Civil Procedure-Defences-Duty of court to raise all available defences in
certain circumstances when the legislation is foreign to the business pra»
tices of the parties

Negotiable Instrument-Promissory Note-Holder in due course-Definition of
promissory note under Bills of Exchange Ordinance 1917

The appellants signed a document, described as a -.mnbiala, whereby
they promised to pay a certain sum to a payee or order. The payee dis-
counted the note at respondent bank. The appellants, in the meantime,
allegedly paid part of the sum to the original payee, who subsequently be-
came bankrupt. The bank then sued the appellants and got a decree, in the
absence of appellants. The Court of Appeal sent the case back for re-trial,
holding that further investigation was necessary to see if the bank was
really a holder 'in due course and whether the document was really a prom-
issory note. The Court of Appeal held this was necessary even though
these issues were not raised below because where the legislature is foreign
to the methods of the parties and where the result will require a party
to pay a debt twice, the court had a duty to see that all available de-
fences were raised.

Bills of Exchange Ordinance 1917, ss. 8 (a), 86 and 92.

• Court: Bell C.J., Wedd A-G., and Hamilton-Grierson J.

Appeal

April 26, 1928. Bell C.J.: The facts of this case are as follows:

On July 7, 1926 the appellants signed a document, described as
a kimbiala, whereby they undertook to pay Sheikh Abdel Rahman
Mohammed Hamid, or to his order, £E.32. Payment was to be on
January 20, 1927: Certain terms relating to payment of interest, if
payment was not made on the due date, are contained in the document.
On the back of the document there is an indorsement, signed by the
payee, "Pay to the order of Barclays Bank . . . value received. in
cash." Under this there is a note, signed by the payee; and dated
November 23, 1926 to the effect, "I am responsible for the payment
of this kimbiala:" It is assumed that the document came into the
hands of the bank on November 23, 1926. On December 3, 1926
the appellants, so they say, paid £E.22.100 m/ms to Abdel Rahman
Mohammed Hamid. Investigation into the truth of this sta:t~ment has
not been made, but the appellants have produced a receipt for the
payment, purporting to be signed by Abdel Rahman Moham Hamid.                                                                                            

On January 19, 1927 Abdel Rahman Hamid petitioned for ad-
judication in bankruptcy. On January 20, 1927 payment fell due.
The bank applied to the Medani Court for protest for non-payment
against the appellants. ' The - instrument of protest stated that these
persons could not be found "because they are at Tendelti as the dis-
counter states."

In the bankruptcy of Abdel Rahman Mohammed Hamid the
bank claimed for £E.687.627 m/ms in respect of three civil suits and
a promissory note for £E.32, the latter of which is the document
under consideration now: On May 12, 1927 the claim for £13.687.627
m/ms was admitted. Although there appear to be funds in the hands
of the court, no dividend has been paid in the bankruptcy.

On December 10, -1927 the bank sued the appellants in the: Wad
Me~ani Court._~{ £E.32, and interest at 8% from ~e date _of maturity
until payme (. The advocate for the bank explamed that the bank
had not been able to find the appellants until then, overlooking
apparently the fact that the instrument of protest stated that they
wen~-;fi Tendelti. On January 9, 1928 judgment was given in favour

. terest. On February 1, 1928 one of the appellants, Mohammed
ed Hamid, appeared before .the court, and asked for the case to

be re-opened. His defence was that he had paid part of the amount
due before the date of maturity. On this the Judge said, "This dis-
closes no defence to the claim of the holder in due \course to whom
the promissory note had been indorsed before the \ date .. of matu-
rity .... Application to re-open refused." The appellants thereupon
appealed.

Assuming that the document is one to which the Bills of Exchange
Ordinance 1917 applies, and that the bank is a holder in due' course,
the law is clearly on the side of the bank, and the appellants will
have to pay, hard though it may seem that they should have to pay
twice in respect of the same debt. But the question remains; is the
bank a holder in due course? It is true that the holder is presumed
to be a holder in due course, but the presumption may be rebutted.
It is part of a banker's business' to take bills for collection, or by
way ofsecurity, It is a question of fact in each case whether a banker,
taking a customer's bill, takes it for collection, or as security, or
whether he discounts it, that is, takes it definitely and at o~ce as
transferee for value. Endorsement by a customer is not conclusive that
the bank takes as transferee for value; the endorsement may have been
~y way of giving additional security. N olj is the entry of the amount
of the bill less discount in the bank's books to the credit of the ens-
tomer conclusive. Whether the customer parts with the entire prop-
erty depends on the nature of the dealings between him and the banker.                              

There is no evidence before us as to the dealings between the
indorsee and the bank. It is clear that he owed the bank a large
sum of money. It may be that the appellantswere well-known to the-
bank, and that the bank was accustomed to. discount bills upon which
the appellants' names appeared. It may be that the bank, in view of
its large claim against the indorsee, which he was unable to meet,
was willing to take this or any other kimbiala by way of security for
what it was worth. The question is a question of fact, on which the
Court of Appeal cannot express an opinion in the lack of evidence.

A further p#i has bee'n raised. in the Court of Appeal, and
that is whetherJhe kimbiala is a promissory note ~thin the definition
of section 8 . '·of the Bills of Exchange Ordinance 1917; whether the
words in e document relating to interest upon failure to pay at the
due rat :J:leprive the document of its essential feature of an uncon-
ditio promise to pay on, demand or at a fixed or determinab

future time a sum certain in money. If the document is not a pramis-.
sory note the bank is in no better position than the indorsee.

No doubt the appellants ought to have raised these defences
themselves in more detail than they did when they said that they
had paid the money, and did not think it fair that they should h~
to pay it again. Now the appellants call themselves merchants, and,
if they use recognised mercantile documents in their' transactions,
they must take the consequences of the law relating to these docu-
ments, even if it involves their paying the debt twice over. On. the
other hand the Bills of Exchange Ordinance 1917, on which the

bank's claim is founded, is a piece of legislation foreign to the methods
of traders such as the appellants, and of which a large part is probably' .
quite unintelligible to them if they. were to read it.

Therefore, as the result of this case depends whether. the appel-
lants shall pay their debt twice, once to their original creditor, and once
to the bank, or whether the bank shall only recover a dividend from
the assets of the person who was in debt to' them, or sh~ also

. recover a part from a stranger, I am of opinion that the court ought
to have seen that every defence available to the appellants was con-
sidered.

For these reasons I think that the court was wrong to refuse to
re-open' the case when the appellants applied, and that the case must
be sent back with a direction to the court to re-open the case now,
so far as £E.22.100 m/rns of the amount is concerned, and to con-
sider' whether the bank was a holder in due course, or was in some
other position in which defences available to the appellants as against
the indorsee would also be available to them as 'against the bank;
and also whether the document in question in the case is a promissory
note within the meaning of the Bills of Exchange Ordinance 1917.,

The case was re-heard at Wad Medani.

October 28', 1928. Cutter P.J.: I have been directed by the
Court of Appeal to re-hear the case so far as £E.22.100 m/ms of the
amount is concerned, and to consider the two following points:

1. Whether the bank was a holder in due course or not; and
2. Whether the document upon which this case is brought is
   a promissory note within the meaning of the Bills of Exchange
   'Ordinance 1917

Neither of these' points were raised by thf defendants to 'the
action, and the document upon which the plaintiffs are suing is on the
face of it a valid document. I am not clear how far a court is
justified in raising specific lines of defence of its own motion. The
only case I can remember bearing on the point was a case in which a
High Court Judge 'set aside the decree of.a District Judge,' and ordered
a rehearing, on the ground that the court had no right to consider
the defence of prescription, as this defence had not been specifically
raised by the defendant, and this, moreover in a case where the
defendant's defence had been obviously prejudiced by the plaintiff's
unexplained delay.

As to the first point, the document is endorsed by the payee,
"pay to the order of Barclays Bank, value received in cash.", It has
never been suggested by the indorser;' or by the' defendan~ that this
is not true. When I suggested this line of defence' to the 'defendants,
they refused to have anything to do with it whatsoever. The manager
of the. bank stated on oath' that they took the bill in the ordinary
course of banking business. as a bill dis.counted, and they credited the
indorser's current account with the amount. I agree that the -bank .
manager's explanation of how the special indorsement came to be.
addecf is not very intelligible, but it is admitted that the . indorsement
was added at the request of the bank manager, and it is also admitted'
that the bank had no knowledge whatever of the payments' by de-fendants. It is inconceivable that the bank, at this time when they

had first begun to have suspicions of Abdel Rahman's solvency, would'
have done anything to release the makers of the note from Iiability.
Under the circumstances I decide that the bank was' a holder in due course.

As regards point 2, in my opinion a stipulation for payment of in-
terest at a certain rate in default of payment of the principal at the
time specified does not vary the nature of the document. There is -
still an unconditional promise in writing, made by. one person to
ano~er,. si~ed by the maker, engaging ~ payat a fixed, time a sum
certain m money to the order of a specified person. The effect of

 this clause is, in my opinion, merely to fix the rate of interest which

woulQ/become' payable under the Ordinance. on protest for non-
p~'ent. ~ven supposing it. were a clause. which contemplat~d

yment of interest on the sum due at matunty, I am doubtful, if suCh
, clause would alter the nature of the document (see sections 92 and

(a) of the Bills of Exchange Ordinance 1917).