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SUPPRAMANIAN CHETTY v. WHITE.
D. C., Kandy, 8,617.
Payment for supplies to tea estate—Arrangement between creditor andsuperintendent—" Delegation " and *' Novation "—Application o] pay-ments on monthly accounts.
In accounts between defendant, the proprietor of a tea estate, and'plaintiff, a trader who had supplied goods to the estate, there appearedan unpaid balance in favonr of plaintiff. A, who was superintendentof the estate when this debt was contracted, requested plaintiff to keepthe existence of this unpaid balance secret from his successor in thesuperintendentship and gave plaintiff his own promissory note for thewhole amount of the balance—Held, that the grant of the promissorynote by A did not constitute a valid delegation, inasmuch as defendant,the original debtor, was no party to the arrangement. Defendant still .remained liable, and plaintiff having, by arrangement with A, cancelledthe arrangement between them and returned the note, was entitled to-recover from the defendant the original debt.
Payments made to plaintiff, after A had left the estate, by his successorcould not, in the circumstances, be attributed to this old debt, but hadtobe applied in reduction of the monthlyaccountsrendered to the-
N this case plaintiff sued defendant for the recovery ofRs. 24,111.99 for goods sol'd and delivered and for money
lent by plaintiff to defendant. It- appeared that the defendant,being an absentee proprietor of a tea estate in Ceylon called theDa rag ala estate, carried on its cultivation by a superintendent,and that one Mr. Gantlay, appointed by the defendant as superin-tendent, received supplies of money,rice,poonac,&c., from the
plaintiff for the use of the estate. At the end of 1889 Mr. Cantlaywent away on leave, and Mr. Evans succeeded him as superin-tendent. At that time there was a balance due to the plaintiff,but what that balance was did not appear. During the eightmonths in which Mr. Evans was in charge, the payments made-by him from month to month satisfied the current expenditure,so that, when Mr. Evans left, there vvas nothing due for theperiod of time during which Mr. Evans acted. No account wassent in to Mr. Evans showing that there was any previousexisting debt.
On Mr. Cantlay’s return, the plaintiff continued to do businesswithhim on behalf of the estate, andMr.Cantlaymade payments
fromtime to time. The plaintiffdidnot appropriate those
payments, month by month, to the current expenditure, butappropriated them to the payment of the pre-existing debt, with
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■the result that, when Mr. Cantlay ceased to be superintendent atrfche end of 1898, plaintiff came into Court and sued the proprietorof the estate, claiming a sum of its. 24; 111.99 as due by the(defendant.
The defendant denied the claim, and pleaded that the superin-tendents of the said estate were not authorized by him to purchasegoods or borrow money for the use of the said estate on hiscredit, and as an alternative plea the defendant averred thatfor goods sold and money borrowed in March, 1890, the defendantpaid plaintiff the sum of Its. 2,103.43, and for goods sold and•money lent in April, 1890, the defendant paid plaintiff the sumof Bs. 3,444.19, and that the defendant accepted the said sums in•satisfaction of the amounts due for the said two months, andthereafter the defendant purchased goods and borrowed moneyfrom plaintiff, and his liability in respect of the said transactions•since April, 1890, amounts to Bs. 169,853.86, and since June, 1890,in respect of the said transactions the defendant paid plaintiff thesum of Bs. 117.479.73, and that by such payment the defendant'sliability has been satisfied.
Counsel being unable to agree upon the issues, the District•Judge (Mr. J. H. de Saram) framed the following issues: —
Whether the transactions between the plaintiff and defend-ant were satisfied by payment of Bs. 4,931.59.
Whether the defendant is indebted to the plaintiff inBs. 24,111.99.
After hearing evidence, the District Judge found in favour pfth.e plaintiff on the first issue; and as regards the second issue,he held as follows : —
" The difference of Bs. 1,001.42$ in the accounts has been provedto be inplaintiff’s favour, and hasalso beenadmitted tobe
" It was contended the defendant's superintendents were not■authorizedbyhimto purchase goodsand to borrow moneyfor
the use of his estate on his credit, or that they had the right topledge his credit. As to this question, there is the fact that thesuperintendent was in charge of the estate, which required to becultivated,and the’benefit of whichcultivationaccrued tothe
•defendant.Itis not denied that the money,rice, Ac.,was
obtained by the superintendent for the upkeep and cultivation ofthe estate, and it is not suggested that the superintendent waskept supplied with funds by defendant to render it unnecessaryfor him either to borrow money or purchase rice, &c., on credit,in order to keep the estate in proper cultivation, or that he wasplaced in funds to pay the amount of-this claim.
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“.I therefore hold that the defeudant is liable to the plaintiffin Rs. 24.lll.99, and give him judgment with interest thereon at9 per cent, per annum from the 16th August, 1894, up to the dateof payment and costs.”
Defendant appealed. The Supreme Court, by its judgment of20th November, 1896, set aside the judgment of the Court below,and remitted the ease in order that an account might be takenfrom the beginning of all dealings and transactions between theplaintiff and the defendant which resulted in the alleged debtof Rs. 24,111.99. In remitting the case, Chief Justice Bonserobserved:“ In a case like this, where the defendant is an absent
” tea proprietor, he should have the accounts properly proved before'' he is made liable. Questions may arise as to the appropriation of.
” the various payments made. In deciding them the District“ Judge will, be guided by the principles laid down in Ephraims“v. Jan8z (C. R-, Galle, 3,407-).”
On the case going back to the Court below, the accounts inquestion were taken and referred to an accountant for audit, andhis report being duly submitted to the Court, the District Judgefound as follows: —
” The accountant has examined the plaintiff's accounts fromJanuary, 1881, to January, 1894, and finds that the balance due tothe plaintiff is Rs. 24,666.41, which is Rs. 554.42 in excess of theamount claimed by the plaintiff up to July, .1888. Payments wereregularly made, and all debits closed up to March, 1888. CharlesCdntlay, who was the superintendent at. the time, was remiss inhis payments thereafter. At the end of October, 1889, theaccount shows that plaintiff had advanced money and sold anddelivered goods to the value of Rs. 224,419.26, and had been paidon account Rs. 203,748.32, leaving a balance of Rs. 20,670.94.On the 5th December, 1889. he tooa a promissory note forRs. 20,416.89 from Charles Cantlay, payable seven months afterdate'for the balance due at the end of October, 1889. Accordingto the account the note should have been for Rs. 20,670.94. Thenote was taken by the plaintiff as security for the repaymentof the amount. Charles Cantlav left the estate in November,1889, and returned in June, 1890, shortly before the note felldue. .During his absence Evans was defendant's superin-tendent. When Evans took charge, he was not informed of thebalance outstanding at that date. Cantlay had expressly askedthe plaintiff not to inform Evans of that balance. For thatreason none of the accounts rendered to Evans showed anybalance due by his predecessor. Accounts were rendered to himand were, settled by him. When he left, and Cantlay resumed
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charge of the estate, there was due to plaintiff, oil account ofEvans’ transactions for May and June, 1890, Rs. 4,595.93. On the6th July, 1890, Cantlay paid plaintiff Rs. 6,000. The promissorynote had then fallen due.. Then, in August, 1890, Oantlav paidRs. 7,016.78, when there was due only Rs. 2,420.85 for July, 1890.(ioing a little further into the account, I find that, while thesupplies from May to August, 1890, totalled Rs. 10,499.38, Cantlaypaid plaintiff in July, August, and September, 1890, Rs. 17,288.67,or Rs. 6,734.29 in excess of what was due. This large excesswould not have been paid by Cantlay, but for there being theprevious existing debt of Rs. 20,416.89, which he knew, and forwhich he gave a promissory note. Mr. JtJeven made a great dealof the fact that Evans had not been informed of the large amountoutstanding, and that he had never been asked to pay it, but, as Ihave already observed, Cantlay expressly asked the plaintiff,for reasons, 1 conclude, best known to himself, not to informEvans of it. It appears to me that, as the account taken underthe directions of the Supreme Court shows, not only that thebalance alleged to be due when Evans took charge was then due,but also that a larger balance is now due to .the plaintiff thanthe amount claimed by him, he is entitled to judgment. Thequestion as to the appropriation of payments does not arise .
' " Mr. Beven contended that the evidence in the case establishedthat the plaintiff allowed Cantlay to use the money paid to himby the defendant for purposes of his own instead of meeting thecurrent expenditure on account of the estate, anil that plaintiffaccepted a promissory note from Cantlay for the amount., IfCantlay was placed in funds by the defendant, that is a factcapable of being proved either by the examination of the defend-ant’s attorney in the Island or by the issue of a commission forthe examination of the defendant in England, but there is no proofof this.
■’ It was next contended that the granting and acceptance of thepromissory note was a novation of the debt as a personal debt ofCantlay. The express and declared will of the creditor to makea novation is requisite in order to constitute novation (Vunder-linden, 369). There is no proof of this. On the contrary, theevidence is that the note was taken as security. This staudsuncout-radicted. The evidence is all one wav, and the onlypossible conclusion is that the plaintiff is entitled to judgment.”
The District Judge entered a decree in plaintiff’s favour forRs. 22,744.25, with interest thereon at 9 per cent, per annum fromthe 16th August, 1894, to the date of payment.
The defendant appealed.
( 1M )1900. Layard, A.-G. (and H. Loos), for defendant, appellant.—CantlayJuly lo. borrowed the money claimed by the plaintiff ostensibly for the-estate on behalf of the defendant, but when Cantlay proposed to go-on leave he asked the plaintiff to keep the amount covered by the-promissory note secret. Plaintiff agreed to do so. This was a.novation of the debt. Prom that moment plaintiff must betaken to have known that that debt was personal to Cantlay..Plaintiff’8 taking the promissory note discharged the defendant.If plaintiff had sued Cantlay on the. note, he would have gotjudgment. The defendant could not also be made liable for-t-hat debt. Apart from novation, the act of the plaintiffin concealing the existence of this debt from Cantlay’s-employer, estops the plaintifF from making any claim now..Having represented to the defendant that there was no suchdebt as was said- to be on the promissory note, plaintiffcannot now go back and say “ You nov owe me that amount.”Plaintiff’s representation led to these consequences. Defendant-retained Cantlay in his service; and if defendant bad acknowledgedCant-lay’s debt as his debt, the defendant would have sued Cantlayfortherecovery of it.Bv plaintiff’s conduct,defendant could
not exact securities from Cantlay.
Wendt, for plaintiff, respondent.—The plea of novation cannotbesupported. Oran tingfor the moment thatthe Chetty dis-
charged the defendant and accepted Cantlay as his debtor whenhetookthe promissorynote, it would be thedebtor who. was;
changed and not the nature or character of the debt-. But novation-can only arise where there is a change in the nature of the obligationbythesame debtor. In novation it is theobligation which’
changes, and the debtor remains the same. Where the obligationremains unchanged, but a new debtor steps into the shoes of the-old one, that is called delegation (•? Btiri/e, 781, et seq.). Herethe defendant- knew nothing of the promissory note at the-time it was made. He was not cognizant of this attempt to shiftdebtors. T-n delegation all the three parties must concur. Defend-ant’s concurrence not being proved, being in fact contrary to allthe evidence, the attempt to argue any delegation or novation fails-But neither the plaintiff nor Cantlay meant to shift the burdenof the defendant from defendant’s shoulder. The promissory note-was a mere formal security, which the plaintiff took to satisfyhimself that- he would getrhis money back. It was a collateralsecurity, by which , Cantlay succeeded in winning the plaintiffover to secrecy.. Defendant could not be discharged withoutknowing that he was discharged. The rule- is this. The accept-ance of a negotiable security from an agent discharges the
principal only, if by reason of the acceptance of such securitythe principal has been induced to settle with the agent, but ifthe position of the principal has not been changed, the dishonourof the bill'- or negotiable security or its withdrawal leaves theprincipal still liable. Consequently, there was no change in the debtornor in the nature of his liability. There was' no novation(Vamlerlinden, 269; 4 N. L. R. 165). As to estoppel—Is it nowin the mouth of the defendant to raise this plea? Estoppel isessentially a matter for the pleadings at the earliest opportunity.Here the defendant knew all the facts at the first trial, but tothe "very last he only insisted on novation. The plea or estoppeldoes not appear even in the petition of appeal.
The evidence leaves no room for any argument as to mis-representation or estoppel. Whatever wrong Cantlay may have•done defendant, defendant as principal is liable to plaintiff. Hisliability cannot be avoided in any way (1 8. C. C. 34; 4 S. C. C.40; 5 S. C. C. 34; 6 S. 0. C. 45, 116, and 159).
15th -July, 1900. Lawrie, A.C.-J.—
In the end of 1899 there was an unpaid balance due by thedefendant to the plaintiff. The superintendent, to whom monthlyaccounts had been regularly rendered, was about to leave theIsland for a time. He asked the plaintiff to keep the existenceof this unpaid balance secret from his successor in the superin-fendentsbip, and at the same time he gave the plaintiff his ownpromissory note for the whole amount, payable in seven months,which was the time he excepted to be absent from the Island. Itwas argued that this was a novation by which the defendant (thedebtor) was released- and a new debtor, the superintendent, wassubstituted in his place.
It certainly is not the novation of the Civil Law. which is thesubstitution of a new engagement or obligation bv t-be samedebtor to the effect of extinguishing the original debt. Thesubstitution of a new debtor for the old with the consent of thecreditor was delegation. The person substituted was called ex-• promissor. The distinction between novation and delegation isclearly stated by Burge (vol. 3. p. 782):“ In the Civil Law and
the jurisprudence of Holland, Spain, France, and Scotland, andthe State of Louisiana, the new or second engagement by whichthe former is extinguished, if it be a change of the nature of theobligation without any change of the debtor, is called novation.If the original obligation still subsist, but the debtor is changed.
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that is, if the person change himself with the original obligationinstead of the former debtor, or enter into a new obligation, it iscalled delegation.” Later, at .p. 788, Burge says: ” Delegation isnovation effected by the intervention of another person, whomthe debtor, in order to be liberated from his creditor, gives to
such creditorand such person so given becomes obliged to
the creditor in the place of the original debtor. Delegare est vicesna alium ream flare crefliiori vel cui juaserit ”. And later, atp. 790: “ It is necessary that there should be the concurrence of theperson delegating, that is, the original debtor, and of the persondelegated, with the person whom he appoints. The intention ofthe creditor to discharge the first debtor and to accept the secondin his place must, in order to give effect to the delegation, beperfectly evident.
Addison, on Contracts, ch. IP, setion 2, says: ” But there mustbe a mutual agreement between all the three parties, the creditor,his immediate debtor, and the intended new debtor, for thesubstitution of the new debt in the place and stead of the originaldebt; for if that continue to subsist, there is no consideration forthe new contract and no valid substitution takes place, and thecase, as regards the intended new debtor, is no more than if Ipromise a stranger, to whom T do not owe anything, that if hewill accept me to be his debtor for £60, I will pay it to him. yetthis is but a nudum pactum, because I was not indebted to himbefore, and my promise to pay, if • the other will receive it, isnothing but a mere voluntary promise, which does not bind meat dll (Forth v. Stanton, 5 Taunt. 450)."
Without going so far as to say that the superintendeut was notbound by his undertaking to pay, as evidenced by his grantingthe promissory note, the transaction between the plaintiff and thesuperintendent was (in' my opinion) a matter which did not affectthe debtor, he was no party to it; and later, when the agreementbetween the other two was cancelled by mutual consent, by thepromissory note being returned, I think the debt between theplaintiff and the defendant remained in the same position as if thepromissory note had never been given. I would repel the plea ofnovation or delegation.
During the course of the argument in. appeal it was suggestedthat the plaintiff was estopped from asserting that the debtremained due because by his conduct from 1889 to 1893 he, byhis omission to vender accounts to the defendant bringing outthis balance, intentionally caused or permitted the defendant tobelieve it to be true that there was no balance outstanding, andto act On that belief, and therefore that he may not in this
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subsequent suit between himself and the debtor deny the truththat there was then no balance due. I am of the opinion thatthe plaintiff did voluntarily cause the defendant to believe thatno balance was due; T am not sure that there is evidence thatthe defendant acted on that belief. It may be that if the defend-ant had known that the superintendent had, for masons of hisown, asked that the debt be kept secret, the defendant would•have dismissed the superintendent from his service; that would-have left the plaintiff and the defendant in the same position asbefore, and doubtless the defeiidant would have. promptly paidthe debt.
The next ■ question is. Had the plaintiff right to attribute to theold debt the payments made by Mr. Evans after Mr. Cantlay leftthe estate? I am of the opinion that he had no right to attributethis to any but to payment of the monthly accounts rendered toMr. Evans and paid regularly by him. Then, as regards paymentsmade by Mr. Cantlay after his return to the Island, these, I think,were also attributable to the monthly accounts rendered. It isplain that all concerned, the plaintiff; the superintendent, thevisiting agent representing the defendant regarded the- moneysas paid in reduction and satisfaction of the current account;these payments could not be attributed without the latter’sconsent to the payment of an oIcT debt, of the existence of whichthe plaintiff kept the defendant in ignorance. But it is said thatthe defendant’s agent, the superintendent, knew of the old debt,and that his knowledge was the defendant’s knowledge. I thinkit was not the defendant’s knowledge; the transactions betweenthe plaintiff and the superintendent were separate from andsomewhat antagonistic to the relations of either with thedefendant. With regard to third parties. Mr. Cantlay was thedefendant's agent; regarding them, anything -he knew materialto his principal’s interests must be presumed to have beencommunicated; but here the plaintiff knew that the agent hadnot communicated to his principal the existence of the debt.
I am of the opinion that the payments made since 1881) cannot-be attributed to the old debt. The debt for which the plaintiffnow sues has been paid, and the action for the goods supplied sinceMay, 1893, must be dismissed with costs.
I have come to the same conclusion. I agree that there was nonovation. I believe that neither the agent of the plaintiff norCantlay meant to release the defendant; they meant to makehim pay, and Cantlay’s promissory note was taken as a collateral
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security in consideration of the connivance at the deception hewas practising on his employer. I agree that the payments madeby the defendants since 1889 cannot be attributed, to the olddebts, and that therefore this action must fail.
As for estoppel, it seems to me that the view of the ChiefJustice as to tire appropriation of payments comes very nearto holding that the plaintiff, having represented to the defendantfor a considerable period of time that he, the defendant, waspaying his expenses from .month to month, cannot now turnround and say that the payments were made in respect of olddebts.
1 should be disposed to think that the estoppel has an evenbroader basis. The- plaintiff's representation was to this effect:
“ Our accounts are squared; you owe me nothing. You are simply“ paying for what I am supplying from month to. month. ” In'orderto estop the plaintiff from contradicting this representation, it is notnecessary to show that the defendant sustained damage by actingupon it. It is enough to show that he acted upon it. The defend-ant was a man of substance, little likely to leave his superintend-ent short of funds, and if he had known that Cantlay had allowedthe estate to fall into debt to the plaintiff to the extent of morethan Rs. 20,000, I can scarcely think that he would have retainedCantlay in his employment. It appears to me that in consequenceof the plaintiff’s conduct the defendant continued to deal withthe plaintiff ■without dismissing Cantlay, and that he retained himas superintendent without exacting the securities for his goodconduct, which he would certainly have required if he had knownthe truth.
I apprehend that the previous judgments and proceedings ofthis Court have in effect opened the issue between the partiesto be whether in honour or honesty defendant (or his legalrepresentatives) now are indebted in aught to the plaintiff.
Defendant was the proprietor resident in England. A. Cantlayholds his power of attorney, and was his visiting agent. Hisbrother, C. Cantlay, was superintendent of the tea garden in ques-tion. We must not exaggerate his position or powers. His dutieswould ordinarily be to have control of the cultivation, the labourforce, and (subject always to the visiting agent's control) toreceive moneys necessary to defray expenses and make suchpayments. Is there anything proved to show that he had authorityto novate debts or bind the proprietor by estoppel, unless the
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proprietor was directly and personally affected with notice orknowledge thereof? The entries in the plaintiff’s accounts of theparties, when C. Cantlay first took charge and of Evans' inter-regnum, show that in ordinary course of business, the proprietor(or his attorney or financial agents in Ceylon) would place thesuperintendent in funds so promptly that any creditor, like plain-tiff, supplying goods could be paid by the superintendent for themwithin two months. C. Cantlay so paid plaintiff’s accounts withintwo months, down to 30th September, 1882, and 20th November.Then he drifted into three months’ arrears, the account to 31stAugust, 1884, being paid 3rd November following; then into fourmonths, the account to 30th September, 1886, not being paid till22nd January, 1887, and that to 30th September, 1888, not till 30thJanuary, 1889; then he drifted into six months arrears, the accountto 30th June, 1889, not being paid till 31st January, 1890, and thatto 31st July, 1890, not till 31st January, 1891. The averagemonthly supplies by plaintiff were about Rs. 3,900, and soC. Cantlay’s promissory note of 5th December, 1889, to plaintifffor Rs. 20$£16.89 was for five to six months’ expenditure.
Now, if this action were being fought under the provisions ofsection 18 of the Civil Procedure Code as a triangular duelbetween plaintiff, defendant, and C. Cantlay, we should have the oldquestion raised against plaintiff in this broad honour and honestyinquiry: “ To whom was credit given?” which formally came forconsideration in R am ana than’s Reports (1886), payee 178-197;4 S. G. C. 40; 6 S. C. O'. 33; 6 S. C■ C. 52, 115, and 159, dc., andI consider that in this case the incident of the promissory note of5th December, 1889, and the suspension for seven months of anydemand of the balance debt which C. Cantlay requested and plaintiffgave, following the manner in which plaintiff had extended creditfor two to six months without any apparent cause therefor ondefendant’s part., though very possibly to oblige C. Cant-lay, are allsufficient to show that he (plaintiff) ^waited upon his pleasure anddealt with him as his principal debtor, and that he should be by usremitted now to his claim against his true debtor. We all know byexperience how in the competition of trade a native trader willbe kindly and obliging to a (superintendent at times so as to gainthe business of the estate at first by this favour, and then by thefetter of the arrears—debt. It can be no hardship to him to bidhim have resort to his true debtor, while there can be no legal claimagainst the proprietor, who has in all bona fides kept the superin-tendent always in funds to make payment in the necessary orcustomary period of two months. I would dismiss plaintiff’saction with costs.
SUPPRAMANIAN CHETTY v. WHITE