Eber v Thomsen (C.A. 1/1935) [1935] EACA 34 (1 January 1935)

## COURT OF APPEAL FOR EASTERN AFRICA.

Before SIR JOSEPH SHERIDAN, P., ABRAHAMS, C. J. (Tanganyika), and LAW, C. J. (Zanzibar).

## MORITZ EBER TRADING AS A. EBER & SOHN, Appellant, $(Original \ Defendant)$

A. THOMSEN, Respondent (Original Plaintiff).

C. A. $1/1935$ .

Contract—Principal and Agent—Contract to employ for fixed time—Anticipatory breach by Principal—Agent remunerated by Commission—Principal continuing to carry on business— Damages—Condonation of alleged misconduct by agent.

Action for damages for breach of contract.

The appellants appointed the respondent their agent for a term of five years for the sale on commission of goods imported by them into Kenya, Uganda and part of Tanganyika. Subsequently the appellants endeavoured to persuade the respondent to accept commission at lower rates than had been originally offered by them and agreed to by him, and threatened, if he did not accept these altered terms, to dispense with his services. The respondent elected to treat this as a repudiation of the contract and sued for damages.

The appellants pleaded that the respondent had been guilty of negligence and misconduct, which, they said, would have entitled them to dismiss him, and they further pleaded that, if there had been a breach of contract by him, as they were not bound to import any goods, he was not entitled to any damages.

At the trial judgment was entered for the plaintiff for Sh. 21,988/87, which included Sh. 20,000 damages for breach of contract.

$Held$ (15-2-35).-(1) That the respondent was justified in bringing an action for damages for an anticipatory breach of contract.

(2) That, as the evidence showed that the appellants had no intention of giving up trading, the respondent was entitled to damages.

(3) That, even if the respondent had been guilty of misconduct, such misconduct had been condoned by the appellants.<br>Turner v. Goldsmith (1891 1 Q. B. 544), Reigate v. Union Manu-<br>facturing Co. (1918 1 K. B. 592), Phillips v. Foxall (7 Q. B. 666), followed. Judgment of the Supreme Court affirmed.

Ross for the Appellants.

Atkinson for the Respondent.

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SIR JOSEPH SHERIDAN, P.—This is an appeal from the Supreme Court of Kenya.

The appellant is a German merchant residing in Hamburg. and the respondent is a German merchant and mercantile agent residing and carrying on business in Mombasa.

It is sufficient for the purposes of this appeal to state that the respondent was engaged by the appellant as his agent on a commission basis for a term of five years from the 1st January, 1932, in respect of all oil products imported by the appellant for the whole of Kenya, Uganda, and the Bukoba District. His commission on these products was to be $7\frac{1}{2}$ per cent on the selling price.

In paragraph 4 of the defence the appellant stated that he admitted the terms of the contract alleged, "but is a stranger to certain of the letters referred to in the said paragraph and will refer to the same when produced for their contents". I have been unable to understand what the appellant means by the words I have quoted, but I have taken it that the appellant admits the contract pleaded: certainly the learned Judge has found the contract to have been as pleaded by the respondent, and I agree with that finding.

Now the main issue in this case is whether the respondent was justified in bringing an action against the appellant on the grounds that the appellant had committed an anticipatory breach of contract. The correspondence in the case clearly shows to my mind that after the contract had been entered into the appellant not only pressed the respondent to accept a lesser rate of commission (at one time suggesting as low a figure as $1\frac{1}{2}$ per cent), but even threatened him that if he refused to conform with his proposal of a reduced rate of commission he would dispense with his services.

I would refer to the following evidence as showing that the appellant had no intention of giving up trading in the products referred to when he made these proposals to the respondent. The appellant's representative, Mr. Harbeck, in an affidavit filed on the 22nd day of February, 1933, stated: "(1) the defendant has never had any intention of abandoning or discontinuing his trade in Kenya and his goods and money will remain in Kenya; (2) As soon as I reached Kampala I proceeded to make arrangements for the continuance of our business, and a draft agreement between the defendant and Nanji Kalidas Mehta of Lugazi and Kanji Naranji of Nairobi, merchant, was prepared by Mr. George Ishmael of Kampala, advocate. This I am prepared to exhibit. The new contract has not yet been completed, and I am at present negotiating with Kanji Naranji in Mombasa. It is, therefore, clear that Mr. Thomsen's allegation that we contemplated

continuing our business through a fictitious company is unfounded". This affidavit speaks for itself, showing clearly that it was the intention of the appellant all along to continue trading in the products in respect of which he had appointed the respondent as sole agent in the area referred to.

In a letter of January 4th, 1933, Exhibit A. T. 77, addressed by the appellant to the respondent, he states: "What did vou do for the commission you ask? You have caused us losses. In case you are not satisfied with the commission of $2\frac{1}{2}$ per cent we must even withdraw this offer and we do so herewith"; and in a letter of January 11th, 1933, (A. T.79) similarly addressed, he writes: "As regards your commission, we mention again that a higher commission than $2\frac{1}{2}$ per cent is out of question", and later in the same letter he says: "If you will and cannot do that, we shall know other ways which enable us to do business on an absolutely safe basis"; and the last sentence of the same letter reads: "Then a legal action must take its course and, whatever the result will be, then we are absolutely free men and we shall then put everything on quite another basis".

From this evidence to which I have referred it is clear, firstly, that the appellant was determined to get rid of the respondent should the latter not agree to accept the altered rate of commission, and secondly, that the appellant not only had no intention of giving up trading but was actually contemplating making other arrangements for the carrying out of that trading. Different from the case of Rhodes v. Forwood, 1 A. C. (1876) 256, there was no question of determining the contract by reason of the disappearance of the subject matter of the agency. When, therefore, the learned Judge states in his Judgment: "I have already alluded to their letters of 20-10-32, A. T. 59, which enclosed a draft agreement, and 14-1-33, A. T.77, both of which make it plain that the defendants were asserting the right to vary the contract in a material term, namely as regards the rate of commission", I respectfully agree with him, as I also agree with him when he says earlier in his Judgment: "I have been unable to find either in the correspondence or in the evidence of Mr. Harbeck anything more than attempts to persuade the plaintiff to agree to a modification of the terms of his contract in a sense more favourable to the defendants".

I am consequently satisfied that when the respondent brought his action against the appellant claiming damages for an anticipatory breach of contract he was justified in doing so.

An argument was addressed to us by counsel for the appellant that the respondent, by reason of his disobedience to the appellant's orders, was guilty of such conduct as would disentitle him from succeeding in his action. This question of the alleged disobedience of the respondent was considered by the learned Judge and he came to the conclusion that it had not been

established. But to my view it is quite unnecessary in this appeal to consider whether or not the respondent was guilty of such misconduct, for it is the fact that, assuming he was so guilty, the appellant took no action in the matter; so still on that assumption, it must be taken that such conduct had been In these circumstances I am unaware of any procondoned. position in law entitling the appellant to say to the respondent: You have been guilty of conduct for which I might have dismissed you; consequently you are not permitted to bring this action against me". In short, once it is established that the appellant took no action against the respondent by dismissing him, the question of misconduct does not fall for consideration. The dietum in Phillips v. Foxall, 7 Q. B. (1872) at p. 680 quoted by the learned Judge is applicable; it reads: "Now the law gives the master the right to terminate the employment of a servant on his discovering that the servant is guilty of fraud. He is not bound to dismiss him, and if he elects, after knowledge of the fraud, to continue him in his service, he cannot at any subsequent time dismiss him on account of that which he has waived or condoned".

Finding, therefore, that the respondent is entitled to sue the appellant, the question is what sum he is entitled to recover. Obviously in a case of this kind the calculation of damages is not any easy matter, and I am prepared to say that the figures arrived at by the learned Judge is not an unreasonable one and should stand.

While I am referring to the question of damages I would say that Mr. Atkinson, for the respondent, withdrew his cross-appeal asking that the damages should be increased and in regard to the cross-appeal agreed that it should be dismissed, there being no order as to costs, and I would so order.

In addition to the question of commission in respect of the oil products there is a question for consideration as to whether the respondent is entitled to claim commission in respect of certain leopard traps which were ordered. Apparently the leopard traps could not be obtained from the manufacturers for importation into the area covered by the respondent's agency, and the appellant and respondent had recourse to the device of obtaining the traps from the manufacturers and importing them to Aden. no doubt with a view of having them sent from there subsequently to East Africa. The order was placed but before execution it would seem that the manufacturers discovered the ruse and refused to supply the traps. In respect of this transaction the appellant took his chance, and I agree with the learned Judge that he should pay the commission. I am unaware of there being anything contrary to law in the parties making the arrangement referred to.

I would dismiss the appeal with costs.

ABRAHAMS, C. J.—I agree and have only a few words to add. The correspondence which the learned President has detailed leaves me in no doubt that the appellant meant to convey to the respondent that, if the respondent did not meet his views in respect to the rate of commission, he would discontinue the agency and either employ another agent or in some way carry on business in East Africa without an agent at all, though he preferred to use language to keep the respondent in the dark as to which modus operandi he meant to adopt. If there were any uncertainty as to what the appellant intended to convey by his letters the affidavit of Mr. Harbeck of the 11th March, 1933, disposes of this.

As to the contention of the appellant that the conduct of the respondent disentitled him to succeed in his claim I know no authority which enable a principal to say to his agent: "I did not dismiss you but I had ample cause for doing so of which I did not avail myself when I might have done". This is asking the Court to condemn what the appellant condoned.

Then as to the leopard traps, an examination of the correspondence in proper chronological sequence clearly shows that the appellant was a party to the scheme for introducing these goods into East Africa by a circuitous route. The scheme which was perfactly lawful having failed, I can see no reason why the respondent should be made so responsible for it as to lose the commission he would have been entitled to claim had it succeeded.

LAW, C. J.—Respondent's claim against appellant was in respect of four items, namely: $-$

- (a) Sh. 6.100, balance of account, with interest thereon at 9 per cent per annum from the date of filing the action till judgment. - (b) Sh. $135,000$ , damages for breach of contract. - (c) Sh. $685$ , commission. - (d) Sh. $300$ , commission.

With regard to $(a)$ respondent was awarded Sh. 1,078/37 und regarding $(d)$ appellants admitted Sh. 225. The parties have accepted these figures, which are now not concerned in this appeal. As for (c), Sh. $513/30$ of the Sh. 685 which was disputed by appellants. This amount represented commission at 5 per cent on certain leopard traps, value Sh. 10,260, which respondent had sold, on behalf of the appellants, to one Alibhai Adamji Dar, who was resident in an area for which another person, by contract with the manufacturer, was the sole importer. As pointed out by the learned trial Judge, the parties, realizing that the manufacturer would not supply these traps for importation into an area which was closed against them, arranged to have them imported via Aden and Kismayu. There appears to be no

legal objection to such procedure being adopted. (Imperial Tobacco Co. of Indian v. Bonnan, 1924, A. C., p. 755.) Unfortunately, the manufacturer refused to supply the traps, evidently in protection of his sole importer. The full circumstances were known to the parties and I would agree that the respondent had earned his commission. The appellants must, therefore, fail in their appeal in this connection.

It remains to consider $(b)$ , the claim for Sh. 135,000, which is substantially the subject-matter of this appeal. With regard to this, it is necessary to know exactly what contract existed between the parties. This is set out in para. 5 of the plaint, whereby respondent alleged that, by certain correspondence and cables, he was appointed as the sole and general agent of the appellants for the whole of Kenya, the whole of Uganda and the Bukoba District (Tanganvika), for a term of five years from the 1st of January, 1932, in respect of all oil products dealt in by the appellants and in respect of all other export goods exported by the appellants to those areas. Further, that the appellants should pay to the respondent commission at the rate of 7% per cent on the selling value in respect of petrol, kerosene and other oil products. Certain other terms were agreed upon, which do not concern this appeal. Respondent alleged that appellants refused to carry out this contract, and in particular refused to pay commission at the rate agreed upon, and also expressed their intention of carrying on the business in Kenya under a fictitious name. The appellants, in para, 4 of their defence, admit the terms of the contract as alleged, but plead that the term of 7<sub>2</sub> per cent commission was obtained by respondent by misrepresentation in that he wilfully or negligently concealed from the appellants the fact that a Consumption Tax of 15 cents per gallon (raised to 35 cents as from the 25th July, 1932) was pavable on petrol and oil products for the whole of Kenya. Further, that it was respondent's duty to acquaint himself with the existence of such tax. Finally, that they never refused to carry out the contract or committed a breach thereof as alleged by respondent, but that the rate of commission was reduced from $7\frac{1}{2}$ per cent to 5 per cent by mutual agreement. In the alternative, appellants pleaded that if they did put an end to the contract they were entitled to do so because of the negligence and incompetence of the respondent. both as alleged and because respondent did, and refrained from doing, certain acts in regard to an action which had been brought against them by a firm called Walli Hasham & Co. and also with regard to borrowing money from that firm contrary to appellants' By way of counter-claim appellants ask for a instructions. declaration that the respondent by his conduct and in particular by bringing the action, committed a breach of the contract which had thereby become void and of no effect.

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On the claim under (b) the respondent was given judgment for Sh. 20,000, and it is with regard to this that this appeal is substantially concerned.

At the hearing of the appeal, the question of the reduction of the rate of commission from $7\frac{1}{5}$ per cent to 5 per cent was abandoned.

In their Memorandum of Appeal, the appellants repeat their allegations of misconduct, incompetence and negligence against respondent, arguing that such conduct entitled them to dismiss the respondent—if in fact they had so dismissed him—and thus to terminate the agency. These matters were fully considered and discussed by the learned trial Judge, and it is only necessary for me to say, for the purpose of this judgment, that I entirely agree with his conclusions thereon. In my opinion, these allegations are answered by the case of Phillips v. Foxall (1871-72, 7 Q. B. p. 666). The fact is that appellants did not dismiss the respondent at the time the acts complained of occurred, and, in view of the decision in the case quoted above, they cannot be permitted to bring these matters against respondent at a later stage in order to attempt to justify their action.

The appellants also urge that they had never waived their right to have the rate of commission $7\frac{1}{2}$ per cent altered. It is difficult to appreciate this contention in view of the fact that a concluded contract was pleaded by respondent and admitted by appellants of which a material term was this-rate of commission. It is also observed that the $7\frac{1}{6}$ per cent was offered by appellants themselves in unqualified terms (see A. T. 7 dated 17th November, 1931) which, to use their own language, "is usual in trade".

The real point of substance, so I consider, which has been argued before us, is whether the appellants threatened to put an end to the contract or whether they were merely endeavouring to get the respondent to accept less generous terms. In this connection we have been referred to Exs. A. T. 47, A. T. 59, and A. T. 77, respectively dated the 24th September, 1932, 20th October, 1932, and 4th January, 1933, and it is claimed on behalf of the appellants that this correspondence could not possibly have amounted to threat or refusal on their part to carry out the contract. With this I cannot agree. Also, whatever may be the truth regarding the interview between respondent and Mr. Harbeck early in February, 1933, the cumulative effect on respondent of all these circumstances was undoubtedly that he understood that appellants had decided to discontinue business with him, and that he was therefore entitled to repudiate the contract and bring this action for damages. The proof of the pudding is said to be in its eating, and certainly respondent's impression, which I accept, seems to have been confirmed when one refers to the

contents of Mr. Harbeck's affidavit of the 20th February, 1933. I have no hesitation, therefore, in agreeing with the learned Judge that appellants did refuse to carry out their part of the contract on the terms as agreed and that respondent was entitled to repudiate the contract.

We have been asked to say whatever may have been the rights of the parties when the suit was filed, the respondent nevertheless had no cause of action against appellants because no term could be read into the contract that they were bound to provide respondent with business throughout the five years. At the highest, the appellants claim that respondent is only entitled to be paid for such business as they might put in his way during that period. The learned trial Judge has very carefully discussed the law in this connection, but, in my view, none of the decided cases referred to can be applied exactly in this case. The position is this: appellants gave a contract to respondent whereunder he was entitled to earn a commission on all the business of the appellants within a certain area within a certain period. Appellants now say that they intend continuing business in that area and will conduct it themselves. Had they said they would do no more such business, then I would agree that the Rhodes v. Forwood rule (1878, 47 L. J. Ex. p. 396) would apply, and that no action could lie against them. But they intend to carry on their business (see the observations of Lord Penzance at p. 404). In my opinion, this is a distinct breach of the contract. for which respondent is entitled to damages.

Regarding the damages, I have no reason to disagree with the amount awarded. For the foregoing reasons it follows that appellants are rot entitled to the Decluation they ask for and that the Counter-claim was properly dismissed.

Respondent filed a Notice of variation of judgment on the question of damages. By consent this was withdrawn and it was agreed that no order should be made thereon as to costs.

In the circumstances, I would dismiss this appeal with costs.

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