The National Bank of Commerce v. Reid and Two Others Civ. Case 2-D-70; 9/2/71; Georges C. J.

 

The National Bank of Commerce v. Reid and Two Others Civ. Case 2-D-70; 9/2/71; Georges C. J.

            The plaintiff the successor in title to National and Grindlays Bank Ltd. (the Bank) sued the defendants to recover on a guarantee signed by them undertaking to pay sums due and owing to the Bank by the Imara Plywood Co. Ltd. of which they were directors at the material time. The suit proceeded against Reid, the first defendant, the others having consented to judgment being entered against them. After signing the guarantee difficulties arose between the defendant directors and the first defendant was brought out by the others. The first defendant then wrote to the bank requesting that the guarantee given by him be released. The Bank refused to release him until the company repaid its indebtedness or until adequate alternative security was furnished. By the terms of the guarantee, the guarantee was binding on the defendants as containing security unless they gave one month’s notice in writing to the contrary. The first defendant argued(a)that his letter was a notice to the Bank terminating his future liability as he was entitled to do under the agreement; (b) that the plaintiff was not entitled to sue under the guarantee since it had been given to the Bank and the substitution of the plaintiff for the Bank relieved him of all liability; (c) that the pleading in the plaint contained factual innacuries relating to dates of liability; (d) that the guarantee was not adequately stamped contrary to s. 18 (1), (2) and (3) of the Stamps Ord. (Cap. 189) because though the stamp had been crossed, it could be carefully moved from the document and placed on another to fit there appropriately.

           

            (1971) H. C. D.

            - 52 –

                        Held: (1) “Basically the letter dealt with releasing the first defendant form his guarantee, an entirely different matter. The Bank’s reply confirms that he letter was so understood. They were unwilling to release him unless adequate arrangements had been made. One feels a great deal of sympathy for the first defendant but he appears, though a lawyer himself, to have dealt with this matter in a way which showed little thought for the legal position. Had he terminated his future liability then, his obligations would have been quantified as the amount then due form the Company. If the Bank had not then taken action against him within the prescribed period he would have been able to take advantage of the Limitation Act. As it was, the Bank made it clear that they were not releasing him from his continuing guarantee unless proper arrangements wee made. There id nothing on the record to show that he ever replied to that letter.” “On these facts I find that the Bank had made it plain that they would not release the first defendant from his continuing liability until satisfactory arrangements had been made. Those were never made and the first defendant was not released either from accrued or future liability.” (2) The National Bank of Commerce (Establishment and Vesting of Assets Act) 1967, section 8(1) provides “that the National Bank shall be deemed to have taken over the business of certain banks in Tanzania, including the Bank in this case. Section 8(2) and (3) provide that the assets and liabilities of the banks shall be deemed to be vested in the National Bank upon the affective date. Section 9 deals with the operation of contracts and provides that any instruments to which any of the banks was a party and under which money might be payable to or from the Bank should continue to be of full force and effect and that the national Bank should be substituted for the bank as a party thereto and that the National Bank should be liable to make payments thereunder and should be entitled to receive or enforce payments thereunder. Among the instruments specifically mentioned were guarantees. By virtue of these provisions the plaintiff became substituted as a party to the guarantee given by the first defendant and his co-directors to the Bank. No notice was needed. The substitution was guite involuntary, by force of the enactment.” (3) “A deficiency in a pleading should not be aground for dismissing a claim unless the situation is such that the plaint failed to disclose a cause of action. Paragraph 7 properly pleaded the guarantee and the evolution of rights under it to the plaintiff. Paragraph 8 properly alleged that the Bank and the plaintiff from time to time advanced further sums on mutual open and current accounts of the company with the Bank. Paragraph 9 then set out the total indebtedness. The misdescription is not significant and I would be prepared at this stage to grant and amendement to correct it.” (4) “Even if initials and date were placed on a stamped. The question is one of degree of difficulty in effecting such a transposition. The question as to whether a stamp has been otherwise effectively cancelled is a question of fact. In this case I hold that the stamp appearing on the guarantee has been effectively cancelled.’ (5) Judgment for plaintiffs with costs.