Hirani v Kassam (Civil Appeal No. 11 of 1952) [1952] EACA 131 (1 January 1952)

## COURT OF APPEAL FOR EASTERN AFRICA

Before SIR BARCLAY NIHILL (President), SIR NEWNHAM WORLEY (Vice-President) and MAYERS, J. (Kenya)

## ISMAIL SUNDERJI HIRANI, Appellant (Original Applicant)

## NOORALI ESMAIL KASSAM, Respondent (Original Respondent)

Civil Appeal No. 11 of 1952.

(Appeal from decision of H. M. Supreme Court of Kenya—Windham, J.) Procedure.

The respondent gave appellant a promissory note for Sh. 9,350 payable on demand. This was made over to one B. T. Raval, who sued respondent thereon in August, 1949. Judgment was entered in terms of a compromise which provided for judgment for Sh. 7,000 with interest at Court rates and for payment of the decretal amount by instalments of Sh. 50 monthly, the full amount to be due in default of any instalment. The respondent paid 18 instalments and the balance was assigned to the appellant and the assignment filed in Court. The respondent continued to pay Sh. 50 monthly but in May, 1951, the appellant demanded payment by monthly instalments of Sh. 250 and on refusal filed a motion asking for leave to execute against the judgment debtor's property so as to permit bankruptcy proceedings or a substantial increase in instalments and a declaration that the assignee was entitled to enforce payment of the whole amount in view of alleged default in instalments.

The Kenya trial Judge dismissed the motion with costs and the applicant appealed.

Held (1-8-52).—(i) Where a compromise is recorded under Order 24, rule 6, the decree is passed upon a new contract between the parties superseding the original cause of action.

(ii) The compromise of a disputed claim made bona fide is a good consideration<br>and the Court cannot interfere with it in circumstances which would afford good ground for varying or rescinding a contract between the parties.

(iii) No ground had been shown to justify any Court in interfering between the parties.

Cases cited: Wentworth v. Bullen, (1829) 9 B & C. 841 109 E. R. 316; Pooley v. Gilberd 2 Bulst 41. 80 E. R. 943; Bidwell v. Catton Hob. 216 80 E. R. 362; Callister v. Bischoffscheim, (1870) L. R. 5 Q. B. 449; Holsworthy U. D. C. (1907) 2 Ch. 62; King v. Michael Faraday & Partners, Ltd., (1939) 2 K. B. 753.

Appeal dismissed.

## Khanna for appellant.

Nowrojee for respondent.

JUDGMENT (delivered by SIR NEWNHAM WORLEY (Vice-President)).-The questions in issue in this appeal can be most conveniently approached by a recital of the history of this matter. The appellant and the respondent were at one time in partnership together and apparently in consequence of a dispute or difference over accounts, the respondent on 12th January, 1949, gave to the appellant a promissory note for Sh. 9,350 payable on demand "for value received lost in business of my shares". This promissory note was made over to one B. T. Raval, a lawyer's clerk, who sued the respondent on it in August, 1949, in Kenya Supreme Court C. S. No. 626 of 1949. Appearance was entered but before any defence was filed a compromise was arranged and on 3rd October, 1949, the advocates for the parties wrote jointly to the Registrar as follows: --

"We beg to request you to enter the following judgment in the above case which has been settled amicably.

By consent judgment for plaintiff for Sh. 7,000 with interest at Court rates from date of filing to date of judgment and hereafter to date of payment in full. No order as to costs. The decretal amount to be paid by the defendant, by monthly instalments of Sh. 50 each, the first payable on the 10th October, 1949, and the subsequent on the 10th day of each succeeding month. On default on the part of the defendant at any time in making payment of any of the said instalments, on due date thereof, the full amount then remaining due on account of the decretal amount, shall forthwith become due and recoverable by taking out execution proceedings."

Judgment was entered on these terms on the same day by the Deputy Registrar, acting in pursuance of Kenya Civil Procedure (Revised) Rules, 1948, Order 24, rule 6, and Order 48, rules 2 $(2)$ and 4.

On 2nd March, 1951, by which date the respondent had paid on account of the judgment debt Sh. 900 in 18 instalments, the balance of Sh. 6,100 and interest was assigned to the present appellant (the original holder of the promissory note) for Sh. 6,100, and the assignment was filed in Court in July, 1951. The respondent continued to pay monthly instalments of Sh. 50 as they fell due but in May, 1951, the appellant demanded payment by monthly instalments of Sh. 250 and on refusal by the respondent filed a motion asking for various orders which in substance came to: $-$

- (1) leave to execute against the property of the judgment debtor so as to permit proceedings in bankruptcy at the instance of the assignee, or that the order for instalments be very substantially enhanced; and - (2) that in view of two alleged defaults in payment on 10th October, 1949. and 10th April, 1950, the assignee be declared entitled to enforce payment of the whole decretal amount by attachment of bankruptcy proceedings."

Windham, J., in a considered and reasoned judgment held that the Court had no power to grant the applicant any of the reliefs which he sought and an appeal is now brought to this Court from his Order dismissing the motion with costs.

I will deal first with the fourth ground of the memorandum of appeal which alleges that the learned Judge erred in not deciding the question of default and in mistakenly assuming this question was not before him. The relevant passage in the judgment reads, "It is not contended for the applicant before me that any default has yet been made by the respondent in payment of the instalments of the judgment debt as agreed to in the consent judgment", and the learned Judge's note of Mr. Khanna's submission on this point reads:

"Court can review an order for payment by instalments even if there has been no default. There has been no default here."

Mr. Khanna contended that this was an error on the part of the learned Judge and was quite positive that he had said, "There has been default". The respondent's advocates' note however agreed with the Judge's note and in these circumstances, we thought it right to call for a report from the learned Judge, who is confident that his note is correct. He points out also that the respondent's counsel did not address the Court on the question of default. The matter is not now of any materiality as Mr. Khanna has conceded that there has not been in fact any default because the two days specified in the motion were public holidays and payment was made on the next ensuing day in each case, in accordance with Order 41, rules 1 and 3. I am satisfied that the question of default was abandoned in the Supreme Court and feel bound to express my regret that counsel should have questioned the accuracy of the record on no stronger ground than his own fallible recollection of what he had said.

The other grounds of appeal are, in substance, that Windham, J. was wrong in holding that the agreement of compromise embodied in the consent-judgment was one and indivisible and that the part relating to the mode of payment of the judgment debt was part of the consent-judgment and could not be severed from the rest. The learned Judge, it is said, was wrong in holding that the Court cannot interfere with it except in such circumstances as would afford good ground for varying or rescinding a contract between the parties.

In support of these grounds of appeal, it has been urged that the power of the Court over its decrees is unfettered and that an agreement which purports to fetter such power is void as against public policy. I would observe in passing that this argument comes strangely from the mouth of a party who is seeking the assistance of the Court to enforce the very agreement which is said to be void. Further, the appellant sought to invoke Order 21, rule 7 (1), and Order 20, rule 11 (1), which reads: $-$

"Where and in so far as a decree is for the payment of money, the Court may for any sufficient reason at the time of passing the decree order that payment of the amount decreed shall be postponed or shall be made by instalments, with or without interest, notwithstanding anything contained in the contract under which the money is payable."

He also invoked section 97 of the Civil Procedure Ordinance (Chapter 5) urging that the Court was concerned to ensure the speedy enforcement of its decrees and that an agreement which spread payment of the judgment debt over a period of 25 years was an abuse of the process of the Court.

I think the fallacy in the appellant's arguments is that they fail to distinguish between two types of cases in which judgments may be entered by consent. The first case is where a defendant submits to judgment on the claim but asks for time to pay, or makes an offer to pay in instalments which the judgment creditor accepts. In such a case the judgment is founded upon the original cause of action, i.e. the original contract. Order 20, rule 11 (2), would apply to any order made for payment by instalments and it may well be that, though there is no express provision in the Rules for review of such an order, the Court would in a proper case exercise such a power on the application of either party. However, it is not necessary to decide that point now.

The other case is where the suit has been settled by a compromise recorded under Order 24, rule 6, which is the present instance. In such case, the decree is passed upon the new contract between the parties which supersedes the original cause of action. As Parke, J. said in Wentworth v. Bullen, (1829) 9 B & C. 841 at page 850: 109 E. R. 316, "The contract of the parties is not the less a contract, and subject to the incidents of a contract because there is superadded the command of a Judge". Mr. Khanna has boldly averred that this compromise is *nudum pactum* and not enforceable for lack of consideration; consenting to judgment, he said, is no consideration for an agreement. He adduced no authority to support this pontifical statement, which is perhaps not surprising seeing that the contrary view was held as far back as 1612 in *Pooley v. Gilberd* 2 Bulst 41: 80 E. R. 943 and again in 1617 in Bidwell v. Catton Hob. 216: 80 E. R. 362. In the former case it was said, "the forbearance and stay of this suit is a great case to the defendant in regard to travers and expenses: and this is a good consideration and so the whole Court agreed clearly". Subsequent cases have been chiefly concerned with such questions as whether forbearance to prosecute a groundless or doubtful action afforded good consideration capable of supporting a promise, and it is now settled that the compromise of a disputed claim made bona fide is a good consideration, even although it ultimately appears that the claim was wholly unfounded: aliter, if the claim was not made in good faith: Callister v. Bischoffscheim, (1870) L. R. 5QB. 449: Holsworthy U. D. C. v. R. D. C. of Holsworthy, (1907) 2 Ch. 62.

I am therefore, in entire agreement with the following passage in Windham, J.'s judgment: -

"The mode of paying the debt, then is part of the consent-judgment. That being so, the Court cannot interfere with it except in such circumstances as would afford good ground for varying or rescinding a contract between the parties. No such ground is alleged here. The position is clearly set out in Seton on Judgments and Orders (7th Edition), Vol. 1, page 124, as follows: $-$

'Prima facie, any order made in the presence and with the consent of counsel is binding on all parties to the proceedings or action, and on those claiming under them ... and cannot be varied or discharged unless obtained by fraud or collusion, or by an agreement contrary to the policy of the Court ...; or if the consent was given without sufficient material facts, or in misapprehension or in ignorance of material facts, or in general for a reason which would enable the Court to set aside an agreement."

It is, however, necessary to refer to the decision in *King v. Michael Faraday* & Partners, Ltd., (1939) 2 K. B. 753 on which the appellant also sought to rely. In this case, a consent-judgment was entered subject to a condition for stay of execution on certain terms, including a term that the debtor would pay his creditor £1,000 a year for 10 years and give to his employer an irrevocable authority to make these payments out of his salary, which was at that time £3,000 a year. Subsequently the debtor's salary was reduced to £1,000 a year and he was adjudged a bankrupt. On an action brought by the creditor's executrix against the employer to recover the instalments of £1,000 a year payable under the judgment. Atkinson, J. held (*inter alia*) that, in respect of the instalments due since the date of the reduction of the debtor's salary, the claim also failed for two reasons: -

- (a) that there was an implied condition that the debtor's salary should continue to be paid at such a rate as to leave sufficient, after the payment of the $£1,000$ a year, for the support of himself and his family; and - (b) that it would be against public policy to enforce an agreement which would deprive the debtor of his sole means of support.

Mr. Khanna has sought to use this to support an argument that the same principle applies when a debtor's circumstances have improved.

It is relevant to observe that there was no evidence before Windham, J. of any such improvement: the appellant's affidavit set out what he alleges are the respondent's present circumstances from which presumably he wished the Court to draw the conclusion that the respondent could reasonably pay more than Sh. 50 a month. But there was no comparison of his financial position now and at the time when the compromise was effected, and I do not think that in the circumstances of this case there can be any presumption that Sh. 50 a month was the most that the respondent could reasonably pay at that time.

But apart from that question of fact, there is no analogy to be drawn from Faraday's case, which was from one aspect a case of frustration of the contract. At page 762 Atkinson, J. said:-

"It (i.e. the obligation to pay $£1,000$ a year) had, in truth, become an obligation wholly impossible of performance from the common-sense point of view, for to attempt to enforce it would necessarily end it, as the debtor would be driven . . . to break his contract of employment, in which event of course, the plaintiff would get nothing.

It seems to me that there had been a change in an essential condition, the continuation of which must have been contemplated as the basis of the obligation—namely the payment of a salary which after payment of the $£1,000$ left at any rate enough for the debtor and his family to live on."

In these circumstances, the learned Judge found no difficulty in implying a term of the contract that in the events which had happened the debtor was excused from performance.

In the matter now before us, there would be no justification for implying a term that the instalments would be increased in amount if the debtor's circumstances improved: the parties may reasonably be supposed to have had that contingency in mind but it does not follow that they would necessarily have agreed to such a term. Nor does any consideration of public policy require the Court to substitute, for the mode of payment agreed upon a sliding scale of payments moving up or down as the debtor's financial position varies.

In conclusion therefore, as no ground had been shown which would justify any Court in interfering with the contract between the parties, I think Windham, J., was correct in holding that he had no power to make any of the orders asked for in the motion and this appeal fails.

It remains to consider the question of costs. Mr. Khanna has urged that the costs of this appeal at least should be set off against the large sum still due from the respondent on the consent-judgment. The effect of such an order would be that the unsuccessful appellant, who we were informed was party to the negotiations which led up to the compromise and who took the assignment of the judgment debt with full knowledge of all its terms, will have had "a free run for his money"; whereas the successful respondent who has been unnecessarily (and according to his affidavit maliciously) brought to this Court will be out of pocket for his costs and will be remitted for their recovery to some 20 or 25 years ahead. I cannot see that such a result would be fair and just and see no reason for departing from the usual rule that costs should follow the event.

SIR BARCLAY NIHILL (President).—I concur with the judgment of the learned Vice-President. The appeal is dismissed with costs.

HENRY MAYERS, J. (Kenya).—I agree and have nothing to add.

Order.—After hearing Mr. Khanna we order that should any difficulty arise in the interpretation of the order dismissing this appeal with costs either side shall have liberty to apply.