IN THE SUPREME COURT OF JUDICATURE		No FC3 98/7568/2
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR LEAVE TO ADDUCE FURTHER EVIDENCE ON APPEAL FROM ORDER OF HIS HONOUR JUDGE HOWARTH

								Royal Courts of Justice
								Strand
								London WC2

								Friday, 22nd January 1999

	B e f o r e:

	HIS HONOUR JUDGE KENNEDY

	LORD JUSTICE SCHIEMANN

	SIR PATRICK RUSSELL

	JAMES FRANCIS KENNY
	and
	EILEEN KENNY
	Appellants
	- v -

	AUDREY JOAN CONROY
										     Respondent

	(Computer Aided Transcript of the Palantype Notes of
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 	London EC4A 2HD
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	Official Shorthand Writers to the Court)

MR A ELLERAY QC and MR M HARPER (Instructed by Turner Parkinson, St Mary's Parsonage, Manchester) appeared on behalf of the Appellant (MISS LOUISE DAVIES appeared on 22nd January 1999)  

MR C MACHIN QC (Instructed by Sedgwick Phelan & Partners, Old Trafford, Manchester) appeared on behalf of the Respondent (MISS SUSAN HEWITT appeared on 22nd January 1999)

	J U D G M E N T
	(Draft for approval)

Lord Justice Kennedy:
1.	This is a Defendant’s appeal from a decision of Judge Howarth sitting as a judge of the High Court (Chancery Division) at Liverpool who, on 28th March 1996, gave judgment for the Plaintiff against the Defendant Appellant by 
1)	Declaring that the mortgage dated 6th January 1971 made between the first Defendant of the one part and the late Edmund Michael Conroy .... is and remains valid and enforceable as an equitable charge or mortgage of all the interest and estate of the first Defendant in the property situate and known as 30 Liverpool Road, Formby, Lancashire .... and -

2)	Ordering that the said property be sold with vacant possession, the first Defendant’s share of the proceeds of sale being used to discharge the sums found to be due under the said equitable charge/mortgage.

2.	History
	The background to this litigation is lengthy and depressing.  The Plaintiff (Mrs Conroy) and her late husband had a partnership called Lancashire Acceptances, which traded from at least the mid 1960s.  They also had two limited companies, one called Lancashire Acceptances Limited, and another called Lancashire Acceptances (Investments) Limited.  Lancashire Acceptances (Investments) Limited was dissolved in 1971 and Lancashire Acceptances Limited was dissolved in 1988.  It is not entirely clear to what extent each company was used as a vehicle for trade.  The Lancashire Acceptances  letterhead described Mr and Mrs Conroy as “financiers”.  A lot of the firm’s business seems to have consisted of providing money for hire purchase transactions, but it is the case for the first Defendant (Mr Kenny) that there was also an element of money lending within the scope of the Money-Lenders Acts 1900 and 1927.  In general Mr Conroy ran the business, and Mrs Conroy looked after the home, and his records show that in August 1966 the partnership paid £15 for a money-lenders licence.  The fee was paid again in the following year, but was then returned.  According to Mrs Conroy, Mr Conroy was a careful book-keeper, and it is clear that he kept a cash book, an open book and a closed book.  He also kept some record cards, but not surprisingly after all these years the records are incomplete.  It is an open question whether records of particular transactions were never made, or have perished with the passage of time.  
	Turning now to the position of Mr Kenny, in 1970 he was living with his sister at 30 Liverpool Road, Formby, which had been their family home.  It was subject to a mortgage in favour of the South Shields Building Society.  Mr Kenny was engaged to marry Eileen Kenny (his co-defendant in the Court below), so he agreed to clear the mortgage and buy out his sister’s share of the home, with some financial help from his fiancée.  Before those arrangements had been completed, on 6th January 1971, he borrowed £6,000 from Lancashire Acceptances, on the security of his stake in the family home.  He needed that money to finance some litigation.  It was intended to be quite a short term loan - to the end of 1971 - and he agreed to pay interest at 18%.  There was, it seems, some adjustment of interest payments in 1972, and Mr Kenny made his last monthly payment of interest in May 1974.  The capital has never been repaid.  Mr Kenny was rendered bankrupt in 1976.  That was annulled in 1978, and in 1980 Mr Conroy died.  
	On 10th March 1986 Mrs Conroy commenced these proceedings, seeking an account, and an order for the sale of the property.  In their defence Mr and Mrs Kenny claimed that in 1971, when the loan was made, Lancashire Acceptances were unlicensed money lenders plying their trade, and that accordingly, by reason of the Money-Lenders Acts, the security was void and the loan was irrecoverable.  There were various problems at interlocutory stages, but eventually, in March 1996, the case was listed for trial.  Three days before the case was due to be heard, Counsel for Mr Kenny sought a further adjournment to enable newly instructed solicitors to seek legal aid and prepare for trial.  That application was refused, and so Mr Kenny had to conduct his own defence and the defence of his wife.  In her case he was successful, and I need say no more about her part in these proceedings.  

3.	At the trial
	After a four day hearing the trial judge held that Mr Kenny had failed to show that at the material time Lancashire Acceptances were in business as unlicensed money lenders, and so he granted the relief sought.  Belatedly Mr Kenny sought to appeal, and on 19th November 1996 Beldam and Ward LJJ granted an extension of time and a stay of execution of the order which had been made in the High Court.

4.	Notice of Appeal
	In this Court Mr Elleray QC, for Mr Kenny, attacks both the trial judge’s decision to refuse the late application for an adjournment and his conclusion in relation to the main issue.  As to the main issue Mr Elleray submits that the trial judge:-
	(1)	Misunderstood the legal test which he had to apply, and -
	(2)	Did not properly evaluate the evidence which was before him.  A proper evaluation would, it is contended, have led the judge to conclude, and should now lead this Court to conclude, that in 1971, when the relevant loan was made, Lancashire Acceptances were money lenders within the meaning of the Money-Lenders Acts.
Mr Elleray also asks us if necessary to receive further evidence which was not adduced before the trial judge. 
	On behalf of Mrs Conroy Mr Machin, who did appear in the Court below, submits that the Judge was right to refuse the application to adjourn.  He recognises that the Judge’s interpretation of the law might be better expressed, but submits that in substance the Judge was right for the reasons that he gave.  In argument before the Judge, and in his skeleton argument for this Court, Mr Machin placed some reliance on section 6(d) of the Money-Lenders Act 1900, but before us that was expressly abandoned.  Mr Machin submitted that we should dispose of the case without admitting any further evidence, but if we are prepared to look at the fresh evidence tendered on behalf of Mr Kenny Mr Machin invites us to consider also fresh evidence on which he would like to rely.  Mr Machin recognises that some of the fresh evidence is contentious, and if we were to admit it we would inevitably have to consider the possibility of a re-trial, but so much time has passed, and so much money has already been expended on litigation, that Mr Machin does not seek that form of relief.  

5.	Law
	It was common ground before us, as it was in the Court below, that:
(1)	in 1971 Lancashire Acceptances, when making the £6000 loan, was not registered as a money lender for the purposes of the Money-Lenders Acts:
(2)	if the firm was a money lender as defined by Section 6 of the 1900 Act, then it, and thus Mrs Conroy, has no legal right of redress.  She cannot recover the money lent, or any interest thereon.  Section 6 of the 1900 Act, so far as relevant, provides that:
	“The expression ‘money-lender’ in this Act shall include 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”.

(3)	a defendant who seeks to take advantage of the defence afforded by the Money-Lenders Acts has to assume the burden of proof:
(4)	it is not normally money lending within the scope of the Money-Lenders Acts to finance hire purchase transactions (Olds Discount Co. Ltd. v Cohen [l938] 3 All E.R. 281) or to purchase debts (Olds Discount Co. Ltd. v John Playfair Ltd. [l938] 3 All E.R. 275).
(4)	but if a lender is shown to be in fact a money-lender within the scope of the Acts, that need not be his only business, provided of course that the transaction in question was a transaction of that kind (North Central Wagon Finance Co. Ltd v Brailsford [l962] 1 All E.R. 502).
	As Cairns J. said in that case at 508B -
	“A person who makes a business of lending money is not any  the less a money-lender because he carries on some other business as well on a much larger scale.”

	So, at the end of the day, the question to be answered is, as it seems to me, largely a question of fact, namely whether on 6th January l971, when Mr Kenny borrowed £6,000 from Lancashire Acceptances, the business of that firm was that of money lending, or the firm advertised or announced itself or held itself out in any way as carrying on that business.  This case is concerned largely, although not entirely, with the words which precede the disjunctive “or” and it is worth noting that it is only when a borrower is relying on the following words, that is to say when he is seeking to demonstrate that the lender was holding himself out as a money-lender, that it becomes important whether or not the lender was purportedly “carrying on that business”.

6.	Authorities
	The cases which we have been invited to consider illustrate how the statutory words have been interpreted in relation to different facts, but they do not provide an answer to that central question in this case to which I have already referred.
	In Litchfield v Dreyfus [l906] 1 KB 584 an art dealer occasionally advanced money to friends in the trade.  Farwell J. said at 589 -
	“Not every man who lends money at interest carries on the business of money-lending.  Speaking generally, a man who carries on a money-lending business is one who is ready and willing to lend to all and sundry, provided that they are from his point of view eligible.  I do not of course mean that a money-lender can evade the Act by limiting his clientele to those whom he chooses to designate as “friends” or otherwise; it is a question of fact in each case.”

	On the following page the Judge said:
	“The Act was intended to apply only to persons who are really carrying on the business of money-lending as a business, not to persons who lend money as an incident of another business or to a few old friends by the way of friendship......if a man is carrying on the business of a money-lender he is within the Act, although he may be free from all blame morally.  The question in each case is, does he carry on the business of a money-lender?”

	With all respect, it seems to me that the question is not quite as the Judge put it, because, as I have already indicated, his words do not accurately reflect the words of the statute, but that was not of any significance in Litchfield’s case.
		In Newton v Pyke [l908] 25 TLR 127 Walton J. followed the approach adopted in Litchfield, saying at 128 -
	“Whether a man was carrying on a business as a money-lender must be, as was pointed out in Litchfield v Dreyfus, a question of fact in each case.......it was not enough merely to show that a man had on several occasions lent money at remunerative rates of interest, there must be a certain degree of system and continuity about the transactions.”

	In Nash v Layton [l911] 2 Ch.71 the Court of Appeal allowed the defendant to interrogate about other loans.  That is not an issue in the present case, and it is easy to see that information about other loans would be material in order to show that the alleged money-lender had made loans at other times.  At page 76 Cozens Hardy M.R. said: -
	“It seems to me that the facts which are the subject of the interrogatory here are substantially relevant to the existence or non-existence of the fact whether the plaintiff was carrying on at the critical period in the business of a money-lender.  But I desire to go further.  I am not satisfied that this is in the true sense of the word a mere question of fact.  No doubt the facts have to be ascertained, but as at present advised, I think it would be more accurate to say that it is a question of law arising from those facts whether the plaintiff is or is not carrying on the business of a money-lender.”

	At page 82 Buckley LJ said:-
	“Whether a man is a money-lender or not is an investigation whether he has done such a succession of acts as that upon the facts proved by establishing that those acts were done the court arrives at the conclusion as a matter of law that he falls within the definition of a money-lender in the Act of Parliament.”

	So there arises the suggestion that the requirements of Section 6 may not be met if there is only one transaction but, as I have already indicated, that was not in fact the issue in Nash’s case.
	In Kirkwood v Gadd [l910] AC 422 the House of Lords was concerned with a different section of the l900 Act, in relation to which Lord Atkinson said at 431 that the phrase “carries on his business” must be held to imply “a repetition of acts, the sum of which constitutes the business”.  No doubt that is helpful when it is necessary to construe the second leg of Section 6 with which, as I have said, we are not primarily concerned.
	Newman v Oughton [l911] 1 KB 792 was a case concerning a pawnbroker who had on one occasion made a loan of £50 on the security of a bill of sale.  There was no evidence of any other advance outside the ambit of the pawnbroking business.  The Divisional Court held that evidence to be insufficient to establish the statutory defence.  On the facts that was clearly right, the evidence was insufficient, but it is of limited assistance to us in relation to the facts of this case.
	In the tax case of J. Bolson & Son Ltd. v Farrelly [l953] 34 TC 161 Harman J. observed, at p.167, that a deal done once is probably not an activity in the nature of trade, though it may be.  Done three of four times, it usually is.  Each case, he said, must depend on its own facts.  I agree.
	The most recent authority which we were invited to consider was Skelton Finance Co. Ltd v Lawrence [l976] 120 Solicitor’s Journal 147, where the defendant was lent money by the plaintiff company which normally made interest free loans to associated property companies.  It had on one previous occasion made a loan to a tenant of an associated company, and Slade J. said that the two isolated loan transactions “did not import the necessary element of system, repetition and continuity necessary to constitute a money-lending business”.  No doubt that was right,  on the facts of that case, but Mr Elleray submits, and I accept, that a licensed money-lender who sets up in business with an office probably falls within the Section 6 of the l900 Act when he makes his first loan, even if he never makes another, because at the time when that loan was made, his business was that of money-lending.  

7.	The Judge’s Approach
	That was not the approach to the statute which was adopted by the trial judge in the present case.  He said at page 17A of the transcript:-
	“I have to ask myself a very simple question, and it is this: if one goes back to January l961 (sic) when this mortgage was entered into, were the late Mr Conroy and Mrs Conroy carrying on business as money-lenders, within the meaning of Section 6 of the l900 Money-Lenders Act?......it seems to me that to carry on a business at all, you have to show that at the very least there have been several transactions over a relatively short period (I am thinking of perhaps something between two to four years) a year either side of the transaction in question; two years either side of the transaction in question, when the persons concerned have made loans at interest to others.  Because if that is not the case, the making of a single loan is plainly not carrying on a business by itself.  There has to be some repetition and some regularity in the pattern to establish the carrying on of a business.”

	In my judgment the Judge’s approach was wrong, and it was necessarily the basis of his decision.  As I have said, what the Judge should have asked himself was whether on 6th January l971 the business of Lancashire Acceptances was that of money-lending.  If that question was answered in the affirmative it was unnecessary to look any further, but if it was not so answered then it was necessary to consider the statutory alternative, namely whether on that date Lancashire Acceptances advertised or announced itself or held itself out in any way as carrying on that business.

8.	Evidence
	I turn now to consider what the Judge’s answers would or should have been if he had asked himself the right questions and it is instructive to approach the evidence in chronological order.

A.	The l966 Licence
	The first relevant piece of evidence is that in l966 Lancashire Acceptances did for twelve months have a money lender’s licence, and the Judge had no real assistance as to why that licence was obtained, or as to why it was considered appropriate to dispense with it after 12 months.  There is nothing to suggest that the business changed between then and l971.  So there is some evidence that at one time Mr Conroy thought that, for his business, a licence ought to be obtained. 
B.	Eckersley
	There was also before the Judge clear evidence that between l968 and l971 Mr Conroy was instrumental in making loans to a builder named Eckersley.  In her Affidavit of 17th May l991 Mrs Conroy says that between l968 and l971 Mr Southam of Slater, Heelis & Co. (Mr Conroy’s Manchester solicitors) was acting for “Lancashire Acceptances Ltd in connection with advances to Mr F. Eckersley to complete a small residential development in North Manchester”.  There was before the Judge some correspondence which is no longer available.  Apparently Mr Conroy signed some letters as “director” which led the Judge to conclude, as Mrs Conroy asserted, that the Eckersley loans were made by Lancashire Acceptances Ltd and not by the partnership, but it is noteworthy that Mr Conroy’s letter to Mr Southam of 6th December l971, which refers to both the Kenny loan and to Mr Eckersley is not so signed.  Mr Conroy having died the Judge was rightly cautious in relation to Mr Kenny’s assertion that in late l971 Mr Conroy told him that he was in the money lending business and that he had lent money to Eckersley, but it is noteworthy that the loans to Eckersley do not seem to have been recorded in the cash book or in the closed book.  Clearly as it seems to me, Mr Conroy, either personally or by means of his company Lancashire Acceptances Ltd, was engaging in unlicensed money lending prior to and during l971.  The letter of 6th December l971, to which I have already referred, speaks of Mr Eckersley settling the extra interest which has accrued.  Furthermore, the documentation plainly does not provide a complete record.  That may or may not be due to the passing of time.  The documentation also to some extent suggests that the boundaries between Mr Conroy’s companies and his individual trading were not always rigidly maintained.

C.	Prudent Finance
	It is also common ground that between l966 and l973 Mr Conroy was instrumental in securing payments by Lancashire Acceptances or Lancashire Acceptances Ltd to Prudent Finance which bought, refurbished and then sold on mortgage residential properties at the bottom end of the market.  It is clear from the cash book that sometimes Lancashire Acceptances paid the money and sometimes it was Lancashire Acceptances Ltd., and Sarah Bligh, whose statement was before the trial judge by agreement as she was at the time of trial living in South Africa, clearly did not regard the distinction between the firm and the companies as significant.  In the l960’s she had been Mr Conroy’s secretary, and apparently she was the only office employee.
	As can be seen from the helpful schedule prepared by Mr Elleray there were between 7th September l966 and 3rd August l973, 24 occasions on which money was advanced to Prudent Finance.  Twenty two of the advances had been made by the end of l971, and on each of those occasions the sum advanced was £3,000.  Plainly each advance was in some way related to properties held by Prudent Finance, and Mr Elleray’s explanation is quite simple.  He says that the advances were loans repayable with interest at a rate which varied from about 12% upwards.  The properties were offered as security for the loans, and were charged as such, but with the transactions taking place so frequently, this procedure proved cumbersome, so on 8th December l969 the 13th advance, and all subsequent advances, were secured by a floating equitable charge on all of the property of Prudent Finance.  At trial Mr Peter Conroy, the accountant son of Mrs Conroy, put forward a different explanation of his father’s advances to Prudent Finance, which had been made at a time when Mr Peter Conroy  was far too young to be personally involved.  He said that the advances were in essence sales by Prudent Finance to Lancashire Acceptances or Lancashire Acceptances Ltd., at a discount, of the mortgages which Prudent Finance owned.  This he described as block discounting.  There is nothing unusual about the idea of selling mortgages at a discount to produce an immediately available capital sum, but - 
(1)	such an arrangement would normally involve a contract.  We have seen an example of a standard form of block discount agreement, but there is no evidence that any such agreement was ever made in relation to any Prudent Finance advance:
(2)	an examination of the cashbook entries in relation to the earlier advances - prior to the creation of the floating charge - reveals no discernible relationship between the value of the mortgages and the amount of the advance, save that the former comfortably exceeded the latter.  This is suggestive of the mortgages being no more than a loose form of security rather than the subject matter of the sale.
 (3)	there is no evidence of any mortgage ever having been assigned by Prudent Finance to Lancashire Acceptances or Lancashire Acceptances Ltd.  Charges were registered, but such registration was inconsistent with an outright sale.
(4)	on odd occasions when the closed book refers to a Prudent Finance transaction, it is possible to calculate, and Mr Elleray has calculated, that the sums advanced have been repaid over three years with interest at 12½% or 13%.  That is clearly indicative of a loan rather than a sale.
(5)	in their earlier Affidavits Mrs Conroy and Mr Peter Conroy, although referring to block discounting, also referred to the Prudent transactions as loans, to be bracketed together with the loans made to Mr Kenny and to Caddick Supermarkets (to which I will turn in a moment) so that in November l991 the skeleton argument prepared by counsel for Mrs Conroy read -
	“5.5	Accordingly there were 8 loans (including the defendants) in the period November l969 to May l974 (4½ years) to three persons (Prudent, Caddick and the defendant).
	 5.6	The loans (averaging less than one per year and none at all being made in l972), were too infrequent to constitute the business of money lending.” 	

	Against that background I find it surprising that the judge should have been unable to decide whether the Prudent transactions were loans by Lancashire Acceptances to Prudent Finance or the purchase price paid under a block discounting scheme (see the judgment at 10E and 11C).  Part of the explanation may be that we, unlike the Judge, have had the advantage of hearing from leading Counsel for Mr Kenny, but in any event it seems to me to be abundantly clear that the Prudent Finance transactions were loans made regularly by Lancashire Acceptances both before and after the loan which was made to Mr Kenny.

D	Mr Kenny’s Loan
	The way in which Mr Kenny obtained his loan is also, in my judgment, significant.  He did not know Mr Conroy, but he was a professional client of Mr Southam.  He asked Mr Southam if he had any clients who were in the business of lending money on the basis of security, and Mr Southam gave him the name of Lancashire Acceptances, at the same time advising Mr Kenny that the rates would be high, about 18%, double what was then the norm.  Mr Kenny accepted the terms, Mr Southam contacted Mr Conroy, and a formal contract was drawn up.  The letters exchanged between Mr Conroy and Mr Southam on 16th and 18th December l970 show this to have been a carefully formulated arms length transaction.  The obvious inference, even from this one transaction, is that Mr Conroy was treading ground he had trodden before.  The circumstances were such as to suggest quite clearly that a business of Lancashire Acceptances, even if not its sole business, was that of money lending.  Insofar as it is necessary to consider the second part of Section 6 of the l900 Act. Mr Southam’s reaction to Mr Conroy’s enquiry and what happened thereafter suggests to me that at the material time Lancashire Acceptances was holding itself out as carrying on that business.

E	Avoiding the Issue
	In l972 a partner in a firm of solicitors in Wigan was acting for a client who was considering purchasing from Lancashire Acceptances its mortgage in respect of Mr Kenny’s home.  The solicitor asked Mr Conroy whether Lancashire Acceptances were unlicensed money-lenders.  As the correspondence shows, the partner did not get any clear reply.  Mr Conroy knew from at least l966 what was meant by an unlicensed money lender, and if Lancashire Acceptances were not in that position, I cannot see why he should not have said so.

F.	Caddicks Supermarkets
	It is common ground that in l973/4 Lancashire Acceptances made three loans to Caddicks Supermarkets.  The total sum involved was £17,000, and they were, as the Judge said, “quite plainly loans”, to stock supermarkets.  The Judge regarded those loans as of limited significance because they did not begin until nearly three years after the loan to Mr Kenny.  That I accept, if the evidence of the loans to Caddicks stood alone, but it does not stand alone, and there is nothing to suggest any significant shift in the trading of Lancashire Acceptances between January l971 and December l973.

9.	Conclusion
	As Mr Machin points out, when Mr Kenny was bankrupt the solicitors who were then involved recognised the debt and did not seek to raise the defence under the Money-Lenders Acts, but they were not acting for Mr Kenny at a time when he was being pressed to sell his home and in my judgment nothing turns on that.
	This court is always slow to interfere with the factual conclusions of the trial judge who has had the advantage of hearing the witnesses giving their evidence, but here, as I have explained, the Judge misunderstood the law, and reached conclusions which, as it seems to me, do not depend upon the credibility of witnesses but upon the approach to be adopted to contemporary documents and other undisputed facts.  In my judgment if the Judge had asked himself the right question, he would have concluded that on 6th January l971, when it was dealing with Mr Kenny, the business of Lancashire Acceptances was that of money lending, and I would therefore allow the appeal and dismiss the action.  I have reached that conclusion without reference to any of the further evidence which Mr Elleray invited us to consider, but I draw some comfort from the fact that a brief glance at the further evidence suggests that it supports my conclusion.

10.	Refusal of Adjournment
	My conclusion in relation to the main issue makes it unnecessary to consider in any detail Mr Elleray’s challenge to the Judge’s decision not to adjourn, but Mr Kenny’s failure to act sooner when he found himself unable to pay for legal representation put the Judge in a very difficult position.  Obviously it would have been much better if the case had been tried with Mr Kenny legally represented, but the delays had been such as to make it highly desirable to proceed.  The decision to proceed was an exercise of judicial discretion, and in my judgment it has not been shown to be plainly wrong.

LORD JUSTICE SCHIEMANN:  For the reasons set out in the judgment of Kennedy LJ I agree that this appeal ought to be allowed and that the action be dismissed.

SIR PATRICK RUSSELL:  I agree.

Order:  Appeal allowed with costs.