Principles

·  NEGOTIABLE INSTRUMENTS — Defences to action on — Failure of consideration or fraud or satisfaction.

As a defence to an action on a note a Court will only accept total failure of consideration, fraud or satisfaction. Other defences which could form the basis of a separate suit, such as defect in goods given in consideration of executing the note, will not be accepted.

Judgment

Advocates: Kamal Shanteir and

MA. Mahgoub …………………………for plaintiff

Mahdi Sherif………………………….for defendant

M. Y. Mudawi, P.J., June 6, 1964: On March 19, 1964 advocate Shanteir instituted these proceedings on behalf of plaintiffs, the Building Materials Company Ltd. against defendants, Saddik Abu Agla and Abu Agla Khogali and Sons, merchants of Wad Medani, for the recovery of £S.22,005.000.m/ms. being value of promissory notes. First defendant is the executor of the notes whilst second defendant is a guarantor. Defendants admitted execution of the notes and the guarantee. They also admitted non-payment of the amount claimed. They further put forward the defence of total failure of consideration But in spite of that, they told the Court that they accepted the goods on March 2, 1963 though they later discovered that the goods were not of merchantable quality. Defendants counterclaimed for the part of the price they paid.

On the day fixed for the issues advocate Mahgoub appeared in Court and announced that he took over from advocate Santeir and proceeded to explain his reply to the defence. He applied to the Court to enter Judgment for plaintiff on the ground that what defendants’ counsel is alleging is not total failure of consideration as the goods were accepted by defendants. Advocate Mahgoub further delved into some. arguments which are in the opinion of this Court as unessential as they are beside the point and there is no reason why they should be repeated in this judgment.

This Court has now and again reiterated the ‘view that in an action based on promissory notes the defences generally accepted by the Court are those of total failure of consideration or of fraud or of satisfaction. Any other defence that could be the subject matter of an independent suit will not be accepted and the person who raises such defence is almost always ad to seek remedy by instituting separate proceedings. This practice is evolved by the Court in order to prevent delay and to give transactions through promissory notes and bills of exchange the sense of urgency they are meant to have. In the case of Otto Schroder v. Zoheir Enterprises Ltd.,

HC-CS-541-1962. this Court made the following pronouncement:

“According to the practice of this Court the defences we entertain in bills of exchange are fraud and total failure  of consideration. Any plea in the nature of a counterclaim as the one before us cannot be entertained by the Court for the only consequence of it would be delay and nothing more

In my judgment the real nature of defendants’ plea is far from a plea of total failure of consideration. defendant admitted that plaintiffs gave defendants goods in consideration of executing the notes, which goods were accepted by defendants. These goods may be defective: they may be unfit for the purpose for which they were bought; they may be of unmerchantable quality. But this does not deprive them of being consideration for the notes. The defect is only partial failure which could be remedied by separate legal proceedings This Court is not anxious to involve itself in this suit in the lengthy process of investigating the defect complained of.

In view of this, judgment is entered in favour of plaintiffs. The counterclaim and defence of defendants are struck off. Defendants can seek their remedy in a separate action if they so desire.

Editors’ Note: In 0tto Schroder v. Zoheir Enterprises Ltd., HC-CS 541-1962, (MY. Mudawi, P.J.), cited above, the Court stated that defendants pleaded that “part of the goods received by defendant were damaged. Hence there is no total failure of consideration.”