NATIONAL BANK OF INDIA , LTD.,Appellant, and ARTHUR FERNANDO, Respondent

097-NLR-NLR-V-44-NATIONAL-BANK-OF-INDIA-LTD.Appellant-and-ARTHUR-FERNANDO-Respondent.pdf


JAYETILEKE J. National Bank of India, Ltd., and Arthur Fernando.
375
1943Present: de Kretser and Jayetileke JJ.
NATIONAL BANK OF INDIA, LTD., Appellant, andARTHUR FERNANDO, Respondent.
340—D. C. Colombo, 39b.
Contract—Mistaken belief regarding subject-matter—Not induced by otherparty—Want of assent—Rescission.
Where a party enters Into a contract under a mistaken belief regarding'the subject-matter of the contract, which was not' induced by theother party to the contract, it is not open to him to set up such mistakeas a want of assent bn his part in order to rescind the contract.
.A.PPEAL from a judgment of the District Judge of Colombo.
N. Nadarajah, K.C. (with him D. W. Fernando), for plaintiff, appellant.
H. V. Perera, K.C. (with him N. E. Weerasooria, K.C., and Cyril E. S.Per era), for defendant, respondent.
Cur. adv. vult.
June 7, 1943. Jayetileke J.—
In this case the plaintiff, the National Bank of India, Limited,-sued thedefendant, the executor of the will of Mr. F. L. Goonewardene, deceased,for the recovery of a sum of Rs. 19,795.07 and interest and for a hypothe-cary decree over the following shares :—;
913 shares in the Mayen (Ceylon) Tea & Rubber Co., Limited.
300 shares in the Mulhalkelle Tea Company, Limited.
shares in Walker & Greig, Limited.
150 shares in the Meall Mor (Ceylon) Estates, Limited.
, – >
After the institution of the action some of the shares were sold with theconsent of the defendant and the amount due to the plaintiff at the dateof trial was Rs. 8,989,80."
The defendant pleaded, that the plaintiff had agreed to take a transferof the shares held by it as security in full satisfaction of its claim artdtherefore this action could not be maintained. This plea was upheldby the trial Judge and the plaintiff’s action was dismissed with , costs.The appeal is from that order.
*1 3 Bala-ringhan i’s Report$ 53.
376 JAYET1LEKE J.—National Bank of India, Ltd., and Arthur Fernando.
The material facts are these: —The deceased had a banking account-with the plaintiff. On February 15, 1928, he arranged for an overdraftfor Rs. 25,000 by pledging to the plaintiff the following shares: —
143 shares in the Mayen (Ceylon) Tea & Rubber Co., Limited.
ordinary shares of Rs. 10 each in Walker & Greig, Ltd.
10 shares in the Mahawila Estates Company, Limited.
He granted to the' plaintiff a letter of lien (P 7) and a promissory note forRs. 25,000 (P 8).
On March 13, 1928, and June 7, 1928, he arranged for further overdraftsfor Rs. 4,000 and Rs. 11,000 respectively by pledging to the plaintiff thefollowing shares: —
408 shares in the Uva Highlands Tea Company, Limited.
222 shares in the Onnagala Tea Company, Limited.
600 shares in the Mulhalkelle Tea Company, Limited.
500 shares in the Meall Mor (Ceylon) Estates, Limited.
150 shares in the Fairlawn Estates, Limited.
He granted to the plaintiff two promissory notes for Rs. 4,000 (P 9) andRs. 11,000 (P 10).
He died in England leaving a last will which was proved in testamentaryproceedings No. 6,537 of the District Court of Colombo and probate wasgranted to the defendant on February 20, 1934. The account with theplaintiff was continued by the-defendant who in the years 1935, 1936, 1937,and 1938 wrote P 1, P 2, P 3, and P 4 confirming the correctness of theamount due by him to the plaintiff.
In 1937, the London Office of the plaintiff instructed Mr. Scroggie,the local Manager, to get a valuation of the shares pledged to the plaintiff.Mr. Scroggie sent for Mr. Parsons of Messrs. Bartleet & Company, a firm ofshare brokers, and discussed with him the question of selling or retainingthe shares, and he was advised that, from a market point of view, theshares ought to be held till the beginning of the following year.
A note of the interview dated July 2, 1937, was read in evidence markedP 12. This document shows that at that interview Mr. Scroggie got theimpression that the estate of the deceased had no other assets besides theshares that were-pledged to the plaintiff.
In August, 1939, Mr. Harrison, the Accountant of the Bank, wasappointed Manager, and he sent for the defendant to discuss the deceased’s,•affairs. At an interview he suggested to the defendant to transfer the "shares in the name of the plaintiff’s nominee and to give a letter authorisingthe plaintiff to sell the Shares at its discretion. The correspondence thatfollowed shows that there was a misunderstanding as to the proposalinede by Mr. Harrison to the defendant at the interview.
On August 26, 1938, Mr. Harrison wrote to the defendant a letter (D 2)requesting him to sign and return to him nine blank transfer deeds whichhe enclosed, together with a cheque for Rs. 150, being the approximate
JAYETTLEKE J.—National Bank of India, Ltd., and Arthur Fernando. 377
cost of transfer, to enable him to arrange for transfers to.be executed infavour of the plaintiff’s nominee of the following shares : —
shares of Walker & Greig, Limited.
150 shares of Meall Mor (Ceylon) Estates, Limited.
300 shares of Mulhalkelle Tea Company, Limited.
913 shares of Mayen (Ceylon) Tea & Rubber Co., Limited.
The evidence does not show that these were the only shares held by theplaintiff at that date.
On August 27, 1938, the defendant wrote D 3 in reply to D 2 statingthat his offer was to transfer “the shares” in full settlement of the debt.We do not know what he meant by “the shares” because admittedlythere were other shares pledged to the plaintiff besides those referred toin D 2.
On August 29, 1938, Mr. Harrison wrote to the defendant informinghim that he could not accept a transfer of “ the shares held by the plaintiffas security for the overdraft ” in full settlement of the amount due to thedefendant. The first paragraph of the letter seems to indicate thatMr. Harrison understood the defandant’s offer to be to transfer the sharesheld by the plaintiff as security for the overdraft in full settlement of theplaintiff’s claim.
On August 30, 1938, the defendant wrote D 5 regetting the mis-understanding and stating that there was no point in transferring theshares to a nominee of the plaintiff as he had hitherto been acting as itsnominee.
Now we come to six important letters, D 6, D 7, T3 9, and D 11 writtenby Mr. Harrison to the defendant and D 8 and D 10 written by thedefendant in reply to D 7 and 9 on the interpretation of which thisappeal turns.
. The question that arises is whether the correspondence taken as a wholeindicates that the parties had concluded a binding contract or not.
The plaintiff’s position is that it made an offer which was retractedbefore it was accepted. It is well settled law that, until both parties areagreed, each has a right to withdraw from the negotiation.
In D 6, dated August 31, 1938, Mr. Harrison wrote “We 'beg toacknowledge receipt of your letter of 30th instant and to assist you in thematter we are placing before our London Office your offer to transfer theshares standing in the name of the above deceased, into the name of thenominee of this Bank, in consideration of our accepting .such shares in fullsettlement of the amount due to us. We shall revert to the matter onreceipt of their reply ”.,
The defendant did not reply to this letter though the proposal was inrespect of “ the shares standing in the name of the deceased
In D 7, dated September 23, 1938, Mr. Harrison wrote ‘With referenceto previous correspondence, we beg to advise that our Head Office areagreeable to the arrangement whereby, in consideration of your trans-ferring into the names of the Bank’s nominees the shares standing in thename of the above deceased, we are to accept such transfer in fulldischarge of the indebtedness of the late Mr. Goonewardene to this Bank.You informied us that, in consideration of our acceptance of your offer,.
378 JAYETILEKE J.—National Bank of India, Ltd., and Arthur Fernando.
you would execute transfers in respect of the shares in question and weshall be glad if you will now return to us, duly signed, the nine transferdeeds which accompanied our letter to you of the 26th ultimo. Onreceipt of these and a remittance for Rs. 150, being the approximate costof transferring the shares, we shall arrange for transfers to be executed..Should the transfer fees not amount to Rs. 150, w>e shall, of course, refundto you any balance
By “ the shares standing in the name of the deceased ” in D 6 and D 7Mr. Harrison meant the shares held by the Bank as security, for the over-draft but the defendant seems to have had some doubt as to whatMr. Harrison m'eant as will appear from D 8 which was written in replyto D 7.
In D 8, dated September 24, 1938, the defendant wrote “ I thank youfor your letter of the '23rd instant offering to accept a transfer of thefollowing shares in full settlement of the debt due by the deceased : —
Shares of Walker •& Greig, .Limited.
150 shares of Meall Mor (Ceylon) Estates, Limited.
300 shares of Mulhalkelle Tea Company, Limited.
913 shares of Mayen (Ceylon) Tea & Rubber Co., Limited.
The Uva Highlands have been sold. I am prepared to pay the cost ofthe transfers. Please confirm this arrangement and kindly let me knowthe balance due as at date ”./
It can clearly be inferred from the language of D 8 that there were-other shares standing in the name of the deceased besides those referredto in it. The defendant was willing to Transfer to the plaintiff only theshares mentioned in D 8 and he wanted the matter to be clarified.
He regarded P 7 as an “ offer to accept ” a transfer of the sharesreferred to in his letter D 8. He wanted Mr. Harrison to “ confirm thearrangement” by which he obviously meant that Mr. Harrison shouldlet him know whether his interpretation of the offer was correct.
He was perhaps doubtful whether Mr. Harrison “ would confirm thearrangement ” and that may be the reason why he wanted to know thebalance that was due. He did not return the draft deeds or send a chequeto meet the expenses- of the transfers as requested in D 7.
On receipt of D 8 Mr. Harrison concluded that the estate of the deceasedhad other assets. He says that right through the negotiations he wasUnder the belief that the estate of the deceased had no other assets.There is no evidence that that belief was in any way induced by the■ defendant and if on the strength of that belief he entered into a bindingcontract it is not open to him to set it up as a want of an assent on his part.
In Menzies v. Menzies Lord Watson said : —“ He cannot rescind unlessbis error was induced by the representations of the other contractingparty, or of his agent, made in the course of negotiation and with referenceto the subjeGt-matter of.the contract”.
There is a stream of judicial authority, from Cox v. Prentice2 in 1815■down to Pope & Paarson v. The Buenos Ayres New Gas" Company ‘ in 1892,to; the effect that a mistake merely inducing assent is insufficient to
1 [1893) 20 Kellie. 108 H. of Lords.‘2 (1815) 3 M. and S. 344.
3 (1892) Times Law Rep. Vol. 8, p. 858.
Jayakodi and Paul Silva.
379
nullify assent as it is not a mistake as to the subject-matter of the contract,but as to a collateral fact, onj which only one’s motive in contracting isbased.
In his reply (D 9), dated September 26, 1938, Mr. Harrison wrote“ Before we give our final release to the Estate, we shall be glad if youwill formally confirm that, apart from the shares in question, there are noother assets belonging to the Estate ”.
This letter seems to indicate that at that time the only shares whichthe plaintiff held as security were those referred to by the defendant inD 8. In the course of his evidence Mr. Harrison said that some of theshares had been sold but did not give particulars of the sales.
.On September 28, 1938, the defendant wrote D 10 in reply statingthat the question whether the Estate had other assets does not arise.
On the same date, in D 11, Mr. Harrison wrote “As, however, it nowappears that there are further assets, our agreement to the proposal iswithdrawn ”.
The resulting position is- this : —Mr. Harrison informed the defendantby D 7 that his- Head Office was agreeable to accept “ the shares standingin the name of the deceased” in full satisfaction of the.plaintiff’s claim.The defendant treated D 7 as an offer and thought that the languageused by Mr. Harrison might catch up the shares which had not beenpledged to the plaintiff. To clear up the matter he wrote D 8 on receiptof which Mr. Harrison withdrew His offer.
The correspondence does not show that- there was an acceptance by theone party of the proposal made by the other and. it cannot therefore besaid that there was a binding contract between the parties!
I would accordingly set aside the judgment of the District Judge and!direct that decree be entered for the plaintiff as prayed for in paragraphs.
1 and 2 of the prayer of the petition of appeal.
de Kretser J.— I agree.
. Appeal allowed..