068-NLR-NLR-V-26-MUTTU-CARPEN-CHETTY-v.-SAMARATUNGE.pdf
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Present : Bertram C.J. and Jayewardene A.J.
MUTTU CARPEN CHETTY t>. SAMARATUNGE.
42—D. G Kandy, 31,068.
Promissory note—Holder for value of a discharged note—Right to sue.
Per Jaybwakotsne A.J.—The holder for value of a promissorynote without notice that it has been paid oft is entitled to sue uponit, provided the note has not come back to (he hands of the maker.
The correctness of the decision in Jaymrardcna v. Rakaiman Lebbe 1doubted.
A
PPEAL from a judgment of the District Judge of Kandy. Thefacts are stated in the judgment of the Chief Justice.
H. V. Perera, for plaintiff, appellant.
Drieberg, X.C. (with him R. C. Fonseka),for defendant, respondent.
September 15, 1924. Bertram C.J.—
This is a case which has given us some trouble. The action isbrought on a promissory note for Rs. 2,900 given by the defendanton July 31, 1917, to Sinnan Chetty, a member of a Chetty firmwhich consisted of himself and two brothers. The course of businessin pursuance of which this note was given appears to have been that,when accounts were taken, a note would be given in respect of thebalance due on the amount against the customer, and that would bedischarged by periodical supplies of produce, in this case tea. Theobject of embodying the balance in a promissory note was, nodoubt, partly convenience of suit, and partly the further convenienceof getting an acknowledgment of the debt due. The businessappears to have gone on for some two years, and presumably thedefendant by supplies of tea leaf gradually reduced the balanceagainst him as shown by the note. But some time, in the course ofthe year 1919, this Chetty firm dissolved partnership. Thedefendant says that he knew the plaintiff who was one of themembers of the firm to be such, and that he knew nothing of itsdissolution, and the learned Judge has accepted this account.After this dissolution, as far as one can gather, the business went onin the same way. The story is that the note on dissolution wasassigned to the plaintiff as one of the assets to be appropriated,to his share of the partnership. He took no .action on the note.He does not seem to have given the defendant any notice that thenote had been assigned to him. There is no evidence that anychange took place in the course of dealings between the defendant1 (1919) 21 N. L. R. m.
1924.
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1924. and Simian Chetty, and the defendant alleges that the businessnZITTI__ 'ven* on *n precisely the same way. He further says that two-C.J. years later, in February, 1921, accounts were again taken, and7TTi.it- was found that Rs. 1,392.50 was due from the defendant to the
Carpen firm. To cover that indebtedness the firm took a promissory note,minmmfimjji ^ust before period of prescription expired he brought an actionupon it.
Now the learned Judge has accepted the story of the defendantthat his account was continuous from the time the promissory notewas given in July, 1917, and the time when on a' further settlementthe note for Us. 1,500 was given. We have not these facts at allfully proved. The accounts of the Chetty firm have not beenproduced during the interval, and though the defendant producespass books they do not cover the whole period. He explains thatthe earlier pass books were returned. The defendant pleads thathe has settled the note account, the liability in respect of which thenote for Bs. 2,900 was given, and that the debt should be consideredas discharged.
What is the legal position under these circumstances? It seemsto me there are two answers to the plaintiff’s claim. When hereceived the endorsement of this note in 1919, he had a certainduty in connection with the endorsement. He as partner knew thecourse of business between his firm and the defendant. He knewthat supplies of tea leaf must have from time to time been broughtin. He knew that further supplies of tea leaf would continue to bebrought in. He knew that .these things were given in business ofthis sort, not for purposes of negotiation, but for purpose ofrecord.,"
The question is. Under these circumstances, had he a duty toinform him that the partnership had been dissolved, and that thisnote had been assigned to him, the plaintiff, as his share of theassets. Had that information being conveyed to the defendant,he would have undoubtedly asked for an account to be taken, andto have his supplies of tea leaf brought to account, and he would nothave continued to make these further supplies in liquidation of thenote which he supposed to be still in the hands of the firm.' Nothaving discharged this duty, I think that the plaintiff- is estoppedfrom setting up the plea as against the defendant that the note isstill payable.
Further, I think that the plaintiff is precluded from suing in thisway. Supposing that the partnership had still been subsisting, andsupposing that Sinnan Chetty had endorsed this note over to hisbrother, the plaintiff; for value; and supposing that the defendanthad continued to pay in tea leaf in discharging of the indebtedness;-could this partner have sued the defendant upon the note given inrespect of a firm debt already discharged? Clearly he could not
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Not having given notice of the dissolution of the him, and beingknown to be a partner by the defendant, he is in exactly the sameposition as a partner.
There is also this fact to be borne in mind in connection with thiscase that the action of the plaintiff is suspicious. The learnedJudge is inclined to assume that it was not bona fide. He saysthat it is impossible to doubt that the plaintiff was aware of thefact that dealings were continuing on the original footing. Theonly question which has given us serious trouble is as whether weshould send the case back for further evidence as to what actuallywas done in the accounts between the Sinnan Chetty and thedefendant. The learned Judge has, however, accepted the doubt*less imperfect evidence of the defendant. It would be extremelydifficult after this long lapse of time due to the inaction, and, as to thelearned Judge seems, the male fide inaction of the plaintiff, to obtainthe proper evidence. Sinnan Chetty himself appears to have beenin very infirm health, and may be now even worse. There is thisalso to be said that it is extremely unlikely that the defendantwould have cited Sinnan Chetty to support his story that there wasa continuous account if that story had been fictitious. In thecircumstances, I think* it would be better that we accept the findingof the learned Judge, and leave his judgment undisturbed, and thatthe appeal should be dismissed, with costs.
Jayewaedene A.J.—
I agree. Notwithstanding Mr. H. V. Per era's able argument forthe plaintiff, appellant, I think that the judgment of the learnedDistrict Judge is on the- facts and circumstances of the case correct.The strongest point against the plaintiff is the long and unexplaineddelay in bringing the action. That4 not only led the. defendant tobelieve that the note was paid off, but also rendered it most' difficultfor the defendant to adduce evidence in proof of the fact that theamount due on the note was set-off in the course of the transactionshe had with the payee of the note, who is the plaintiff's brother.There is. also another matter to which I should like to refer. Itappears to have been contended in the lower Court that, if thepromissory note had been endorsed after it had been paid anddischarged in the manner indicated in the answer, it could not besued upon even by an endorsee for valuable consideration-^seeissue No. 2. This contention is based on the authority of the case ofJatjawardena v. Rahaiman Lebbe (supra), where it was held that whena promissory note payable on demand is paid by the maker, it ceasesto be a note, and that the negotiation of it after the date of paymentdoes not give any right to a bona fide holder for value to sue on it.This is judgment of a Bench of three Judges. It is, I am afraid,due to a misapprehension of the effect of certain English decisions
1924.
Bbbxraic
C.J.
MvttuCcurpenChetty v.Samara-lunge
1924.
JAY»WA*-DEMIS A.J.
MuttuCarpenGhetty v.Samaratunge
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on which it is based. I have come across a case (Glasscock v. Balls ')which throws considerable doubt on the correctness of thatdecision. In the English case, which is not referred to in the localcase, it is pointed out that it is only where a note comes back into thehands of the maker that its reissue or negotiation confers no righton an indorse, and this because of a prohibition under the EnglishStamp Act. In that case Lord Esher, M.K. said: ** It has been heldthat there may be a defence to an action by a bona fide indorseefor value, where the note has been paid ancl has come back into themaker’s hand before it was indorsed to the plaintiff. That defencedoes not arise in respect of any merits of the defendant, but becausethe Stamp Act has not been complied with.. In such a case it hadbeen held that there was a reissue of the note, and therefore thecase stood on the same footing as if the note had been issued for thefirst time without a stamp. The effect of non-compliance with thestamp laws is that the note is not a negotiable instrument, and isnot capable of indorsement. Such a defence only arises where therehas been a reissue of the note. The note cannot be said to bereissued, unless it gets back again into the power of control of themaker. If a negotiable instrument remains current, even thoughit has been paid, there is nothing to prevent a person to whom it hasbeen indorsed for value,- without knowledge that it has been pakl,from suing. This case is not within the rule applicable to such casesas Bartrum v. Gaddy.2 *’ Bartrum v. Gaddy is one of the cases reliedon in the local case! The English case was decided by the Court ofAppeal, and a decision of the Court of Appeal in England, on anEnglish Statute identical with a local Statue, is binding on ourCourts—see Trimble v. Hill,2 where the Privy Council laid down therule that where the provisions of a Colonial Statute are identicalwith those of an English Statute, the Colonial Courts should followthe decisions of the Court of . Appeal on the Imperial Statute, InMohideen v. Banda,4 this rule was followed. The local law relatingto bills of exchange and promissory notes is contained in the Billsof Exchange Act. There are, therefore, two decisions on the pointin question which are equally binding on this Court, and when asuitable occasion arises, it will have to decide which of them it willfollow. I have taken this opportunity of pointing out the state ofthe law on the subject, as the point is one of great importance andof frequent occurrence in our Courts.
Appeal dismissed.
1 (1**9) 24 L. R. Q. B. D. 13.1 (1838) 9 Ad. & E. 275.
*{M9) L. R. 6. A. C. 348.4 (1898) 1 N. L. R. 51,