No Shield For Borrowers Under the Money Lenders Act: A Critical Look Into Its Applicability By O.O.Nwani,Esq


It has now become trite that no statue should be used as an engine room of fraud; and the Courts have risen to the occasion most time that litigants and defendants want to hide under a lapse in a statue or technicality in law towards gaining undue advantage.
As always, defaulting debtors and crafty lawyers often boast of their backing in law that they are not going to pay their creditors unless he could confirm that he is an approved money lender who acted strictly in line with the Act. But the law is quite settled that a contract is discharged only when both parties are released from their obligations under the agreement. This usually happens by performance. See ADEGBOLA & SONS.Vs. IDOWU & ORS (2017) LPELR_42105 (SC)
Most of the times, the debtors fraudulently and ignorantly inclined, will be praying the court that the money lender has no licence with which to lend out money; but he collected same money with that knowledge at the back of his mind that the money lender does not lend him the money under the Act nor had any license with which to do so. The law is quite settled that no man should be allowed to benefit from his own wrongdoing, since the debtor obviously knows that the lender is not under the Act but took the money and turned round to plead illegality of the transaction, he is estopped from such defence. We commend AWOJUGBAGE LIGHT INDUSTRIES LTD.Vs. CHINUKWE (1995) 4 NWLR (Pt 390, Pg 390 (SC) @ 462 PARAS A-E.
Indeed, section 1 (1) (h) of the Money Lenders Act which is the interpretation section provides thus:
Moneylender includes every person whose business is that
Of money lending or who advertises or announces himself or
herself or holds himself or herself out in anywhere as carrying
On that business whether or not that person also possesses or
earn property or money derived from sources other than the
the lending of money and whether or not that person carries on
the business as principal or agent; but shall not include…
Worthy of mention is the fact that Sections 6 & 16 0f the Moneylenders Act imposes sanction on unlicensed money lender or one who charges interest beyond the specified amount. The issue of debtors being aware of the lacunas and technicalities under the money lenders Act, but still went ahead to collect the creditors money and then makes a volte-face and declares that the contract is illegal and unenforceable. Having benefitted fully from the loan, now seeks to hide under the illegality of contract to avoid liability. This particular issue has received due attention at the Apex Court in CHIDOKA & ANOR. Vs. FIRST CITY FINANCE CO. LTD (2012) LPELR-9343 (SC) per Muntaka –Coomassie JSC @ Pg 18-21. His lordship submitted thus:-
“The 2nd issue deals with the alleged facie illegality of the transaction by virtue of the provisions of the Money Lenders Law of Lagos State Cap 85, Section 1, (2) (c) thereof. As a preliminary point I must state that I have perused the statement of claims, and the statement of defence and I could not see where the issue of illegality of contract was raised. To make the matter worse, the appellant did not utter any evidence in defence or in support of their statement of defence. It is settled law that the court is only bound to consider and determine issues properly placed before it. It cannot embark on its voyage to fish out issues for parties. See LASISI OGBE Vs. SULE ASANE (2009) 18 NWLR (Pt 1172) Pg.106. it is my view that this issue having not been raised before the trial court is not worthy of any determination. However, even if it was raised, can the respondent be said to be a Money Lender or licensed money lender also make the provision of money lenders law applicable to it? The Appellants cannot admit in his brief of argument that the respondent was not a money lender or a registered money lender. In this respect, I find the view expressed by Okoro JCA useful in ALHAJI ABDULLAHI IBRAHIM .Vs. MALLAM ZANGINA ABUBAKAR BAKORI IN SUIT NO: CA/K/292/2006 UNREPORTED DELIVERD ON 27/7/2009 (Court Of Appeal Kaduna Division) and I wish to adopt it in this judgement. At pages 21-23 the learned justice of the Court of Appeal held as follows:- “a person engaged in any other businesses who out of sympathy or pressure as in this case lends money to his friends to resuscitate his ailing business should not by any stretch of imagination be termed money lender under the law aforesaid. I seem to agree with the view expressed by Farewell J. in LINTCH FIELD.vs. DREYFUL (1906) 1 K.B.554 at 559 thus: “the Act was intended to apply only to persons who are really carrying on the business of money lending, not to persons who do it as incidental business or to a few friends”. He continues and says: though not binding authority, I agree that the view so expressed represents the correct position of the law in this matter. I am always not comfortable at the practice where a party after seeking and obtaining money from a friend for resuscitation of his ailing or dwindling business will turn around to rely on technicalities or loopholes in the law as a cover to absolve himself from contractual obligations by putting up a defence under money lenders law as done by the Appellants in this case . This is Pes-simi exempli of business relations and this court would not lend support for such a party to bite the finger that fed him and deprive him of his hard earned money. A man who, with his eyes open and without the other party committing any fraud against him, enters into an agreement with another, should be prepared to abide by the terms of the agreement illegal or otherwise unenforceable in law. I cannot allow the Appellants after collecting money from the respondent to do business, to now turn around to plead the money lenders law in other to escape the refund of the said money as governed by Exhibit A. between them. It is on this note that I agreed with the learned trial judge that based on the pleadings and evidence before the Court, the respondents are not money lenders under the money lenders law of Kaduna State (supra). Accordingly exhibit A is not governed by the law. My Lords though I am not bound by the above exposition of the law, I agree that the statement represents the law and as such permit me to adopt same as mine. As earlier pointed out the Appellants have stated that the respondent is not a money lender, how can the provision of the money lenders law supra be applicable to him? Apparently, the Appellants were in this state of confusion when they submitted in their brief of argument that the respondent is deemed by law to be a money lender and had the primary burden of proving if not admitted, the facts that shows exemption from companies with licensing requirement of the money lender law. The submission is of no moment. The Appellants have expressly agreed and admitted that the respondent was not a money lender, hence there was nothing left for the respondent to prove. Consequently, I also resolve this particular issue against the appellants and in favour of the respondents. Finally, I hold that the appeal is devoid of any merit and it is accordingly dismissed. The judgement of the lower court upholding the trial court decision is hereby affirmed. One Hundred Thousand Naira cost (100, 000,00) is awarded to the respondent”. (All emphasis mine)

It is now deducible from the verdict above, that the money lenders Act or Law is strictly applicable to those who are licensed under the Act or the law for money lending, those who announced or hold themselves out as money lenders. But on the other hand, it is not applicable to friendly, acquaintance and sundry loans that are incidental to everyday living despite the interest rate charged by those who are not professional money lenders.
Equally, it would do harm to the sacred principle of contract, to invalidate contracts voluntarily entered into by the parties simply on the ground that one of the parties who have benefitted could turned round to plead illegality of such contract when liability has come due, no equitable court will stand by and allow such iniquitous defence on the lane of technicalities.
Flowing from the above, those who took money from friends and whosoever, who is not a money lender but intend to hide under the illegality of the contract under the money lenders Act having benefitted from the transaction are estopped from disclaiming their non obligation on account of the transaction being an illegal one. It is quite appalling and reprehensible denunciation at the late hour, being very unconscionable plea to evade liability; the law of contract has not given them the leg to be so favoured. See VERITAS INSURANCE. Vs. CITI TRUST INVESTMENT LTD (1993) NWLR (Pt.281) pg.3491.
Going forward, CHIDOKA & ANOR. Vs. FIRST CITY FINANCE COMPANY LTD (Supra) is still the law on this contractual obligations that defendants down the ages have been crafting on how to defraud their creditors of their hard earned money at the nocturnal hour when the liability comes due; but the law of contract puts a shield on those who voluntarily entered into contract from shirking their responsibility therein. The equitable jurisdiction of our courts found such act morally despicable, condemnable, reprehensible and wicked. Therefore, all those unconscionable defence and pleas that my creditor did not lend me the money under the money lenders Act or Law is estopped from advancing such defence by our extant laws.

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