HOWARD C.J.—Rodrigo and Bbrahitn.
1943Present: Howard C.J. and Wijeyewardene J.
RODRIGO et al. Appellants, and EBRAH3M, Respondent.
182—D. C. Colombo, 9,517.
Novation—Agreement to substitute one debtor for another—Promise to pay debtof another—New consideration—Prevention of Frauds Ordinance(Cap. 57), s. 18.
Where, by agreement, one debtor is substituted for another with theconsent of the creditor there is a novation of the debt and such anagreement falls outside the scope of section 18 of the Prevention of FraudsOrdinance.
Where the promise to pay the debt of another is based upon, a newconsideration such an undertaking is regarded as an original promise andis not within the section.
Fernando v. Abeyegoonesekera (34-N. L. R. 160) followed.
PPEAL from a judgment of the District Judge of Colombo.
H. V. Perera, K.C. (with him C. Thiagalingam and C. Ranganathan),for the defendants, appellants 2a and 2b.
N. E. Weerasooria, K.C. (with him E. G. Wickremanayake), for theplaintiff, respondent.
Cur. adv. vult.
October 5, 1943. Howard C.J.—
This is an appeal from a decision of the District Judge of Colombo,entering judgment for the plaintiff as claimed for the sum of Rs. 2,569.88and costs. The plaintiff maintained that this sum became due from thedefendants in the following circumstances. The plaintiff had contractedwith the first defendant to supply labour for the transport of merchandisedischarged from steamers calling at Colombo under the agency of Messrs.Narottam & Pereira, Ltd. On June 27, 1938, there was due under
514HOWARD C.J.—Rodrigo and Ebrahim.
this contract to the plaintiff a sum of Rs. 2,769.88. On August 5,1938, the defendants entered into a deed of partnership to carryon the business of the first defendant under the firm name of Muniswamy& Company. On this deed the appellants dbntr^cted with the firstdefendant to pay in full all debts that had been incurred by the firstdefendant up to the date of the said deed. It was also alleged by theplaintiff that, immediately after the execution of the said deed, theappellants requested the plaintiff to ca~ry on the work of loading andtransporting merchandise from the said steamers and stating that theywould pay the amount due from the first defendant. The plaintiffstates that he accepted this undertaking to pay the said sum and con-tinued the work of loading and transporting merchandise. It wasfurthe- averred by the plaintiff that, in pursuance of this agreementa sum of Rs. 200 was paid by the appellants to the plaintiffs in partpayment. -In finding in favour of the plaintiff the learned Judge held—
that the appellants undertook to pay the debt due by the first
defendant to the plaintiff ;
that the plaintiff agreed to accept fr^n the appellants payment
of the sum due to him ;
that there was d novation of the debt due by the first defendant
to plaintiff by reason of the plaintiff agreeing to recover the debtf-om the appellants ;
(c£) that the first defendant is released from liability, but the debthas been taken over by tile .firm of Muniswamy & Co., consistingof the three defendants.
Counsel for the. appellants has challenged the decision of the learnedJudge on two grounds as follows: — (a) That it has not been establishedthat the. appellants undertook to pay the debt of the first defendant tothe plaintiff (b) That the first defendant was not released from his obli-gation to pay the plaintiff and hence there was no novation of his debt.In these circumstances the undertaking by the appellants, even if given,was an agreement for charging them with the debt of the first defendant.Not being in writing, it was, by virtue of section 18 of the Prevention ofFrauds Ordinance (Cap. 57) of no avail in law. I am of opinion thatthere is no substance in (a). It was a pure question of fact and it isimpossible to say that in arriving at the, conclusion he did, the learnedJudge has misdirected himself.
The main; argument of Mr. Perera has been concentrated on (b). Sec-tion 18 of the Prevention of Frauds Ordinance is worded as follows : —
“ No promise, contract, bargain, or agreement, unless it be in writing
and Signed by the party making the same, or by some person thereto
lawfully authorised by him or her, shall be of force or avail in law for
any of the following purposes : —
for charging any person with the debt, default, or miscarriage of
for pledging movable property, unless the same shall have been
actually delivered to the person to whom it is alleged to havebeen pledged;
HOWARD C-I.—Rodrigo and Ebrohim.
for establishing a partnership where the capital exceeds onethousand rupees :
Provided that this shall not be construed to prevent thirdparties from suing partners, or persons acting as such, andoffering in evidence circumstances to prove a partnershipexisting between such persons, or to exclude parol testimonyconcerning transactions by or the settlement of any accountbetween partners.”
The first point that arises for consideration is whether the agreementmade by the appellants charged them with the debt of the first defendantto the plaintiff. If it cannot be regarded in law as so doing, then there isno necessity to determine whether such agreement is in writing and signedby the appellants. Mr. Weerasooria has referred us to Evans translationof Pothier’s Law of Obligations. “ Novation ” is dealt with in Vol. I.,Part ILL, chapter 2, p. 380 et seq. and the various kinds of novations areparticularised. The second kind, according to the author, is that whichtakes place by the intervention of a new debtor, where another person be-comes a debtor in my stead, and is accepted by the creditor, who thereupondischarges me from it. The person thus' rendering himself debtor foranother, who is in consequence discharged, is called expromissor and thiskind of novation is called expromissio. The expromissor differs entirelyfrom a surety who is sometimes called in law adpromissor. For a personby becoming a surety does not discharge, but accedes to, the obligationof his principal, and becomes jointly indebted with him. At page 385the author states that in order to constitute a novation, the consent ofthe creditor is requisite. The question as to whether an agreementwhich constituted a novation of the second kind referred to by Pothierwas considered in Fernando v. Abeyegoonesekera In this case thedefendant had given the plaintiffs a verbal promise to pay certain debtsof his father, deceased, owing to the plaintiffs, and the question fordecision was, whether the promise was enforceable wanting anythingfrom the defendant in writing. In the judgment of Macdonell C.J.I find the following passage :
“It seems to me, however, that if the evidence of the defendant-appellant is rightly apprehended, what he did was not to guarantee thedebt of his deceased father but to assume that debt himself ; it was acase of novation not of guarantee, and if a novation, no writing wasrequired. ‘ If there be an existing debt for which a third party isliable to the promisee, and if the promisor undertakes to be answerablefor it, still there is no guarantee if the terms of the arrangement aresuch as to effect an extinguishment of the original liability:If A says
to X, give M a receipt in full'for his debt to you, and I will pay theamount, this promise does not fall within the statute, for there is nosuretyship, but a substitution of one debtor for another ’—Anson onContract, 12th ed. page 77, citing Goodman v. Chase. Here it certainlyseems as if there had been a substitution of one debtor for another,of the defendant-appellant for the estate of his deceased father. If so,it is a case, of novation and not of guarantee, and it has never been
» 34 N. L. R.160.
HOWARD C.J.—Rodrigo and Ebrahim.
suggested that the Statute, Ordinance No. 7 of 1840, enacted that anovation to be valid must be in writing. It can be by parol merelyand still be perfectly valid.”
Applying the reasoning formulated by Macdonell C.J. to this case,it seems to me that what the appellants did was not to guarantee the debt ofthe first defendant but to assume it themselves. There was therefore asubstitution of one debtor for another. The fact that the plaintiffcontinued the work of unloading on the undertaking given by theappellants, that he has accepted Rs. 200 from the appellants in partpayment of the debt due by the first defendant and that he has sued theappellants, indicates that this was a case of novation vide Kader Saibu v.Teverayan The joinder of the first defendant as a party does not,in my opinion, affect the legal position of the appellants. Even if thereis no evidence, express or implied, to suggest the release of the firstdefendant, there is still the substitution of one debtor for another, namelythe firm of Muniswamy- & Co. for the first defendant. It was a case ofnovation, not of guarantee. Hence the agreement can be parol and stillbe perfectly valid.
A reference to the 18th Edition of Anson on Contract, pp. 64-66, revealsthe fact that English law formulates the same principles. A promise ofguarantee or suretyship is always, reducible to the form : “ Deal with X,and if he does not pay you, I will”. A promise of guarantee must,moreover, be distinguished from one of indemnity. In this connectionanother illustration that appears on page 65 is very much in point:If two come to a shop and one buys, and the other, to gain him credit,promises the seller. “ If he does not pay you, I will ”, this is a collateralundertaking and void without writing by the Statute of Frauds. But ifhe says, “ Let him have -the goods, I will be your paymaster ” or “ I willsee you paid ”, this is an undertaking. as for himself, and he shall be. intended to be the very' buyer and the other to act as but his servant.It has not been suggested in this case that the plaintiff supplied thelabour for loading and transporting merchandise on a collateral under-taking by the appellants to pay the previous amount due only if the firstdefendant failed to do so. The undertaking given was for the appellantsthemselves.
The facts in the case of Ex parte Lane in re Lendon ( (1846) 10 Jurist,382) bear a striking similarity to those in the present case. The. headnoteis as follows.: —
“ A being a creditor of B, B and C enter into Partnership, and,by verbal agreement among the Parties, A is treated as the creditor ofB and C. Such an agreement is not impeached or affected by theStatute ( of Frauds. On the bankruptcy of B and C, A’s debt isproveable against their joint Estate.”
The following paragraph from the judgment is very much in point : —“I am of opinion; upon the evidence, that the impression ofMiss Lane, the creditor, and of Mr. Lendon the elder, the debtor,was of that description, with reference to the debt that was due to herfrom him in the year 1838, when he admitted his son into partnership.
'.4N. i; R. 165.
Navaratne and Jayatunge.
I think it very probable, treating the debt in the way that I hav®mentioned, that all parties considered the. trade as changed by theadmission of the son into that business, and that it was consideredthat the trade was indebted, and is still indebted, to Miss Lane for themoney. I am of opinion that that understanding was communicatedto Miss Lane by the uncle and cousin, or one of them with the assentof both, and that Miss Lane distinctly acceded to it. I am of opinion,that, from thenceforth, all transactions between them proceeded uponthat basis. ”
There is no doubt that in the present case that the debt due by the firstdefendant to the plaintiff was after the partnership agreement wasexecuted and regarded by all parties as one due, if-not by the appellantsonly, by the partnership. Hence there was a novation.
The promise by the appellants to pay the debt due by the firstdefendant was, moreover, made upon the condition that the plaintiffshould carry on with the w,ork of loading and transporting merchandise.It was, therefore, founded upon a new consideration and was not merelyfor the debt of the first defendant. “ Such an undertaking, though ineffect it be to answer for another person, is considered as an originalpromise and not within the Statute ”, vide 7th Edition of Leake onContracts, p. 165.
For the reasons I have given the appeal is dismissed with costs.
Wijeyewardene J.—I agree.