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LAW, J.A.:
[1] The appellant, a Nairobi advocate, who is licensed to practice both in
Kenya and Tanzania, was the plaintiff in a civil suit filed in the High
Court of Tanzania in which the respondents, a limited
[2] Liability Company carrying on business in Dar es Salaam were
defendants.The plaint, which was issued under the summary procedure
prescribed by Order XXXV of the Civil Procedure Code of Tanzania for inter
alia suits upon bills of exchange and promissory notes, claimed the sum of
Shs. 23,485 allegedly due to the appellant as holder in due course of a
promissory note made by the respondents in favour of a Nairobi company known
as Polypen Limited.
[3] The respondents obtained unconditional leave to defend the suit and in
due course filed a defence stating that they were not liable on the note as
it had been made for a consideration which had wholly failed, and that the
appellant had become the holder of the note without consideration,
alternatively with notice of a defect in the title of the drawee, that is to
say with notice of the total failure of consideration aforesaid.
[4] The note was issued in the following circumstances: - the respondents
ordered, and Polypen Ltd.
undertook to supply, 3355 gross ball-pen refills by the end of the October,
1966, and Polypen Ltd. delivered to the respondents a pro forma invoice
dated 3rd October for Shs. 23,485 for the price of these refills. In payment
of the invoice the respondents made and delivered to Polypen Ltd. a
promissory note, dated 4th October, engaging them to pay the said sum of Shs.
23,485 after 60 days.
[5] It is common ground that the note was made before delivery of the goods
so that Polypen Ltd. could discount the note and use the proceeds to clear
the goods from the Customs, and it is also common ground that Polypen Ltd.
failed to deliver the goods in accordance with its contractual obligation,
and that the respondents refused to honour the note when it was presented
for payment by the appellant on 6th December. Polypen Ltd.'s breach of its
contractual obligation to deliver the refills resulted in a total failure of
the consideration for which the promissory note had been given.
[6] Such a total failure of consideration is a defence against a claim on
the note made by an immediate party, see for instance Robinson v Reynolds
(1841) 114 E.R. 76, but is not a defence against a remote party who is a
holder in due course, that is to say a person who took the note in good
faith and for value, and who at the time the note was negotiated to him had
no notice of any defect in the title of the person who negotiated it. The
whole question in this appeal is whether the appellant was, in the
circumstances of this case such a holder in due course.
[7] Apparently Polypen Ltd. intended to discount the note through a bank, as
is normal, and it endorsed the note with a rubber stump to this effect:;
"Pay to the order of the Bank of Baroda" but the inference from an amendment
to that endorsement is that the bank for some reason did not discount the
note. The endorsement was then deleted and the following endorsement
substituted in manuscript: "Pay to B. Sirley & CO.” and accepted for and on
behalf of B. Sirley & Co.
[8] The suit was filed in the name of “B. Sirley & Co." as plaintiff. The
appellant is the sole proprietor of the firm of ‘Bo Sirley & Co” and when
the trial opened a preliminary objection was successfully taken by the
respondents that the appellant was not entitled to sue in his business name
as an
individual carrying on business in a name or style other than his own, and
the court allowed an application made on behalf of the appellant for the
title of the plaintiff in the suit to be altered from "B. Sirley & Co." to
"B. Sirley, practising as B. Sirley & Co.", upon these terms that the
appellant should pay all costs incurred up to date of the amendment.
[9] I shall deal with this matter at a later stage in this judgment. After
some argument as to who was to open, the appellant agreed to do so thus
relieving the learned judge of the necessity for ruling which party should
open, and the appellant gave evidence in support of his case.
[10] He deposed that he was the legal adviser of Polypen Ltd., that he had
formed the company on the instructions of a Swiss Company in 1963, that he
appeared as a subscriber in the memorandum and articles of association, that
he held two shares in Polypen Ltd. as a nominee for the Swiss Company, and
that he had been an alternate director of Polypen Ltd. until the middle of
1965.
[11] He said that the promissory note was endorsed to him by Polypen Ltd. on
the 10th or 12th October, as that company urgently required cash to release
the Goods from the Customs, and that after making inquiries about the
finE1ncic_l standing of the respondents, he agreed to discount the note and
accordingly, on 22nd October, he gave Polypen Ltd. a cash cheque for Shs.
18,000, representing' Shs. 23,485 less 3% discount commission and some Shs.
5,000 which he was owed by Polypen Ltd. for professional fees. The appellant
produced this cheque for Shs. 18,000, and it appeared from the face of it
that the cheque was drawn on the appellant's clients' account.
[12] If in fact the appellant used clients' money to discount the note, it
is clear that he did not give value for it? because although a solicitor is,
as trustee, the legal owner of clients' money lying with him, he is not the
beneficial owner, and he could not use clients' money to discount a note;
except with the authority of the client.
[13] Mr. Balsara, who appeared for the respondents at the trial, suggested
in cross-examination that the appellant had used Polypen Ltd.'s own money to
discount the note. The appellant denied this, and said he had paid Shs.
18,000 of his own money into his clients' account to cover the cheque and
that this transaction was reflected in his ledger. Mr. Balsara made it quite
clear that he did not accept this explanation, and asked to see the ledger.
He pointed out that he had served notice on the appellant to produce all
books, papers and letters relating to the matters in question between the
parties. The appellant explained that he had not brought the ledger, which
was bulky, and which related to the affairs of many other clients so that it
could not conveniently be spared from his office in Nairobi. Mr. Balsara
insisted on being allowed to inspect the ledger, but Mr. Kanji for the
appellant made it clear that the ledger would not be produced, and ho did
not ask for an adjournment to enable it to be produced. I will deal in more
detail with this aspect of the case at the later stage in this judgment.
[14] The learned trial judge gave judgment for the respondents, for reasons
which he summarised in the final paragraph of his judgment as follows
"Having given the most serious consideration to the cases put forward by
each side and having regard to the facts that the plaintiff being so closely
connected with the affairs of Polypen Ltd. as the founder, a shareholder, a
director for a considerable time, and its advocate; that the promissory note
appears to be a doubtful one by reason of the words 'Pro forma invoice of
3.10.66 for 3355 gross refills' immediately after the words 'for value
received', that the cheque.. for Shs. 181000 given to Polypen Ltd. by the
plaintiff for discounting the promissory note was a cash cheque drawn on the
plaintiff's clients' account and not on his personal account1 and that the
plaintiff was unwilling to produce his books of account to the Court for
inspection, when he had been given notice to do so, I find there is a
preponderance of evidence in favour of the defendants. Viewing the evidence
as a whole, I am not satisfied that the plaintiff is a holder in due course
for value without notice of the defect in the title of Polypen Ltd. in the
promissory note so as to entitle him to payment under the promissory note.
In the result the plaintiff's case is dismissed with costs.”
[15] This passage from the judgment has been strongly attacked by Mr. Kanji,
for the appellant, in his argument in support of the two main grounds of
appeal, which are that the learned judge erred. in holding that the
appellant did not give any value for the promissory note, and that he had
notice of the defect in the title of Polypen Ltd. to the note.
[16] I will deal with these grounds of criticism in the order in which they
are set out in the judgment.
[17] Mr. Kanji submitted that in coming to the conclusion that the appellant
,was closely connected with the affairs of Polypen Ltd., the learned judge
misdirected himself in saying that the appellant was the founder of Polypen
Ltd., that he had been a director for a considerable time and that he was a
shareholder. The appellant was not the founder of Polypen Ltd., but the
advocate who formed the company on the: instructions of the founder. The
learned judge was under no misapprehension as to this, and had set out the
correct position earlier in his judgment.
[18] The appellant had been an alternate director for the first two years of
the company's life, and was a shareholder only as a nominee. These matters
were also correctly set out earlier in the judgment, and in referring to the
appellant as a shareholder and director for a considerable time, I do not
consider that the learned judge misdirected himself.
[19] I have had. Some difficulty in understanding what the learned judge
meant when he described the promissory note as "doubtful". It is not usual
to describe, on a promissory note the consideration for which it has been
given, but I can see no objection to the addition after the words "for value
received" of a reference to the pro forma invoice in consideration of which
the note was made. It was never suggested by either party that this
reference was intended to impose a condition, in which case the document in
question would not have been a promissory note at all, having regard to the
definition of a promissory note in section 84 of the Bills of Exchange
Ordinance (Cap. 215) 3.8 being an unconditional promise in writing. I think
that when the learned judge used the word "doubtful” he meant no more than
"unusual".
[20] It may be that in using the word "doubtful" the learned judge meant
that the reference to the pro forma invoice was such , to put the appellant
on inquiry as to whether Polypen Ltd. Had Supplied or in intended to supply
the goods in accordance with the invoice. As the learned author of Chalmers
on Bills of Exchange, 13th Ed., says at p. 94 "if this bill itself conveys a
warning, caveat emptor. If the learned judge was implying that the
appellant, a solicitor, who was being asked to discount a note on behalf of
the client company with which he personally had a close connection, should
have made inquiry as to whether value had been given in accordance with the
invoice referred to on the face of the note, then I do not consider this to
have been an un reasonable comment on the part of the learned judge
especially as the inference from the amended endorsement on the back of the
note is that a bank had refused to accept it.
[21] No explanation as to this aspect of the case was given by the
appellant. As regards the fact that the appellant's cheque which he gave
when discounting the note was a cash cheque drawn on his clients' account,
and that he was unwilling to produce his -books of account, Mr. Kanji
submitted that the learned judge should have accepted the appellant's
explanation that he first paid the necessary money into the account from his
own funds, and that it was unreasonable to expect him to bring a bulky
ledger from Nairobi to Dar as Salaam, although he had been served ,with
notice to produce all relevant books.
[22] Mr. Kanji submitted that it was wrong to draw an adverse inference, as
the learned judge undoubtedly did, from the appellant's failure to produce
his ledger. The position as I see it is that Mr. Balsara clearly and
unequivocally suggested that the appellant had used clients' money, possibly
even Polypen Ltd.'s own money in discounting the note and equally clearly
Mr. Balsara had challenged the truth of the appellant's explanation that he
had put his clients' account in funds with his own money and that this
transaction was reflected in his ledger.
[23] These suggestions by Mr. Balsara amounted to imputations of
professional misconduct against the appellant, and although the appellant's
explanation for not producing his ledger and for his refusal to ask for an
opportunity to do so might have been acceptable in the case of an ordinary
litigant, the appellant is not an ordinary litigant. He is an advocate and
an officer of the court, against whom allegations of professional misconduct
had been made in open court. I find it difficult to understand how, in these
circumstan¬ces he did not insist on being given an opportunity of disproving
these allegations although this might have caused him inconvenience and
expense.
[24] He was actually challenged to produce his ledger, but refused the
challenge. Having regarded to the appellant’s special position I consider
that the learned judge was fully justified in drawing an adverse inference
from the appellant's conduct. Let it be clearly understood that I am not for
a moment suggesting that Mr. Balsara's allegations represented the truth.
But the fact remains that these allegations were made, and however
unjustified they may have been consider that it power for the appellant to
do all in his power, having regard to his special position, to show that
they were untrue.
[25] This he chose not to do, and he must take the consequences.
[26] The most substantial argument put forward by Mr. Kanji was, in my
opinion, that the learned judge was wrong in deciding the case on a balance
of probabilities, having regard to the presumption in the appellant's favour
which is stated in the following words in section 30(1) of the Bills of
Exchange Ordinance "Every party whose name appears on a bill is prima facie
deemed to have become a party thereto for value."
[27] Mr. Kanji submitted that nowhere in his judgment did the learned judge
hold that this presumption had been rebutted, so as to cast on the appellant
the burden of proving that he was a party to the note for value. Reading the
judgment as a whole, however, it is quite clear in my opinion that when the
cheque given by the appellant to Polypen Ltd. for discounting its note was
produced, and when it appeared on the face of that cheque that the money
represented by that cheque did not belong beneficially to the appellant, the
learned judge considered the presumption in favour of the appellant to have
been rebutted.
[28] The learned judge referred to the presumption raised by s. 30(1) of the
Bills of Exchange Ordinance and to the fact that the onus of rebutting this
presumption was on the defence. The fact that he found in favour of the
defence necessarily implies in my view that he considered the presumption to
have been rebutted.
[29] In my opinion the fact that the cheque relied on by the appellant as
establishing his title to the note was drawn on "clients account" prima
facie, rebutted the presumption in his favour that he was the holder thereof
for value. Had notice to produce all relevant documents not been given, the
appellant would not have had to produce this cheque, he could have relied on
the note, and on the presumption in his favour. Once the cheque was
produced, however it became evidence in the suit which on the face of it
rebutted the presumption that value had been given. In these circumstances
the learned judge correctly decided the case on balance of probabilities.
[30] see Nanalal Vrajdas v. Chunilal Dhanji Mehta (1946) XIII EACA 58, and
as ho found that the preponderance of evidence favoured the defence, and has
not been shown to have misdirected himself on the law or on the facts in so
finding, I consider that this appeal should be dismissed and I should so
order with costs to the respondents. As the appeal in my view fails, it is
not strictly necessary to deal with ground 8, which complained that the
learned judge erred in awarding to the respondent all the costs up to the
date of the amendment when he allowed the appellant's application to amend
the title of the plaint.
[31] This was a technical amendment to cure a misdescription in the title
of' one of the parties which had not caused any prejudice 'to the
respondents and I doubt if such a drastic order as that made was justified.
It is true that Mr. Kanji is recorded as having asked that the amendment be
allowed "upon paying costs up to date." This might have been the appropriate
order had the effect of the amendment amounted to creating a new plaintiff.
[32] The respondents were under no misapprehension as to the identity of the
true plaintiff, and took objection to his description in the title of the
plaint at the last possible moment.
[33] In the name of the plaintiff forms an integral part of the plaint, and
had the objection been taken been taken in the defence the plaintiff would
have been entitled, without leave, to make the necessary amendment (A.N.
Phakey v. Worldwide Agencies Ltd. XV EACA 1 ), and see also George and Co.
v.Pritam's Auto Service (XXII EACA 233).
[34] The amendment in this case did not in fact involve the respondent in
any expense and I consider it should have been allowed without any order as
to costs being made against the appellant.
C.D. NEWBOLD, P.:
[35] I have had the advantage of reading in draft the judgment law, J .A.
and I agree with it.
There will be an order in the terms proposed by him.
DE LESTANG, V-P.:
[36] I agree. |
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