Principles

·  Civil Procedure—Account—Moneylending transaction—Civil Justice Ordinance, 1929, s..6 —Suit cannot be brought by borrower

·  Negotiable Instruments—Parol evidence—Guarantor-signatory of note allowed to prove his role as guarantor, not principal

·  Evidence,—Parol evidence—Negotiable instruments—Guarantor-signatory of note allowed to prove his role as guarantor, not principal[2]

An action for account under Civil Justice Ordinance, 1929, S. 6, cannot be brought by a borrower.

Although plaintiff-respondent signed the note in question, evidence taken at trial is allowed to prove that he did so as a guarantor and not as principal.

Although plaintiff-respondent signed the note in question, evidence taken at trial is allowed to prove that he did so as a guarantor and not as principal.

Judgment

 Advocates:

Abdulla El Hassan ……………for defendant-appellant

Ahmed Amin …………………. for plaintiff-respondent

Babiker Awadalla J. May 27, 1963:—The parties to this interesting case are both merchants of El Fasher but it appears that the business of appellant (defendant in the suit) is primarily, or at any rate partly, one of moneylending and that the relationship between the parties culminating in these proceedings is traceable to that aspect of appellant’s business.

The gist of respondent’s case in the court below is that between 1957 and 1960 he had borrowed from appellant various sums which, together with interest thereon at 60 per cent. per annum, were secured by promissory notes. The total amount of the interest charged was £S.15,000.000 m/ms. He prayed for an account under Civil Justice Ordinance, s. 6, and for repayment of any amount found by the court to be in excess of the reasonable rate.

Appellant’s advocate raised a preliminary objection as to the applicability of section 6 to the facts of this case, contending that the section referred to only applied “where a suit is brought for the recovery of money lent or for the enforcement of any agreement. etc” Alternatively he pleaded that respondent was not the original debtor in the dealings referred to but was only a guarantor of the original debtor, Adam Balomai.

   The court below dealt first with the preliminary objection of law on the ground that if successful it would dispose of the whole issue.

 Advocate for respondent made a lengthy reply to the objection and the court adopted his point of view, holding that section 6 is in conformity with English law, under which an action lies at the instance of the borrower.

  The Court then proceeded with the hearing in order to dispose of the rest of the issues. It came to the conclusion that respondent was not guarantor but an original debtor because it was he who signed the promissory notes. It also decided that the interest charged was excessive and passed a decree in favour of respondent for a sum of £S.12,989.93 m/ms (exclusive of costs)), being amount paid by respondent to appellant in excess of the reasonable rate which ought to have been charged.

  Advocate Abdulla El Hassan, who was representing appellant in the court below, is now challenging the decision that appellant’s role in the matter was otherwise than that of mere guarantor. It is strange that although the highly important point as to the applicability of section 6 was raised, by advocate Abdulla In the Initial stage of the suit, yet he failed to put it fourth as a ground of appeal. Civil Justice Ordinance, 1929, s. 6, starts with the words: “Where a suit is brought for the recovery of money lent or for the enforcement of any agreement or security made or taken in respect of money lent.” This means that the bringing of a suit by the moneylender for one of those two purposes is a condition precedent to the exercise by the court of its powers in that behalf. The court below was certainly wrong when it decided that this section can be invoked by the borrower in the circumstances. It is true that in England the situation is different because the statutory provisions analogous to our section 6 give the courts power to exercise the same powers “At the instance of the borrower or surety or other person liable.” Cf. section 1 (2) of the Moneylenders Act, 1900. English precedents on the point are therefore quite misleading. Nor can a court interpret Civil Justice Ordinance, 1929 ss. 9 and 226, in such a manner as was done in this case in order to assume powers which the Civil Justice Ordinance obviously meant to give only in well-defined cases and subject to certain specified conditions.

   I now come to the second point which was dealt with by the court below in the final judgment, whether the relation between appellant and respondent was that of debtor and creditor or simply that of guarantor.

   On the evidence as it stands, there is little doubt that the primary contract in this affair was the one between appellant on the one hand and Adam Balomai (P.W. 9) and Mohamed All El Siddig (P.W. 2) on the other. The purpose of that primary contract was the financing of P.W.9 and his partner, P.W. 2, on their Government contract for building a school. Respondent’s role was clearly an accessory one his liability being only conditional on the failure of P.W. 9 and his partner to honour their liabilities under the main agreement.

 His Honour the Province Judge found that there was no contract of guarantee but that respondent was primarily liable. In my view this finding was obviously against the weight of evidence. No-one, including respondent, made any suggestion that P.W. 2 and P.W. 9 were not at all liable. All that everyone was asserting, including respondent himself, is that appellant made it clear that in case of default he would not proceed by action against the original debtors and that condition was accepted by respondent. I do not think that anyone reading these proceedings would be able to construe the agreement of the parties in a manner absolving P.W. 2 and P.W. 9 completely from any liability. His Honour the Province Judge seems to me to have been much swayed by the fact that the promissory notes were signed by respondent alone. By so doing, he in my view failed to give effect to what may fairly be inferred from the evidence to have been the real intention and understanding of all the parties concerned. It is true that the promissory notes as such entitle appellant to proceed against respondent alone, but that is not inconsistent with a contract of guarantee. In this respect, the law is stated by 2 Chitty, Contracts 441 (22nd ed., 1961), as follows: “When the principal debtor has made default the creditor can - at once - . . . sue the surety before proceeding against the principal.”

 I am sorry I am unable to understand the reference by His Honour the Province Judge to Bills of Exchange Ordinance, s. 22, under which His Honour the Province Judge considers respondent alone to be liable. No one is suggesting that if P.W. 2 P.W. 9 to be proceeded against in the courts they would be proceeded against on the strength of the promissory notes. It is respondent alone who would have been liable under those notes, and the liability of the borrowers is quite separate from the liability of respondent under the promissory not

 For the above reasons, I am of opinion that respondent’s role in this transaction was that of guarantor only, so that even assuming, for the sake of argument that section 6 can be invoked at the instance of a borrower under a moneylending transaction, a guarantor does not satisfy that description This is pure common sense, for a guarantor’s liability under the contract of guarantee may never arise. He may, however be able to invoke section 6 if and when he is sued by the creditor, but then he would be invoking that section, not in his capacity as guarantor, but because he is subrogated to the borrower’s rights and would therefore be entitled to avail himself of all the defences at the disposal of the debtor.

 For these reasons, this appeal Is allowed and the decree of His Honour the Province Judge is hereby reversed.

There will be no order as to cost.  The learned advocate for app failed to render to this court the necessary help when he neglected to raise the main point as to the non-applicability of section 6 to the facts of this case.

 M. A. Abu Rannat C.J. May 27, 1963: I concur.

   M. A. Hassib J. May 27, 1963:—I concur.