CATCHWORDS Money Lenders Ordinance 1936 (A.C.T.) - consideration of definition of "money lender" and of phrase "to carry on business" - whether definition of "loan" in s. 4 (1) of Money Lenders Ordinance 1936 (A.C.T.) necessarily to be imported into definition of "business of money lending" - discussion of extended statutory definition of "loan" including forbearance to require payment of money owing - whether respondent carried on business of money lending. Money Lenders Ordinance 1936 (A.C.T.) ss. 4, 9 ROBERT WILLIAM NADER Appellant AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED Respondent NO. A.C.T. G46 of 1980 CORAM: LOCKHART, SHEPPARD AND KELLY JJ. CANBERRA, A.C.T. 13 OCTOBER 1981 IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY GENERAL DIVISION No. A.C.T. G46 of 1980 ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY BETWEEN: AND: ORDERS JUDGES MAKING ORDERS: WHERE MADE: DATE OF ORDERS: THE COURT ORDERS THAT: ROBERT WILLIAM NADER Appellant AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED Respondent LOCKHART, SHEPPARD AND KELLY JJ. CANBERRA 13 OCT 1981 1. The appeal be dismissed. 2. The appellant pay the respondent's costs of this appeal IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY NO. A.C.T. G 46 OF 1980 DISTRICT REGISTRY GENERAL DIVISION ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY BETWEEN: ROBERT WILLIAM NADER Appellant AND: AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED Respondent CORAM: LOCKHART, SHEPPARD AND KELLY JJ. REASONS FOR JUDGMENT LOCKHART J. 1 3 OCT 1981 This appeal from the Supreme Court of the Australian Capital Territory turns on whether the Money Lenders Ordinance 1936 (A.C.T.) ("the Ordinance") applies to certain transactions between the parties and thus operates to prevent Australian Pharmaceutical Industries Limited ("the respondent") from recovering moneys which it claims are due to it by Robert William Nader ("the appellant") and from enforcing securities taken by the respondent from the appellant to secure payment thereof. -2- The respondent carries on business in the Australian Capital Territory and New South Wales as a manufacturer and wholesale supplier of pharmaceutical goods. The shareholders of the respondent, of whom the appellant is one, are pharmacists who purchase those goods. The appellant carries on business in two shops, one in Manuka, the other in Belconnen. He purchased pharmaceutical goods from the respondent from December 1964 to April 1980 on terms which I shall refer to later in some detail. It is sufficient for present Purposes to say that payment was due within thirty days after the end of the month in which invoices were sent out by the respondent. Accounts that were sixty days overdue were subject to a "service charge" of a fixed percentage per month. The appellant's account with the respondent became increasingly overdrawn, to the concern of the respondent. on 9 February 1978, at the respondent's request, the appellant executed a bill of sale in favour of the respondent securing payment of the moneys then due by him to it. The property charged under the bill of sale included certain articles nominated in the schedule thereto being shelves, stands, cabinets, cash registers, floor coverings, light fittings and the like; it also included the stock of the appellant. About $130,000 was then due by the appellant to the respondent on his overdue accounts which included the purchase price of the pharmaceutical goods together with accrued "service charges". -3- On 3 October 1979, the appellant executed a second bill of sale in favour of the respondent securing the moneys then due by him to it. It contained similar provisions to the first bill of sale; and secured the then indebtedness of the appellant to the respondent, namely about $180,000, this being the amount then due by the appellant to the respondent for goods purchased and accrued "service charges". Under each bill of sale, the appellant covenanted with the respondent to pay to it, within twenty-eight days of written demand, all moneys owing by him to it. Mr. Marris, the credit manager of the respondent, told the appellant and his accountant in February 1980 that the respondent would close his accounts if the total indebtedness exceeded $293,000.00. It did in fact exceed that figure at the end of March; so the appellant's accounts were closed on 1 April 1980 and the respondent stopped supplying him goods on credit. Subsequently the respondent agreed to open two cash accounts for the appellant, the arrangement being that he would pay a cheque each week in advance for goods to be supplied. The accounts were opened on 8 April 1980. The cash accounts were not closed until the end of May 1980. The appellant no longer purchases goods from the respondent. Between September 1978 and 31 March 1980, eight of the cheques received by the respondent in reduction of the moneys due by the appellant, totalling $99,204.42, were dishonoured on presentation. Seven of the cheques were drawn on the banking account of R. W. Nader -4- Merchandising Pty. Limited. One of the cheques, dated 25 May 1979, was drawn on the appellant's own banking account in the sum of $13,099.04. On 1 May 1980, the respondent gave two notices to the appellant; one requiring payment of the moneys due under the first bill of sale, namely $68,274.02; and the other requiring payment of the moneys due under the second bill of sale, namely $228,407.34. The notices referred to the moneys as being due "for goods supplied"; and stated that, if the appellant failed to pay the sums due within twenty-eight days from service of the notices, the failure would constitute default under the bills of sale and that, in such event, the respondent intended to exercise its rights thereunder. The notices were not complied with. The appellant commenced proceedings in the Supreme Court of the A.C.T. in May 1980 seeking, amongst other things, declarations (all based on the Ordinance) that the respondent, in the course of its alleged business as a money lender, had made "loans" to the appellant, that the "loans" were void and illegal; that the bills of sale were void and of no effect; and that the respondent was not entitled to exercise any rights which the bills of sale purported to confer upon it. The respondent filed a defence and counter-claim. In its counter-claim the respondent sought declarations that the bills of sale were valid and enforceable, and that it was entitled to exercise its rights thereunder. It also sought judgment in the sum of -5- $301,601.68 "plus continuing service fees and/or interest". On 9 December 1980, after a contested hearing, the Supreme Court dismissed the appellant's claim and ordered that there be judgment for the respondent on its counter-claim in the sum of $204,861.88 plus interest of $71,090.54 to 31 August 1980 and continuing at the rate of 12% per annum thereafter until judgment. The court declared that the bills of sale were valid and enforceable, and that the respondent was entitled to exercise its rights thereunder. The appellant was ordered to pay the respondent's costs of the proceedings. Certain other orders were made which are not material to this appeal. The appellant appeals from the whole of the judgment of the Supreme Court. It is fundamental to the appellant's case that the respondent carried on the business of money lending. His case was pleaded and conducted before the Supreme Court and this Court on this basis. The appellant accepts that, if this is not established, he must fail. A person is prohibited from carrying on business as a money lender unless he is registered as a money lender under the Ordinance (s. 9). An offence against s. 9 carries a penalty of $400.00. It is common ground that the respondent was not registered as a money lender under the Ordinance. If the respondent carried on the business of money lending, -6- whilst unregistered, the question would then arise whether, in the course of that business, it made "loans" to the appellant within the meaning of the definition of "loan" under the Ordinance. The appellant contended first, that the respondent made loans to him, according to the ordinary meaning of the word "loan", in that on each occasion he acquired pharmaceutical goods from the respondent there was a transaction of loan rather than of purchase of goods because it was inherent in the terms of trading that the appellant could postpone payment indefinitely provided he paid the service charges. The appellant contended alternatively, that, each time he postponed payment beyond the period of 60 days after the due date and incurred a service charge, the respondent, by its acceptance of that situation, made a "loan" to the appellant, within the extended definition of "loan" in the Ordinance (s. 4 (1) ) in that there was a "forbearance to require payment of money owing on any account whatsoever" namely, the account for goods sold to the appellant. The next step in the appellant's argument was that the "loans" were unlawful and, if not void, at least unenforceable by the respondent, as they were made by it, an unregistered money lender, in the course of its business of money lending. The illegality tainted, not only the "loans", but the security taken by the respondent for them namely, the bills of sale. -7- These questions are not without interest or difficulty; but they only arise if the respondent was carrying on the business of money lending. "Money lender" is defined by s. 4 (1) as:- I turn now to that question. "means 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 or who lends money at a rate of interest exceeding twelve per centum per annun, and any person who so advertises or announces himself or holds himself out as carrying on that business shall be deemed to be carrying on the business of money lending; but does not include - (a) (b) (ec) any person or body corporate bona fide carrying on the business of banking or insurance or bona fide carrying on any business not having for any of its objects the lending of money in the course of which and for the purposes whereof he or it lends money at a rate of interest not exceeding twelve per centum per annum; or any body corporate for the time being exempted from registration under this Ordinance by order of the Attorney-General published in the Gazette; and any pawnbroker in respect of the business carried on by him in accordance with the law for the time being in force in the Territory relating to pawnbrokers; Counsel for the appellant contended that, if a person "lends money at a rate of interest exceeding twelve per centum per annum" he is deemed to be carrying on the business of money lending by the very terms of the definition of "money lender" itself. The definition of "money lender" encompasses three classes of persons: first, a person whose business is that of money lending; second, a person who advertises or announces himself or holds himself out in any way as carrying on that business, who is therefore deemed to be carrying on that business; and third, a person who lends money at a rate of interest exceeding 12% per annum. A person in the third category is not deemed to be carrying on the business of money lending; he simply falls within the definition of a "money lender" if he lends money at a rate of interest exceeding twelve per centum per annum. This is to my mind the plain meaning of the definition. Also, if the appellant is right it means that any person who lends money at a rate of interest exceeding twelve per cent (and is therefore deemed to be carrying on the business of money lending) is required to register as a money lender by force of s. 9. Unlike the Money-lenders and Infants Loans Act, 1941 of New South Wales (s. 3 (1)) the definition in the Ordinance does not describe the ad hoc money lender as a person who "from time to time" lends money at a rate of interest exceeding a specified percentage. I need not consider the effect of the absence of these words in the Ordinance; except to say that, if the appellant is right, it suggests that little, if any, frequency or recurrence would be necessary in the making of loans at more than twelve per cent for the lender to be characterised (by the deeming provision) as carrying on the business of money lending. It would follow that such a lender would be required to register as a -~9- money lender under the Ordinance (s. 9); but that would lead to an strange results. A person who did not in fact carry on business as a money lender but who lent money sometimes, or perhaps once only (see Baker v. Pryor [1932] St. R. Qd. 66; Hyde v. Sullivan [1956] S.R. (N.S.W.) 113) at an interest rate exceeding twelve percent must register as a money lender and comply with all the formalities required by the Ordinance for that purpose (s. 9A). A construction of the definition of "money lender" that produces such a bizarre result is one that I would be loath to reach unless compelled by the clear terms of the Ordinance. Even in States where money-lending legislation imposes the obligation to register, or to obtain a licence, not upon persons carrying on the business of money lending but upon persons who are "money-lenders", the courts have strained to find that an ad hoc money lender need not be registered: see Baker v. Pryor (supra); Buchanan v. Kiley [1948] St. R.Qd. 274; J.B. Witts Pty. Ltd. v. Wholesalers (Australia) Pty. Ltd. (1963) 109 C.L.R. 322; Hyde v. Sullivan (supra). Far from the Ordinance compelling the construction contended for by the appellant, the plain words of the definition are to the contrary. The appellant's argument fails. For the respondent to be merely an ad hoc money lender will not avail the appellant. His case rests on the basis that the respondent carried on business as a money lender. If the respondent -10- were an ad hoc money lender only, the Ordinance may operate to restrict the rate of interest he would otherwise be entitled to charge; but this question does not arise here. The learned trial Judge held that s. 11 of the Ordinance applied to the bills of sale so as to limit the respondent's entitlement to interest to twelve per centum per annum. Notwithstanding that the Notice of Appeal challenged this finding, counsel for the appellant abandoned the point during the course of argument before us. There is no uniformity in the statutory definitions of a "money lender" in the money lending legislation of the States and Territories of Australia; but they have certain essential elements in common derived from the definition of "money lender" in s. 6 of the English Money-lenders Act 1900 which defines a "money lender" as a "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". None of the statutory definitions define the expression "business of money lending"; but all of them contain an exclusion of various classes of persons who might otherwise fall within the definition. Whether a person is carrying on the "business of money lending" must be determined by reference to the ordinary and natural meaning of that expression, and having regard to the circumstances of the particular case. This is the approach adopted in all the reported cases to which we were referred by counsel. I will mention some of them. L.J.Q.B. Fairway Estates Pty. Limited v. F. C. of T. (1970) 123 C.L.R. Pp. 165. -ll- In Re Griffin; ex parte The Board of Trade (1890) 60 235 Lord Esher said at p. 237: In my opinion, to say that if only one or two transactions can be proved, then, as a matter of law, it cannot be said that they are transactions in a business, is too drastic a statement. I think that whether one or two transactions make a business depends upon the circumstances of each case. I take the test to be this: if an isolated transaction, which if repeated would be a transaction in a business, is proved to have been undertaken with the intent that it should be the first of several transactions, that is, with the intent of carrying on a business, then it is a first transaction in an existing business. The business exists from the time of the commencement of that transaction with the intent that it should be one of a series, and if the business is one in which it is proper to keep books, then books ought to be kept from the commencement of the first transaction." This passage was cited with approval by Barwick C. J. ain 153 at In an oft-cited judgment in Edgelow v. MacElwee [1918] 1 K.B. 205 McCardie J. said at p.206:- "A man does not become a money lender by reason of eccasional loans to relations, friends or acquaintances, whether interest be charged or not. Charity and kindliness are not the bases of usury. Nor does a man become a money lender merely because he may upon one or several isolated occasions lend money to a stranger. There must be more than occasional and disconnected loans. There must be a business of money lending, and the word 'business' imports the notion of system, repetition and continuity...The line of demarcation cannot be defined with closeness or indicated by any specific formulae. Each case must depend on its own peculiar features. It is ever a question of degree." -12- In Hyde v. Sullivan (supra), Street C.J., Roper C.J. In Eq. and Herron J. said at p. 119:- "Speaking generally, the phrase 'to carry on business' means to conduct some form of commercial enterprise, systematically and regularly, with a view to profit, and implicit in this idea are the features of continuity and system." In Hungier v. Grace (1972) 127 C.L.R. 210, Barwick C.J. said at p. 217:- Whilst no doubt system and regularity are involved in the carrying on of a business, it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. One May systematically make regular deposits to a bank account but not be carrying on a business of doing so. In other words, system and regularity of making transactions are not in themselves definitive in this field. Their absence may well deny that a business is being carried on but their presence does not necessarily establish that it is." Counsel for the appellant contended that to determine the meaning of the expression "business...of money lending", one must have regard to the definition of "loan" in s. 4 (1) of the Ordinance and import its components into the notion of "business...of money lending". "Loan" is defined by s. 4 (1) in these terms:- "'loan' includes advance, discount, money paid for or on account or on behalf or at the request of any person, or the forebearance to require payment of money owing on any account whatsoever, and includes every contract (whatever its terms or form may be) which is in substance or effect a loan of money, -13- and also a contract to secure the repayment of such loan, but does not include interest, and the expressions 'lend' and 'lender' shall be construed accordingly." If it was intended to necessarily import the elements of a "loan" into the definition of the "business...of money lending", the Ordinance could easily have said so or could have defined the expression "business...of money lending" in terms which included those elements or such of them as were thought relevant. But the Ordinance does not do this. The very definition of "loan" includes matters which, although perhaps apposite for the definition (an extended definition) of "loan" itself, are inapposite components of the expression "business...of money lending". Counsel for the appellant relied on the statement in the definition of "loan": "and the expression...'lender' shall be construed accordingly:" but the word "lender" appears elsewhere in the Ordinance (s. 12), so it is given some, albeit rather limited, operation. The definition of "loan" appears in the Ordinance for good reason, as it does in the money lending legislation in the States of Australia, the United Kingdom and New Zealand. Once a person 1s a "money lender" by definition, it is relevant for certain purposes under the Ordinance to determine if he has made a "loan": for example, s. 6 {re-opening transactions of money lenders), s. 7 -14- (calculation of interest on loans) and s. 8 (rebate of interest). Also, it is as well to remember that a person may make a "loan" otherwise than in the course of carrying on the business of money lending, namely by lending money at a rate of interest exceeding twelve per centum per annum. So there is no necessary nexus between a "loan" and the "business...of money lending". I see no reason to depart from the approach adopted by the Courts for many years in this country, the United Kingdom and New Zealand, of determining the definition of the "business...of money lending" by reference to ordinary concepts. This is not to say that the definition of "loan" should be disregarded when inquiring into the ordinary meaning of the expression "pbusiness...of money lending"; indeed, I think it may be looked at to see if it affords any assistance; but that is a very different matter from saying that the definition of the former is necessarily imported into the definition of the latter. Some of the statutory definitions of "money lender" (e.g. the Money-lenders And Infants Loans Act, 1941 (N.S.W.)) define a "money-lender" as including "every person whose business (whether or not he carries on any other business) is that of money lending...". The words in brackets do not appear in the Ordinance. I do not attach any particular significance to the presence of the words in brackets or, for that matter, to their absence. A person may carry on more than one business, only one of which may be money lending. In each -15- case it is a question of examining the activities of a person to see if, among them, he carries on a money lending business. In the light of these principles I turn to the facts to determine if the respondent carried on the business of money lending. There is a paucity of evidence as to the trading activities and financial position of the respondent. No balance sheets or profit and loss statements are in evidence; and we know almost nothing of matters such as sales volume, gross sales and purchases, cash flow, stock and book debts; so we must do the best we can with the little evidence available. The respondent is, as I said earlier, a public company carrying on business in the A.C.T. and N.S.W. as a manufacturer and wholesale supplier of pharmaceutical goods. It is described in the evidence as "a co-operative with the controlling shareholders all being Pharmacists." The appellant is one such shareholder. There were at least 50 pharmacists in the A.C.T. who were shareholders of the respondent and who purchased goods from it. There is some inconsistency in the evidence as to the respondent's terms of payment; but it appears that it was the policy of the respondent to require payment from customers for their purchases of pharmaceutical goods within thirty days after the end of the month in which invoices were despatched. For example, March -16- invoices were to be paid by the end of April, assuming they related to March purchases. As an incentive for prompt payment, rebates and discounts were offered to customers on a sliding scale in accordance with total monthly purchases. On 1 November 1976 a new system of trading terms was introduced by the respondent to ensure that "members received progressive benefits in direct proportion to their degree of support reflected in purchases of pharmaceutical goods". Total purchases and dates of payment of accounts determined the rate of rebate and discount. For example, from 1 November 1976 until 31 December 1977 members who purchased goods in excess of $6,000.00 per month were entitled to a rebate of 9% on the purchase price provided payment was made in full by the twenty-fifth day following the due date. If payments were received after that date, no rebates were given. The terms changed from 1 January 1978. For example, members who purchased goods in excess of $7,000.00 per month were entitled to a rebate of 8%. Full rebates were given if paid by the due date; but there were no rebates if payment was made later. Special discounts were offered by the respondent. From 1 November 1976, as an incentive for early payment, members who purchased goods above a certain minimum value, were entitled to a discount of 1% if their remittances were posted by the date prescribed on the fortnightly statements sent to them by the respondent. The terms as to discount do not appear to have changed. -17- The respondent imposed "service charges" upon its members who purchased pharmaceutical goods from it. They were described in the "Trading Terms" which were in writing and sent by the respondent to its members. These "Trading Terms" described the "service charges" as "penalties for late payment". From 1 November 1976 until 31 March 1980, the respondent made a "service charge" of 1.5% on the accounts of members sixty days overdue. All members who purchased goods for less then $1,000.00 per month were charged a service fee of $50.00 per month. As from the trading month, September 1979, the respondent increased its "service charge" on accounts sixty days overdue to 1.75%. Also the "service charge" of $50.00 which applied to members whose monthly purchases were less than $1,000.00 was increased to $100.00 per month. Sometimes the respondent assisted its members by guaranteeing the repayment by them of advances made to them by their bankers. In those circumstances the respondent took security from the members by bills of sale over their trading stock and other plant or equipment used in their businesses. The liability of the respondent as guarantor was customarily limited to 60% of the value of the trading stock, plant and equipment. In addition, the respondent charged members 1.5% per annum on the amount of its liability under the guarantee. -18- It was the policy of the respondent, described by it as its "credit and collection policy", that the accounts of members would be closed and credit stopped when accounts were sixty days overdue unless the members approached the respondent and came to an arrangement with it to settle the overdue accounts. The respondent sought to retain its liquidity and to keep overdue accounts of members as low as possible. Specific directions were given by the managing director of the respondent to staff to reduce the amount owing by debtors. The respondent did not seek to reduce the number of its members or customers by its credit policies; but it did seek to keep their debts as low as possible. From at least September 1979 the respondent became increasingly concerned at the moneys overdue by its members which was placing a strain on the respondent's finances; and was the reason for its seeking to discourage the growth of overdue debts by increasing the service charge from 1.5% to 1.75% per month from September 1979. One of the reasons for the large amount of moneys overdue by members was that some pharmacists found themselves in financial difficulties over the few years before 1980 probably because their expectations as to the growth of Canberra were not realised. The respondent asked its members to pay their overdue bills; but generally did not go to the extent of suing them. Rather, it -19- sought to secure the overdue content of the indebtedness of members in the way I have mentioned as a means of assisting members to overcome their financial problems, and thereby improving the respondent's liquidity. It is important to remember that about 60-65% of the members of the respondent in the Australian Capital Territory and New South Wales paid their accounts upon receipt of invoice, and thus obtained the benefit of discounts and rebates for prompt payment. The other members were the source of the respondent's concern about liquidity. The appellant contends that in these circumstances the respondent was carrying on the business of money lending. It is true that the respoOndent extended credit to its customers who were also its members. It assisted members by giving guarantees to their bankers in certain circumstances and by taking bills of sale to secure their indebtedness. The respondent is in truth in much the same position as many companies carrying on business. Most have debtors, some more reliable than others. Many companies doubtless encourage prompt payment by discounts or rebates and discourage slow payment by charges such as those called "service charges" in the present case; but this is a far cry from characterising their business as being that of money lending. The respondent is a manufacturer and wholesale supplier to -20- its members of pharmaceutical goods. That is its business. In the course of its business, it acquires debtors - good, doubtful and bad. It adopts the measures of giving rebates and discounts, imposing "service charges", giving guarantees and, in the more extreme cases, of taking securities by way of bills of sale; but all for the overriding purpose of retaining liquidity; reducing overdue accounts and increasing its business of selling pharmaceutical goods. There are elements of system, repetition and continuity in the adoption of these measures by the respondent; but their mere presence is not in itself determinative of the question whether the respondent is carrying on the business of money lending. See Hungier v. Grace (supra). Rebates and discounts are offered by the respondent as an incentive to customers to pay their accounts promptly; "service charges" are imposed as a deterrent to late payment. Securities such as bills of sale are taken by the respondent essentially to safeguard itself against some customers being unable to pay for goods purchased by them. The imposition of "service charges" and the taking of securities are part of the business activities of the respondent as a manufacturer and supplier of goods; but they are not properly characterised as themselves as the business of money lending. In my opinion the respondent was not, at any relevant time, a -21- carrying on the business of money lending. In view of these findings it is unnecessary to consider the other questions involved in the appeal. There was some discussion before us as to the form of the judgment entered by the Supreme Court on the respondent's counter-claim. Although the language of the counter-claim is not entirely clear it seems plain enough that the respondent sought judgment for the moneys claimed to be owing to it by the appellant first, as moneys due under the bills of sale and alternatively, as moneys due for goods sold and delivered. The Supreme Court entered judgment for goods sold and delivered. There is some doubt whether the respondent was entitled to judgment on this basis; but plainly it was entitled to judgment for moneys due under the bills of sale. The Supreme Court declared that the bills of sale were valid and enforceable. I see no difficulty in this Court indicating that the judgment is for moneys owing under the bills of sale rather than for moneys owing for goods sold and delivered. There is no necessity to modify the orders made by the Supreme Court. The appeal should be dismissed with costs. this and the fw entry, (20 aro a tua cozy cf the Ne eee ee wy hors of hes isonour . Justice Loc! iart Acsoc Si Dated 13 OCT 198] IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY No. A.C.T. G 46 of 1980 ew GENERAL DIVISION On Appeal from the Supreme Court of the Australian Capital Territory BETWEEN ROBERT WILLIAM NADER Appellant AND AUSTRALIAN PHARMACEUTICAL INDUSTAiS LiMiTeD Respondent CORAM: Lockhart, Sheppard and Kelly JJ. SHEPPARD J. 13 OCT 1981 REASONS FOR JUDGMENT In this matter I have had the advantage of reading the gudgment to be delivered by Lockhart J. I am thereby saved the necessity of setting out the facts and the relevant legislation. The primary submission of the appellant was that each time goods were acquired by him from the respondent there was a transaction, not of sale and purchase of goods, but of stonex, lent. Thi1s was teceuse the terns of trading envisaged that payment mignt be postponed indefin- itely provided the service charge was paid. The submission overlooks a number of considerations. Firstly, the terms of the various circulers from the respondent show that it was not its desire or purpose that balances of outstanding accounts should be left indefinitely. Its purpose was both to encourage further business and also early payment. For early payment it offered a discount and it discouraged late payment by imposing the service charge. In the event of the pay- ment not being made efter 60 days, the service charge was imposed but only in respect of the third and following months. It was not imposed retrospectively. The respondent could, if it wished, tring matters to a head at any time. A customer such as the appellant was not entitled to delay payment indefinitely or at all. But, if it did and the respondent did not insist on payment, an obligation to pay the service charge was incurred. These considerations demonstrate that it is plainly wrong to cheracterise the transactions through which goods were ac.uilreu as loans. It is true that payment for the goods mignt be postponed, and that if 1t were delayed for more than 60 days a cnarge would be incurred. But payment might not te delayea at all. The transactions must be looked at at the time the goods were delivered. They were simple transactions of sale and purchase in which the respondent did not require cash on delivery. It was prepared to extend credit to its customers upon the terms outlined in its circulars. The primary submission of the appellant ought therefore be rejected. His next submission was that there was a "statutory loan" each time the appellant delayed payment for more than 60 deys and incurred the service charge. He was then, so it was submitted, accepting the offer contained in the various circulars which enabled him for the time being to postpone payment provided the service charge was paid. The loans were said to be made each time the offer was accepted by the conduct of the appellant in leaving the moneys outstanding for longer than 60 days. They were said to be "statutory" because, although they were not loans 1n the conventional sense, they fell within the definition of "loan" in s.4 of the Ordinance an that each transaction constituted a "forbearance to require payment of money owing" on an account, namely, the account for goods sold and delivered. For the purposes of dealing with the submission I am prepared to assume that 1t 1s correct to say that the offers made by the respondent to postpone its entitlement to pay- ment were, when accepted by the appellant, forbearances within the meaning of the definition of "loan" and thus 3. "loans" for the purpose of the Ordinance. I am not prepared to say positively that they were forbearances within the meaning of the definition because I have con- siderable reservation as to whether they were; cf. Pannam "The Law of Money Lenders" (pp.21-22). My reservation arises because the evidence does not necesssrily show that the respondent ever agreed to forbear to sue. Its terms of trading were such as to oblige a customer to pay within 30 days. If he did not pay after 60 days, the service charge was imposed, but it does not follow that there was ever more than a de facto forbearance. The respondent could have sued at any time after the expiration of 30 days after supply. At no time did 1t oblige itself to do otherwise. I am also prepared to assume, again without deciding the point, that the service charge falls within the definition of "interest" in s.4 of the Ordinance. Again i have reservations as to whether 1t does. The evidence disclosed that the amount of the service charge was equivalent to a rate which was in excess of 12 per cent per annum. Upon the assumptions I have made, the respondent was a "money lender" within the meaning of that expression as defined in s.4 of the Ordinance because 1t was a person who lent money at a rate of interest exceeding 12 per cent per annum, The appellant also submitted that upon those assumptions and upon the basis of other evidence which there 1s, the respondent was also a money lender because 1t was a person whose business was that of money lending or because 1t was a person which advertised or announced itself or held itself out as carrying on that business, To that submission I shall come a little later, I propose first of all to return to the consideration of what follows from my conclusion, upon the assumptions I have made, that the respondent was a money lender because it lent money at a rate of interest exceeding 12 per cent per annum. The appellant's next step was to go to s.9 of the Ordinance which provides that a person shall not carry on the business of a money lender unless he 1s registered as a money lender under the Ordinance, A penalty of #400 is provided for an offence against the Ordinance in this respect, It was the appellant's submission that a person who waS a money lender only because he lent money at a rate of interest exceeding 12 per cent per annum was nevertheless carrying on the business of a money lender within the meaning of the Ordinance and thus required to register. It was submitted that failure to register rendered any money lending transaction 1n which such a person was involved De unlawful and tnus, if not void and of no effect, at least not enforceable by nim, he being the person whose obligation 1t was to register; see however, Yango Pastoral Company Pty. Limited v. First Chicago Australia Limited (1978) 139 C.L.R. 410. But the question arises whether a person who is a money lender by reason only of the fact that he lends money at a rate of interest in excess of 12 per cent per annum 1s obliged by s.9 of tne Ordinance to register as a money lender, As I have said, the obligation to register is imposed only upon a verson who carries on the business of a money lender. Is a person who is a money lender only because he lends at a rate of interest in excess of the prescribec rate carrying on the business of money lending within tne meaning of tne Ordinance? The Ordinance does not define that expression; it defines only "money lender". The definition specifies some conduct, which will constitute a oerson a money lender, with regard to the business which he carries on or is deemed to carry on. Thus a person wnose business is that of money lending 15 a money lender as are persons who advertise or snnounce themselves or hold tnemselves out in any way as carrying on that business, They are also to be deemed to be carrying on the business of money lending. To be contrasted with these provisions is that here in question. A person will be a money lender if he lends money at a rate of interest in excess of 12 per cent. Any business which he carries on is not a relevant factor. If he does also carry on the business of money lending, or if he advertises, announces or holds himself out as doing so, . he will be a money lender for that reason also. But he will not be actually, or be deemed to be, carrying on the business of money lending by reason only of the making of one or more loans at a rate of interest in excess of the prescribed rate, It must follow, therefore, that s.9 does not impose any obligation upon such a person to register. He is not carrying on the business of a money lender either in the conventional sense or in the deemed senses provided for in the definition. Counsel for the appellant placal reliance upon the terms of the exception in para.(a) of the definition, particularly on the latter portion thereof which excludes a person who 1S carrying on a business not heving for any of its objects the lending of money. In my opinion that provision is of no assistance to the appellant. Rather, it reinforces me in the conclusion to which I have come. It excludes a person carrying on a business of the kind specified but only if he lends et a rate of interest not in excess of the prescribed rate. The reason for this latter exception 1s to make the definition consistent. Any person lending at a rate above the prescribed rate 1S a money lender no matter what his business or the obgects thereof may be. So much 1s clear from the principal part of the definition, If a person is carry- ing on a business not having for any of its obgects the lending of money, he will not be carrying on the business of money lending, but he will be a money lender because, and only because, of the rate of interest which he charges. The nature of his business 18 irrelevant. Counsel for the appellant also placed reliance on s.4A of the Ordinance. He endeavoured to persuade us that the only purpose of s.4A was to avoid the necessity for the persons whom it excepts from the operation of the Ordinance to register as money lenders. The section provides that a person is not a money lender for the purposes of the Ordinance by reason only that he has deposited money with or lent money to a corporation as a result of an invitation to the public issued, circulated or distributed by 1t or another person. I would regect the submission on the ground that provisions of the Act other than s.9 would have applied to the person excepted by s.4A. But for the section, ss.6, 7, 8, 11 and 12 would plainly have applied to such a person, It follows that if the respondent 1s a money lender only because it lends at a rate which is above that prescribed, it is not required to register and was thus not in breach of s.9. No illegal conduct is involved. I turn to consider the question of whether the respondent was carrying on the business of money lending in the true sense or in any of the deemed senses used in the definition. The principal business of the respondent 1s that of a manufacturer and wholesale supplier of pharmaceutical products. But 1t 1s possible for a company to have more than one business. All banks (cf. State Savings Bank of Victoria v. Permewan Wright & Co. Limited (1914) 19 C.L.R. 457 at pp.470-471) and many insurance companies would carry on, not only the business of banking or insurance, but also the business of money lending. That is no doubt why the draftsman felt 1t necessary to exclude them in para.(a) of the definition. Here 1t was submitted that the respondent, in addition to any other business it carried on, carried on the business of money lending. it was said that this emerged from evidence contained 1n the various circulars showing the amount to be charged on accounts which were more than 60 days overdue, from the fact that many, although not a majority, of the respondent's customers took advantage of this service, from evidence which showed that the respondent was prepared to guarantee customers' accounts with banks and from the fact that the respondent had taken the two bills of sale to secure the repayment of the moneys which the appellant owed. Plainly the only way in which the respondent can be said to have lent money 1s by resort to the definition of "loan". Earlier I said that the appellant contended that the loans were statutory loans. The definition of "loan" says that the expressions "lend" and "lender" are to "be construed accordingly". By this I take them to have a meaning which corresponds witn the definition of "loan", The definition 1s not an exhaustive one but tnat 1s not of consequence in this case. The transactions are transactions of loan only because of the forbearance on the part of the respondent to require payment of the moneys owing by the appellant for the poods purchased by it. The word "loan" 1s not used in the definition of "money lender" but one has to take into account the use of the words "lender" and "lending" notwithstanding that they are preceded by the word "money". In other words, the definition of "money lender" 1s capable of application to a person who enters into a transaction of any of the kinds defined as "loans" in the definition of "loan", On the other hand s.4 1s introduced by the usual words, "In this Ordinance, unless the contrary intention appears ......". If one applies the relevant part of the defination of "loan" 10. and thus "lend't and "lender", the definition of "money lender" will relevantly be: "Money lender" means every person whose business is that of forbearance to reguire payment of money owing on any account whatsoever, or, who advertises or announces himself or holds himself out in any way as carrying on that business. To my mind spelling out whut is involved in the apoellant's submission in the way that I have done demonstrates that the legislature did not intend tnat any of the extended meanings of "loan", "lend" and "lender" snovid be carried into the definition of "money lender" except so much of it as defines as a money lender a person who lends money at a rate of interest in excess of the prescribed rate. There could be no business of forbearance to require payment of money owing on an account, Such conduct could only ever be incidental to or a facet of the carrying on of some other business, in this case the business of manufacturing and selling pharmceut- 1cal products. The situation 1s similar to that supposed by Barwick C.J. 1n Hungier v. Grace (1972) 127 C.L.R. 210 where his Honour referred to the fact that one might systematically make regular deposits to a bank account but not be carrying on a business of doing so (p.217). He li. continued: "In other words, system and regularity of making transactions are not in themselves definitive in this field. Their absence may well deny that a business is being carried on but their presence does not necessarily establish that 1t is". In my opinion there is no basis for a finding that the respondent was carrying on the business of money lending because, upon the hypotheses upon which I have proceeded, 1t was regularly and systematically entering into a series of transactions which were only loans within the meaning of the Ordinance because they each amounted to a forbearance to reyuire the payment of money. I would add that a proper analysis of the legislation requires it to be understood that whilst s.9 1s directed to persons who carry on the business of a money lender, the primary obygect of the draftsman in defining "money lender" in s.4 was to designate those who were deemed to be or were to be regarded as money lenders for the purpose of the Ordinance. His obgect was not to designate those who were to be deemed to carry on the business of money lending. But if a person does carry on such a business, he will be a money lender as will a person who advertises or announces or holds himself out as carrying on that business. A secondary obgect of the draftsman was to provide that persons who advertise, announce or hold 12. themselves out as carrying on the business of money lending will be deemed to be carrying on such a business. A consequence of that provision is that such persons, along with persons whose business is in truth that of money lending, will be required to register. But that circumstance does not alter the fact that when the definition speaks of a person "whose business is that of money lending" 1t 1s referring to the business of money lending in the conventional sense. Apart from the later deeming provision there 1s no extended definition of "the business of money lending", The question of whether a person is carrying on such a business or advertising, announcing or holding himself out as doing so must therefore be determined according to ordinary concepts and principles. The respondent not carrying on the business of money lending nor advertising, announcing or holding itself out as carrying on any such business, it was not required to register as a money lender under the Ordinance. There was accordingly no breach of s.9 and again no illegal conduct. My conclusion means that this appeal must fail but there are some additional matters that I should mention before concluding. The appellant contended that the two bills of sale were, if not void, at least unenforceable by the respondent. He did so upon the basis that the respondent required to 13. be registered under s.9. That is a submission which I have rejected. The two bills of sale ought not to be looked at in isolation from the transactions which led to their being executed by the appellant. They were for past iadebtedness and future indebtedness to arise when' further goods were purchased by the appellant from the respondent. If one were to look at them 1n isolation, no more would be established than that on two occasions the respondent lent money at a rate of interest 1n excess of 12 per cent per annum. That would not constitute it a person carry- ang on the business of money lending requiring it to register. There was some discussion during the argument as to whether the debt owed by the appellant to the respondent for goods sold and delivered had merged in the obligation arising by reason of the personal covenants in the bills of sale, This was relevant to two aspects of the case. If, contrary to the conclusion at which I have arrived, I had decided that the bills of sale were void or unenforce- able, a question would have ar1zsen as to whether the respondent could rely upon the origina] obligation imposed upon the appellant to pay for goods sold and delivered. That 1s not a matter which arises for decision and I express no view upon it. Another relevance which the question of merger has 14, relates to the form of judgment entered by his Honour on the counter claim. He entered gudgment for goods sold and delivered. The question arises as to whether the gudgment ought not to have been entered for moneys due pursuant to the bills of sale. In my opinion the respondent was plainly entitled to gudgment for moneys so due. The amended counter claim, particularly para- graphs 8, 9, 10 and 11 thereof,pleads a case of failure to pay moneys due pursuant to the personal covenants in the bills of sale. The counter claim seeks recovery of those moneys. In those circumstances 1t seems to me that we have ample power to vary what was done by indicat- ing that the judgment is for the balance due pursuant to the personal covenants in the two bills of sale rather than for moneys payable for goods sold and delivered. The orders his Honour made themselves need no alter- ation or variation. I would add that nothing I have said 1s intended to indicate that I think his Honour was in error in entering gudgment for goods sold and delivered. That is not a matter which I have considered. For my purposes it 1s enough to say that the respondent was clearly entitled to gudgment for moneys due under the bills of sale. In the circumstances I would dismiss this appeal with costs. i certify that this andthe J' preceding pages are a true copy of the reasons for judgment herein of The Honourable Mr Justice Sheppard. ( oy IL. [ Associate —- =< — 15,Pated 13 OCT 1981 IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY No. A.C.T. G.46 of 1980 GENERAL DIVISION ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY BETWEEN: ROBERT WILLIAM NADER Appellant AND: AUSTRALIAN PHARMACEUTICAL Respondent CORAM: LOCKHART, SHEPPARD AND KELLY JJ. REASONS FOR JUDGMENT KELLY J. 13 OCT 1981 I have had the advantage of reading the reasons for judgment prepared by Lockhart and Sheppard JJ. I agree with those reasons. I add that I am not, as presently advised, entirely satisfied that the true meaning of the word "forbearance" as used in s.4 of the Money Lenders Ordinance 1936 is that suggested during the course of the hearing of the appeal. It may be that that meaning mav not be established until full consideration is given to the use of the word or its parts in a number of old Usury Statutes. See, for example, 37 Hen.8 c.9 (s.3); 13 Eliz.1c.8 (s.5); 12 Car.2 c.13 (s.2);3 and 12 Anne c.16 (s.1). I agree that the appeal should be dismissed. I certify that this and the | preceding pase@ are a true cony of the Reasons for Judgment herein of his Honour Mr. Justice Ketly we terns " Lid Se Associate Dateds (3ftol x; a