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Carr-lazarus Phillips and ors. Vs. Alfred Ernest Mitchell and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1932Cal889
AppellantCarr-lazarus Phillips and ors.
RespondentAlfred Ernest Mitchell and ors.
Cases ReferredStewart v. Kennedy
Excerpt:
- .....have been pleaded in the alternative. what actually happened was that defendant 2 in that previous suit, arrathoon theodore creet, did in fact raise both those defences in answer to the claim of the plaintiffs. (after stating the relevant paragraphs from the written statement his lordship proceeded.) those paragraphs make it perfectly plain that the defendant arrathoon theodore greet did in fact put forward the very matters on which he now relies in the present suit as constituting a ground for the rectification of the contract of guarantee. the other two defendants in suit no. 1476 of 1928 did not, in their written statements, raise the defence that the instrument of guarantee did not represent the real intention of the parties to it. they were content in the previous suit to take their.....
Judgment:

Cottello, J.

1. This matter is the sequel to a previous suit (No. 1476 of 1928) between the same parties. In the former suit, the present defendants were the plaintiff's and the present plaintiffs were the defendants. The plaintiffs were suing the defendants upon a certain contract of guarantee and their case was that under that contract, Carr Lazarus Phil-dips, Arrathoon Mackertoom Arrathoon and Arrathoon Theodore Greet were liable to pay to them, as the executors of one Arrathoon Stephen, a total sum of Rs. 18 lakhs, which, by the terms of the contract in question, they had guaranteed to the extent of Its. 6 lakhs, each, in respect of a loan of Rs. 40 lakhs made by Arrathoon Stephen to J. C. Galstaun. 'Chat loan had been made upon the security of a mortgage of certain properties belonging to the borrower. The case for the plaintiffs in the previous suit was that, by the terms of the contract of guarantee, the guarantors were liable to pay the sum they had respectively agreed to pay, immediately on the borrower making default in payment to the lender. The defendants, on the other hand, contended that, by the terms of the guarantee their liability only came into existence, if and when the mortgage had been enforced and it had been found that there was a deficit in the amount realized upon the sale of the mortgaged properties. The previous case came before Buckland, J,, and he upheld the contentions of the plaintiffs in the suit and made a decree :in their favour. The defendants in that suit, that is to say, the present plaintiffs, thus finding that their contention with regard to the meaning of the terms of the contract of guarantee was not correct, instituted the present suit, in which they say in effect that, as the contract of guarantee has been interpreted in a manner adverse to them, it does not properly represent the real bargain between them and Arrathoon Stephen. They say that they were only induced to give the guarantee embodied in the contract upon a representation made on behalf of the lender, by one Gregory Avietick Arrathoon, that they would only be called upon to provide the sum of Rs. 6 lakhs each, making the total sum of Rs. 18 lakhs, in the last resort, should it ultimately be found that the mortgaged properties did not realize sufficient to satisfy the debt due from J. C. Galstaun to Arrathoon Stephen.

2. In other words, they now contend that the real agreement between them, as guarantors, and the lender, Arrathoon Stephen, was that they should only be liable to the extent of any deficit after the mortgaged properties had been sold. They accordingly pray in this suit that the terms of the contract of guarantee should be rectified so as to represent the actual bargain between the parties. This suit was, as I have said, instituted in consequence of the judgment given by Buckland, J. But at the same time, the present plaintiffs appealed against the judgment of Buckland, J., and eventually that judgment was reversed by the appeal Court here consisting of C. C. Ghose, and Page, JJ. As a result of that decision of the appeal Court, the present suit appeared to be unnecessary, as the contentions of the guarantors with regard to the meaning of the contract of guarantee had been upheld by C.C. Ghose., J, and Page, J. The present defendants however carried the other suit to the Judicial Committee of His Majesty's Privy Council, and there the Board reversed the decision of the Court of appeal here and restored the judgment of Buckland, J. Thereupon the present plaintiffs proceeded with the suit with which we are now concerned. Put shortly, the whole matter comes to this that the present plaintiffs, having found it finally decided against them that their construction of the contract of guarantee was not correct, now seek to say that, that being the case, {she contract does not represent the true agreement between them and Arrathoon Stephen. As an answer to the case made by the plaintiffs in the present suit the defendants have traversed the plaintiffs' allegations with regard to the actual terms of the agreement, which were ultimately embodied in the written contract of guarantee and they have also set up a plea in bar which is contained in para. 6 of the written statement in these terms:

In any event these defendants submit that the present suit is barred by estoppel and res judicata or principles analogous thereto by reason of the plaintiffs' conduct and the decision in Suit No. 1476 of 1928.

that is to say, the previous suit between the parties to which I have referred. In order that the point raised in that paragraph of the written statement might be disposed of, it was agreed between the parties that it should be determined as a preliminary issue, and the matter accordingly comes before me upon that question and that question alone. It is obvious that if this point is decided in favour of the defendants, that of itself would be sufficient to put an end to the suit. On the other hand, if the defendants are not untitled to rely on the plea contained in para. 6, then the suit must proceed to trial and evidence gone into upon the main question raised by the plaintiffs heroin. It is to be observed at the outset that the doctrine of res judicata is a part of the wider general principle of estoppel. As regards this preliminary point, the defendants are relying mainly on the doctrine of res judicata as a bar to the plaintiffs' claim, though they also say hat the defendants are estopped from succeeding in their present claim by reason of their conduct, that is to say, their conduct in connexion with the previous suit. Mr. S.M. Bose, on behalf of the defendants, has argued that the matter is really covered by the provisions of Section 11, Civil P. C, which contains a statutory definition of 'res judicata' and gives explanations with regard to the circumstances in which it operates. In particular, Mr. Bose relied upon the provisions of Expl. 4 annexed to Section 11. Section 11 roads as follows:

No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court corn-potent to try such subsequent suit or the suit in which such issue has been subsequently raised and has been heard and finally decided by such Court.

3. And Expl. 4 says:

Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit.

4. Now, in order to ascertain whether the present case falls within the ambit of Section 11 and Expl. 4, it is necessary to examine with some care what the position was in the former suit as between the parties to the present suit. Mr. Bose has argued that the question whether the contract of guarantee really represented the true agreement between the guarantors and the lender was raised in the previous suit, or, at any rate, might have been raised and ought to have been raised in that suit. There is to my mind no doubt whatever that the issues which are now raised in the suit before me might have been raised in the previous suit, but there is still the more difficult question of whether they ought to have been raised by the defendants in that suit. The first point to be considered in this connexion is : what was the precise nature of the claim made by the executors of Arrathoon Stephen in Suit No. 1476 of 1928, and reference to the plaint in that suit shows that what they were claiming was a decree against each of the defendants for the sum of Rs. 6 lakhs. In other words, the executors of Arrathoon Stephen were claiming a specific sum of money which they alleged was due to them under the contract of guarantee. As I have already pointed out, the main answer to that claim was to the effect that it was premature because it had not then been ascertained or become apparent whether or not upon an enforcement of the mortgage security there would be any deficit.

5. But it seems to me clear beyond all doubt that the defendants could, in answer to the plaintiffs' claim, have contended, in the alternative, that if the contract of guarantee did not bear the meaning they sought to put upon it, then in that event it did not represent the real bargain between the parties. It is clear that those two defences could have been pleaded in the alternative. What actually happened was that defendant 2 in that previous suit, Arrathoon Theodore Creet, did in fact raise both those defences in answer to the claim of the plaintiffs. (After stating the relevant paragraphs from the written statement his Lordship proceeded.) Those paragraphs make it perfectly plain that the defendant Arrathoon Theodore Greet did in fact put forward the very matters on which he now relies in the present suit as constituting a ground for the rectification of the contract of guarantee. The other two defendants in Suit No. 1476 of 1928 did not, in their written statements, raise the defence that the instrument of guarantee did not represent the real intention of the parties to it. They were content in the previous suit to take their stand upon their submissions with regard to the true construction of the instrument of guarantee itself. However when the suit was being heard before Buckland, J., on 26th April 1929, counsel appearing for the three defendants, Mr. Ameer Ali and Mr. Clough for defendants 1 and 3 , and Mr. Meyer for defendant 2 followed the common practice of the Courts in this country and raised the issues which they wished the Court to determine in the suit. It appears from the minutes of the proceedings before Buckland, J., on the date I have mentioned that Mr. Ameer raised the following issues:

1. Was it agreed by the terms of the guarantee contained in the letter of 9th February 1927, that the defendant should only be liable for any deficiency after sale of the property mortgaged to secure the loan of 40 lakhs by Stephen ?

2. Have the defendants been discharged from their liability on the said guarantee by the sub-mortgage, dated 14th February 1927, by Stephen, in favour of the Imperial Bank ?

6. It appears from the minutes that Mr. Meyer on behalf of defendant 2 adopted the issues raised by Mr. Ameer Ali and it also appears that ha deliberately abandoned any defence based on any agreement or otherwise apart from the letter of guarantee and did not raise any other issue. It seems to be clear therefore that at any rate so far as defendant 2 is concerned, upon the broad principle of estoppel ho cannot now be heard to set up his present contention and found a claim for rectification (which after all is only a defence by way of attack), having regard in the attitude adopted by him through his learned counsel at the hearing of the previous suit. Buckland, J., in his judgment referred to the matter in these terms:

Oil behalf of defendant 2, Mr. Creet, the issues submitted on behalf of the other defendants were adopted. Learned counsel who appeared for Mr. Creet, who had by paras. 7 and 8 of his written statement (as a matter of fact that should have been paras. 6 and 7) indicated a defence apart from any question of the terms of the letter of guarantee, stated that he abandoned anything based on agreement or understanding outside that letter. The ease therefore resolves itself into a question of construction.

7. And, his Lordship proceeded to deal with the matter solely upon that basis.

8. As regards the other defendants in the previous suit, defendants 1 and 3, Carr Lazarus Phillips and Arrathoon Mackerthoom Arrathoon, it seems to me that it would have been open to their learned counsel, having regard to the practice which obtains in Courts in this country, if they had thought fit, to have asked the learned Judge at the trial to allow them to raise the same issues which had been raised by their co-defendant Creet in paras. 6 and 7 of his written statement. It is generally the practice of these Courts to allow the parties, if they so desire, to travel outside the strict ambit of their written pleadings, when it appears desirable that this should be done, in order that the matters in dispute between the parties may be finally determined.

9. I cannot help feeling that if Mt. Ameer Ali, in the exercise of his discretion, had wished to do otherwise than fall into line with the learned counsel appearing on behalf of Mr. Creet, he might even at the trial have raised as the defence the very matter which is in issue between the parties in this suit, Apart from that aspect of the case however in my opinion, the preliminary point which I have to determine does fall within the scope and contemplation of the provisions of Section 11. Civil P.C., and, in particular, within the terms of Expln. 4. It has to be borne in mind that the Court has to deal with this matter in accordance with the law of this country as laid down in statutory form. For good or ill much of the law to be applied in the Courts in India, has been embodied in the form of a Code and therefore it is not always right to attempt to adjudicate on points of law or points of practice by reference to English decisions on analogous points. With regard to Section 11, Expln. 4, there are a number of authorities in this country, the effect of which can be summed up in this way. If a matter which forms the ground of attack in a subsequent suit could have been alleged as a ground of defence in a former suit but was omitted to be so used in that suit, it must be deemed to have been primarily or substantially in issue in that suit within the meaning of Expln. 4. Now the ground of attack in the present suit is that the instrument of guarantee did not fully represent the actual agreement, arrived at between the guarantors and the lender. That is the basis of the plaintiff's claim in this suit.

10. It seems to me clear beyond all doubt that that ground of attack could have been alleged as a ground of defence in the former suit. In fact as I have already pointed out, it was so alleged by defendant 2, although at the trial he, through his counsel, thought; fit to abandon that particular line of defence. I have no doubt that had the other defendants so chosen they could have taken that de-fence in their written statement, or they might even have bean allowed to raise it at the trial before Buckland, J. In support of the proposition which I enunciated a few moments ago, I would refer to the cases of Moottoo Vijaya Raganadha Bodha Gooroo Sawmy Periya Odaya Taver v. Katama Natchiar (1860) 11 M.I.A. 50 and Doorga Persad Singh v. Doorga Konwari [1878] 4 Cal 190. The test to be applied for determining whether or not the matter might and ought-in the words of Expln. 4 -to have been made a ground of defence in the former suit, is indicated by Sir Dinshaw Mulla in his admirable notes on Section 11, Civil P. C., in those words:

'The question whether a matter might have been made a ground of attack or 'defence in the former suit rarely represents any difficulty. Whether it ought to have been made a ground of attack or defence, depends upon the facts of each case. As a general rule every ground of attack with reference to title sued on must be pleaded if necessary in the alternative, for the plaintiff will not he allowed to make a fresh case after wards.

11. I have no doubt whatever that the matter, which is now a ground of attack in the present suit, not only might but ought to have been made a ground of de-fence by all the defendants in the previous suit. Therefore this is a matter which does fall within the purview of Section 11, Expln. 4, Civil P. C. Mr. Pugh on behalf of the plaintiff in his very cogent argument before me, relied upon the well-known English case of Wilding v. Sanderson [1897] 2 Ch. 534. At first sight this case does appear to be favourable to the argument which Mr. Pugh has put before me, that the present plaintiffs are not barred by any principle of estoppel or res judicata. Mr. Pugh, in particular, relies upon the passage in the judgment of Lord justice Chitty, L. J., which appears at p. 552 of the report:

There is one point remaining. It is said for the appellants that, by reason of his subsequent conduct. Wilding cannot now complain of the order. It is urged that he has affirmed the con-tract as it stands expressed on the face of the order, and in the sense in which it was construed by the Court of Appeal. This argument, in my opinion, is urged in vain. Wilding has throughout maintained that the agreement ought to be construed in the sense in which he interpreted it, Stirling, J., thought he was right but the Court of Appeal held that he was wrong. He then applied by motion to Romer, J., to have the order set right hut he failed on the technical ground that this could not be done on motion. Thereupon he at once instituted the present action.

The order of November 1894, has not been acted upon in the meanwhile and the position of the parties has not been changed. A comparison of the two cases of Stewart v. Kennedy [1890] 15 A.C. 108 shows that, after failing in an attempt to obtain decision in his favour on a point of construction, it is competent for a man to institute an action to have the contract set aside. For these reasons I think the appeals ought to be dismissed.

12. This case at first sight does seem to create a difficulty, but there is a passage in the judgment of Byrne, J., who heard the case in the first instance, in which he refers to the case of Stewart v. Kennedy [1890] 15 A.C. 108 which puts the matter in a somewhat different light. The passage runs as follows:

Another argument put forward by the present defendants against granting the relief asked for by Wilding was that be had lost the right (if any) he might have had to rescission or cancellation by electing to stand on the judgment, and that it is therefore incompetent for him now to ask for the relief, which, if he had not made the election, he would have been entitled to And in support of this proposition the case of Stewart v. Kennedy [1890] 15 A.C. 108 and other cases were referred to. It is sufficient to refer to that alone as being the most authoritative and most favourable to the contention I am dealing with. In that case the contract was clear and unambiguous in its terms, and the party complaining has deliberately elected to take his chance of succeeding on the terms of the contract as they stood.

13. Now it does seem, in the present instance, that all the three defendants in the previous suit did elect to take their chance of succeeding upon the terms of the instrument of guarantee as it than stood. In these circumstances, it may well be that their position falls within the circumstances referred to by Lord Herschell in the House of Lords in his judgment in Stewart v. Kennedy [1890] 15 A.C. 108, where he says:

And now it is sought to reduce the contract simply on the ground that the appellant did not intend to make the offer which the Courts have held that ho did make. Such a contention is far-reaching in its consequences. It would apply in every case where the parties differed in their construction of an essential part of the contract. After litigating the matter through all the Courts without success, it would always be open to the defeated litigant to reduce the contract, provided he could show that he understood the contract to bear the interpretation for which he had contended.

Unless it can be distinctly shown that this has been held to be the law of Scotland, I am not prepared to yield to the argument urged on behalf of the appellant. The consequences of so doing would, I think, be most mischievous. As the Lord President said in the present case : 'If this plea were listened to, every litigant who is unsuccessful in a question as to construction and effect, or, to use the pursuer's own words, 'the import and effect,' of a contract, could at once have the remedy of reducing the contract which he had deliberately made and afterwards persistently misconstrued.

14. It does seem to me, as I have said, that the defendants were contesting the question of their liability towards the executors of Arrathoon Stephen's estate solely upon the basis of the terms of the written instrument itself. Under those circumstances they must be taken, having regard specially to the peculiar circumstances of this case to which I have already referred, to have made an election from which they ought not to be allowed to recede. They are accordingly estopped from re-agitating the matter upon the basis of an attack which might and ought to have been the ground of a defence in the previous suit. I accordingly hold that, upon the facts and circumstances of this particular case and by reason of the statutory provisions contained in the Civil Procedure Code, the plea set up by the defendant in para. 6 of the written statement is a valid plea and the plaintiffs claim is barred accordingly. It follows therefore that the suit must be dismissed.


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