IN THE COURT OF APPEAL FOR EAST AFRICA
AT DAR ES SALAAM
CORAM: (NEWBOLD, P, DE LESTANG V-P, AND LAW, J.A.)
CIVIL APPEAL NO 14 OF 1968
B. SIRLEY, practising as
B. SIRLEY AND COMPANY}…………….......................APPELLANT
TANGANYIKA TEGRY PLASTICS LIMITED]………...RESPONDENTS
(Appeal from the judgment and decree of the High Court of Tanzania at Dar es Salaam (Saidi, J.) dated 5th January, 1968 in Civil Case No. 42 of 1967).
3 July, 1968.
The following Judgments were read:-
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.”
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.
I will deal with these grounds of criticism in the order in which they are set out in the judgment.
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.
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.
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".
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.
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.
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.
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 circumstances he did not insist on being given an opportunity of disproving these allegations although this might have caused him inconvenience and expense.
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. This he chose not to do, and he must take the consequences.
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."
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.
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.
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.
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.
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.
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.
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).
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.:
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.: