Moneylending-Interest-Excessive rate-Device to avoid interest controls-
Security

In June of 1935 the appellant was in need of ready money and ap-
proached the respondent for a loan. A loan was arranged by the use of
the following device: Respondent sold appellant 80 bags of sugar on credit
for £E.288, a price well above the market price; by reselling the bags im-
mediately in the market, the appellant was abl~ to obtain £E.222.400
mlms in cash; the appellant then gave respondent a mortgage on real prop-
erty in Wad Medani to secure the payment of £E.288, due six months
after the date of the mortgage. In August 1935 the appellant obtained an
additional £E.83.400 mlms by the same device, and a second mortgage
was executed""", Had the mortgage debts been repaid on time the effective
interest rates would have been 59% and 97% respectively, but the rate was
reduced somewhat by the delay of respondent in demanding payment.
When respondent sued on the mortgage debts, the appellant sought the
protection against excessive interest which is provided by section 6 of the
Civil Justice Ordinance 1929.

Held: (i) Whatever form the transaction took it was in fact a money-
lending transaction to which section 6 of the Civil Justice Ordinance was
applicable.

(ii) In view of the adequate security provided, the respondent was en-
titled to only 10% interest on these loans, and all interest due beyond 10%
was excessive and not recoverable.

Civil Justice Ordinance 1929, s. 6.

Appeal

June 15, 1937. Creed C.J.: The facts of the present case are as
follows: In June 1935 the appellant Kousa Butros El Kousa was in

* Court: Creed C.J., Bennett A.G. and Flaxman 1.

need of ready money. He went to the respondent Osman Zayyad for
help in his difficulties, and it _ was agreed between them that the ap-
pellant should buy from the respondent eighty sacks of sugar at
£E.3.600 m/ms a sack. It was understood between the parties that
the appellant would at once resell the sugar to a third party. The
maximum price at which sugar was then being sold to the public in
Wad Medani was £ E.2.965 m/rns a sack, and as there was plenty of
sugar in the market at the time, the average price was lower. The
appellant almost immediately resold the sugar--40 sacks to Ali El
Gazuli at £E.2.780 m/rns a sack, and 40 sacks to Saleh Eissa at
£E.2.800 m/rns a sack. Delivery orders on the respondent were given
by the appellant to Ali El Gazuli and Saleh Eissa. The sugar never
actually passed into the hands of the appellant. On June 30, 1935,
certain property of the appellant-Plot 12, block 13, Wad Medani
Town, was mortgaged by registered mortgage to the respondent to
secure the sum of £E.288 as expressed in the mortgage deed. The
mortgage debt was repayable after six months.

In August 1935 the appellant was again in need of ready money.

A similar transaction was effected between the appellant and respon-
dent. It was agreed that the appellant should purchase 40 sacks of
sugar for £E.28.600 m/ms cash and £E.122 credit, that is at the rate
of £E.3.515 m/rns a sack. The current price of sugar at that time
was in the neighbourhood of £E.2.800 m/ms. The appellant at once
resold to George Michel Terrous at £E.2.800 m/ms a sack, and gave
him a delivery order on the respondent. The sugar did not in fact
pass into the hands of the defendant. On August 22, 1935, a further
mortgage was registered by the appellant on the same property in
favour of the plaintiff to secure the sum of £E.112, the loan being
repayable after four months and seven days.

It is agreed that tbe appellant does not ordinarily deal in sugar,
and it is abundantly clear that the mortgages were in fact, as the
learned judge states, given as security for money lent. It is Dot open
to doubt on the evidence before the court that, whatever form the
transactions between the appellant and the respondent took, they were
in fact nothing more or less than money lending transactions. It is
to be noted in passing that had the mortgage debts been repaid on the
date on which they fell due the respondent would have received in-
terest at the rate of 59 % in respect of the first loan, and at the rate of
97% in respect of the second loan. As the respondent did not at
once reclaim his money at the end of the mortgage term, and no
further interest had been claimed, the rate has automatically fallen.