BARCLAYS BANK D.C.O. (PLAINTIFFS)
v.
1. ABDUL AZEEZ KUYE
(TRADING AS KOJUMARIBI TRANSPORT CONTRACTS, FORMERLY KNOWN AS GOOD TRANSPORT CONTRACTS)
2. SECTION B. BAKARE
3. JIMOH OGUN ASUNI (DEFENDANTS)
(1961) All N.L.R. 767
Division: High Court of Lagos
Date of Judgment: 6th November, 1961
Case Number: Suit No. LD/313/1961
Before: Sowemimo, J.
Action on Bonds of Guarantee.
The plaintiffs brought this action against the defendants jointly and severally for the payment of an overdraft and interest thereon. The defendant section B. Bakare, executed two documents on the 8th of September, 1956, and 15th of February, 1958, respectively, whereby he agreed with The plaintiffs, in consideration of their making advances and granting banking facilities to the First-named defendant. Abdul Azeez Kuye, to guarantee the due payment of all sums that might become due or owing to the plaintiffs from Kuye, together with interest and bank charges thereon. The guarantees respectively provided, inter-alia, that "the total amount recoverable hereon shall not exceed", in the case of the guarantee executed in 1956, £2,000, and in the case of that executed in 1958, £4,000. When the 1956 guarantee was executed, Kuye was trading under the name and style of Good Transport Contracts and on the 5th of November, 1957, when his account closed, he had a debit balance of £2,574-17s-10d. On the 28th of November, 1957, he opened an account in the name of Kojumaribi Transport Contracts which showed a debit of £2,574-17s-10d, the same amount as the outstanding debit of the Good Transport Contracts account. The court inferred from this that the debit of the former firm was transferred to the account of the latter. The First and Last named defendants submitted to Judgment but the Second-named defendant pleaded, inter alia, by way of defence that-
3. The second defendant in reply to paragraph 4 of the Statement of Claim avers that if any guarantee was made by him in respect of an overdraft of £2,000 granted by the plaintiff to the first defendant, which is denied such sum was exceeded by the first defendant in running his account.
4. Further that excess of the guaranteed amount was never at any time notified by the plaintiff to the second defendant. That in any case, that amount of £2,000 had been fully liquidated.
6. In further reply to paragraph 5 of the Statement of Claim the second defendant avers that, if he guaranteed advances made by the plaintiff to the first defendant, which is denied, the amount so guaranteed was in fact exceeded by the first defendant in the running of his account without such fact being made known to the second defendant who will contend at the trial that such action by the plaintiff in failing to notify the second defendant of the excess of the overdraft guaranteed releases the second defendant from any obligation to the plaintiff, if any.
At the trial, it was contended that the two guarantees executed by the second-named defendant merged; and consequently his liability was only to the extent of £4,000, the amount specified by him in the guarantee dated the 15th of February, 1958.
HELD:
(1) A guarantee for an advance not exceeding a certain sum is construed as merely limiting the liability of the guarantor to that amount, and not, unless it appears clearly to be the intention, as making the liability conditional upon the advance being limited to that amount.
(2) Where a person executes at different times more than one bond of guarantee in respect of liabilities, or proposed liabilities, of another to a third person, such bonds do not merge unless it is the intention of the parties that there should be a merger, and such intention should be clearly expressed.
Judgment for the Plaintiff.
Cases referred to:-
Blest v. Brown, (1862), 4 DeG.F. & J. 367; 6 L.T. 620; 8 Jur. N.S. 602; 10 W.R. 569; 45 E.R. 1225.
ACTION on Bonds of Guarantee.
Bentley for the Plaintiff.
Moore, Q.C. for the Defendants.
Sowemimo, J.:-The first and third defendants have submitted to Judgment in this case and the claim which is outstanding is that in respect of the second defendant. It is as against the second defendant as a guarantor for the first defendant for the sum of £6,000 jointly and severally with the first and third defendants on two written contracts dated the 18th September, 1956, and 15th February, 1958, respectively whereby in consideration of the plaintiffs making advances or banking facilities available to the first defendant, the second defendant agreed with the plaintiffs to guarantee the due payment of all sums due or owing to the plaintiffs from the first defendant together with interest and bank charges thereon to a maximum of £6,000.
In view of the nature of the defence set up, no evidence was led and the following documents were admitted as exhibits:-
(1) The Affidavit sworn to by Mr Hurst, a Bank Official;
(2) Guarantee dated 18th September, 1956, signed by second defendant in respect of Good Transport Contracts for £2,000;
(3) Guarantee dated 28-8-56 signed by third defendant-Ex. 'C';
(4) Guarantee dated 15th August, 1958 signed by second defendant in respect of Kojumaribi Transport Contracts for £4,000-Ex. 'D';
(5) Bank Statement in respect of Good Transport Contracts-Ex. 'E';
(6) Bank Statement in respect of Kojumaribi Transport Contracts-Ex. 'F'; and
(7) Affidavit in support of notice of intention to defend-Ex. 'G'
Paragraphs 3-5 of the Statement of Claim are as follows:-
3. The first defendant was at all times material to this action, the customer of the plaintiff Bank and the Proprietor of the firm known as Kojumaribi Transport Contracts, formerly known as Good Transport Contracts.
4. By a contract in writing dated the 18th day of September, 1956, the second defendant, in consideration of the plaintiffs making advances or banking facilities available to the first defendant, agreed with the plaintiffs to guarantee the due payment upon demand up to a maximum of £2,000 of any advances made by the plaintiffs to the first defendant.
5. By a further contract in writing, dated the 15th February, 1958, the second defendant agreed with the plaintiffs, in addition to the guarantee referred to in paragraph 4 above, to guarantee the due repayment of a further sum of £4,000, such guarantee being in consideration of the plaintiffs granting further overdraft and Banking facilities to the first defendant.
In the defence filed by second defendant, paragraphs 2 to 6 read as follows:-
2. The second defendant admits paragraphs 1, 2 and 3 of the Statement of Claim.
3. The second defendant in reply to paragraph 4 of the Statement of Claim avers that if any guarantee was made by him in respect of an overdraft of £2,000 granted by the plaintiff to the first defendant, which is denied, such sum was exceeded by the first defendant in running his account.
4. Further that such excess of the guaranteed amount was never at any time notified by the plaintiff to the second defendant; That in any case, that amount of £2,000 had been fully liquidated.
5. The second defendant denies each and every allegation of fact contained in paragraph 5 of the Statement of Claim and will require strict proof thereof at the trial.
6. In further reply to paragraph 5 of the Statement of Claim the second defendant avers that, if he guaranteed advances made by the plaintiff to the first defendant, which is denied, the amount so guaranteed was in fact exceeded by the first defendant in the running of his account without such fact being made known to the second defendant who will contend at the trial that such an action by the plaintiff in failing to notify the second defendant of the excess of the overdraft guaranteed releases the second defendant from any obligation to the plaintiff if any.
Three defences were thereby set up by the second defendant viz:-
(a) That the first overdraft of £2,000 was exceeded by the first defendant.
(b) That the amount of £2,000 had been liquidated.
(c) That the first defendant was allowed to exceed the guaranteed amount of £4,000 without notice being given to the second defendant. It is the contention of the second defendant that failure to notify excesses as per (a) and (c) above would release the latter from any liability.
Before discussing (a) and (c), I would first of all deal with (b) which is that the amount of £2,000 had been liquidated. It is not in dispute that first defendant was at one time Proprietor of the Good Transport Contracts which later on was changed to Kojumaribi Transport Contracts. According to exhibit 'E' the Good Transport Contracts had a bank credit balance of £20-0s-0d on 3rd November, 1955 and on the 5th November, 1957, when its accounts seemed to have closed there was a debit balance of £2,574-17s-10d. The Statement of account of Kojumaribi Transport Contracts showed on 28th November, 1957, when the account was opened a debit of £2,574-17s-10d. This amount is the same as the outstanding debit of the Good Transport Contracts. The inference is that the debit of the former firm was transferred to the account of the second firm. If that is so it is second defendant's contention that the guarantee-exhibit "B"-merges with exhibit "D" in the sense that the liability of the second defendant is to the extent of that shown in exhibit "D." If the Statement of Account of the two firms has been kept as a continuing one, there would have been no necessity for exhibits "E" and "F." There is nothing in exhibit "F" to show that in spite of the amount of £2,574-17s-10d debited against Kojumaribi Transport Contracts, the firm, had ever been in funds. The account-exhibit "F" has always been on the debit side-always overdraft. I can therefore not accept the contention, however one considers this case, that the amount of £2,000 covered by the first guarantee had, at any time, been liquidated. With regard to the change of name and its effect I refer to paragraph 12 of the Guarantee.
With regard to (a) and (c) the contention, which is a legal one, is that since the plaintiffs have granted an overdraft over and above that guaranteed by exhibits "B" and "D" respectively, therefore the second defendant is released from his liability. The guarantees in both cases are in identical terms save the change in the name of the firms and amounts guaranteed. Paragraph 2 of the guarantee reads as follows-"This guarantee is to be a continuing security for the whole amount now due, or owing to you or which may hereafter at any time become due or owing to you as aforesaid by the Principal until the expiration of three months after the receipt by you from the undersigned or any one or more of them or their respective executors or administrators of notice in writing to discontinue it (but notwithstanding the discontinuance as to one or more of the undersigned the guarantee is to remain a continuing security as to the other or others) but nevertheless the total amount recoverable thereon shall not exceed the sum (of two thousand pounds in the case of exhibit "B" and four thousand pounds in the case of exhibit "D") in addition to such further sum for interest thereon and other banking charges in respect thereof and for costs and expenses as shall accrue due to you within six months before or at any time after the date of demand by you upon the undersigned or any one or more of the undersigned for payment." The operative words regarding the limitation of liability are "but nevertheless the total amount recoverable hereon shall not exceed...."
The authorities cited by Chief Moore go to show that where there is any variation in any terms of a contract of guarantee, to which the guarantor did not consent, that is sufficient to set aside the obligation of the surety. On at 102 of Rowlatt on Principal and Surety (3rd Edition) the principle is set out thus:-
A guarantee will only extend to a liability precisely answering the description contained in the guarantee. And the onus is upon the creditor to show that the surety consented to any alteration. But the surety can afterwards ratify his liability, though the principal contract has been varied or only partly performed. It must always he recollected, said Lord Westbury in Blest v. Brown in what manner a surety becomes bound. You bind him to the letter of his engagement. Beyond the proper interpretation of that engagement you have no hold upon him.
He receives no benefit and no consideration. He is bound, therefore, merely according to the proper meaning and effect of the written engagement that he entered into. If that written engagement be altered in a single line, no matter whether it be altered for his benefit, no matter whether it be innocently made, he has a right to say, the contract is no longer that for which I engaged to be a surety: you have put an end to the contract that I guaranteed and my obligation is at an end.
In the case before the court, plaintiff's case is that there has been no alteration whatsoever. The obligation of the second defendant remains the same. The terms have not been altered. It is a fact that the overdraft of the debtor has been increased over and above that amount recoverable. But on a proper construction of the document there is no limit placed on amount of the overdraft to be granted. All the guarantor contracted for is that "but nevertheless the total amount recoverable hereon shall not exceed" either £2,000 or £4,000 as the case may be. It is my contention therefore that to grant any amount exceeding that recoverable from the guarantor is no alteration of the guarantee. All the authorities cited by Mr Bentley support this contention. Even where the contract provides that advances should not exceed a certain amount the law is "a guarantee for advance not exceeding a certain sum is construed as merely limiting the liability of the surety to that amount, and not, unless it clearly appears to be the intention as making the liability conditional upon being limited to that amount. And this construction has been adopted, even where grammatically, the limit seems imposed, not upon the liability, but upon the advance." The law as I have just stated has been followed in all authorities cited by Mr Bentley.
I have earlier discussed that there is no merger of one bond of guarantee in the other. If it is the intention of the parties that that should be so, it would have been clearly stated.
In the circumstances therefore, there would be Judgment against the second defendant jointly and severally with the first defendant, and with the third defendant, subject to the limit of his liability, for the sum of £6,000, and costs assessed at 60 guineas. The plaintiff is awarded a further sum of 20 guineas costs in addition to the 60 guineas costs to which the second defendant and the other defendants are jointly and severally liable.
I am not disposed to grant the interest claimed.
Judgment for the Plaintiff.