The United Africa Go. Ltd V. Paul Jazzar As Surety For John Naoum—Deceased (1940)
LawGlobal Hub Judgment Report – West African Court of Appeal
Action on a guarantee—nature of business normally involving indebtedness of principal debtor—non-disclosure of amount of indebtedness at time of signing does not discharge guarantor from liability—Appeal dismissed.
Held : Since the surety knew that a debit balance was an ordinary incident of the relations between Respondents and principal debtor, and could have ascertained the amount if he wished, he cannot be heard to complain to the Respondents that he did not know that their produce buyer had been overdrawing his account or what the nature of his business was. London General’ Omnibus Co
Ltd. v. Holloway 1912 2 K.B. 71
The facts are fully set out in the judgment.
Wells Palmer for Appellant. Cameron for Respondents.
The following joint judgment was delivered :—
KINGDON, C.”, NIGERIA, PETRIDES, C. J., GOLD COAST
AND GRAHAM PAUL, C..) ., SIERRA LEONE.
In this case the Plaintiffs claimed in the Supreme Court the sum of £141 1s. 6d. ” being the amount due and owing by ” John Naoum dece.sed and for which amount Paul Jazzar stood as surety under bond dated 3rd January, 1938 “.
A Statement of Claim was filed alleging, in paragraph 1, a verbal agreement between the parties in November 1937 whereby Plaintiffs agreed to employ Naoum in their trade or business in consideration for the Defendant promising to indemnify the Plaintiffs against all losses charges etc. which might be suffered by the Company owing to the dishonesty misconduct neglect or default_ of Naoum, and that the said agreement was reduced to writing on the 3rd January 1938. It further averred, in paragraph 2, that the Plaintiffs accordingly employed Naoum who defaulted to the extent of £141 1s. 6d. The last paragraph reads ” The PlaintiE therefore claims as per writ of summons “. No defence waLE-. filed but at the hearing Counsel for Defendant informed the Cour that his defence was :—
” Paragraph 1 is admitted in so far as the guarantee in respect of transactio as from the date of the agreement.
(Whether the verbal or written agreement is not made clear). ” Paragraph 2. Proof required.
” At the date of the agreement it was not disclosed to Defendant that the person guaranteed was already indebted to Plaintiffs.”
Thereupon the Plaintiffs led evidence supporting their claim. The written agreement was put in as Exhibit ” A “.
It is in the following terms :-
” To the United Africa Company Limited of the Marina. Lagos, and elsewhere in Nigeria.
” 1. I PAUL JAZZAR of 58 and 60 Balogun Street, Lagos Nigeria, hereby request you to employ JOHN NAOUM of 27, Balogun Street Lagos aforesaid (hereinafter called ‘the clerk’) in your trade or business in such capacity at such place or places and on such terms and conditions as may from time to time be agreed upon between you and the clerk.
” 2. If you comply with my request I promise and agree as follows :
- That the clerk will always so long as he shall remain in your service honestly diligently and faithfully do all such work as you may from time to time require him to do.
- That I will on demand make good to you up to two hundred pounds (£200), all losses charges damages and expenses etc., you may hereafter suffer or undergo owing to any dishonesty misconduct neglect or default on the part of the clerk or of any person deputed by the clerk to assist him in the conduct of his duties.
‘ (c) That my liability to you as aforesaid shall not be in any way impaired by any arrangements you may from time to time make with the clerk even though such arrangements are not made with my consent or knowledge.
” 3. This guarantee may be cancelled by me at any time by giving to you one calendar month’s notice in writing and I shall not be liable to you for any losses charges damages or expenses etc., you may suffer or undergo after the said month shall have expired.”
” Dated the third day of January, 1938.
” Signed and Delivered by the above-named ” PAUL JAZZAR in the presence of :
‘ 3 /1 /38.”
The Ledger containing Naoum’s account was also put in evidence.
This account shows that on the 31st December there was a debit of £149 7s. ld. representing, as the Plaintiffs’ produce manager said, cash advanced, and on the credit side £55 11s. 2d. leaving a balance in Plaintiffs’ favour of £93 15s. lid. The position on the 3rd January was the same.
This figure of £149 7s. Id. persists throughout the accounts for the subsequent months as the balance of the cash account at the end of each month until the transactions between the Plaintiffs and Naoum came to an end owing to the latter being killed in an accident about the end of March. On the accounts being finally made up it was found that the ” grand balance ” owing by Naoum to the Plaintiffs was £141 Is. 6d. and that is the sum sued for.
In the Court below Defendant’s Counsel argued :—
- ,That the guarantee only became effective on the date of signature namely the 3rd of January 1938 at which date there was a non-disclosure of the principal’s indebtedness to the Plaintiffs which at that time amount to about £90 and that the contract was invalidated by such non-disclosure.
- That even if the contract dated from the verbal agreement there was a similar non-disclosure of the indebtedness of £12 existing at that time.”
U.A.C. Ltd.And the learned trial Judge upon considering these arguments gave the
v.following judgment :—
Jazzar, etc.” In my opinion both of these contortions are unsound. A contract
of guarantee made orally is not void or a nullity but is merely incapable of
Kingdon,proof unless and until a memorandum complying with the Statue of Frauds
Petrides andis prepared. This memorandum may, as in the present case, be signed at.
Grahama later date, and then becomes available to prove the original contract.
Paul,” Secondly a contract of suretyship is not, as is a contract of insurance,
C.Jj.a contract of Uberrima Fides ‘. A mere nondisclosure on the part of the
promise is not a ground oL avoidance unless it amounts to misrepresentation or actual fraud. The ordinary rule is that if the intending surety is unacquainted with the risk he is undertaking he should make enquiries on the subject. There is no suggestion of actual fraud in this case, and the misrepresentation alleged consists in the failure to disclose the indebtedness of the principal to promisee. In such cases it depends upon the nature of the particular transaction whether the fact not isclosed is such that it is impliably represented not to exist this being a ques on for the jury to answer.
” I am quite unable to hold that the Plaintiffs non-disclosure of the small debit balance in their favour existing at the end of October :nounted o a misrepresentation such as would entitle the defendant to avoid the contract, nor, had it been necessary, should I have been prepared to hold that the non-diSclosure of the debit balance of £90 at the beginning of January amounted to such a misrepresentation.
” There is no suggestion that at either of these dates the principal was unable to meet the indebtedness, or had in any way committed default and there was in my opinion no obligation on Plaintiffs to disclose these matters in the absence of enquiry by the defendant.
” There must be judgment for the Plaintiffs for the amount claimed with costs assessed at 12 guineas.”
Against that judgment the Defendant now appeals to this Court.
Now it is clear on the evidence that the Appellant knew that Naoum the principal debtor in the course of his dealings with the Respondents as their produce buyer would naturally be from time to time in a position of owing money to the Respondents. He knew this before he signed the document of 3rd January 1938. He denied in his evidence that he actually knew at the time he signed that Naoum in fact owed money to the Respondents and says that if he had known he would not have signed. But there is evidence that he saw the ledger in November 1937 and he admits that he did see a book like the Ledger. In November the ledger showed a debit balance due by Naoum.
If when shown the ledger containing Naoum’s account the Appellant elected not to examine it he cannot now be heard to complain of non-disclosure.
This case appears to come within the reasoning of Farwell L. J. in his opinion expressed in the Court of Appeal in the case of London General Omnibus Co. Ltd. v. Holloway 1912 2 K.B. at p. 82 where he said :—
” Dishonesty may occur, and the guarantee is given to ensure against the chance, but guarantees for overdrafts are required for the purpose, and not on the chance, of being used. A man may have the misfortune to be robbed by his servant in the course of his business ; if he is, it is a mischance ; but it is perfectly legitimate and usual for a man to carry on his business on borrowed mousy, including money borrowed from his bankers by way of overdraft, and the surety knows this, and becomes surety for the very purpose of enabling him to do so. There is nothing in such a case which the surety
does not know as well as any other member of the community, and nothing U.A.C. Ltd.
therefore which needs to be disclosed to him. The surety may well complainv.
‘ I did not know that your servant was a thief ‘; but he cannot be heard Jazzar, etc. to complain ” I did not know your customer had been overdrawing his
account or what the nature of his business was ‘.”Kingdon,
Petrides and
aurah a,m
The document of 3rd January 1938 constitutes a guarantee G Pl, C. J J. against the consequences of any default on the part of Naoum
which ” you may hereafter sufter “. It is clear on the evidence that a floating outstanding debit against a produce buyer in his account would not be a ” default “. On the contrary it is a natural incident of such business. The Respondents Agent at all material times from November to Naoum’s death regarded the state of the account as satisfactory and never regarded the outstanding debit as a ” default “.
The account was closed by Naoum’s death and the balance then due was not paid. That is the default which makes the Appellant liable.
If the Appellant had desired to know how much the debit against Naoum was at 3rd January 1938 he could have asked the Respondents. Knowing that a debit balance was an ordinary incident of the relations between the Respondents and Naoum as a produce buyer he elected to take no steps to protect himself by enquiry ; he was content with the restriction of his liability to £200 and signed the guarantee accordingly.
In these circumstances we consider that the surety cannot be heard to complain to the Respondents that he did not know their produce buyer had been overdrawing his account or what the nature of his business was.
For these reasons we think the Court below arrived at a correct conclusion and the appeal is dismissed with costs assessed at 15 guineas.
