United Dominions Corporation (J'ca) Ltd v Shoucair

JurisdictionJamaica
JudgeLewis, J.A.,Henriques, J.A
Judgment Date01 January 1963
Neutral CitationJM 1963 CA 20
Docket NumberCivil Appeal No.14 of 1963
CourtCourt of Appeal (Jamaica)
Date01 January 1963

Court of Appeal

Lewis, J.; Henriques, J.A.

Civil Appeal No.14 of 1963

United Dominions Corporation (J'ca) Ltd
and
Shoucair

Contract - Debtor and Creditor — Interest

Lewis, J.A.
1

This appeal raises two interesting questions. The appellant corporation (hereinafter referred to as U.D.C.) lent the plaintiff-respondent substantial sums of money on mortgage security at a fixed rate of interest of nine per cent per annum, repayable on demand. This loan was outside the operation of the Moneylending Law, Cap.254, by virtue of section 13. Subsequently U.D.C. demanded interest at the rate of eleven per cent per annum and the plaintiff agreed to pay it. The first question raised is whether there was consideration to support the new agreement. Has the respondent proved that he agreed to the new rate of interest in return for forbearance on the part of U.D.C.? Secondly, the agreement for the new rate being admittedly unenforceable by virtue of section 8 of the Moneylending Law, and the payment of interest being only one of several terms of the mortgage agreement, was the new agreement effective to vary the mortgage so as to make the loan one at 11% and so unenforceable; or were the parties left to their original rights under the mortgage?

2

First, as to consideration. The learned judge found that the only reasonable inference to be drawn from the conduct of the parties was that it was agreed that U.D.C. would not demand payment while the plaintiff paid interest at 1'I% and, in addition, while he paid x.150 per week on his account. Upon this finding he held that the plaintiff had established that there was consideration for the agreement to pay the increased rate of interest.

3

Learned counsel for U.D.C, submitted that the learned judge erred in so holding because the evidence did not establish that any forbearance on the part of U.D.C, was due unequivocally to the plaintiff's promise to pay increased interest, or, alternatively, that notwithstanding the arrangement for weekly payments, U.D.C. would probably have called in the loan if the plaintiff had not agreed to the demand for increased interest.

4

In my opinion, the learned judge's decision on this point was right. As he said, “the thing must be looked at in a business way, taking into account, so far as they are known, the normal usages of commercial life.”

5

The plaintiff was a business man who had mortgaged all he had for repayment of a large loan. He found himself in difficulties in making payments satisfactory to his creditor. From March 1961, he had paid nothing. He had been told that further advances which he had expected and for which he had immediate need would not be made to him. His efforts to get the parent company to intervene had been unsuccessful and had only resulted in a stern letter from the general manager, Mr.Neale, ending with the statement that his failure to pay certain installments “hardly tends to inspire confidence.” All this at a time when credit restrictions imposed by Government and by U.D.C. had had the effect of reducing sales in the motor trade in which the plaintiff was engaged. It is no doubt possible to criticise as extravagant the learned judge's reference to the plaintiff as a “debtor in extremis” but that his financial situation was critical and that he was under pressure, polite but firm, to meet his commitments in a manner more satisfactory to U.D.C, there can be little doubt.

6

It was in these circumstances that the plaintiff received on August 22 nd, the demand for payment of increased interest. What was he to do? Had his financial situation been secure he might have protested on the ground that his mortgage agreement contained no provision for a change in the interest rate. But with his loan payable on demand, his interest payments months in arrear and his creditor patently dissatisfied, he could be under no illusion as to the probable consequences if he refused. Nor does it appear from the phraseology of the letter, as learned counsel for the plaintiff pointed out, that U.D.C. contemplated a refusal. It stated -

“As a result, interest on your loan will be computed at 4% above the Bank of England rate which is at present 7%.This change will take effect as from 26 th July 1961.”

7

The request to “confirm by signing and returning the attached copy” was almost a formality dictated by legal necessity.

8

Within a week of the receipt of this letter the plaintiff was called in by Mr. Neale for an interview about his account.Mr. Neale had returned from holiday to find a new commitment - an advance of $1,800 in fulfilment of a previous undertaking to Barclays Bank D.C.O. The plaintiff had earlier been informed that this advance would bear interest at 11% and would “be added to the existing mortgage loan.” Mr. Neale was disturbed by this new commitment and “thought it was time for a heart to heart talk with plaintiff to see if we could get the thing put on a proper basis.” Whether the plaintiff actually signed the confirmatory copy of the letter before or after this talk is not clear, for it was not delivered to U.D.C.(he says, by hand until September 7 th, one day after payment of the first weekly installment of £ 150 agreed upon at the interview. But the discussion clearly took place against the background of U.D.C.'s demand for the increased interest rate. Having made this demand U.D.C, was now calling for a fixed weekly payment. Could the plaintiff refuse either?

9

There can be little doubt that the promise to make weekly payments was made under pressure and, as subsequent events showed, with little real prospect of its being honoured.

10

The plaintiff gives his reason for agreeing to pay the increased rate. He says -

“I signed it” (the letter “because I had no choice. If I hadn't signed it they would have pressed for payment. I was not then able to repay the £ 55,000 and outstanding interest.”

11

The learned judge accepted this, in my view rightly. I am clearly of opinion that the demand for increased interest' in the circumstances in which it was made constituted pressure upon the plaintiff in connection with the payment of his loan. The plaintiff's acceptance of the demand can only be explained on the basis that he hoped thereby to avoid the loan being called in - an implied request to U.D.C. to forbear from calling for payment.

12

Learned counsel for U.D.C. submitted that the plaintiff must show that notwithstanding the agreement as to payment of fixed weekly installments U.D.C. would probably have called in the loan had the plaintiff refused to pay the new rate. Looking at the facts in a business way I think it is a reasonable inference that had Mr. Neale received on September 7 th a letter of refusal instead of an acceptance he would probably have moved promptly to call in the loan. It is unlikely that U.D.C. would have been content to allow the money to remain at the lower and unremunerative rate with a debtor in whom they had lost confidence and whose account they considered unsatisfactory. But in my opinion' once the connection between pressure, promise to pay the increased rate of interest and forbearance is established, it is not necessary for the plaintiff to exclude any possible effect that the promise of weekly payments may have had concurrently. That connection is sufficient to establish consideration for the agreement and I can see no reason in principle why the presence of some other factor should deprive it of its legal effect.

13

I think that this part of the case is really concluded by the reasoning in The Alliance Bank v. Broom, (1864) 34 L.J.Ch.257 where Kindersley v. C. says:

“Now, what is the effect of the letter written by the defendants? It appears to me that when a creditor demands payment of a debt' and the debtor' in consequence of that application' agrees to give a certain security' although there is no promise by the creditor to abstain from suing for any given time, yet the effect is that the creditor does in fact give or must be assumed to give and the debtor receives or must be assumed to receive the benefit of some degree of forbearance, although for no definite or fixed period. If the debtor had refused to give any security at all, the creditor might, of course have taken immediate steps to enforce payment, but in consequence of the promise to hypothecate, the debtor does receive some degree of forbearance.”

14

And in Glegg v. Bromley, [1912] 3 K.B.474, Fletcher Moulton, L.J.said, at p.486:

“If there has been pressure and in response to...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT