Essay: Moneylender v Borrower: Arguing the Failure to Comply with Moneylenders Ordinance of Sarawak



Paste 1. Facts Of The Case

On 14th June, 1960, the respondent to the present appeal (the “borrower”) executed a charge of his land under section 143 of the Land Code in favour of the appellant (the “moneylender”). The memorandum of charge, which was in the statutory form, recited that the moneylender had lent the borrower $6,600 with interest at the rate of 12% per annum payable monthly. This charge was registered under the provisions of the Land Code on 16th June, 1960. It is, I think, admitted and at any rate has not been denied that this sum of $6,600 was actually lent. Subsequently the borrower executed further charges of the same land in favour of the moneylender expressed to be for various sums of money lent. These subsequent charges were all in the statutory form and were all registered in accordance with the provisions of the Land Code. Later the moneylender demanded payment of the sums in respect of which the charges had been given and, payment not being forthcoming, on 22nd May, 1964, he issued an originating summons asking for an order of sale under section 148(2) of the Land Code.

On 31st July, 1964, the borrower filed an affidavit in which he admitted the execution of the charges but denied the correctness of the amounts stated to be owing. This was based on allegations of failure to give credit for payments and compounding of interest which have not been examined and which it is not necessary for this court to examine here. Then on 26th August the borrower filed an application for an order dismissing the originating summons on the ground “that the proceedings are bad for want of compliance with section 3(1) and section 4 of the Moneylenders Ordinance (Cap. 114)”. The matter came on for hearing the following day and was adjourned till 17th September and then till 2nd October.

On 17th September, that is during the adjournment, the charges on which the moneylender’s claim was based were registered in the High Court in purported pursuance of section 3(1) of the Moneylenders Ordinance. When the matter came on for hearing on 2nd October, 1964, the judge decided to deal first with the moneylender’s application for sale. In the event he held that registration of the charges under the

Moneylenders Ordinance after an application had been commenced for an order for sale was out of time, that the charges were “documents of debt” within the meaning of the Moneylenders Ordinance and that by reason of want of registration they were unenforceable. Against that decision the moneylender has now appealed.

2. Issue Arises

1. Whether there has been a failure to comply with the provisions of the Moneylenders Ordinance of Sarawak ?

2. Whether one of the results is to deprive the appellant of the remedy which he seeks in these proceedings?

3. Arguments/Contentions Advanced By The Plaintiff/Appellant/Applicant.

On 14th June, 1960, the appellant had lent the respondent $6,600 with interest at the rate of 12% per annum payable monthly. This charge was registered under the provisions of the Land Code on 16th June, 1960.  Subsequently the respondent  executed further charges of the same land in favour of the appelant expressed to be for various sums of money lent. These subsequent charges were all in the statutory form and were all registered in accordance with the provisions of the Land Code. Later the appellant  demanded payment of the sums in respect of which the charges had been given and, payment not being forthcoming.

On 22nd May, 1964, appellant  issued an originating summons asking for an order of sale under section 148(2) of the Land Code. Respondent filed an affidavit in which he admitted the execution of the charges but denied the correctness of the amounts stated to be owing and  filed an application for an order dismissing the originating summons on the ground “that the proceedings are bad for want of compliance with section 3(1) and section 4 of the Moneylenders Ordinance (Cap. 114)”.

The trial judge dismissed the application of the appellant on the ground that the registration of the charges under the Moneylenders Ordinance after an application had been commenced for an order for sale was out of time, that the charges were “documents of debt” within the meaning of the said Ordinance and that by reason of want of registration they were unenforceable. So, against that decision the moneylender (appellant) has now appealed.

As was said by Lord Dunedin in the case of Whitney v Inland Revenue Commissioners [1926] AC 37, “A statute is designed to be workable, and the interpretation thereof by a court should be to secure that object, unless crucial omission or clear direction makes that end unattainable.”

4. Arguments/Contentions Advanced By Defendant / Respondent.

The respondent had executed four charges over the land concerned securing certain principal sums and interest. The execution of the charges was admitted, but the amount owing under them was disputed and, in particular, the default alleged (that payment of interest was in arrear) was denied.

On 31st July, 1964, the defendant / respondent filed an affidavit in which he admitted the execution of the charges but denied the correctness of the amounts stated to be owing.Then on 26th August the defendant / respondent filed an application for an order dismissing the originating summons on the ground “that the proceedings are bad for want of compliance with section 3(1) and section 4 of the Moneylenders Ordinance (Cap. 114)”.

Sections 3 and 4 of the Moneylenders Ordinance are to the following effect:–

3. (1) Every document of debt of whatsoever nature entered into with a registered moneylender shall be made out and registered in court, and any such document not complying with this Ordinance shall not be accepted as evidence in court.

    (2) No unregistered moneylender shall make out a document of debt in court.

4. At the time a document of debt is signed by the borrower, the officer attesting such document shall, if a cash loan, see that the full amount set forth therein is paid over in his presence by the lender to the borrower or, if the consideration be other than cash, satisfy himself that the borrower has received full value for the amount set forth in the document.”

In support of these grounds, it was submitted that a charge on land under the Land Code was not a document of debt within the meaning of section 3 of the Moneylenders Ordinance and, alternatively, that, if it was, the Land Code, having been enacted subsequently to the Moneylenders Ordinance and containing specific provision in regard to execution of instruments under that Code.

5. Opinions And Judgments Of The Judges On The Arguments Of The Parties.

THOMSON LP

For myself I have given the matter the best consideration I can. There is little assistance to be derived from authority, although it may be that some light is shed by the following observations by Humphreys J. in the case of Hill v Regen [1945] KB 329 332:–

“Whether I regard the derivation of the world ‘document’ from Latin, or the decisions of the courts on the meaning of the word, I find that a document must be something which teaches you and from which you can learn something i.e., it must be something which affords information. In the dictionaries the word is repeatedly defined as something which is ‘evidence,’ not in the sense that it is something admissible in a court of law, but as being something which makes evident that which otherwise would not be evident.”

 A charge of land at any rate to the extent to which it sets out the terms of a loan of money is clearly within the expression “document of debt” within the meaning of the Ordinance. It has been argued that the documents were properly attested and registered under the Land Code and that that amounts to compliance with the provisions of the Moneylenders Ordinance. The argument is without substance. The two statutes are different.

I would add that I am fortified in the results at which I have thus arrived by the case of Jangir Singh v Ko Tak [1957] SCR 46 in which the facts were the same as those in the present case. Moreover that case effectively disposes of an argument which was addressed to us to the effect that the provisions of the Moneylenders Ordinance have fallen into desuetude so far at any rate as concerns transactions where there is a registered charge of land. That may or may not be true, and the appellant unsuccessfully sought to adduce evidence to that effect that was not called at the trial. The argument, however, is beside the point. If the Ordinance has fallen into desuetude it can only be because its provisions have been deliberately disregarded for Jangir Singh’s case shows that the necessity for compliance has been asserted by the courts as recently as 1957.

For myself I would dismiss the appeal with costs.

WYLIE CJ

In the present instance, there was no compliance with sections 3 and 4 of the Ordinance. Section 3 could not be complied with by means of the late registration that was effected, because by that time it was impossible to have the document of debt prepared before an officer of the court. In consequence, these charges may not be “accepted as evidence in court”, to quote the language of section 3 of the Ordinance.

Another matter the court would need to satisfy itself on this application is that the notice given under subsection (1) (which was exhibited in the evidence on affidavit) complied with the terms of the charge, as required by subsection (3). It does not seem possible, in the course taken so far in these proceedings, for the court to be so satisfied, if the charges cannot be accepted in evidence.

I consider that this application for leave to sell the respondent’s land cannot succeed and I would dismiss this appeal with costs.

TAN AH TAH FJ

I have had the advantage of reading the judgment of the Chief Justice of Borneo. I agree with it and have nothing to add.

6. Review

Yes, I accept the opinions and judgements of THOMSON LP on the argument of the parties and the issue that whether  there has been a failure to comply with the provisions of the Moneylenders Ordinance of Sarawak. It is required proper documents of debt as the proof of debt or any transaction of money occurred in between two parties.

It is entitled an Ordinance to “provide for the control of moneylenders” and provides for the compulsory registration of such persons. It does not define what a moneylender is but section 8 says that the “Ordinance shall apply to the lending of money at interest” except by a number of certain specified classes of persons including banks, pawnbrokers, statutory corporations and persons carrying on a business which does not have for its primary object the lending of money but in the course of which and for the purpose of which money is lent. This type of people are whom lend money to personally known people or to friends of friends upon recommendation due to emergency reasons or in good faith of helping them with just the mutual understandings and promise to pay back based on trust. Normally people who does this will no have any written agreement, registered contract papers or documents as they are either lay man or even money lending is not  their routine or business. They don’t have any registration to government concerning that through this act they will be collecting interest payment on the amount the lend to others. However, the ‘moneylenders’ who are running such business of lending money to others for a fixed rate of interest for a certain period of time. They are the parties who register themselves as a company or an institution which lend money or finance others with loan with the affirmation of signed documents of debts. This documents should be registered in court or should be sent to stamping in the Lembaga Hasil Dalam Negeri (LHDN) for the purpose of validness of the said documents.

This documents of debt can’t be done by any other unregistered person whom willing to lend money or becoming moneylenders without proper licence. This is because it is unlawful for a unregistered moneylender to charge interest on anybody whom they lend money. Preparing such documents to be signed by the borrower or to be used as the proof of the moneylending transaction will be null and void, where it is not accepted as an evidence in the Court of Law following any dispute on the said moneylending transaction. It is unlawful for unlicensed moneylenders to prepare such documents but there is an option of preparing agreements which has been labelled as “Friendly Lon Agreement” and to be signed by the both parties and be stamped in Lembaga Hasil Dalam Negeri (LHDN) and make it a valid agreement by paying stamp duty to the government. Through this agreement, it is also allowed for the person who lending money to request for a security which is equal to loan amount and borrower has to provide security where the party giving loan can apply for a caveat on the said property as an interested party to the property.

Referring to the case of Abirami Ammal v Meyappa Chettiar [1959] MLJ 149, the dispute was to whom the charged land to be transferred as the land owner whom charged the land as security for the money he borrowed, played a dirty game by charging the land to two different parties claimed to be moneylenders. There were proper documents of debt was prepared and signed by the borrower and the first moneylender as well as the second moneylender. But in our case, it is not clear of the documents of debt which is the important evidence for the dispute. If the charges in the present case are “documents of debt”, that particular documents has never been seriously contested in court and they certainly did not comply with the provisions of the Moneylenders Ordinance. This is not just a case of being registered out of time. It is admitted that nothing was done even to attempt to comply with the provisions of the Ordinance till 17th September, 1964. That was long after the money was paid by the moneylender and it was long after the documents were executed. The long gap or the time period between the date of moneylending done and the date of court commencement were started shows that something is missing along the process of this dealing between the Appellant and the Respondent.  

It has been argued that the documents were properly attested and registered under the Land Code and that that amounts to compliance with the provisions of the Moneylenders Ordinance. The argument is without substance. From this, I have to think that the documents prepared was according Land Code which is totally different to which our Learned Judge has been complying with which is Moneylenders Ordinance. I too has no clear picture on the documents of debt whether it was filed as the evidence in the bundles of evidence or not as I’m not sure with the content of the documents signed the Appellant and the Respondent. As told by the Learned Judge, the importance of the documents of debt was not pressured by the Appellant as it would be the main key for them to succeed in their appeal to obtain the charge and sell the land which was charged as security for the money owed by the Respondent.

Yes, I accept the opinions and judgements of WYLIE CJ on the argument of the parties. This appeal arises from the refusal of the judge in chambers at Kuching to grant to the appellant an order for sale under section 148(2)(c) of the Land Code (Cap. 81 of the Laws of Sarawak). Substantially, the reason for the refusal was that the appellant had failed to comply with the provisions of section 3 of the Moneylenders Ordinance (Cap. 114 of the Laws of Sarawak).

The respondent, in his affidavit, admitted execution of the four charges, but denied that interest was in arrear under any of the charges. He also disputed the amount owing under the charges.

In support of these grounds, it was submitted that a charge on land under the Land Code was not a document of debt within the meaning of section 3 of the Moneylenders Ordinance and, alternatively, that, if it was, the Land Code, having been enacted subsequently to the Moneylenders Ordinance and containing specific provision in regard to execution of instruments under that Code, must be held to have impliedly repealed the requirements of section 3 of the Moneylenders Ordinance so far as charges over land are concerned.

Each memorandum of charge records, in the usual terms, the advance of a sum of money by the appellant to the respondent, the receipt of that sum by the respondent and the latter’s promise to repay that sum and, in the meantime, to pay interest. The document then proceeds to create a charge over the land in favour of the appellant. There is no doubt, therefore, that this document, although it is a memorandum of charge under the Land Code, also records a debt arising out of the lending of money at interest by the appellant.

It is very clear that the Appellant has signed a document with the Respondent to affirm the money lending process but he question arose is that whether that document is under Moneylenders Ordinance. Even though it is complied by Land Code, still the Learned Judge find it not appropriate to be used as evidence in the moneylending process by the Appellant to respondent where the land which has been charged as security to be sold to reclaim the debt. The normal process upon default payment by the borrower is that the property that has been charged as security to be sold by the moneylender for the overdue settlement and the balance amount to be given to borrower. But the failure to produce a valid document of debt is the key here for the appeal to be dismissed as there is no grounds or evidence for the Learned Judge to allow the Appellant to sell the land.

your essay in here…