Conflict of Laws-Limitation of actions-Lex loci contractus versus lex fori as
the applicable law

Contract-Debt-Promissory note-Right of creditor to sue either on the note
or the original debt

* Court: Dun C.J., Fleming and Williamson JJ.

Limitation oj Actions-Debt-Promissory note given as evidence oj the debt
Negotiable Instrument-Action against maker-Right to sue on instrument or
original debt

Negotiable Instrument=-Promissory Note-Evidence oj the underlying debt

Plaintiff and defendant were both resident in Cairo in 1906. In No-
vember 1906 respondent lent to the defendant £E.400 and took from him
a promissory note 'Payable on November 15, 1907. The note was not paid
on the date mentioned and was still unpaid in 1910 when defendant left
Cairo and took up residence in' Khartoum, In 1918 the plaintiff, through
an agent in Khartoum, tried to negotiate a settlement with the defendant
and obtain payment. Only two payments of £E.6 and £E.10 were ob-
tained. In 1920 the plaintiff instituted this action.

The defendant objected that the action was barred by section 99 of
the Bills of Exchange Ordinance 1917 as more than 5 years have elapsed
since the promissory note became due. He also alleged that the two pay-
ments he made were made in view of the negotiations and not under the
promissory note, and further that an agreement had been concluded be-
tween him and plaintiff's agent that the debt should be settled by' payment
of a lesser sum. The plaintiff answered that she was not suing on the note,
but on the debt of which the note was evidence, and that no agreement
was concluded between the defendant and .her agent. The High Court judge
gave judgment for plaintiff and defendant appealed.

Held: (i) Since the negotiable instrument in this case was not negoti-
ated, except to an agent for collection who returned it, the creditor could
sue either on the negotiable instrument or on the consideration for it, viz.,
the debt.

(ii) The five year provision of section 99 of the Bills of Exchange Or-
-dinance 1916 does not apply when the creditor is suing on the debt.

(iii) The defendant failed to prove that any agreement to pay a lesser
amount was concluded between him and the plaintiff and must, therefore,
pay the full amount.

Bills of Exchange Ordinance 1917, s. 99.

Appeal

Advocates: Mr. Francoudis ... For appellant; Mr. Christodou-
lides ... For respondent

November Jft~ 1921. R. H. 'Dun C.J.: I am of opinion that this
appeal must be dismissed.

The facts are shortly as follows: The plaintiff and defendant were
both resident in Cairo in the year 1906 and the defendant was a
trader 'in that city: there is no evidence whether either or both were
Egyptian local subjects or foreigners nor whether the plaintiff was a
trader, though, being a woman, it is probable she was not.

The plaintiff lent the defendant £E.400 on. November 15, J.::IUO,
and the defendant gave the plaintiff a promissory note payable on No-
vember 15, 1907, to the plaintiff or her order.

In the year 1910 the defendant came to live ~ Khartoum not hay-
.ing paid ~e debt. In 1918 the. pla~tiff got Mr. Krikor Krikorian to try I
and obtain payment. He obtamed m that year two payments of £E.6
and £E.I0. There were negotiations for a settlement at that time
and it is alleged that these payments were made in view of the negotia-
tions and not in respect of the bill.

In'1920 the plaintiff instituted this action. The first defence is
based on Sec. 99¹ of the Bills of Exchange Ordinance 1917 which bars
an action on a promissory note when 5 years have elapsed since it, be- .
came due. The plaintiff's answer is that she is not suing on the note,
but on the debt of which the note is at once evidence and security.

On consideration of the English cases I am of opinion that this is
a- good answer. The giving ofa bill of exchange, cheque or promissory
note is conditional payment of a debt and operates as an agreement to
give credit until the negotiable instruinent becomes due, but it does not
put an end to the liability for which it is given unless it is accepted as
doing so or there are circumstances to show, that i~ was intended to do
so. If the negotiable instrument is not negotiated and is not paid when
it is due, the creditor may sue either on the negotiable instrument or on
the consideration for it.

When the instrument is negotiated and is in the hands of a third
party different circumstances arise. In this case the note has not been
negotiated except to an agent for collection and has come back into th~
hands of the plaintiff and I think she can sue either on the debt, or the
note. I see from the way the issues are framed that the action was 'not
based solely on the note but also on the debt.

I, therefore, think that section 99 of thb Bills of Exchange Ordi-
nance 1917 is not- a good defence to the action.

The further question was raised whether the 'plaintiff- was not en-
~tled to the benefit of the English law which Provides that the de-
fendant in an action on a negotiable instrument pleading the 5 'ears

1 Section 99 (1) of the Bills of Exchange Ordinance 19n reads.

"No action on a bill of exchange, cheque OJ; promissory note shall be
maintained against any party thereto after the expiration of five yean .from
the time when the cause of action first accrued to the then holder alrainst
such party."

prescription provided in the Egyptian codes can be required to give a
oath that he is no Ion get: indebted.

It is clear that the lex loci contractus prevails as to the interpreta-
tion of the contract, but it is not at all clear that it prevails over the lex
fori as to questions of procedure and prescription. I am, therefore, of
opinion that it would not be safe to base the judgment in this case on
the rules of prescription in Egypt.

The only other point I need notice is the effect of the negotiations
which took place in 1918. It is obvious that if there was a concluded
agreement that the debt should be settled by the payment of £E.216
or £E.60 the old debt would be extinguished, but the judge of the
High Court evidently was of opinion that such agreement had not been
proved as he gave judgment for the full amount claimed and on
reading the evidence, I think, he was right.

M. Fleming J.: The defendant in this case admits that in Novem-
ber 1906 he received from plaintiff £E.400, that he has paid £E.144
as interest on that' sum, and that of the principal sum no more than
£E.16 has been repaid, leaving £E.384 of the principal sum still un-
paid. Defendant, however, asks the court to say that because he gave
plaintiff a promissory note for the money he received and the promis-
sory note is more than 5 years old he is relieved of any obligation to
pay the money back. That seems to me to be making use of the Bills
of Exchange Ordinance for a purpose for which it was never intended,
namely to deprive people of rights which they possess apart from the
existence of any bill or note at all.

Plaintiff is not suing defendant on a promissory note, she is suing
on an admitted loan of which the note was at first the, best possible evi-
dence, but of which no evidence is necessary. The existence of a debt
is admitted in defendant's letter of April 17, 1910, it is impliedly ad-
mitted by the payments of £E.6 and £E.10 in 1918, and it is ad-
mitted by the defendant on oath when he acknowledges that of the
original sum of £E.400 only £E.16 has been repaid. In these cir-

<, cumstances it cannot be maintained that, merely because there was a
promissory note in the case, the obligation is extinguished. The utmost
the defendant can say is that the lapse of five years shifts the burden of
. proof from him to the plaintiff. The note is no longer a document of
debt, and the obligation must be proved by other means than the mere
production of the note; but the existence of the note, so far from dero-
gating from any other modes of proof employed, ought rather to