A LOAN TRANSACTION

Dominion, Volume 11, Issue 131, 20 February 1918, Page 4

A LOAN TRANSACTION

0 CLAIM ON A PROMISSORY NOTE

RATE OF INTEREST 40 PER CENT

A judgment of considerable interest to moneylenders and to those who borrow small sums on the security of endorsed promissory notes was delivered by Mr. S. E. M'Carthy, S.M., in the Magistrate's Court yesterday, in the case in which the Wellington Loan Company, Ltd., proceeded against Maurice J. Easier to recover £28 lCs., being money alleged to be due in respect to a dishonoured promissory note. The evidence given on behalf of tho defendant sought to establish a collateral and controlling oral agreement between the defendant and the plaintiff company's one-time manager acting within the alleged scope of his authority as the plaintiff company's servant. The defendant further relied on the provisions of Section 3 of the Moneylenders Act, 1908. Tho facts were that the plaintiff company on June 7, 1913, lent defendant £25. There was no proof that anything was said directly as to the rate of interest. Defendant therefore gave the plaintiff a promissory note for £27 10s. This noto and several succeeding notes bore- the name of an endorsee who eventually went to the front, and the succeeding, notes wero unendorsed. Tho practice had been for the defendant at the conclusion of each three-monthly period to give the company a renewed promissory note for £27 10s., having a currency of three months, and paying tho company £2 10s. The quarterly payments had been punctually paid up to' March 7, 1917. His Worship remarked that if the £2 10s, paid quarterly was to be regarded as interest and nothing more, the interest paid- was thus £10 per annum for £25, or 40 per cent, per annum. On March 7 defendant paid £2 10s., and gave a promissory note having a currency of three months for £27 10s., the note in respect to which tho claim was made. Tho company claimed that the £2 10s. paid every quarter was merely interest, and that no part of it was principal or intended by either party to be principal. The Moneylenders Act, His Worship contended, should not be administered so as to allow of debtors ridding themselves of onerous contracts merely because they were inconvenient to discharge. On the other hand the creditor should not he enabled by an oppressive iise of bis powers to exact more than a reasonable return for the use of his money, regard being had to all the circumstances and the nature and extent of the risk. Apart altogether from the question whether the rate of interest was excessive, the plaintiff company had promised the defendant to treat the quarterly payments as having been paid in reduction of both principal and interest, and if prompt payments were made the rate of interest charged would be reduced. That promise might or might not be admissible in evidence in an ordinary action to recover 4 .he amount of tho bill, but where the defendant claimed the benefit of the Moneylenders Act the fact that such a promise was made rendered it harsh and unconscionable on the part of the plaintiff company within the meaning of Section 3 not to carry it out, more especially as deFendant had already overpaid principal and interest, calculating the latter at far above the commercial rates. Exercising the powers undjr the Act, the Court, remarked the Magistrate, had reopened the transaction between the plaintiff company and the defendant, and had taken an account, between them. The result of that accounting was that, nuWinp: tho plaintiff company interest at the rate of £20 per cent, per annum, the plaintiff company's claim had been already overpaid. Judgment would.be for defendant, but as the latter's defence had been the invocation of n statutory remedy, to relieve him from a lawful though burdensome contract, the judgement* would be silent as to costs. Leave to appeal was granted, security for same was fixed at £7 7s. At tiie hearing Mr. ¥>. M. Beechey appeared for the plaintiff company and Mr. P. W. Jackson for the defendant.