Hungier v Grace

[1972] HCA 42

HIGH COURT OF AUSTRALIA

Barwick C.J., Menzies and Walsh JJ.

HUNGIER v. GRACE

(1972) 127 CLR 210

1 August 1972

Money Lenders (Vict)

Money Lenders (Vict.)—Business of moneylending—Loans made to one borrower on request based on proportion of profits of specific business transactions by borrower using borrowed funds—Money Lenders Act 1958 (Vict.), ss. 3*, 22.

Decisions

August 1.
The following written judgments were delivered : -
BARWICK C.J. The appellant, Henry Hungier, carried on business as an electrical contractor and builder of flats. The respondent, Leslie Grace, whom the appellant had known previously in their native Poland, carried on a timber business which included fairly frequent dealings with governmental and semi-governmental bodies. When the respondent procured timber to satisfy orders received from these bodies and paid cash for it, he could generally obtain a mark-up of about twenty-five per cent, less five per cent for his expenses, on the price charged to those bodies. However, to be in a position to pay cash for the timber, he needed to have large sums of ready money available, sums considerably beyond his liquid resources. Also, there was necessarily an interval of time during which he would be out of his money, that is to say, before he could recover payment after delivery of the timber. He therefore approached the appellant with the suggestion that if the latter would provide the necessary cash to provide the purchase price of the timber for such deals the two men could split the net profit, resulting in a ten per cent profit for each person, that is to say, ten per cent on the purchase price of the timber which, if the appellant provided it, would be ten per cent on the amount of money made available by him. Hungier agreed to provide what was in substance the circulating capital for the deals in timber for the governmental and semi-governmental bodies. Accordingly, he began and continued over a period of about six years to make money available to the respondent Grace. These transactions between the two men were found by the Court of Bankruptcy and, in my opinion, correctly, to be loans. (at p212)

2. The first of these loans occurred on 24th March 1959 when the appellant lent the respondent $4,000 which the latter suggested and the appellant agreed should be repaid by ten equal instalments of $440, thus passing on to the appellant his agreed ten per cent. The repayment was to be carried out by means of cheques post-dated at varying intervals, but ending on 9th June 1959, some eleven weeks later. (at p212)

3. This loan was typical of the fairly frequent transactions which were to follow. In the period March 1959 to November 1964 there were thirty-two loans totalling $287,000, although this figure was reached, to a large extent, by the recirculation of the same capital. This sum, together with ten per cent thereof, was repaid to the appellant in something like 307 instalments. On each occasion it was the respondent who approached the appellant seeking the loan. If the appellant had the money available he would lend it, but if not the respondent's request would be refused. Furthermore, the respondent always set his own schedule for repayment, sometimes proposing to repay within a couple of months, at others extending the time to seven or eight months. The relationship between the two men was such that in 1962 the respondent made an offer to the appellant to become a partner in the timber business, but the offer was declined. (at p213)

4. On 24th December 1964 the appellant lent the respondent a further sum of $4,000 as a transaction in the same series. This loan, together with a loan of $6,000 on 2nd February 1965 and two loans of $4,000 on 1st March and 1st April 1965 respectively, also in the same series, are the subject of the dispute between the parties. The four loans were all to be repaid by instalments of $1,100, but in June 1965 one of the respondent's cheques was dishonoured and eventually $14,100 was left unpaid in respect of the four loans. (at p213)

5. A scheme of arrangement between the respondent and his creditors, dated 2nd November 1966, was duly registered on 22nd November 1966 under Pt XI of the Bankruptcy Act 1924-1965 (Cth). By a proof of debt sworn on 16th December 1966, the appellant claimed that on 2nd November 1966 the respondent was, and still remained, indebted to him in the sum of $14,100. Everett Thomson Bent, the trustee administering the scheme, informed the respondent in February 1968 that proof of debt for $14,100 had been admitted for $13,217.81, but deferred under s. 86 of the Bankruptcy Act 1924-1965, on the basis that the appellant had lent the money in return for "a share of the profits" arising from the carrying on of the respondent's business. The figure of $13,217.81 was arrived at after deducting $882.19, which it was agreed the appellant owed the respondent for timber sold and delivered. Even with the appellant's proof of debt admitted the scheme was a solvent arrangement. (at p213)

6. The trustee also advised the respondent that, under r. 257 of the Bankruptcy Rules made under the then current Act, he had the right as a debtor to apply to the Bankruptcy Court to have the trustee's decision varied, if he considered that the proof of debt had been wrongly admitted. Consequently, by a notice of motion dated 28th February 1968, the respondent sought, inter alia, an order expunging the proof. This was filed only a few days before the Bankruptcy Act 1924-1965 (Cth) was repealed and replaced by the Bankruptcy Act 1966 (Cth), which came into operation on 4th March 1968. The dates are important for although r. 257 extended to debtors, who were defined as including "any debtor proceeded against under the Act, whether he becomes a bankrupt or not" (r.4), the equivalent provision in the new Act, s. 99, substituted "bankrupt" for "debtor". The respondent does not fall within the meaning of "bankrupt" under the present Act. However, s. 285 (4) of the Bankruptcy Act 1966 provides that :

"(4.) Any proceedings (including the hearing of an appeal) in a court or before a Registrar or Deputy Registrar in Bankruptcy under the repealed Act that had not been completed before the commencement of this Act may be continued and completed, and any right of appeal in relation to those proceedings may be exercised and the appeal heard and determined, as if this Act had not been passed." (at p214)

7. The Federal Court of Bankruptcy therefore held and, in my opinion, rightly, that it had jurisdiction. On 23rd October 1968 it ordered that the appellant "be at liberty to deliver to the debtor . . . a statement of claim stating with full particulars his claim to be a creditor of the debtor". The appellant in his particulars relied on the oral agreements relating to the four loans to the respondent after December 1964. Alternatively, he alleged that the respondent was the drawer of fifteen dishonoured cheques for sums totalling $16,500 less $2,400 previously received. In his defence the respondent alleged that the appellant was at all material times a money lender within the meaning of the Money Lenders Act 1958 (Vict.), and that as he was unlicensed as a money lender he was not entitled to recover from the respondent any money lent or any interest in respect thereof by reason of s. 22 of the Act. (at p214)

8. Despite the form of the proceedings taken in accordance with the order of 23rd October 1968, under which the appellant appeared to be a claimant, the onus of proving that the appellant was a money lender, within the meaning of the Money Lenders Act, rested on the respondent Grace who was seeking to expunge a proof of debt admitted by his trustee. The respondent was in the position of a debtor seeking to evade payment of a debt by reliance on the Money Lenders Act. (at p214)

9. A money lender is defined, in s. 3 of the Money Lenders Act 1958, as :

"Every person whose business (whether or not he carries on any other business) is that of money-lending or who advertises or announces himself or holds himself out in any way as carrying on that business and who lends money at a rate of interest exceeding ten per centum per annum. . . " (at p214)

10. Section 22 provides :

"(1) No money lender shall be entitled to recover in any court any money lent by him or any interest in respect thereof or to enforce any agreement made or security taken in respect of any loan made by him unless he satisfies the court by the production of his licence or otherwise that at the date of the loan or the making of the agreement or the taking of the security (as the case may be) he was the holder of a licence under this Act.

(2) Notwithstanding anything in the last preceding subsection a money lender shall be entitled to recover in any court the principal of any loan made by him and may enforce any agreement made or security taken in respect or any such loan but not to recover any interest in respect of that loan if he satisfies the court that the failure to hold a licence was accidental or due to inadvertence and that he had acted honestly and reasonably in all the circumstances of the case and ought fairly to be excused for the failure." (at p215)

11. It is clear that the lodging of a proof of debt comes within the scope of activities prohibited by s. 22 (1). In discussing s. 19 of the Money Lenders Ordinance of Nigeria, part of which was to the same effect as s. 22 (1) of the Victorian Act, the Privy Council said in Kasumu v. Baba-Egbe (1956) AC 539, at p 551:

"Such requirements as that the money lender must be registered or licensed, must use his authorized name, must procure a note or memorandum of the contract signed personally by the borrower, must keep a book in which is entered a contemporary record of the transaction, strike indifferently at all money lenders' loans, however moderate the terms of any particular transaction. When the governing statute enacts that no loan which fails to satisfy any of these requirements is to be enforceable it must be taken to mean what it says, that no court of law is to recognize the lender as having a right at law to get his money back."

Furthermore, the Privy Council went on to hold that (1956) AC, at pp 546-547:

". . . their Lordships are satisfied that the words of deprivation 'not be entitled to enforce any claim in respect of any transaction' are very widely drawn and that they should not be confined to the assertion of rights by means of or in the course of legal proceedings. Thus the performance of such acts in the law as the exercise of a right of sale over property mortgaged or charged or the retention or taking possession of such property in assertion of the claim to repayment is also precluded." (at p215)

12. Although the respondent alleged that the appellant had lent money to other parties, the learned judge in Bankruptcy did not regard these transactions as assisting him in deciding whether or not the appellant was a money lender. One group were "small and irregular loans without interest made by Hungier to friends, lacking the necessary attributes of commercial enterprise, system, regularity and a view to profit"; whereas the others were advances to a partnership of which the appellant was a member. In accordance with the decision of this Court in Kilgariff v. Morris (1955) 91 CLR 524 , these contributions to the funds of the partnership were not regarded as loans in the relevant sense. (at p216)

13. Therefore, the judge said, "the case against Hungier must . . . stand or fall upon the conclusions to be drawn from his dealings with Grace". In this regard his Honour said :

"I have borne in mind that Grace and Hungier were old friends, that Grace sought the loans, that he was the only relevant borrower, that there was no readiness on Hungier's part to lend 'to all and sundry' (see Litchfield v. Dreyfus (1906) 1 KB 584, at p 589) and that there were none of the signs and trappings which often accompany and evidence a business, such as advertising and special business premises. Nevertheless, I am satisfied from the size and frequency of the loans, the long period over which they were made and repaid by many instalments, and the usurious rates of interest charged that Hungier in his dealings with Grace was carrying on a form of commercial enterprise, systematically and regularly, with a view to profit."

His Honour continued that "it was common ground that Hungier did not hold a licence under the Act", and accordingly he ordered that the proof of debt lodged by the appellant be rejected by the trustee. (at p216)

14. The issue was not, of course, whether in making available sums by way of capital from the carrying on of the respondent's business, the appellant was "carrying on a form of commercial enterprise . . . with a view to profit". Undoubtedly, although the arrangements sprang out of friendship - an element which at least as to friendship had a Shakespearian denouement - they were commercial arrangements made with an eye - indeed probably a keen eye - to profit. The question is whether the appellant, in relation to the transactions with the respondent, was carrying on the business of money-lending. (at p216)

15. The decision whether a person is one "whose business (whether or not he carries on any other business) is that of money-lending" can only be reached after a close examination of the facts in each particular case. It is not enough merely to show that a person has lent money to another. As McCardie J. said in Edgelow v. MacElwee (1918) 1 KB 205, at p 206:

"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 formula. Each case must depend on its own peculiar features. It is ever a question of degree."

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. (at p217)

16. The judge, in the passage quoted above, summarized his view of the "peculiar features" of this case. In argument before us, counsel for the appellant has relied primarily on the submission that his Honour erred in placing undue emphasis on the rate of interest charged. Indeed, counsel went further in submitting that the rate of interest was irrelevant in determining whether a person was carrying on a money-lending business, once it had been established that some interest was charged. The only relevance of the rate of interest, it was said, was when a case involved the second limb of the definition of a money lender. In my opinion, this second submission is clearly too sweeping, for situations can occur in which the rate of interest is not only relevant but is that one of many relevant factors which finally tips the scales one way or the other. However, the narrower proposition, in my opinion, remains valid. (at p217)

17. There is no doubt that the profits made by the appellant on his loans, when calculated as rates of interest in accordance with the 2nd Sch. of the Money Lenders Act, are very high. On the figures submitted at the trial by counsel for the respondent they ranged between 16.11 per cent and 81.98 per cent. No doubt this led his Honour to use the expression "usurious" in describing the rates of interest. But they were not rates struck as rates at which the business of money-lending would be carried on. They result from a calculation of the profits the appellant made out of the part he played in the respondent Grace's business and of the acceptance of Grace's suggestion that the profits of that business be shared between them. In my opinion, the trustee of the scheme of arrangement was right when he accepted the position that the moneys advanced by the appellant were loans, but loans which involved the appellant in the sharing in the profits of the respondent's business. In the particular circumstances of this case, to which reference has already been made, it is difficult to see how the rates of interest could correctly be considered as definitive of the question whether the appellant was a person "whose business was that of money-lending". I agree that the reward of the appellant for providing money to the respondent bulked too largely in his Honour's consideration of the case. For my part, in the particular circumstances, I would place little weight on the calculated rates of interest. (at p218)

18. I shall commence consideration of the question whether the four loans here in question were made by the appellant in the course of carrying on the business of a money lender, with the inception of these business transactions between the parties. All the features which were present at the time of the making of the four loans now in litigation were then present except the repetition of the same kind of transaction and temporal extent of that repetition. It is very important, in my opinion, to bear in mind that it was intended and contemplated at the inception of the relationship that the mutual transactions would be repeated over an indefinite but long period of time. The nature of the recurrent transactions did not diverge from that of the first : the reward or profit expressed as a rate of interest was of a like order, only varying in the various instances because of the length of time the respondent proposed to take in repayment of the money advanced. (at p218)

19. There is no question that the appellant was not at the time of the first transaction carrying on the business of money-lending : or that he then had no intention of so doing. None of the common indicia of the business of a money lender was then present : or intended to be brought into existence. What facts or circumstances emerged in the course of time which made the contemplated transactions of the same kind as the initial transaction, the carrying on of the business of a money lender? None that I can perceive but the number of transactions entered into over a long period of time at various intervals : but all were events of the respondent's initiation and, strangely enough for one said to be in the business of money-lending, none of the appellant's seeking. (at p218)

20. It is said that the transactions were systematic and regular. But there was no system on the part of the appellant except to respond to the respondent's requests. There was no regularity but of the respondent's contriving. There was no nomination by the appellant of the effective rate of interest which was a function of the length of time the respondent proposed for the reimbursement of the amount provided by the appellant. (at p219)

21. It is, of course, possible to carry on the business of a money lender with only one borrower. But in this case the arrangement initially made by the parties by its very nature precluded the making of any like transaction with any other person. It was not a case of a money lender desiring to have only one client. Rather the suggestion is that the appellant drifted into conducting the business of a money lender by reason of the nature of his initial arrangement with the respondent, namely, that he would provide the price of timber to be purchased by the respondent for resale to government and semi-government bodies so often as the respondent required such assistance if, when requested, the appellant had ready cash of the required amount available. (at p219)

22. Weighing all the factors, including the size and number of the transactions and the appellant's profit thereon expressed as a rate of interest, I am not satisfied that the four loans in question were made by the appellant in the course of carrying on the business of a money lender. It follows that the "defence" of the respondent fails. (at p219)

23. The correct conclusion in this case is that the transactions entered into as a means of sharing the profits of a business should be analysed as the lending of money and not as indicative of the carrying on of the business of money-lending. See Chow Yoong Hong v. Choong Fah Rubber Manufactory (1962) AC 209, at p 218 (at p219)

24. Having reached this conclusion it is unnecessary, therefore, for me to discuss the argument for the appellant that he came within the scope of the proviso to s. 22 of the Act. In my opinion, the appeal should be allowed. (at p219)

MENZIES J. The Federal Court of Bankruptcy has ordered that a proof of debt lodged by the present appellant, Henry Hungier, with E. T. Bent, the Trustee administering a scheme of arrangement under Pt XI of the Bankruptcy Act, 1924-1965 made between the respondent, Leslie Grace and his creditors, should be rejected on the ground that the appellant is not entitled to recover moneys which he lent Grace or interest thereon because, when he lent the moneys in question, he was an unregistered money lender. This is an appeal against that decision which was given in proceedings instituted by Hungier claiming a declaration that he was a creditor of Grace's in the amount of $14,100, being the balance of moneys lent and interest. In the alternative, the appellant claimed the sum as the balance of fifteen persona grata cheques for sums amounting to $16,500 of which $2,400 only had been paid. The cheques given were as security for the repayment of the loans. Although, in form, Hungier's claim is against the trustee, in substance, it is against Grace because his other creditors having been satisfied there is money in the estate to pay Hungier's claim which money will, if the declaration which has been made stands, be paid to Grace. (at p220)

2. Hungier is a successful electrical contractor. He was born in Poland and there he knew Grace. Both came to Australia after the war - Hungier in 1952, Grace a few years earlier - and here they became close friends. This friendship continued until 1965. His Honour found that before 24th December 1964 - the date of the first loan in question here - there had been no less than 32 transactions between Hungier and Grace whereby Hungier had lent Grace moneys repayable at short term with interest calculated at ten per cent on the whole of the moneys lent so long as any portion thereof remained unpaid. In the judgment of Sweeney J. there are to be found particulars of these loans. His Honour's summary is as follows :

"1. Between March 1959 and November 1964, Hungier made some 32 loans to Grace which amounted to $287,000.

2. In respect to these loans he received payment from Grace of $315,700 being the loans of $287,000 plus ten per cent thereof.

3. The payments from Grace to Hungier in respect of the 32 loans were very numerous, being of the order of 307 over the years 1959 to 1964.

4. Some of the loans were made before all payments in respect of earlier loans had been received and in each of the years 1963 and 1964 payments by Grace to Hungier were made more frequently than once per week. . .

5. Grace repaid the amounts which he had borrowed from Hungier and the interest upon them until the middle of 1965 when a cheque for $1,100 in respect of a loan made on December 24, 1964, was dishonoured. . . .

7. The dealing between the two men had by 1962 reached the stage that Grace then made an offer to Hungier that he should enter into partnership with him in his timber business. Hungier considered the offer but declined." (at p220)

3. His Honour found that Hungier had not lent money except to Grace and the question which faced his Honour was whether the lending of money to Grace as aforesaid constituted Hungier a money lender as defined by s. 3 of the Money Lenders Act 1958 (Vict.). There, "money lender" means :

"Every person whose business (whether or not he carries on any other business) is that of money lending . . . and who lends money at a rate of interest exceeding ten per centum per annum . . ." (at p221)

4. The question then was whether Hungier's money-lending to Grace showed Hungier's business to be that of a money lender. The question for this Court is whether his Honour's decision that it did is wrong. (at p221)

5. In the course of his judgment his Honour said :

"The case against Hungier must, therefore, stand or fall upon the conclusions to be drawn from his dealings with Grace. Due consideration must be given to the fact of their friendship which began in 1946 in their native Poland and continued when they met again in Australia in 1952, where they exchanged social visits and remained close friends. It is also to be remembered that it was Grace, not Hungier, who proposed the idea of the loans. This friendship and the fact that Grace sought the loans were properly advanced as factors tending to show that Hungier was not a money lender but was merely obliging his friend. A consideration of the rates of interest which follow tells powerfully against this argument." (at p221)

6. His Honour thereupon considered the rates of interest and found that the rates charged varied between eighty-two per cent approximately and sixteen per cent approximately if calculated in accordance with the 2nd Sch. of the Money Lenders Act. The amount of interest paid on loans which totalled $287,000 was $28,700. (at p221)

7. His Honour's conclusion is expressed as follows :

"In the present case, I have borne in mind that Grace and Hungier were old friends, that Grace sought the loans, that he was the only relevant borrower, that there was no readiness on Hungier's part to lend 'to all and sundry' (see Litchfield v. Dreyfus(1906) 1 KB, at p 589) and that there were none of the signs and trappings which often accompany and evidence a business, such as advertising and special business premises. Nevertheless, I am satisfied from the size and frequency of the loans, the long period over which they were made and repaid by many instalments, and the usurious rates of interest charged that Hungier in his dealings with Grace was carrying on a form of commercial enterprise, systematically and regularly, with a view to profit." (at p221)

8. Before examining this conclusion, it ought to be said that, although the relationship between Hungier and Grace was clearly enough that of lender and borrower, there was an element of profit sharing in the relationship, in that the interest rate was calculated to be half of the net profit that Grace was making out of transactions in his timber business for which he required the loans in order to pay cash. Indeed the trustee's view was that the parties were carrying on some sort of joint venture which attracted s. 86 of the Bankruptcy Act. (at p222)

9. "Business" is, of course, a word of great flexibility, but, in the relevant definition of "money lender", it ought not, I think, to be extended further than to cover what I would describe as the carrying on of a course of money lending in an organized way with some continuity and generality. It is true that, in lending money as he did, Hungier was acting as a businessman not a philanthropist, but the fact that he got a good return on the money which he lent - albeit without security - does not, of itself, give his lending the character of the carrying on of a business. Indeed, in this case, it seems to me that the high rate of interest charged has not the significance which his Honour attached to it. The extraordinary variation in the rate charged on loans, points, I think, away from the conclusion that Hungier's lending was part of his business. What he got by way of interest depended upon what Grace was getting by way of profits in his business on purchases paid for out of loans. True it is, that Hungier was financing Grace's business transactions, but was it his business to do so, or was it rather no more than a convenient way of his investing surplus funds derived from his business, which both helped his friend, and yielded him a higher return than he could have obtained by depositing surplus moneys with some borrowing institution? (at p222)

10. Upon the whole, I have come to the conclusion that in reaching his decision, his Honour attached too much weight to matters which seem to me, in the special circumstances of this case, to be equivocal, such as the number of loans, the number of repayments, and the "usurious rates of interest". It is to the whole relationship between the parties that regard must be had, and that relationship is not, I think, to be determined simply by emphasizing details such as I have mentioned. Furthermore, in the last resort, what is decisive is the character in which Hungier made the loans in question. My conclusion is that the evidence does not establish that he made those loans in the course of carrying on a moneylending business. The circumstances are, I think, too complicated for such a simplistic solution. (at p222)

11. Accordingly, I would allow the appeal. (at p222)

WALSH J. The decision in the Court of Bankruptcy that the appellant was a person whose business was that of money-lending was a decision upon a question of fact. There were, as his Honour pointed out, circumstances which tended to show that the appellant was not carrying on the business of money-lending and other circumstances which supported the conclusion reached by his Honour that the appellant was carrying on that business. (at p223)

2. The question arises whether or not an appellate court, even if it would have preferred the opposite conclusion, if dealing with the case at first instance, is justified in disturbing his Honour's finding. I have felt some difficulty in resolving that question, but have come to the conclusion that the appellant is entitled to succeed. (at p223)

3. The judgments prepared by the Chief Justice and by Menzies J. make it unnecessary for me to do more than to set out some of the considerations that have led me to the same conclusion as that which their Honours have reached. (at p223)

4. The onus rested upon the respondent to establish that the appellant was a money lender within the meaning of the definition of that expression in s. 3(1) of the Money Lenders Act 1958 (Vict.) and was, therefore, disentitled to recover the money lent by him or interest on it. Upon a consideration of all the facts found by the learned primary judge or proved by evidence that was not contradicted, it appears to me that the ultimate conclusion should have been reached that the respondent had failed to establish that defence to the claim of the appellant. I think it is proper to give effect to that view. I am of opinion that in the circumstances of this case I should not regard this Court as obliged by the rules setting limits to the interference by an appellate court with a judge's finding of fact to give a decision which would deprive the appellant of a right to recover a debt which was without doubt owed to him. There is no question here of reversing any finding of the learned judge based upon his opinion as to the credibility or the reliability of any witness or any finding as to what were the actual transactions that took place between the parties. I am differing from his Honour only as to the ultimate conclusion which ought to be reached, upon a balancing of the competing considerations arising out of the primary facts, in a case in which his Honour's conclusion favoured the party who had the onus of proof. (at p223)

5. There were some facts which were not expressly stated in his Honour's findings but which may be accepted as established by the evidence. His Honour did find that it was the respondent Grace who "proposed the idea of the loans" and who "sought the loans". He did not find specifically that it was the respondent who determined what was the period over which each loan was to be repaid. But the appellant Hungier gave evidence that this was the way in which the terms of the loans were fixed and this was not contradicted by the respondent who did not give evidence. The periods fixed varied from about two months to about eight months, but the interest to be paid was in each case fixed at ten per cent of the amount lent. Two accounts were given by the appellant of conversations in which the figure of ten per cent was fixed as the interest to be paid. One was that the respondent said that if the money were advanced he would make twenty-five per cent profit and after deducting five per cent for overhead expenses he would share equally with the appellant the remaining twenty per cent. The other was that the respondent said that he could get a twenty per cent discount by paying cash for the purchase of timber and they would share that discount equally. The appellant said in evidence that both these things were said. That was not contradicted and there is no reason, in my opinion, for not accepting it. On either of these explanations of the selection of ten per cent as the interest to be paid, that was a figure related to the use of the money by the respondent in his own business transactions. It was not stipulated by the appellant as the return required by him as a condition upon which he would lend money. The evidence does not go so far as to show that in each of the very numerous transactions between the parties the respondent repeated his statements about sharing with the appellant the benefits that the respondent expected to obtain from the use of the money. But it does establish, in my opinion, that the arrangement in accordance with which the particular transactions took place was an arrangement proposed by the respondent, under which it was contemplated that the appellant would finance the business projects of the respondent (although the appellant would not be bound to do so) and the respondent would obtain from the use of the money benefits in which the appellant would participate. (at p224)

6. The fact that loans were made to one borrower only is not decisive against a finding that the making of them constituted the carrying on of a business of money-lending. But I think that it provides a very strong indication against that finding when it is accompanied by the circumstance that it was not the lender who stipulated the terms for repayment of the loans. This latter fact is itself, in my opinion, one which weighs heavily against a finding in favour of the respondent. No doubt the terms proposed by the respondent and adopted were quite profitable to the appellant and provided him with a handsome return for his money. But when the borrower proposes the period for repayment of the loan, as well as the amount, which irrespective of the length of that period, is to be paid by way of interest, that seems to me to be so greatly at variance with the manner in which I should expect a person to carry on a business of money-lending that it becomes very difficult to affirm that the appellant was carrying on that business. (at p225)

7. In my opinion the appeal should be allowed. (at p225)

Orders

Appeal allowed with costs. Order of the Federal Court of Bankruptcy made on 2nd September 1971 set aside and in lieu thereof order that the notice of motion of the respondent Leslie Grace to that Court filed on 28th February 1968 be dismissed and that the respondent Leslie Grace do pay the costs of that notice of motion other than the costs dealt with by the order of the Federal Court of Bankruptcy made on 23rd October 1968.