023-SLLR-SLLR-2002-3-MERCANTILE-CREDIT-LTD.-v.-THILAKARATNE.pdf
206
Sri Lanka Law Reports
[2002] 3 Sri LR.
MERCANTILE CREDIT LTD.
v.THILAKARATNE
COURT OF APPEALWEERASURIYA, J. (P/CA) ANDDISSANAYAKE, J.
CA NO. 518/93
DC COLOMBO NO. 40958/MHPJULY 09, ANDAUGUST 02, 2001
Hire Purchase Agreement – Failure to pay instalments – Term beneficiumsui divisionis excussionis not explained to guarantor?
Evidence Ordinance, sections 101 and 102 – Burden of proof – On whom lies theburden – Special fact – Plea of non est factum.
The plaintiff-appellant filed action against the 1st (principal debtor), 2nd and 3rddefendant-respondents (guarantors) jointly and severally to recover a certain sumof money, and the return of the vehicle (on hire purchase) and damages. The 2nddefendant-respondent (guarantor) whilst admitting signing the Guarantee Bondstated that he was not aware of the conditions of the agreement, he had notrenounced all the rights and privileges to which the sureties are ent^'ea to bylaw and that the clause relating to the renunciation of the benefit were not explainedto the guarantors. The District Court held with the defendant-respondent.
Held:
The burden of proving that the clauses relating to the renouncing of all benefitsand privileges to which sureties are entitled to by law were not understoodby him is a special fact within the knowledge of the person alleging it andby virtue of section 101, the burden of proving that fact is with the personwho asserts that fact.
If as asserted to by the 2nd defendant-respondent that he was not awareof the conditions of the agreement at the time he signed it, it was open forhim to have opted for his common law remedy of repudiating his suretyshipwhen he came to know by receipt of certain letters. Furthermore, he statesin evidence that he did not care to read it and that he signed because afriend told him to do so.
CA
Mercantile Credit Ltd. v. Thilakaratne (Dissanayake, J.)
207
Negligence on the part of the 2nd defendant-respondent is not an excuseto deny liability.
“Where a person who is neither illiterate nor blind signs a deed withoutexamining the contents he would not as a general rule be permitted underthe Roman Dutch Law to set up the plea that the document is not his.”
APPEAL from the judgment of the District Court of Colombo.
A. J. I. Tilakawardane with Upul Fernando for plaintiff-appellant.
H. D. E Gunatilake for 2nd defendant-respondent.
Cur. adv. vult.
January 31, 2002DISSANAYAKE, J.
The plaintiff-appellant by his plaint dated 18.06.1992 filed action against oithe 1st, 2nd and 3rd defendant-respondents jointly and severally torecover a sum of Rs. 30,897.44 due as arrears of instalment andinterest, return of the vehicle bearing No. 38 Sri 9081 or to pay itsvalue Rs. 154,071.91 and damages Rs. 57,060 with continuing damagesat Rs. 3,170 a month until the return of the said vehicle, this claimarising out of the hire purchase agreement dated 29. 05. 1990 (P2)signed by the 1st defendant-respondent as the hirer and the 2nd and3rd defendant-respondents as guarantors.
The 1 st and the 3rd defendant-respondents failed to appear in court ioon summons being served on them and ex parte trial was orderedto be held against the 1st and the 3rd defendant-respondents.
The 2nd defendant-respondent by his answer dated 16. 02. 1993whilst denying the averments in the plaint prayed for dismissal of theplaintiff’s action.
208
Sri Lanka Law Reports
[2002] 3 Sri L.R.
The trial against the 2nd defendant-respondent proceeded on 11issues, and at the conclusion of the evidence the learned District Judgeby his judgment dated 03. 09. 1993, dismissed the plaintiff-appellant’saction.
It is from the aforesaid judgment that plaintiff-appellant filed this 20appeal.
The contention of the plaintiff-appellant in the petition of appeal wasthat the learned District Judge has misdirected himself in refusing toaccept the evidence of Danforth with regard to witness Rajasunderaexplaining the clauses of the hire purchase agreement to the signatoriesin a language that they can understand.
It was also the contention of the plaintiff-appellant that the learnedDistrict Judge had also erred in concluding that the clause relatingto the renunciation of the benefits to which guarantors are entitled toby law, which is known by the term “beneficium sui divisionis 30excussionid’, has not been explained to the guarantors.
At the commencement of the trial the 2nd defendant-respondentadmitted the signing of the agreement marked B and filed with theplaint (P2). It should be noted that when the guarantors signed theagreement which includes clauses 21 (a) to 21 (/) and clause 22 theirliability becomes inherent in the agreement. Thus, they become jointlyand severally liable with the hirer.
Therefore, the 2 guarantors had bound themselves jointly andseverally to pay on demand the amounts of any judgment or decreethat the owners may obtain against the hirer. The 2nd defendant- 40respondent had. also agreed to renounce his right to request that thehirer be sued in the first instance and had renounced the benefit ofdivision of liability.
CA
Mercantile Credit Ltd, v. Thilakaratne (Dissanayake, J.)
209
These rights of the sureties had been explained in clause 23. Thehirer and the two guarantors have placed their initials on the marginof clause 21 which is an indication that clauses 21, 22 and 23 havebeen brought to the attention of the parties to the agreement, beforeit was signed.
In view of the fact of admission of signing of agreement (P2) bythe 2nd defendant-respondent and the testimony of Danforth to the 50effect that he was present when the conditions and clauses of theagreement were explained to the signatories in the language that couldbe understood by them, calling Rajasundera to establish those factsis not. necessary.
Therefore, it would appear that the plaintiff-appellant has dischargedthe burden of proving that the 2 guarantors including the 2nd defendant-respondent had renounced all the rights and privileges to which thesureties are entitled to by law including the right to ask that the hirerbe sued in the 1st instance and also to ask for division of the liability.
The burden of proving that the clauses relating to the renouncing eoof all benefits and privileges to which sureties are entitled to by lawwere not understood by him is a special fact within the knowledgeof the person alleging it and by virtue of section 101 of the EvidenceOrdinance the burden of proving that fact is with the person who assertsthat fact. In this case since it was the position of the 2nd defendant-respondent that the conditions of the agreement relating to renunciationof the rights and benefits of the guarantors were not understood byhim, the burden of proof of that fact lies with the 2nd defendant-respondent who alleges it.
It is well to be borne in mind that under section 102 of the Evidence 70Ordinance, the burden of proof lies on that person who would failif no evidence at all were given on either side. Illustration B givenin section 102 is relevant in this regard, namely where A sues B formoney due on a bond execution of the bond is admitted, but B states
210
Sri Lanka Law Reports
[2002] 3 Sri L.R.
that it was obtained by fraud, which A denies. If no evidence weregiven on either side, A would succeed as the bond is not disputedand the fraud is not proved.
Thus, it is clear that the burden of proving that he signed theagreement without understanding that he was renouncing the benefitof requesting that the hirer be sued in the 1st instance, and the benefit aoof requesting the division of the claim, lies on the 2nd defendant-respondent.
Wille in his book ‘‘Principles of South African Law” 5th edition atpage 462 stated that the benefit of excussion and the benefit of divisionfail if the surety has renounced the said benefits either expressly orimpliedly, ie for eg. where the surety signs the suretyship agreementas principal debtor or as surety and co-principal debtor, he has renouncedthe said benefits.
The 2nd defendant-respondent did not deny the receipt of thefollowing letters :90
notice of termination of the hire purchase agreement (P8).
the letter terminating the hire purchase agreement (P9), and
the letter of demand by the attorney-at-law of the plaintiff-appellant company (P11) claiming the amount due from thehirer as well as the 2 guarantors as being jointly liable.
If as asserted to by the 2nd defendant-respondent he was not awareof the conditions of the agreement (P2) at the time he signed it wasopen for him to have opted for his common law remedy of repudiatinghis suretyship, when he came to know by receipt of the aforesaid letters,that he had bound himself jointly as the hirer. Even after receipt of 100letters P8, P9 and P11 he did not opt to repudiate his suretyship.
CA
Mercantile Credit Ltd, v. Thilakaiatne (Dissanayake, J.)
211
Wille in his book “Principles of South African Law" 5th edition atpage 465 under the heading “Notice of Termination” states thus: “Noticegiven by the surety to terminate the suretyship releases him in thecase of continuing guarantee which provides that it is subject totermination after the expiration of due notice given by the surety.”
It is interesting to note that the 2nd defendant-respondent in histestimony with regard to signing of the proposal form F1 stated in hisexamination in chief that P1 was in English and since he was askedto sign, he signed it, but in fact the proposal form P1 is both in Sinhala noand English. In cross-examination he stated that he did not care toread it. With regard to the agreement (P2) he stated that he signedbecause a friend told him to do so and that he had not read thecontents thereof.
Despite his admission in evidence that he was a businessman inwhose names the businesses are registered and he is a payee ofincome tax, he took up the position in cross-examination that he wasnot aware of the nature of the contract to which he entered into. Heis a person who has taken loan facilities offering guarantors as security.Therefore, his evidence that he did not understand or did not care 120to see what he was required to sign and that he did not know themeaning of the word guarantor in its colloquial sense makes histestimony unacceptable.
Weeramantry on ‘The Law of Contracts" 1999 reprint, vol. 1 at page300 enunciates the rule as follows:
“In accordance with the rules of justus error the Court wouldnot readily come to the aid of a person who states that he didnot sufficiently attend to the terms of a contract or did not readit sufficiently carefully, or altogether neglected to read the documentcontaining the contract. Thus, where a person who is neither illiterate ’30nor blind signs a deed without examining its contents, he wouldnot, as a general rule, be permitted in Roman Dutch Law to set
212
Sri L&nka Law Reports
[2002] 3 Sri L R.
up the plea that the document is not his. If however, withoutnegligence, a person executes a document in ignorance of its truenature, he may repudiate it, and this repudiation holds good evenas against 3rd persons who have in good faith acted upon it asa genuine expression of intention.”
Therefore, negligence on the part of the 2nd defendant-respondentis not an excuse to deny liability and burden on his part. The 2nddefendant-respondent did not make use of numerous opportunities as 140aforesaid to repudiate the agreement, if he bona fide was of opinionthat he had not renounced the benefits to which guarantors are entitledto. Thus, his evidence is untenable.
In the backdrop of the above evidence it would appear that thelearned District Judge misdirected himself when he came to the findingthat it was incumbent on the plaintiff-appellant to have called Rajasunderato establish that the 2nd defendant-respondent renounced his rightsand privileges that he is entitled to as a surety.
Taking the totality of the evidence the’irresistible conclusion thatcould be arrived at is that the 2nd defendant-respondent signed P2150to be liable jointly and severally as the hirer, after having renouncedall his rights and privileges which he was entitled to as a surety.
I set aside the judgment dated 03.09.1993 of the learned DistrictJudge and direct the learned District Judge to enter judgment anddecree for the plaintiff-appellant as prayed for in the plaint. The appealis allowed with costs.
WEERASURIYA, J. (P/CA) – I agree.
Appeal allowed.