Adam v Bhagwanji and Company (Civil Appeal No. 24 of 1949) [1949] EACA 13 (1 January 1949)

# COURT OF APPEAL FOR EASTERN AFRICA

## Before Sir Barclay Nihill, C. J. (Kenya), Sir G. Graham Paul, C. J. (Tanganyika), and SIR JOHN GRAY, C. J. (Zanzibar)

### A. H. ADAM, Appellant (Original Plaintiff)

## **BHAGWANJI and COMPANY, Respondent (Original Defendant)** Civil Appeal No. 24 of 1949

(Appeal from decision from H. M. Supreme Court of Kenya—Thacker, J.) Contract—Agency—Control of Import Regulations.

By letter dated 16th January, 1948, the respondents recited that they had obtained an import licence for 500 tents "on Messrs. Quilliam Products", that appellants had agreed to pay 5 per cent commission on landed costs, and to deposit with respondents a further 25 per cent cash on the value of a letter of credit to be opened by respondents in "your suppliers name", the balance to be paid on presentation of shipping documents.

The appellant agreed to these terms. The goods were shipped by appellant's suppliers by Bill of Lading and declared invoice to respondents who cleared the goods at Mombasa.

Held (4-8-49).—(1) There was nothing in the letter to suggest a contract of sale between respondent and appellant and the contract was one of agency.

(2) There was nothing in the Control of Import Regulations to prevent an importer applying for an import licence so as to serve a principal or oblige a friend who is unable to get a licence.

(3) The respondents have the rights of reimbursement and of lien which are conferred upon agents under the Indian Contract Act.

Cases referred to: Ireland and others v. Livingston (1872), 27 L. T. R. 79; and Jefferson v. Querner (1874), 30 L. T. R. 867.

Khanna for the Appellant.

Slade for the Respondent.

JUDGMENT (delivered by SIR BARCLAY NIHILL, C. J. (Kenya)).—The material point for our determination in this appeal is whether the learned Judge in the Court below was right or wrong when he found as a fact that the relationship between the parties was that of principal and agent. If he was wrong then everything Mr. Khanna has urged in support of paragraphs 1, 2, 3 and 6 of the Memorandum of Appeal must be accepted and this appeal is entitled to succeed. What was in issue between the parties was clearly revealed by the pleadings and the task before the learned Judge was to decide on the documents and the oral evidence what was the true nature of the transaction which has brought about this litigation. So far as the essential facts are concerned there has been little or no conflict of evidence. An English firm trading under the name of Quilliam Products advertised in a Nairobi newspaper that they had bivouac tents for sale. The appellant saw the advertisement and got into touch with the advertiser and agreed to take a certain number at a certain price. It is evident that the respondent would never have come into the picture at all but for one fact. Owing to the system of import control obtaining the appellant knew that he had no chance of obtaining a licence to import a class of goods in which he had never dealt before; it was therefore necessary for him to find some importer willing in return for suitable consideration to get these tents into the Colony on his behalf as a part of that importer's licensed quota. The result of the appellant's efforts is seen in the document exhibit $1(b)$ , which signed as it is by both the respondent and the appellant, represents the contract made between them. Prima facie it is difficult to read into this document anything more than a communication between agent and principal, in which the agent states his terms for what

he is to do on the instructions received. The commission is to be 5 per cent and a letter of credit is to be opened in favour of Quilliam Products, who are described as the appellant's "suppliers". The appellant as requested signed this document at its foot and stated that he agreed to the terms therein set out.

Following this agreement telegrams passed between the appellant and Quilliam Products regarding the letter of credit, not be it noted, between Quilliam Products and the respondents (Exhibit 1 (c) and 1 (d)). Up to the time then that the goods arrived in Kenya there is no evidence of a direct agreement for sale between Quilliam Products and the respondents. After their arrival and the clearance and delivery in Nairobi much has been made of fact by Mr. Khanna that the documents disclose that the respondents made efforts to dispose of the goods to other likely purchasers. This is so, but on this point the learned trial Judge after hearing the witnesses accepted the evidence of the respondents that this was done solely on the request of the appellant who did not want the goods because the market was on the turn. There is no documentary evidence in support of the respondent's statement but there is also nothing to the contrary so that the learned Judge was entitled to make his finding on this conflict in the oral evidence, and it is not for us, an Appeal Court, to say that he was wrong. It is significant I consider that there is a gap in the correspondence between the 18th May, 1948, and 29th May, when the appellant's lawyers wrote to the respondents. It seems to me a fair inference to draw that during this interval efforts were being made to off-load the goods on some third party, and that it was the failure to do so that impelled the appellant to seek the aid of his lawyers. Be this as it may the learned Judge who saw the witnesses, has accepted the evidence of the respondents' manager on this point and that to my mind is conclusive. It was furthermore a finding entirely in keeping with all the documentary evidence up to the 18th May.

One point in this appeal at first gave me some difficulty. It is I think quite apparent that in approaching the respondents at all the appellant was in effect attempting to drive a coach and six through the Control of Imports Order, 1941. He could not import direct from Quilliam Products; it was necessary to have a conduit pipe. Were then the respondents in breach of paragraph 4 of the Order when they agreed to act in this capacity? Paragraph 4 reads as follows:-

"No person to whom an import licence has been granted may transfer such licence, or any part thereof except with the written authority of the Imports Controller."

It is the very definite evidence given in this case by the Assistant Imports Controller that has set any doubts I had on this point as rest. Apparently so far as the regulation of importation is concerned the Control only looks to see that goods on the restricted list are imported only by approved licences. What happens to goods after a lawful importation is no concern of the Control although such goods will then probably enter another sphere of control, namely price control. As the respondents did not transfer their licence in respect of these tents to the appellant they committed no offence against paragraph 4 of the Order, and since the commission they charged for their services was not in excess of the percentage profit they could have claimed under the Price Control Regulations on a first sale, namely 5 per cent, it follows that the arrangement they entered into with the appellant is not tainted by illegality. As regards the House of Lords decision in Ireland and Others v. Livingston, Vol. 27 L. T. R. 83 on which Mr. Khanna greatly relied I must confess that after a careful study of the judgment I can find little in the peculiar circumstances of that case to make it applicable to the quite simple facts of the instant case. I do observe, however, that in effect their Lordships found on a contract of agency that the agents had done their best to carry out the ambiguous instructions of their principal and that therefore they should not be held responsible for the loss which ultimately attached itself to the transaction. Here there was nothing ambiguous in the instructions and here the respondents did all they reasonably could do to perform their part of their contract with the appellant.

For these reasons I can see no ground for reversing the judgment of the Court below which dismissed the appellant's claim and allowed the respondents'. counterclaim for their outlay on the transaction. As my learned brother, the Vice-President, whose judgment I have had the privilege of reading, is of the same opinion, it follows that this appeal is dismissed with costs.

SIR GRAHAM PAUL, C. J. (Tanganyika).—In this case, as in so many of the cases before this Court where the parties are traders, the main question at issue is what was the material bargain actually made between the parties. In this as in other cases that is of course a question of fact. In this case our task of resolving that question of fact is made much easier than usual, indeed in my view is made perfectly simple, for the reason that the respondents were prudent enough to put into writing the arrangement between the parties and get that writing expressly agreed and signed by the appellant. The resulting document is in evidence $-$ Exhibit 1 (b).

That written evidence to my mind is so conclusive of the main issue in this appeal that I think it well to quote it in full. It is as follows: $-$

"Messrs. A. H. Adam,

Bhagwanii and Company, Nairobi.

P. O. Box 1986. Nairobi.

16th January, 1948.

Dear Sirs.

In accordance with your instructions we obtained an import licence in respect of 500 Bivouac Tents for two-men size on Messrs. Quilliams Products Ltd., Surrey, England. At the time of entering into business with your firm it was agreed that 5 per cent commission on landed costs Nairobi would be charged in the transaction by us and a further 25 per cent on cash would also be deposited with us on the value of the letter-of-credit to be opened by us in your suppliers name, and the balance would be paid on presentation of shipping and clearing documents: $\frac{2\pi}{\omega} \sim 1$

We shall now be very pleased if you will confirm the above terms by appending your signature to the postscript of this letter that this is so.

Thanking you,

We remain, dear Sirs,

Yours faithfully,

for Bhagwanji and Co.,

Manager.

P. S. We, Messrs. A. H. Adam, agree to the terms as mentioned in the above letter.

> A. H. Adam. $(Sgd)$

Witness:

$Date:$

It is the contention for the appellant that this document represented an agreement between the parties that the respondents would, on their own responsibility and for their own account, buy from Quilliam Products in England the specified tents, ship them to Kenya, and then re-sell or "Sub-sell" them to the appellant. In my view this document not only does not represent any such agreement but is expressly and manifestly quite inconsistent with the existence of any such $\frac{1}{2} \cdot \frac{1}{2} \cdot \frac{1}{2}$ agreement.

1948."

To my mind this document very clearly and definitely represents an arrangement whereby to a limited extent the respondents became the agents of the appellant in regard to these tents. The specification of the tents and the price had already been fixed by the appellant in his correspondence with the English suppliers before the respondents came into the matter at all. The respondents had no say whatever in choosing the goods or in fixing the price to be paid. All that to my mind makes complete nonsense of the suggestion that there was a contract of sale made by the respondents on their own account with the English suppliers.

Everything the respondents did in respect of these goods was as agents for the appellant. Exhibit 1 $(b)$ is simply a record that the respondents agreed to act as agents of the appellant to the following effect: —

- (1) To supply the necessary letter of credit to induce the *appellant's* suppliers. to supply the goods specified by the appellants, at the price fixed by the appellants. - (2) The respondents to charge 5 per cent commission on landed costs as remuneration for their said services as Agents. - (3) The cash advanced by the respondents to be repaid as to 25 per cent by a deposit and as to the balance "on presentation of shipping and clearing" documents".

It also recorded that the respondents in accordance with the appellant's. instructions had obtained the necessary import licence.

There is nothing whatever in Exhibit 1 $(b)$ to suggest that there was a contract. of sale of these 500 tents between the respondents and the appellant. The document is in all essentials quite inconsistent with such a sale.

That being the very simple contract of agency between the parties, the authorities and arguments put before us as to Sale of Goods have of course no application whatever to the contract in question or to this appeal.

The respondents as agents duly carried out their duties under the agreement, Exhibit 1 (b). Through their bankers against their own credit they fixed up payment to the appellant's suppliers in England. The goods were shipped by the appellant's suppliers in the ordinary way by Bill of Lading and declared Invoice to the respondents who cleared the goods through the Customs at Mombasa and had them sent up to Nairobi. It is to be noted that it was on the appellant's instructions that his suppliers consigned the goods to the respondents. The learned Judge in the Court below found that there was no delay for which the respondents. could be held liable in clearing the goods at Mombasa or in railing them to Nairobi, and that finding is not attacked in this appeal. Nor could it be attacked. on the evidence.

The respondents having thus completed their part of the agency contract. wrote to the appellant on 18th May, 1948, that they had done so, and asking the appellant to arrange to take delivery as soon as possible in Nairobi. The respondents informed the appellants in that letter that there were some tents short for which their Mombasa branch were lodging a claim with the shipping company a very ordinary happening and treated in the ordinary way by the respondents as agents for the appellant in regard to these goods.

On 29th May, 1948, the appellants' advocates wrote to the respondents refusing to take delivery of the tents "for the reason that the quantity of the goods is. less than they have contracted to buy". In this solicitor's letter, eleven days after delivery offered, emerges the first suggestion that there was a contract of sale between the respondents and the appellant and I can find nothing in the evidence to justify such a suggestion, though the fall in prices in May might perhaps. explain this attempt on the part of the appellant to get out of taking the goods. which his agents had had shipped to Mombasa, railed to Nairobi and offered to the appellant all in accordance with the appellant's instructions as recorded in Exhibit 1 $(b)$ .

The respondents as they were entitled to do rendered an account for their agency services and expenses. Liability for this was repudiated by the appellant and the appellant brought the present action to recover the amount paid in advance to the respondents under Exhibit 1 (b) and the respondents counterclaimed for the balance due to them for their services and outlays as appellant's agents.

The Court below dismissed the appellant's claim and gave judgment for the respondents on the counterclaim. From that judgment the appellant appeals to this Court.

In my view there is no substance whatever in this appeal. The learned Judge found as a fact—for in my opinion it was a finding of fact—that the arrangement made by the parties was one of Agency and not Sale of Goods. Having perused the record of the evidence, written and oral, and listened with patience to the lengthy argument of the appellant's advocate I am unable to see how the learned Judge could reasonably have come to any other conclusion.

That question of fact being decided adversely to the appellant there is really nothing more of much importance to be said; the whole basis of the appeal is gone.

I might however mention one further point, the effect of the Defence (Control of Prices) Regulations on the relations between these parties. The first thing to observe is that the arrangement between the parties came into being certainly for no other reason than that the appellant by reason of the practice of the Controller in refusing import licences to persons who had no past history in dealing with the goods in question, could not get a licence to import these tents. The respondents on the other hand had the necessary past history of importing such goods so they could get licences up to the quota allotted to them.

The object of the regulations and the Controller's practice is two-fold: $-$

- (1) To restrict the total imports into Kenya. - (2) To prevent "mushroom" traders coming into the trade because of advantageous war conditions (prices, shortages, etc.).

The first object is in the general public interest, the second object in the interests of established traders like the respondents.

Once a trader gets a licence to import certain goods and imports them, he can, subject only to price control, do what he likes with them. The Controller is not concerned with the reason why an importer asks for an import licence for specific goods. I can find nothing in the regulations to prevent an importer applying for an import licence for goods so as to serve a principal or oblige a friend who is unable to get a licence. On arrival of the goods the importer may clear the goods and pass them on to his principal or his friend. If he chooses to make such use of his quota neither the Controller nor anyone else can object. The contract in this case between the appellant and the respondents regarding these tents that the respondents should use up part of their quota to get the goods into the country and then hand them over to the appellant was quite legal and proper. Be it noted that there is no suggestion in pleadings or evidence that this contract made at the request and in the interests of the appellant was illegal in any respect or under any regulation. Nor in my view was there any such illegality.

For these reasons I would dismiss the appeal with costs.

SIR JOHN GRAY, C. J. (Zanzibar).—A proper decision in this appeal depends entirely upon a question of fact, and in particular upon the construction of the letter which the respondents wrote to the appellants on 6th January, 1948, and to the terms of which the appellants gave their written consent. As regards the oral evidence in the case the learned trial Judge has said that he has no hesitation in preferring the evidence of the respondents to that of the appellants and I can see no reason for holding that he was wrong in so doing. I agree with him that the relations between the parties were not those of vendor and purchaser but those of principal and agent.

In the circumstances the appellants cannot recover from the respondents, but the respondents on the other hand have the right of reimbursement and of lien which are conferred upon agents under the Indian Contract Act

During the hearing of the appeal we were referred to certain passages in the opinion of Blackburn J. (as he then was) in *Ireland v. Livingston* (1872) 27 L. T. 79 at p. 82, which at first sight might appear to lend some colour to the argument put forward on behalf of the appellants. But not only are the facts in that case distinguishable from those in the present case, but also the decision in that case was the decision of the House of Lords. The report of the case shows that, whatever opinions may have been expressed by the learned Judges to whom the case was submitted, the learned Members of the House each one of them dealt with the case as one of principal and agent and further held that the repudiation of the contract by the principal did not disentitle the agent to his rights as such. *Ireland v. Livingston* has in fact been explained and distinguished over and over again. I would venture to refer in this connexion to Jefferson v. Querner (1874) 30 L. T. 867, where Quain J. pointed out that the relations in Ireland's case had been held to be "not that of vendor and vendee, but of agent and principal".

It is therefore enough to say that in view of the facts in the present case *Ireland v. Livingston* cannot possibly assist the appellant.

I would therefore dismiss this appeal with costs to the respondent.