Cornelius v. Phillips

Factual and Procedural Background

The Respondent was a registered moneylender whose only registered place of business was “[Number] Main Street, The City.” On 24 November 1914 a “Friend” introduced the Appellant, an officer in the Royal Garrison Artillery, to the Respondent at “The Hotel” in “The Town,” several miles from the registered address. The Respondent produced two already-prepared promissory notes for £300: one to be signed by the Appellant in favour of the Respondent and the other by the Friend in favour of the Appellant. In consideration, the Respondent handed the Appellant a cheque for £200, which the Appellant immediately endorsed and passed to the Friend, who received the funds.

The Appellant thus became liable on a £300 note, although only £200 was advanced. The Respondent later negotiated the Appellant’s promissory note to a bona fide third-party holder (“Third-Party Holder”), who sued the Appellant and obtained judgment. By virtue of section 1(1) of the Moneylenders Act 1911, the Appellant issued third-party proceedings seeking indemnity from the Respondent.

Ridley J. granted indemnity to the Appellant. A majority of the Court of Appeal (Swinfen Eady and Bankes L.JJ.; Phillimore L.J. dissenting) reversed that decision, holding the transaction enforceable despite breach of the Moneylenders Act 1900. The Appellant appealed to the House of Lords, which delivered the present opinion.

Legal Issues Presented

1. Whether a single loan effected at a place other than the registered address of a moneylender constitutes “carrying on the business of a moneylender” at that other place within section 2(1)(b) of the Moneylenders Act 1900.
2. If so, whether a transaction concluded in contravention of section 2(1)(b) is void (thereby defeating the moneylender’s contractual rights) or merely exposes the moneylender to statutory penalties while leaving the contract enforceable.

Arguments of the Parties

Appellant’s Arguments

• The entire loan was negotiated, documented and completed at The Hotel, which was not the Respondent’s registered address; therefore the Respondent “carried on” the moneylending business at an unauthorised address, contrary to section 2(1)(b).
• Statutory language is prohibitory; any contract made in breach is illegal and void, granting the borrower complete relief and an indemnity against subsequent holders.
• Whiteman v. Sadler concerned section 2(1)(c) and defective registration; it does not control the effect of a direct breach of section 2(1)(b).

Respondent’s Arguments

• A single transaction does not amount to “carrying on” a business at another address; at most it is an isolated loan outside the statutory mischief.
• Even if section 2(1)(b) is breached, the Act imposes only a monetary penalty and does not render the loan void; the reasoning of Whiteman v. Sadler was said to be decisive.
• Reading section 2(1)(b) so broadly would render section 2(1)(c) redundant, contrary to principles of statutory construction.

Table of Precedents Cited

Court's Reasoning and Analysis

1. Breach of section 2(1)(b)
All five Law Lords agreed that negotiating and completing the loan at The Hotel constituted “carrying on” the moneylending business at a place other than the registered address. The statutory phrase does not require proof of multiple or habitual transactions; one completed loan suffices.

2. Interaction of subsections (b) and (c)
The Respondent’s redundancy argument failed. The Court explained that subsection (c) serves the distinct purpose of ensuring the moneylender’s registered name appears on all securities, whereas subsection (b) secures publicity of the registered address. Overlap is permissible and does not narrow the ordinary meaning of subsection (b).

3. Consequences of Contravention
Relying on long-standing principles, the House held that where Parliament expressly forbids particular conduct, any contract formed in breach is illegal and void, unless the statute indicates otherwise. Section 2(1)(b) contains an unqualified prohibition; the accompanying penalty in subsection (2) does not substitute for, or negate, invalidity.

4. Distinguishing Whiteman v. Sadler
In Whiteman the defect lay in an improper but de facto registration; Lord Macnaghten’s remarks on collateral breaches were confined to subsection (c). The present case concerns a direct breach of subsection (b); the contractual illegality therefore follows, and the dicta in Whiteman are not binding here.

5. Restoration of First-Instance Judgment
Because the transaction was void, the Appellant’s liability to the Third-Party Holder carried with it a statutory right of recourse. Ridley J.’s order granting indemnity correctly reflected that right and should be reinstated.

Holding and Implications

APPEAL ALLOWED; judgment of Ridley J. restored in favour of the Appellant.

Consequently, the Respondent must indemnify the Appellant for the liability and costs incurred in the Third-Party Holder’s action. The decision crystallises two important principles: (1) a single loan outside the registered address is sufficient to constitute “carrying on” a moneylending business under section 2(1)(b); and (2) any such contravention renders the transaction void, not merely penal. Although the ruling does not create new statutory law, it clarifies the scope of borrower protection under the Moneylenders Act 1900 and curtails the enforceability of loans made outside a moneylender’s registered premises.