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Present: Dalton and Maartensz JJ.
SENANAYAKE v. WIJEYESEKEKE.
364—D. C., Colombo, 26,952.
Promissory note—Claim against bank—Agreement to abandon claim—Consideration.
Plaintiff, who was the customer of a bank which had suspendedpayment, gave a cheque for the amount lying to his credit to thedefendant, who -was the managing director and largest shareholderof the bank, in return for a promissory note given by the latter.
Held, that there was sufficient consideration for the note.
LAINTIFF sued the defendant to recover a sum of Rs. 611.99due on a promissory note. The defendant was managing
director of the Bank of Colombo. He was also the largest share-holder and the largest debtor. Plaintiff was a shareholder andcustomer of the bank. The bank suspended payment in June,1921, when there was a sum of Rs. 468.68 lying to the credit of
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plaintiff's account. Plaintiff’s case -was that the defendant toldhim that if he abandoned bis claim on the bank, the defendantwould be personally liable for it. Thereupon in return for a chequefor the balance of plaintiff’s account, the defendant gave thepromissiory note sued upon. Defendant while admitting the makingof the note, pleaded failure of consideration.
The learned District Judge gave judgment for the plaintiff.
N. E. Weerasooria, for defendant, appellant.
M. T. de S. Amarasekera (with Amarasinghe), for plaintiff,respondent.
July 25, 1929. Dalton J.—
Plaintiff is suing deftndant for the sum of Es. 611.99 made upof principal and interest, and further interest alleged to be due on apromissory note. Defendant admits the signing of .the note, butpleads there has been a total failure of consideration. The note isdated November 20, 1922, and the amount is payable on December28, 1927, at the Imperial Bank of India, Colombo. The defendantwas managing director of the Bank of Colombo, Ltd. He was alsoapparently under the name of Wijeyasekera & Co., the agent andsecretary of the bank. He was also, according to his evidence, thelargest debtor to the bank and the largest shareholder. Plaintiffwas a shareholder and customer of the bank. The bank sus-pended payment in June, 1921, at which time there was the sum ofEs. 468.49 to the credit of plaintiff’s account. Defendant saysthere were 425 creditors at that time, of whom 300 were creditorsfor sums over Es. 100, the bank being indebted in the sum of two orthree lakhs of rupees when it suspended payment.
In 1922 the Eegistrar of Joint Stock Companies published anotice in the Gazette of September 1, 1922, that three months fromAugust 30 the name of the bank would be struck off the registerand the company would be dissolved unless cause be shown to thecontrary. The evidence shows that defendant was very anxiousto prevent this being done as he wished to restart the bank. It wasobvious however that he could not open its doors without firstcoming, to some arrangement with the bank’s creditors. Heaccordingly circularized them, including plaintiff, with the object ofcoming to some arrangement with them. His idea seems to havebeen to postpone the creditors’ claims by arrangement with them.He met plaintiff on November 20, just ten days before the Eegistrar’snotice expired. What happened at that meeting is not agreed on.Plaintiff says defendant asked him to take no action in respect ofthe bank’s indebtedness to him and told him that if he abandoned
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1929. his claim he (defendant) .would be personally liable for it and give^^ him* a note for the sum payable with interest in five years. In
Dalton J., .. m,„,,.. ^^.
return plaintiff was to give him a cheque for the balance to his
Senanayake (plaintiff’s) account. This freed the bank from further liability to
Wijeyesekere plaintiff,, although he gave no other writing abandoning his claim.
It may well be, as defendant says, that the creditors as a whole
were not prepared to spend further money on enforcing their claims
against the bank. It is clear however that, defendant wished to take
steps to prevent them doing anything of the kind. Plaintiff, on this
version, clearly gave consideration for the note, forbearance to take
action against the bank for the sum admitted to be due to him.
So far as he was concerned therefore there was nothing to prevent
defendant opening again the doors of the bank. Unfortunately,
however, only ten of fifteen were agreeable to take notes for their
claims and so the bank was not reopened, being dissolved as from
Defendant’s version of what happened on November 20 differsin one important respect from plaintiff’s version. He states it wasagreed that he was only to be liable on the promissory note given toplaintiff by him, if he was able to cash plaintiff’s cheque. That ofcourse depended upon the bank .being reopened and funds beingforthcoming to meet the cheque, for the cheque was on plaintiff'saccount at the bank. As the bank was not reopened it was•impossible to cash the cheque, .and therefore the consideration onthe note failed. The trial Judge prefers to accept plaintiff’s versioninstead of defendant’s as to the transactions on November 20, andin that conclusion, upon the evidence produced in the lower Court,I entirely agree with him. Another similar note (P 4) was producedat the trial, given to another creditor who has since died, and datedNovember 30. How it could be said'that under the agreementcome to with this creditor at any rate defendant was only to beliable upon that note if the bank was reopened I fail to see, sinceNovember 30 was the last day for showing cause against thedissolution of the company. It is admitted he has been paying offthe sum due on P 4 by instalments, but he stopped payments so soonas he had notice of this present action. He says the paymentswere made out of charity and not because he was legally liable.This note was clearly given to prevent the creditor suing the bank.One concludes from the evidence that this creditor received thesame circulars as plaintiff, and that defendant was actuated inrespect of his dealing with all the creditors by the same motive,namely, the desire to reopen the bank. That could only be done,as I have stated, by making arrangements to prevent them enforcingtheir claims against the bank. The obtaining of a cheque fromplaintiff was an insurance, as the trial Judge finds, that plaintiff’sclaim was abandoned. He received defendant’s promise in the noteto be personally liable in return for that forbearance.
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I am unable to agree, upon the facts here, that anything adverseto plaintiff .can be drawn from the fact that he endorsed the noteover to a third party who presented the note for payment at thebank.
The decision of the trial Judge must therefore be'affirmed and theappeal is dismissed with costs.
The defendant in this action appeals from a judgment enteredagainst him for the recovery of a sum of Rs. 611.99 and furtherinterest.
The sum sued for was alleged to be due on a promissory note forRs. 468.49 made by the defendant in plaintiff’s favour, datedNovember 20, 1922, and payable at the Imperial Bank of India,Ltd., on December 31, 1927.
The only question argued in appeal was whether there was afailure of consideration.
The note was made in the following circumstances. The plaintiffwas a customer of the Bank of Colombo and had to his creditRs. 468.49 when the bank suspended payment in June, 1921.
On August 30,- 1922, the Registrar of Companies published anotice in the Gazette that there is reason to believe the Bank ofColombo, Ltd., is not carrying on business and that in terms ofthe provisions of the Ordinance No. 22 of 1866 and section 242 (3)of the Companies (Consolidation) Apt, 1908, at the expiration ofthree months from the date of the notice the name of the Bank ofColombo, Limited, will, unless cause is shown to the contrary, bestruck off the Register of Joint Stock Compahies kept in the officeof the Registrar and the company will be dissolved.
The defendant, who was the largest shareholder and the managingdirector of the bank, wrote two circular letters P 3 and D 3 to everycustomer, including the plaintiff, dated September 7, 1922, andNovember 4, 1922.
The letters are as follows:—
Colombo, September 7, 1922.
T. D. G. P. Senanayake, Esq.Colombo.
As I am aware that yon have a claim against the Bank of Colombo,Ltd., I shall be glad if yon or your representative will kindly see me byappointment on any week day convenient to yon between, 9 and 11 a.m.at- my office, No. 3, Staples street, Slave Island.
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For your information I would like to add that I am the largestshareholder of the said bank and am anxious to see whether I couldcome to an arrangement with its creditors.
(Sgd.) 0. B. WuEYBSBKEBA.
In continuation of my letter of September 7, 1922, you will see fromthe enclosed that the Registrar of Companies had gazetted that thename of the Bank of Colombo, Ltd., will be struck off the Register ofJoint Stock Companies on the 30th instant. It might therefore be toyour advantage if you will kindly see me as early as possible on any weekday convenient to you between 9 and 11 a.m. at my office, No. 3, Staplesstreet, Slave Island.
(Sgd.) 0. B. WlJBYBSBKEBA;
The – plaintiff says he saw the defendant with reference to hisfirst letter and the defendant said “ if I gave him the cheque in hisfav.our and abandoned the claim against him he would be responsiblefor the money and he would give me a note agreeing to pay themoney within five years with interest.”
The plaintiff did not consent as h6 wished to consult: his lawyers.The defendant says plaintiff did not see him before the second letterwas written. The learned District Judge has accepted the plaintiff'sevidence and I see no reason to disagree with him. As the secondletter was a circular letter I cannot infer from the terms of it. thatit was written because plaintiff had not seen the defendant inresponse to his first letter.
As regards the interview on November 20, when the note wasmade, the plaintiff’s evidence is that the defendant gave him thenote in exchange for his cheque for the amount standing to hiscredit at the Bank of Colombo, that the defendant told him he wouldget payment of the amount due on the note at the end of five years,and that he did not take any steps against the bank because thedefendant had given him the note. He denied that defendant toldhim he would not get payment if the bank did not reopen.
The defendant’s evidence is, that the note was given on thecondition that he would be liable on the note only if the bank wasreopened and he was able to cash the. cheque given by the plaintiff.
The defence to the claim is that as the bank was not reopenedand the defendant was unable to cash plaintiff’s cheque there was afailure of consideration.
The trial Judge has accepted the plaintiff’s evidence and I thinkthat his view of the evidence is in accordance with the facts.
The defendant was not only .the largest shareholder in the bankand the managing director, but he was also the largest debtdr tothe bank, and it is to be expected that he would not be anxious tohave an inquiry regarding the circumstances which compelled thebank to suspend payment. It was possible to avoid an inquiryby taking from the customers cheques for the amounts standingto their credit in exchange for promissory notes on which thedefendant was personally liable. It is highly improbable that thecustomers would part with their cheques merely on the chance ofthe bank being reopened./
The plaintiff was not the only customer to whom the defendantgave promissory notes. He gave a note to one Elisa Fernandodated November 30, payable at the Imperial Bank of India, Ltd.,like the note sued on, in 1927. As the note was made on the lastday on which cause could be shown against the bank being struckoff the List of Companies and dissolved it could not have been madeon condition that the bank was reopened. What is more, thedefendant paid, off a large part of the amount due on that notebefore 1927, and stopped payment only because this action wasfiled. This note clearly supports the'plaintiff’s evidence that thenote shed on was not given on condition that the bank was reopenedand his cheque cashed. Even on November 20 the defendant hadhardly time to place himself in a position to show cause against theRegistrar’s notice.
I am of opinion that the note was given to the. plaintiff in con-sideration of his abandoning his claim against the bank and thatthere was no condition that the defendant should not be liable if thebank did not reopen.
I accordingly dismiss the appeal with costs.