007-NLR-NLR-V-08-LIPTON-v.-BUCHANAN.pdf
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LEPTON v. BUCHANAN.D. C., Colombo, 14,621.
1904.
October 17.
Agreement not to sue—Partnership debt—Payment of moiety of debt by onepartner, after dissolution of partnership—Undertaking by creditor not tosue such debtor for the other moiety until all means of recovery againstthe other debtor had been exhausted—Bight of creditor to maintain suitagainst both debtors for the balance moiety—English Law—Roman-DutchLaw—Action upon a nude pact when maintainable—Distinction betweencausa and consideration.
B and F carrying on business in partnership incurred a debt to L in1899. In 1896 the partnership was dissolved by decree of Court, whichappointed a receiver.
F paid a .moiety of the debt to' the receiver, who paid it to L, and Lthereonundertookthat hewould not take anysteps against Ffor the
-recovery of the balance due by the firm until he (L) had exhaustedevery possible means of recovery against B.
In 1901, L raised the present action against B and F to .recover themoiety still remaining unpaid.
Held, that the question in issue, not being one “ with respect to thelaw of partnership ” in the words of section 2 of the Ordinance No. 22-of 1866, was not to be decided in terms of the English Law, and that asthe question was as regards the validity of an agreement, between twopersonswho werenot partners, not to recovera debt due, theRoman-
Dutch Law should govern the case.
Heldfurther, that therewas a justa causafor the agreement. For
the creditor-plaintiff recognized that, although , the entire debt wasexigible from either partner, yet between themselves each was liablefor one-half only; and that although a receiver had been in possessionof the firm’s assets for three years, yet he had not been able to pay theplaintiff anything at all-. When defendant F thereupon came forwardand paid half the debt, presumably saving the plaintiff further delayand trouble, theplaintiffin return promisednot to proceedagainst
F for the balance until B had been completely excused.,
though according to English Law there may be no consideration forthis promise, according to the Roman-Dutch Law it was supported by asufficient causa.
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1904.
October 17.
Cutua denotes the ground, reason, or object of a promise giving suchpromise a binding effect in law.
It has a much wider meaning than the English term “ consideration, ”and comprises the motive or reason for a promise, and also purely moralconsideration. N
Even if the agreement was a nudum, pactum, it wonld yet support anaction under the Homan-Dutch Law, since the maxim of the TtwnMLaw Ex nudo pacto non oritur actio did not hold good in the Boman-Dutoh Law.
Nude pacts made in earnest and with a deliberate mind give rise toactions, equally with contracts.
Held also that, as the plaintiff did not act promptly in taking measuresto recover the other moiety from B before he became insolvent, theplaintiff's action against F could not be maintained.1
T
HE two defendants were at one time trading in partnershipunder the name and style of Buchanan, Frazer & Company
and they then became indebted to the plaintiff in Its. 15,259.96.The partnership was dissolved by mutual consent and a receiverappointed to recover the assets. Thereafter the second defendant,through this receiver, paid the plaintiff’s attorney one-half of theabove debt, to wit, Rs. 7,629.98, and received from him, in writingthe following undertaking:—“ In consideration of my havingreceived from Mr. S. D. Young, the receiver of the late firm ofBuchanan, Frazer & Company, the sum of Rs. 7,629.98 contributedby you as your half share of the debt owed by that firm to me, Ihereby undertake that I will not take any steps against youpersonally for the recovery of the balance of the amount^ due bythe aforesaid firm until I have exhausted every possible means ofrecovery against your late partner, Mr. D. R. Buchanan.” At thedate of this undertaking the first defendant was possessed of amplemeans to pay his debts. The plaintiff, however, delayed takingsteps against the first defendant more than a year, and in themeantime the first defendant contracted fresh debts, and hisproperty was exhausted in, the payment of his debts, except thatdue to the plaintiff. The plaintiff now sued both the defendantsand claimed that they be jointly and severally condemned to payhim the said sum of Rs. 7,629.98.
The second defendant pleaded that the plaintiff’s delay was abreach of the above agreement, and the second defendant was nottherefore liable.
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The District Judge held (1) that the agreement was governedb?' the English Law and inoperative for want of consideration;(2) that'even if the Roman-Dutch Law applied, it was equallyinoperative for want of consideration; and (8) that' the -delayaforesaid on the part of the plaintiff did not constitute a
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breach of the agreement, and entered judgment for plaintiff asprayed.
The second defendant appealed.
Walter ' Pereira, K.C., for second defendant, appellant.—Theagreement between the second defendant and the plaintiff'sattorney is governed by the Boman-Dutch Law, and not by theEnglish Law. The Law of Partnership in this Island is no doubtthe English Law, Ordinance No. 22 of 1866 has introduced thatlaw; but the agreement in question has nothing to do with thetransactions of the defendants as partners. The partnership hadbecome indebted to the plaintiff, and one of the partners on his.own account and for his own benefit entered into the agreement.The partnership as such had no concern with the agreement. Itwas a matter between the second defendant and the plaintiff, andthe law governing transactions by the partnership did not there-fore necessarily apply to the agreement. It was governed by theCommon Law of the land. Under the Boman-Dutch Law noconsideration is necessary to support a promise. All that isrequired is a justa causa. The question has not been authorita-,tively decided in Ceylon, but the Boman-Dutch authorities on thesubject are clear. If a local case were necessary, the dictum ofClarence, J., in Muttu Careen v. Capper (1 C. L. B. 11, seecolumn 2) is in point. There he Says that if the matter inquestion in that case “ be governed by the Boman-Dutch Law, noconsideration would be needed.” The Boman-Dutch authoritieswill be found summarized by Mr. Kotze, late Chief Justice of theTransvaal, in a lengthy and able note at page 28 of vol. II. of histranslation of Van Leeuwen’s Commentaries. He there pointsout that Mr. Lorenz in his translation of Van der Keessel’s Theses.and Mr. Henry in his translation of Van der Linden’s Instituteshave mistranslated the Dutch word “ oorzaak ” in their use of theword “ consideration,” and he bites numerous authorities showingthat the maxim of the Civil Law—Ex nudo pacto non orituractio—does not obtain in the Law of Holland.
In point of fact, there would appear to have been considerationfor the agreement. The firm of Buchanan, Frazer & Companyhad been dissolved and a receiver appointed, and the first defendanthad a counterclaim against the plaintiff; and by the prompt pay-ment by the appellant the plaintiff was saved the trouble* ofprolonged litigation as regards the amount paid. ,#
Thep, there was a breach of the agreement, on the part ofthe plaintiff. The first defendant was at its date possessed ofvaluable properly; and the plaintiff, at his own risk, delayed
1904.
October IT.
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1904. proceeding at law against the first defendant for more than aOctober 17. year, and during that time the first defendant’s property'practically "disappeared by its application for the payment
of his other debts.
Domhorst, K.C., for plaintiffs respondent.—The law applicableto the agreement between the plaintiff and the first defendant isthe English Law. The agreement is inseparable from the partner-ship transactions that resulted in the debt to th.e plaintiff, and asregards these transactions the law governing them is the lawrelating to partnerships, which, in Ceylon, is the English Law,The agreement itself is a nudum ■pactum, there being no consider-ation to support it. The payment by the second defendant of,halfthe partnership debt is no consideration, because he was liable atlaw .to pay it. Kendall v. Hamilton, 4 App. Cas. 504. Then,there was no breach of the agreement by the plaintiff. Meredelay to prosecute his action against the first defendant is nobreach. The second defendant is premature in his defence.' – Itis only if the plaintiff attempt to levy execution on his property,before exhausting all means of recovery against the firstdefendant, that the second defendant will have cause forcomplaint, if at all. •
Walter Pereira, in reply.—The plaintiff's undertaking is that hewill not take, any steps against the second defendant until he, hasexhausted every possible means of recovery against the firstdefendant. Far from exhausting every possible means ofrecovery, the plaintiff deliberately omitted to avail himself of theonly means of recovery; and inasmuch as in those circumstancesthe plaintiff could not take any steps against the second defend-ant, he could not maintain the present action.
Gur. adv. vult.
17th October, 1904. Wendt, J.—
The facts out of which this appeal arises are as follows: —The defendants Buchanan and Frazer carried on business inpartnership under the style of Buchanan, Frazer & Company untilthe year 1896, when the partnership was dissolved by a decree ofthg District Court, which appointed a receiver of the partnershipbusiness. The partnership had incurred a debt of Bs. 15.259.96to»the plaintiff, and on the 5th May, 1899, the defendant Frazerrecognizing. his liability in the winding up to contribute one-halfof this sum, paid to the receiver Bs. 7,629.88, which the receiverpud over to plaintiff on account of the firm’s indebtedness. On
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the BAmfl day the plaintiff wrote to Frazer the letter B 1, which, isin the following terms:—
“ Gordon Frazer, Esq.
Dear Sir,—In consideration of my having received from Mr. S.D. Young, the receiver of the late firm of Buchanan, Frazer &Company, the sum of Bs. 7,629.98 contributed by you as yourhalf share of the debt^ owed by that firm to me, I hereby undertakethat I will not take any steps against you personally for the recoveryof the' balance of the amount due by the aforesaid firm until .1have exhausted every possible means of recovery against your latepartner, Mr. D. B. Buchanan.
Yours faithfully,
Thos. J. Lip ton,
by his Attorney, S. Jeffery.”
Ho further payment having been made, the plaintiff on the23rd February, 1901, commenced this action against both Buchananand Frazer to recover the remaining moiety of their firm’s debt,viz., Bs. 7,629.88. The first defendant pleaded a set off, admittinga nett Balance to be due of Bs. 2,303.15, and also pleaded theOrdinance of Limitations. He has not, however, appealed againstthe’decree which was passed for plaintiffs claim in full. (I maynote in passing that the decree should have been for Bs. 6,538.70only, the plaintiff having in his replication limited his claim tothat’ sum.) The second defendant in defence set up the under-taking contained in plaintiff’s letter B 1, averring that plaintiff hadfailed to take any steps whatever against the ’first defendant for therecovery of the debt, and in the alternative claimed damages forbreach of the said agreement. The learned Additional DistrictJudge held that the effect of the agreement must be determinedby English Law and not by. Boman-Duteh Law; that it was badfor want of consideration, the payment by Frazer of a debt whichhe owed being no consideration; and that, moreover, suchconsideration as was constituted by the payment had been past atthe date of the agreement. He further held that plaintiff hadcommitted no breach of it: he had tried various means amicablyto recover the debt, and, these failing, had been obliged to come toCourt. He. might in fact say he was still carrying out the termsof the agreement. He was obliged to sue Frazer also, or he wduldhave lost all remedy against him, and he -might, on recoveringjudgment, still enforce it against Buchanan in the first instanceand Resort to Frazer in the event only of nothing being sorecovered. Judgment was therefore given for the plaintiff, andthe defendant Frazer has appealed.
1904.
October 17.
Wendt, J.
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1004.
October 17.Wendt, J.
As regards the law applicable to the case, I think the DistrictJudge was wrong. He gives no reason for his- opinion, but Igather that he relied, as respondent’s counsel before us did, onthe Ordinance No. 22 of 1866, which enacted that “in all questionsor issues which may hereafter arise or which may have to be
decided in this Colony with respect to the law of partnership
the law to be administered shall be the same as would be admin-istered in England in the like case, at the corresponding period,if such question or issue had arisen or had to be decided inEngland, unless in any case other provision is or shall be madeby any Ordinance now in force in this Colony or hereafter to beenacted.’’ The question here raised is not one “ with .respect tothe law of partnerships.’’ It does not arise among partners orbetween partners and a third party. It is between two individuals.It is admitted that Frazer owed plaintiff a debt, and the questionregards the validity of an agreement not to recover that debt. Thefact that that debt arose out of plaintiff’s dealing with Frazer andhis partner does not affect the point. I think the English Law isexcluded,' and that the Roman-Dutch Law, as the Common Law ofthe country, is the law which should be applied.
According to that law, then, even assuming the agreement wasnudum pactum, it would yet support an action. The maxim of, theRoman Law—Ex nudo pacto non oritur actio—did not obtain inthe Roman-Dutch Law. Voet (2, 14, 9) says that nude pacts madein earnest and with a deliberate mind give rise, equally withcontracts, to an action. Grotius (3, 1, 52) says it was the rule andpractice that all promises based upon any reasonable cause gave aright both of action and of exception (Maasdorp’s Translation,1st Ed., p. 304). Van der Keesel, dealing with this passage says:“ A promise which is not founded on a just causa debendi doesnot give a right of action, although in other respects the actionis maintainable as a nudum pactum.” Groenewegen De Leg. Abr.(adi Cod. 2, 3) lays it down: Moribus nostris ex nudo pacto nonsolum exceptionem sed et aptionem competere constat. Van derLinden (I, 14, 1) prescribes the following conditions as necessaryfor the existence arid validity of perfect obligations: (1) a lawfulsource (causa); (2) competent parties; (3) a thing capable of beingthe subject of an obligation. He then (section 2) states the mostgeteral source of obligations to be contracts, and dealing with thegrounds of their invalidity says: “ Contracts are also void whenm&de without any causa whatsoever, or on a false causa, or on acausa which is contrary to justice, bona fides or boni mores ”Causa denotes the ground, reason or object of a promise, givingsuch promise a binding effect in law. It has a. much wider
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meaning than the English term “consideration,” and comprisesthe motive or reason for a promise, and also purely moral con-sideration. (See a learned note by the translator at p. 28 of Kotze’s
Fan Leeuwen, VoL II., where the subject is discussed at length.)
In the present instance there was a lawful causa for the agree-ment. The creditor recognized that although the entire debtmight be exigible from either partner, yet between themselveseach was liable for one-half only. A receiver was in possessionof the firm’s assets which had not enabled him, in spite of thewinding up being three years old, to pay the plaintiff anything atall. The defendant Frazer thereupon came forward and paid halfthe* debt, presumably saving the plaintiff further delay andtrouble, and the plaintiff in return promised not to proceed againstFrazer for the balance until Buchanan had been completelyexcused. It may be that according to English Law there was noconsideration for this promise, but I certainly think that accord-ing to our Common Law it was supported by a sufficient causa.Suppose that, instead of merely making further action againstFrazer dependent on a certain condition, the plaintiff had, uponreceiving the payment, absolutely released him from the balanceof the debt; he could not thereafter have been sued for it. Thatwas laid down by this Court in Wikramasekara. v. Tatham{Grenier, 1873, D. C., p. 31), and has always been accepted as goodlaw. Why then should not the lesser promise be equally bindingon the plaintiff ?
The next question is, whether plaintiff has fulfilled the conditionprecedent to further recourse against the defendant Frazer. Hashe exhausted every possible means of recovery against Buchanan ?And here it is said that this very action, being a proceeding bywhich Buchanan may be compelled to pay, is a step towardsexhausting every possible means of recovery against him, andcannot therefore be objected to by Frazer. But this contentionI consider unsound. If it were otherwise, plaintiff might waittwenty years without setting the law in motion against Buchanan,perhaps occasionally accepting payment of & few rupees fromhim, just sufficient to avoid prescription, and then come againstthe appellant, who would be without defence. That surely wasnot the meaning of the agreement contained in letter B 1. J*sterms could not have been stronger: plaintiff is to exhaust all‘possible means of recovery against Buchanan. Surely that meantthat plaintiff was to act promptly, within a reasonable time;that te was not to delay . until the condition intended forFrazer’s protection became meaningless and nugatory by Buchanan
1904.
October 11,
Wendt, J.
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1904.
October 17.
Wendt, J.
wasting his substance and becoming insolvent. That is just whathappened. At the date of the agreement he was. quite solvent.He owned the property called the Maddema Mills, which nearly twoyears later and a month after the commencement of this actionwas sold for Bs. 82,500, and after satisfying the mortgagees left abalance of Bs. 12,890.4:9. It may be true that plaintiff $ould notwithout obtaining a judgment attach this property. Why thendid he not proceed to obtain a judgment ? The appellantrepeatedly pressed him to take the necessary steps to realize hisdebt out of the mills, and doubtless Frazer would then haveraised no objection to being sued along .with Buchanan, if .thatwas a formality necessary in law to preserve plaintiff’s ultimateright of recourse against him in terms of the agreement. But noaction was brought. The excuse offered is that Buchanan inMarch, 1900, wrote to plaintiff’s proctors the letter P 1, authorizingthem, out of the proceeds sale of Maddema Mills,, after satisfyingthe mortgagees, to pay plaintiff his half share of Buchanan,Frazer & Company’s debt, “less the amounts due to me on theHunt, general and advertisement accounts rendered.’’ Besides thefact that this letter is dated ten months after the agreement inquestion, it affords no valid excuse for plaintiff’s delay. For theHunt, general and advertisement accounts, which were and aredisputed by plaintiff, and which Buchanan has in this action notattempted to substantiate, amounted to Bs. 5,826.83, and theauthority to pay cobid therefore only apply to the balance ofplaintiff’s claim, viz., Bs. 2,303.05, and could not excuse the delayin enforcing the claim. In fact plaintiff’s proctors tried to induceBuchanan to withdraw the qualification relating to his counter*claim, but failed. The authority, such as it was, was thereafterverbally withdrawn by Buchanan at some unascertained datebefore the sale, and the nett balance of the proceeds sale wasapplied in paying his unsecured creditors. Buchanan has leftthe Island an insolvent, and Frazer, if condemned in this action,has no prospect of recovering contribution from him. /
For these reason^ I think that plaintiff .has not fulfilled thecondition entitling him to recover his claim from the appellant,and that it is no longer in his power to fulfil it. The actiontbgrefore fails, and I would allow the: appeal with costs.
Middleton J.—
I have had the advantage of reading my brother Wendt’sjudgment, and as he has fully set out the facts it is needless forme to recapitulate them.
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As I queried during the argument, and think now, this is not aquestion with respect to the law of partnership, which wouldoblige us under Ordinance No. 22 of 1866 to apply the EnglishLaw.
The question here is, whether.the second defendant is protectedfrom the ^action of the plaintiff by the terms of a letter written bythe plaintiff’s agent at second defendant’s request.
On one construction of that letter the second defendant couldbe sued on his admitted liability as a former partner of Jbhe firstdefendant; on another he could not.
The construction does not depend upon any question of partner-ship, but on a consideration of certain facts showing whether ornot the plaintiff “ has exhausted every possible means of recovery "against the second defendant.
The .plaintiff and defendant are not, nor ever have beenpartners, and the fact that second defendant was at one time apartner with the first defendant raises no question that I can seewith respect to the law of partnership which would affect theplaintiff’s right to sue the second defendant as governed by theletter in question.
I agree, therefore, with my brother that the learned AdditionalDistrict Judge was wrong in applying English Law to the caseand concur in my brother’s view of the Boman-Dutch Law asapplicable to to this case, and his conclusion that the plaintiff hasnot fulfilled the conditions entitling him to recover his claim fromthe second defendant.
The appeal must therefore be allowed with costs.
1904.
October 17.
Wendt, J.
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