HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 226/94

JOHN MANGE

-v-

EKANI RENCE

High Court of Solomon Islands
(Muria, CJ.)

Hearing: 16 August 1994 at Gizo
Judgment: 17 August 1994

P. Lavery for Plaintiff
Respondent in person

MURIA CJ: The appellant borrowed in 1993 $200.00 from the respondent and was to be repaid with 20% interent on the sum borrowed. The appellant later wrote out a cheque for $300.00 payable to the respondent. That cheque was not honoured when it was presented at the Bank. The appellant then wrote a cheque for $240.00 which was cashed. The respondent demanded the balance of $60.00. The appellant agreed that he should only owe the respondent $60.00 and not $240.00 as claimed by the respondent. The respondent had also been lending money to other people on interests.

In the Magistrates Court, Mr Lavery who also appeared for the appellant argued that the Money Lenders Acts of 1900-1927 apply in Solomon Islands pursuant to schedule 3.1 of the Constitution. The Magistrate found that the Money Lenders Acts apply in Solomon Islands.

Mr Lavery then argued that under the provisions of the Money Lenders Acts of 1900-1927, the lending of money by the respondent was illegal and so it was unenforceable. Counsel argued that the respondent carried out a business of lending money without licence and as such he contravened the provisions of the Acts.

The respondent now tells this court that he lent money but not as a business as such. He however did not deny that he was running a Fund and the lendings were for the benefit of that Fund.

The Magistrate found that the respondent was carrying out a business of lending money, and further that the respondent was not registered and therefore had no licence to carry out the business of lending money. However the Magistrate went on to conclude that the Money Lenders Act 1900 does not prohibit the making of a contract as that made between the appellant and respondent in this case.

Mr. Lavery argued that the Magistrate was wrong in law to find for the respondent having concluded that the respondent contravened the Money Lenders Acts. Counsel relied also on the case of Bonnard -v- DOTT [1906] 1 Ch 740.

Wether a person carries on the business of lending money is a question of both fact and law. In the sense that it is a question of fact, the borrower must establish that the lender was carrying on a business of lending money to other people and that he was holding himself out as ready to lend money as a business. See Chitty on Contracts, 23rd Ed. Vol.II, paragraph 1136, page 534.

However the law defines "money lender" and in certain circustances a money lender may not necessarily be carrying out the business of lending money if he falls outside that definition. Section 6 of the Act of 1900 defines 'money lender' as follows:

"The expression 'money-lender' in this Act shall include every person whose business is that of money-lending, or who advertises or announces himself or holds himself out in any way as carrying on that business...."

Under that section "money lender" does not include a person bona fide carrying on a business not having for its primary object the lending of money, in the course of which and for the purposes whereof money is lent. It is for the respondent, in this case, to establish that as a matter of law.

In the present case the Magistrate found as a matter of fact that the respondent was carry ing on a business of lending money. The Magistrate also found that as a matter of law the respondent was a money lender. On the evidence before the Court, the Magistrate was clearly entitled to reach those conclusions and I see no reason to conclude otherwise.

It is not therefore surprising that Mr Lavery complained against the final conclusion of the Magistrate giving the respondent the right to claim under a contract between the appellant and the respondent and awarding the respondent $60.00 as the sum outstanding under that contract to be paid by the appellant. The Act clearly provides that a money lender must register and must have a licence before carrying on the business of money lending. If he fails to do so and lends money out, he cannot enforce any claim arising from such lending. He is, in law, incapable of entering into such transaction which must be regarded as void.

The case in point is that of Bonnard -v- Dott (supra) where the court held that a money lender who has not registered himself as such is prohibited from making an agreement for purpose of lending and making repayment of money and from taking securities on such loan. Any agreement so entered would be illegal and void and a borrower may recover any securities which he has given although the money lender cannot recover the money he has advanced. At page 745, Collins MR had this to say about the position of an unregistered money lender:

"That the defendant is a person who is declared by the court to be a money lender and who by his omission to register himself finds himself under a statutory incapacity to enforce the bargain which he made. The consequence of that is that whether it is the borrower or the lender who brings the matter before the court, the transaction is absolutely void. The lender cannot compel the borrower to return the money lent, while the borrower, being one of the class which the Act was presumably designed to protect.... can compel the lender to return the securities for the loan, at any rate on the terms of repaying the amount lent".

On that authority, I do not see how the respondent should be allowed to enforce a contract which was clearly void. The lending of money by the respondent was prohibited by statute unless he had brought himself under the Act.

The law on money lending is designed to regulate the conduct of a business of money lending. But I think it is much more than simply that. It is also designed to protect a borrower who may be subjected to unfair, harsh and unconscionable bargain.

I do not need to consider the other matters raised by Mr. Lavery, as I am clearly of the view that this appeal must be allowed.

Appeal is allowed with costs.

(G.J.B. Muria)
CHIEF JUSTICE