange, each for £1,000. Once they produced those bills of exchange, the legal burden passed to the defendant to prove that the plaintiffs ware unregistered moneylenders. In order to discharge that burden, the defendant had to prove that the business of the plaintiffs was that of moneylending. For this purpose the defendant proposed to deliver the usual interrogatories in the form settled by Nash v. Layton, 1911, 2 Chancery p. 71. But the plaintiffs' solicitor avoided these interrogatories by making in a letter the admission that "our clients have for many years past made and do make numerous loans of money to customers. Such loans are made by our clients at varying rates of interest in the course of their business". That admission was sufficient proof that the plaintiffs carried on the business of moneylending. The burden then passed to the plaintiffs to prove that they came within exception (d), i.e. that they bona fide carried on the business of banking. And as I read the Judge's judgment, they accepted that burden. He says that it was "admitted for the plaintiffs that, unless they came within the first limb of exception (d), they must fail in this action". In order to discharge the burden, the plaintiffs opened the case to the Judge and called witnesses. The question is: Did their evidence discharge the burden of proof?

9

THE PRIVILEGE OF BANKERS

10

Bankers are a privileged class. They are exempt from the vexatious restrictions which are imposed on other money lenders. They are an exclusive circle to which entry is limited. It is important that we should know what these privileges are: for we will see that Parliament, when granting them, has never defined who is a banker.

11

(1) Bankers are not compellable to produce their books in Court, but may send copies. No definition is given of "banker" save that it means any persons or company "carrying on the business of bankers", see the Bankers Books Evidence Act 1879 and Section432 of the Companies Act 1948.

12

(2) Bankers are given special protection from liability when paying a crossed cheque to a banker; or receiving payment of a crossed cheque for a customer; or paying a cheque that is not endorsed. No definition is given of banker save that it includes a body of persons, whether incorporated or not, who carry on the business of banking, see Sections 2, 79, 80, 82 of the Bills of Exchange Act 1882,and the Cheques Act 1957.

13

(3)Bankers are given special exemption from stamp duty when giving drafts or orders for payment from one banker to another. No definition is given of a "banker" save that it means "any person carrying on the business of banking in the United Kingdom", see Section 29 of the Stamp Act 1891, and the First Schedule, "Bill of Exchange", Exemption (2).

14

(4)Bankers are given special exemption from registration under the Moneylenders Acts and from all the stringent regulations affecting moneylenders and their contracts. No definition is given of a banker save that it is "any person bona fide carrying on the business of banking", see the Moneylenders Act 1900 and 1927. Parliament seems to think that it is possible for a moneylender readily to know whether he is carrying on a banking business or not, because if a moneylender publishes an advertisement implying that he is carrying on a banking, business, he is guilty of a criminal offence, see Section 4 of the Moneys lenders Act 1927. Yet Parliament does not attempt to define what a banking business is.

15

(5)Trustees may, pending investment, pay any trust money into a "bank" – see Section 11 of the Trustee Act 1925: but the Act does not tell us what is a "bank".

16

(6) A bank can advance money to a farmer and take a charge on all his stock and assets. No definition is given of a bank save that it means any firm, incorporate company, or society carrying on banking business and approved by the Ministry – see Section 5(1)(7) of the Agricultural Credits Act 1928.

17

(7)The Bank of England can request information from bankers and make recommendations to them. "Banker" is defined as meaning "any such person carrying on a banking undertaking as may be declared by the Treasury to be a banker" – see Section 4 of the Bank of England Act, 1946.

18

(8) A "company carrying on the business of bankers" which furnishes an annual return under the Companies Act 1948 is exempt from old banking statutes, but no definition is given of the "business of bankers", see Section 432 of the Companies Act 1948.

19

(9) A banking or discount company has a special privilege in making up its balance sheet and profit and loss account. It need not disclose a lot of matters which other concerns have to disclose, see the Companies Act 1948, 8th Schedule, paragraph 23. In that paragraph the expression "banking or discount company" means any company which satisfies the Board of Trade that it ought to be treated as a banking company or a discount company. Thus, the Board of Trade are made the arbiters of the question without anything to guide them. They would welcome such guidance: for in the Report of Lord Jenkins' Company Law Committee it is said:...

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