Samuel and Another v. Newbold [1906] UKHL 611

UKHL
Samuel and Another v. Newbold
[1906] UKHL 611 · 1903-10-03
(Before the Lord Chancellor (Loreburn) , Lords Macnaghten , James of Hereford , Robertson , and Atkinson .)44 SLR 611Samuel and Another v. Newbold.Subject_ Money Lenders Act 1900 (63 and 64 Vict. c. 51) — Harsh and Unconscionable Transaction — Proof — Excessive Interest — Onus — Section 1. Facts:
“Excessive interest of itself is sufficient to render a contract harsh and unconscionable. Proof of excessive interest may of itself, therefore, be sufficient to entitle the debtor to relief. What amounts to excessive interest is to be determined by the tribunal in each case, the question of risk being a material matter for consideration. When excessive interest is apparently established, any facts that tend to show that such excess does not render the contract ‘harsh and unconscionable’ should be proved in evidence by the lender. The burden is on him.”
Appeal from the judgment of the Court of Appeal ( Vaughan Williams, Romer , and Cozens-Hardy ), who had affirmed a decision of Kekewich, J .The facts are fully set out in the judgment of the Lord Chancellor infra.Lord Chancellor (Loreburn) —In my opinion the judgment of the Court of Appeal ought to be affirmed. The plaintiffs, Braham Samuel and Philip Samuel, trading as moneylenders under the name of P. Saunders, brought an action against James William Newbold, as the executor of one Alton, deceased, upon a promissory-note for £3300, made by the said Alton on the 3rd October 1903, in their favour. The defence in substance was raised under the Moneylenders Act 1900. Both Kekewich, J., and the Court of Appeal held that the Act did apply, and that the plaintiffs were not entitled to more than the sum of £2000, the money actually advanced, with 10 per cent. interest. This case is undoubtedly of importance, because the construction of the Act in question, which I understand has given rise to differences of opinion, comes up directly for the consideration of your Lordships. The facts of the case are in substance as follows—Alton was in the year 1903 a wealthy man. When he died in the following year his net estate was over £40,000. There appears to be no doubt that owing to intemperate habits, or, it may be, other disease, he was a person liable to be imposed upon, and singularly improvident in affairs of business. I will assume, however, that the plaintiffs were not aware of this. In the summer of 1903 one Sagar introduced Alton to the plaintiffs, and Alton borrowed from them on a promissory-note

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Lord Macnaghten —I agree. I think this a very idle appeal. I do not think that there is any difficulty either as regards the facts or as regards the law. It seems to me that the construction of the Moneylenders Act 1900 is plain enough, and that the evidence before your Lordships is more than sufficient to show that this case is within the mischief which the Act was designed to remedy. Before considering the precise terms of the Act I would venture to make one or two observations. The first thing I think which must strike anyone on reading the Act is that the jurisdiction created or conferred by it is not committed exclusively to the division of the High Court already conversant with somewhat analogous questions. Any branch of the High Court — any County Court—any Court in the kingdom to which the moneylender may resort for the purpose of enforcing his extreme rights, is armed with power to protect the moneylender's victim. The next observation that I would make is that although the Court of Chancery from the earliest times was familiar with questions more or less analogous it never assumed to deal with them on the principle on which this Act grants relief. In certain cases which, in modern times at any rate, have been confined to dealings with expectant heirs, including the whole class of persons for convenience sake comprehended under that designation, the Court of Chancery gave relief on terms. On the plaintiff submitting to do equity by repaying what was justly due the Court set aside the transaction which it considered unrighteous, and ordered that the securities impeached should stand as a security for the money actually advanced with interest. But the Court never remodelled the bargain. “The Chancery,” as a distinguished judge said many years ago, “mends no man's bargains.” So the Act involves a new departure in principle and the working of the machinery is intrusted—I will not say to more vulgar hands—but at least to a less select body; and yet it is argued that there is an atmosphere of Chancery about the Act. The question which it is said that this appeal was brought to determine is whether the view of Ridley, J., in Wilton v. Osborne , 84 L. T. Rep. 694; (1901) 2 KB 110 , or the view of the Court of Appeal in Re A Debtor , 88 L. T. Rep. 401; (1903) 1 KB 705 , was right. Ridley, J., with whom Channell, J., seems to have agreed, thought that the relief which the Act extends to a borrower must be limited to those cases in which before the Act the Court of Chancery would have given relief, and that the only standard to be applied under section 1 is that adopted by the courts of equity before the Acts. Speaking for myself, I must say that, while listening with great interest to the exhaustive exposition addressed to the House by the learned counsel for the appellants, I could not help thinking what a mockery it would be if that were all that the Act has done. What an intolerable strain would be thrown upon inferior courts unfamiliar with the doctrines and the practices of courts of equity if they were condemned or privileged to listen to lengthy arguments and venerable precedents before deciding a question which any man of common sense is just as capable of deciding as the most learned judge in the land, if he is not hampered by authorities which require no little training to discriminate and appreciate at their true value. But does the Act require anything of the sort? It says that if “there is evidence which satisfies the court that the interest charged in respect of the sum actually lent is excessive,” and that “the transaction is harsh and unconscionable or is otherwise such that a court of equity would give relief, the court may re-open the transaction and … relieve the person sued from payment of any sum in excess of the sum adjudged by the court to be fairly due in respect of principal and interest as the court, having regard to the risk and all the circumstances, may adjudge to be reasonable.” It seems to me that there are two cases contemplated by the Act. One where the interest is excessive and the transaction harsh and unconscionable; the other where the interest is excessive and the transaction is such that without the necessity of proving the transaction to be harsh and unconscionable—without going into that question at all—a court of equity would give relief. It seems to me that those two cases are meant to be distinct. I think that this is the grammatical construction of the language used. I think that it is shown by the introduction of the word “is” in the second limb of the sentence, and I think that the circumstance that the second alternative is excluded in the application of the Act to Scotland points in the same direction. It would be, of course, inapplicable to the Scottish system of jurisprudence. But in the application of the Act to Scotland nothing is introduced in its place, and the case under the first limb of the sentence is complete without anything more. The court then must be satisfied that the interest is excessive, and as an alternative that the transaction is harsh and unconscionable. I do not for a moment doubt that the interest

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Lord James of Hereford —I feel that, apart from the decision upon the particular case before your Lordships, it is very desirable that a judgment upon the construction of the Moneylenders Act should be clearly and distinctly expressed. I am glad that the Court of Appeal has declared that the construction put upon the Act by the judges of the King's Bench Division was incorrect. The views expressed by those judges went far to render the Act nugatory, and it is important that all doubt upon the subject should be removed. Now, the objects of the Act can easily be traced from its contents. The ends sought to be remedied by it were generally recognised. A class of men well known under the term “moneylenders” were, under different names and disguises, carrying on the business of lending money. No usury laws remained to restrain them, and so in many instances they lent money at as high a rate of interest as could be wrung from the necessities of the borrower. Terms were imposed which caused default, however technical, to add to the burden to be borne by the debtor. No sufficient legal remedy existed. The old Chancery jurisdiction was too narrow to meet the case. It was not with remaindermen and reversioners that the modern moneylender dealt. The needy, helpless, perhaps unwary, borrower was of a different class from those who had in former days applied to the Court of Chancery for relief. It was principally in the County Courts that the moneylender sought to enforce his contract, and those Courts had no power to grant direct relief against oppressive contracts. True it was that humane judges would sometimes mark their sense of the unsatisfactory state of the law by minimising the payments to be made to such an extent that many judgments given in accordance with the existing law became nugatory in their effect. To remedy such evils by affording sufficient legal protection against them the Legislature was moved to action. It certainly did not intend to leave the old law as it was. The intention certainly was to give the debtor greater legal protection against the moneylender than then existed. This appears from the statute itself. The title and the provisions of the Act all show that the Act is an amending Act, and that Vaughan Williams, L.J. , was correct when he spoke of it as an “amplifying” Act. The basis of the jurisdiction of the Court when granting relief is “that the interest charged in respect of the sum actually lent is excessive” … then also the transaction must be harsh and unconscionable or otherwise such that a Court of equity would grant relief. On these grounds the transaction may be re-opened, and the relief given by the statute is important to be noted—“The Court may relieve the person sued from payment of any sum in excess of the sum adjudged by the Court to be fairly due in respect of such principal, charges, and interest as the Court, having regard to the risk and all the circumstances, may adjudge to be reasonable.” Now, two learned judges—Ridley and Channell, JJ.—held that a contract to pay interest, however high and excessive, could not be reopened unless it was for other reasons “harsh and unconscionable” within the old practice of Courts of equity, which apart from fraud granted relief only when contracts affecting estates in remainder had been made. Such too was the argument at your Lordships' Bar. But the learned counsel for the appellants had to admit, as I understood him, that his argument went beyond the express words of

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Lord Robertson concurred.Lord Atkinson —I concur. The Moneylenders Act of 1900 in my opinion confers upon the courts of this country a new jurisdiction, and gives to borrowers a form of relief different in kind and range from that theretofore granted by any class of tribunal in this country. The relief given is not that heretofore administered by courts of equity, but differs from it in character, nature, and extent. The relief being thus different, it appeared prima facie to be an unsound mode of construction of the statute which would confine the grounds for giving that enlarged relief to those heretofore recognised as sufficient in courts of equity, and, in addition, merely alter the law to the extent of widening the limited class who had hitherto been able to seek relief in Chancery, so as to make it include all borrowers. I concur with the Court of Appeal that the words “harsh and unconscionable” are not qualified by those words which immediately follow—namely, “such that a court of equity would give relief.” The statute, I think, did more than extend and widen the character and nature of the relief which might hitherto have been granted, or increase the number of possible applicants for equitable relief. It also extended the grounds on which this enlarged relief might be given. I am quite unable to accede to the argument pressed

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Appeal dismissed.Counsel for Appellants— Upjohn, K.C.— Hohler. Agent— B. Barnett, Solicitor.Counsel for Respondents— P. Ogden Lawrance, K.C.— M. Macnaghten. Agents— Fowler & Company, Solicitors.