Vrajdas v Mehta (Civil Appeal No. 23 of 1946) [1946] EACA 14 (1 January 1946)

## COURT OF APPEAL FOR EASTERN AFRICA

Before SIR JOSEPH SHERIDAN, C. J. (Kenya), SIR NORMAN WHITLEY, C. J. (Uganda), and BARTLEY, J. (Kenya)

NANALAL VRAJDAS, Appellant (Original Defendant)

ν.

CHUNILAL DHANJI MEHTA, Respondent (Original Plaintiff)

## Civil Appeal No. 23 of 1946

(Appeal from decision of H. M. Supreme Court of Kenya)

Promissory note—Bills of Exchange Ordinance, section 30 (1)—Burden of proof.

Section 30 (1) of the Bills of Exchange Ordinance provides: "Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value".

The plaintiff sued the defendant on a promissory note which the defendant admitted he had made and signed in favour of the plaintiff but which he alleged was given for an illegal consideration.

Held $(21-8-46)$ .—(1) The presumption established by S. 30 (1) of the Bills of Exchange Ordinance that a bill of exchange is deemed to be given for good consideration may be rebutted by evidence to the contrary.

(2) The presumption is rebutted when at the end of the case there is a preponderance of evidence in favour of the defendant but not so if the preponderance of evidence is in<br>favour of the plaintiff or if the Court is left in doubt.

Appeal allowed.

Cases referred to: Jones v. Thomas 160 E. R. 493; Moii Golabchand v. Mohamed<br>Medi 20 Bombay 367; Talbot v. Van Boris (1911) 1 K. B. 854; Clark v. Holmes 175 E. R.<br>967; Hollington v. Hawthorn & Co. (1943) 1 K. B. 587; Arthur Co

Bryson for the Appellant (Christie with him).

C. A. Patel for the Respondent.

SIR JOSEPH SHERIDAN, C. J.-I have had the advantage of reading the judgments about to be delivered in this case and find myself in substantial agreement with them. The suit was on a promissory note made by the defendant in favour of the plaintiff so that the plaintiff had an initial advantage by reason of the provisions of section 30 (1) of the Bills of Exchange Ordinance which enacts "Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value". The plaintiff, had there been no evidence led other than the production of the note, would have been bound to succeed in accordance with the section quoted. The promissory note in this case was admitted to have been made by the defendant in the plaintiff's favour so that the defendant was called on to begin and the onus of proving what he alleged, that the promissory note was given for an illegal consideration, a gambling debt was placed on him. If at the conclusion of the defendant's case and assuming that his evidence had been believed, and no evidence had been given for the plaintiff then in my opinion the prima facie case under section 30 (1) of the Ordinance would have been rebutted and he would be entitled to have the suit dismissed. The plaintiff however did give evidence and the question is how one should consider the evidence at the conclusion of the case. In my opinion the proper way in which to approach the matter is to weigh the evidence given by the defendant against that given by the plaintiff and to decide the case

according to the provisions of section 3 of the Indian Evidence Act which provides "A fact is said to be proved when after considering the matters before it the Court either believes it to exist or considers its existence so probable that a prudent man ought under the circumstances of the particular case to act upon the supposition that it exists". In other words, if at the end of the case the Court considers that there is a preponderance of evidence in favour of the defendant, a decision in favour of the defendant should result and conversely if the preponderance is in favour of the plaintiff. If however the Court is left in doubt as to who should succeed, then in a case like the present the decision should be given in favour of the plaintiff, as the onus of proving that the promissory note was given for an illegal consideration rested on the defendant.

On the evidence on the record there is in my opinion a preponderance of evidence in favour of the defendant and I would accordingly decide the case in his favour, allowing the appeal with costs in this Court and the Supreme Court.

SIR NORMAN WHITLEY, C. J.—This is a suit upon a promissory note. The defendant admits making the note but alleges that it was given in consideration of a gambling debt. His Counsel admitted that the burden of proof was upon him and opened the case by calling his client. The plaintiff then gave evidence. There were no other witnesses.

In a short judgment the learned trial Judge concluded as follows: —

"In the result 1 find myself in the position that $1$ am unable to say that the defendant has satisfied me that he gave the promissory note in consideration of a gambling debt. Undoubtedly it is a case where one may suspect that possibly his story is true. On the other hand, in spite of the points Mr. Doshi has made, I am not able to say that I disbelieve the plaintiff in his version that the promissory note was given in consideration merely of a loan. It follows that there must be judgment for the plaintiff with costs."

For the appellant Mr. Bryson contends that the learned Judge approached the case from the wrong angle in that he failed to appreciate that the burden of proof in such a case might shift to the plaintiff and that in the circumstances of this case and of the evidence before him the burden had shifted to plaintiff to prove that good consideration was in fact given. He relied upon the following passage in Byles on Bills 19th Edition at page 125:-

"In the case of other simple contracts, the law presumes that there was no consideration till a consideration appears; in the case of contracts on bills or notes, a consideration is presumed till the contrary appears, or at least appears probable."

The authority for that passage is the old case of *Jones v. Thomas* 160 E. R. 493 the head note of which concludes as follows: -

"Agreements entered into between an attorney and his client for the purchase by the attorney, at an under price, of estates to which the client had good title, but of which he was not in possession, set aside for fraud and maintenance. Where an account is decreed to be taken of the dealings and transactions between an attorney and his client, in the course of which the attorney has taken securities from the client, the attorney must not only prove the securities, but likewise the consideration for which they were given. Therefore where a promissory note was given by the client to his attorney under circumstances of great suspicion, but the client was unable, for want of witnesses, to prove fraud in the attorney, the Court, upon decreeing an account between the parties, directed an inquiry as to whether the attorney could by any, and what affirmative evidence, prove the consideration for the note"

That case was decided over one hundred years ago, but the fact that it is still quoted by this learned author in this standard work suggests that in spite of the passing of the Bills of Exchange Act in 1882 it remains good law in England. That Act was substantially a codification of the common law so that the old cases may still be looked to except in so far as the common law has been superseded or altered by any particular section of the Act.

Section 30 (1) provides that every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value.

That in effect merely restates what was theretofore the position under the common law and it would accordingly seem that if the present case were being decided in England the Court would be entitled to look at the case of *Jones* $v_1$ Thomas for guidance provided always that the facts there were sufficiently on all fours with those which we have to consider.

It seems to me however that we must not lose sight of the fact that the law as to evidence in this Colony is to be found in the Indian Evidence Act and that in section 114 of that Act there is a special provision covering this question of consideration.

That section reads: —

"The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case.

Illustration $(c)$ .—The Court may presume that a bill of exchange accepted or endorsed was accepted or endorsed for good consideration.

But the Court shall also have regard to such facts as the following in considering whether such maxims do or do not apply to the particular case before it—namely, as to illustration (c) A, the drawer of a bill of exchange, was a man of business. B, the acceptor, was a young and ignorant person completely under A's influence."

As a general rule, of course, the consideration for a contract should be the subject of averment and proof but bills of exchange and promissory notes are thus made an exception as is the case in England, but it is to be noted that the section says "may presume" and not "shall presume" and section 4 lays down that whenever it is provided by the Act that the Court may presume a fact it may either regard such fact as proved unless and until it is disproved or may call for proof of it whereas whenever it is directed by the Act that the Court shall presume a fact it shall regard such fact as proved unless and until it is disproved.

The presumption when the word "may" is used is accordingly substantially weaker than when the word "shall" is used in the act and in the former case the presumption is the more easily displaced. Since our law on the point is the law of India, Indian decisions although not binding on our Courts may be looked to for guidance and have to be treated with respect. In the case of *Moti* Golabchand v. Mohamed Medi 20 Bombay 367 the practical effect of illustration (c) is considered and the Court laid down certain guides for considering the evidence in cases of that kind. The facts were: -

"Professional money-lenders sued a young man recently come of age to recover certain loans of money alleged to have been advanced by them to him on promissory notes. The defendant, who, under the will of his father, was entitled to a large property but had not yet come into possession of it, was of an extravagant and reckless character. He pleaded, as to part of the consideration for the notes, that he did not receive it, and as to a further part, that the consideration was immoral."

- The guides laid down were: $\rightarrow$ - (1) That upon the above facts the ordinary presumption that a negotiable instrument has been executed for value received was so much weakened that the defendant's allegation that he had not received full consideration was sufficient to shift the burden of proof and to throw upon the money-lenders (the plaintiffs) the obligation of satisfying the Court that they had paid the consideration in full. That is the practical effect of illustration $(c)$ to section 114 of this Act. - (2) Where the plaintiff, in answer to such a defence, affirmed that he had paid the consideration in full, and was corroborated by his books and witnesses the onus of proof again shifted over upon the defendant. - (3) The burden of proof thus thrown upon the defendant could only be met by a perfectly truthful and harmonious statement which the Court felt able to rely upon with confidence. In the absence of this, the ordinary presumption laid down in the Negotiable Instruments Act must prevail, viz., until the contrary is proved, the presumption should be made that every negotiable instrument was made for consideration.

These guides seem to me to be logical and reasonable and in conformity with the dictates of common sense. In spite of some apparently conflicting English decisions it seems to me proper for us to apply these propositions when weighing the evidence in the present case. Each case has of course to be considered in relation to its own particular facts. These suggested guides were not brought to the attention of the learned trial Judge. The trend of his judgment is such, if they had been and if he had thought it proper to follow them, I suspect that he might have come to a different conclusion.

On the pleadings the ordinary presumption of good consideration arises under section 114 of the Evidence Act so that the defendant rightly accepted the onus of proof in the first instance. His evidence in my opinion raised such a strong probability that it was a gaming transaction that the burden of proof was shifted and the obligation was thrown upon the plaintiff to satisfy the Court that he had given good consideration. After the plaintiff had endeavoured so to satisfy the Court it was for the Court to consider whether his evidence, together with such corroboration as could be found from his books, was sufficiently convincing to shift the onus again over to the defendant. In my opinion it was not. The books were unsatisfactory and inconclusive. The plaintiff was admittedly a visitor on 29th July at the gaming house where the defendant alleges that he lost the money the subject of the note. The plaintiff's explanation that he went at night to this address, previously unknown to him, in order to collect the money due on the note is quite incredible. The whole of his evidence on this point, to my mind, rings supremely false and I have not the least doubt. that he was there for the purpose of gaming. That affords strong corroboration of the defendant's story. The plaintiff gave no explanation as to why the. defendant borrowed this large sum. If the plaintiff had really lent it he would surely have inquired what the money was wanted for. Furthermore the note is silent as to interest. True it is a demand note, but in such cases in a genuine commercial transaction one generally finds either that the sum stated is larger than the sum actually loaned and includes the arranged interest or that the rate of interest is inserted in the note. Here the plaintiff says that Sh. 5,000 passed in cash and Sh. 5,000 is the sum stated. The question of interest is apparently left in the air. That is entirely consistent with the note having been given because the defendant could not pay money he had lost at gambling. It is far less consistent with an ordinary commercial loan.

Section 3 of the Evidence Act provides that a fact is said to have been proved when, after considering the matter before it, the Court either believes it to exist or considers its existence so probable that a prudent man ought, in the circumstances of the particular case, to act upon the supposition that it does exist.

The real question in issue in this case is "Was the note given in payment of a gambling debt?" After considering all the evidence I consider it so probable that that was the origin of the note that 1 think a prudent man ought in the circumstances of the case to act upon the supposition that the defendant's allegation of the gaming transaction is correct. I accordingly regard that allegation as proved within the meaning of section 3 and I would allow the appeal, set aside the judgment of the Supreme Court and direct that judgment be entered for the appellant here and in the Court below.

BARTLEY, J.—The plaintiff (respondent) in this case sued the defendant (appellant) on a demand promissory note drawn by the appellant in favour of the respondent. The appellant in his statement of defence alleged that as the note was given in respect of a gambling transaction on a game of dice-it should be regarded as given without consideration.

The learned trial Judge holding that the burden of proof was upon the appellant and to quote his judgment "I am unable to say that the defendant has satisfied me that he gave the promissory note in consideration of a gambling debt. Undoubtedly it is a case where one may suspect that possibly his story is true. On the other hand in spite of the points Mr. Doshi has made I am unable to say that I disbelieve the plaintiff" gave judgment for the plaintiff.

Mr. Bryson for the appellant submitted that the trial Judge misdirected himself in holding that the onus of proof was on the appellant. His submission was that the evidence given rebutted the presumption that the promissory note was given for valuable consideration and that the onus therefore shifted to the plaintiff.

I do not agree with that submission. Section 30 sub-section (1) of the Bills of Exchange Ordinance applies to this case and that sub-section reads: "Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value.'

In Talbot v. Van Boris (1911) 1 K. B. 854, which is the authority for holding that sub-section (2) of section 30 of the above Ordinance does not apply to this case; the whole section being taken from section 30 of the Bills of Exchange Act, 1882, Vaughan Williams, L. J., in dealing with a case which was outside the scope of sub-section (2) referred to Taylor on Evidence. I quote: "He begins by saying that the presumption in such a case is that the instrument was given for good consideration, and goes on to say that if the defendant intends to set up the defence that value has not been given, or that the instrument was originally obtained by fraud the burden of proving that lies on him."

All the cases cited in 6 E. & E. Digest at pages 172 to 174 appear to me to show that this above quotation sets out the law in England on cases coming within section 30 (1) of the Bills of Exchange Act.

I only consider it necessary to refer to one more case therein cited, that of Clark v. Holmes 175 E. R. 967, which was an action on a bill of exchange drawn by the plaintiff and accepted by the defendant for £99 "for value of goods received". The defendant having pleaded no valuable consideration gave evidence in which he swore positively that he had only received goods to the value of £11. The plaintiff then gave evidence. Martin, B., in directing the jury, said:

"The action is an undefended one as to £11 and as to the rest, the onus is upon the defendant of satisfying the jury that he has not received."

The case of Jones v. Thomas 160 E. R. 493 to which reference is made in Byles on Bills in the heading to section 30 of the Act is cited in those pages of the Digest to which I have referred. The heading to the reference in the Digest reads "Rebuttal of Presumption—Solicitor and Client". In my view that case is only an example of the enforcement of the rule the Court imposes that when the parties to a contract are solicitor and client and when such relationship may give the solicitor an advantage over his client an onus is cast on the solicitor to prove that the transaction was fair.

I have had the advantage of reading the judgment of the learned Chief Justice of Uganda regarding the effect of sections 4 and 114 of the Indian Evidence Act but I am of the view that although these sections must of course receive due consideration section 30 (1) of the Bills of Exchange Ordinance must also receive due consideration.

In other words although section 114 of the Evidence Act .permits the Court to presume that the promissory note in this case was given for good consideration under section 30 (1) of the Bills of Exchange Ordinance the defendant is prima facie deemed to have become a party to the note for value and the onus lies on him to prove otherwise.

In Moti Golabchand v. Mohamed M. T. Topan (1896) 20 Bom. 367 the Court laid down propositions, not as rules of law, but as guides in considering the evidence in similar cases. As Field pointed out in his Law of Evidence the propositions were laid down in a case in which the drawer of the note was in a dependent position and in such cases Courts adopt the attitude adopted in cases between solicitors and clients.

In my view Mr. Bryson, for the appellant, is on stronger ground when he submitted that he had discharged the onus of proof laid upon him at the trial. I have already quoted from the judgment of the learned trial Judge and it is obvious from that quotation that he had some difficulty in arriving at his decision.

It seems to me that on the evidence on the record it was more probable that the Sh. 5,000 was given in payment for a gambling debt than for a loan of that sum. The defendant's evidence as to the gambling transaction was not so far as I can see shaken in any way in his cross-examination. The plaintiff's evidence on the other hand from beginning to end was improbable. He started his evidence by explaining how he came to lend the Sh. 5,000 in cash instead of as one would have expected by cheque. His evidence was that on the very date he gave the loan he was paid Sh. 29,000, being the balance of the sale price of a house he had sold. His evidence in examination in chief was "I sold it for Sh. 35,000. I received 25 per cent of the amount earlier and Sh. 29,000 on 10th July, 1944. I received Sh. 3,300 by two cheques and the balance in cash ... Ahmed Shamji gave me this amount in the office of C. H. Patel, advocate, and I took this money to my shop". Quite apart from the fact that a payment of 25 per cent of the purchase price of Sh. 35,000 would only leave Sh. 26,250 to be paid and not Sh. 29,000 the payment in cash of such a large sum in an advocate's office is a matter for comment. One would naturally expect corroboration of such evidence which if true could easily have been obtained. The books of account produced in support of this evidence were very far from unimpeachable. The cash book entry for the day 10th July shows a payment of Sh. 20,000 to Vassanji Naransingh, the mortgagee of the house sold. It was obvious that the entry of the name Vassanji Naransingh had been an afterthought and the plaintiff's explanation of that was that when he made the entry he had for otten

the name of the man to whom he had mortgaged his house for Sh. 20,000. Again with regard to the cash book for 10th July both sides of the account for that day were incorrectly totalled, the credit side being Sh. 4 too much and the debit side Sh. 2,000 too much. This resulted in the cash on hand balance brought forward to next day being Sh. 1,996 on the short side. This mistake was never discovered. Again the plaintiff admitted in his evidence that he went to premises in which the defendant was gambling at 10 p.m. one night and he alleges that he went there to collect the debt due on this promissory note. On that night the people in the house were all arrested by the police. The plaintiff explained his going there to collect his debt by stating "I did not go to the defendant's house to collect the money because he is a family man".

The learned trial Judge made two marginal notes during his recording of the plaintiff's evidence, one was "lying? and evasive" and the other "will not answer question".

In dealing with this question it is necessary to disregard the evidence contained in the record of the criminal case which was wrongly admitted (*Hollington* v. Hawthorn & Co. 1943 1 K. B. 587).

I have in mind the decision of this Court in Arthur Corrie Lewin and Others v. Dennis Nolan Neylan (1934) 1 E. A. C. A. 5 with regard to an appeal on a finding on facts but I feel certain that a wrong conclusion was arrived at in the Court of first instance.

I would allow the appeal with costs in this Court and the lower Court.