Janmohamed and Co. v Valabhdas and Co. (Civil Appeal No. 16 of 1956) [1950] EACA 255 (1 January 1950)

## H. M. COURT OF APPEAL FOR EASTERN AFRICA

Before SIR NEWNHAM WORLEY (President), BRIGGS (Acting Vice-President) and BACON, Justice of Appeal

## RASHID ALLARAKHIA JANMOHAMED & CO., Appellants (Original Plaintiffs)

## **JETHALAL VALABHDAS & CO., Respondents (Original Defendants)**

## Civil Appeal No. 16 of 1956

(Appeal from the decision of H. B. M. High Court of Zanzibar, Windham, C. J.)

Res judicata—Allegation of fraud in second proceedings—Whether in issue in first proceedings—Whether issue "heard and finally decided"—Civil Procedure Decree of Zanzibar, section 6, Explanation IV-Indian Code of Civil Procedure, section 11.

In the first proceedings, Zanzibar Civil Case No. 83 of 1953, the appellants had sued the respondents alleging that they had engaged the respondents as their agents for the sale of a consignment of cloves and that the agents had failed to account in full for the proceeds of the transaction. The consignment had in fact been sold while still affoat by the appellants to the respondents at a price of £830 per ton less 2 per cent, on which basis they had already accounted to the appellants. The High Court held that the respondents had not acted as agents for the appellants and dismissed the suit. The appellants filed an appeal, but before the appeal was heard moved the Court for leave to adduce additional evidence in the form of cablegrams sent and received by the respondents, the existence of which they had only discovered after the hearing on the ground that their suppression constituted a fraud on the Court. The motion was dismissed on the ground that the appellants could have obtained discovery but had not done so. The appeal was then heard and dismissed on the merits (E. A. C. A. Civil Appeal No. 46 of 1954).

The appellants then commenced fresh proceedings against the respondents alleging that they had been induced to sell to the respondents at £830 per ton by a false representation made by the respondents that "on or after 10th July the best market price for cloves operative in Semarang (Indonesia) was £830 per ton". They claimed that as a result of the sale they had lost Sh. 22,678/42 and claimed this amount as damages. The respondents raised the defence of *res judicata* and the trial Judge upheld this on the ground that the allegation of fraud was "a matter that might and ought to have been made a ground of ... attack" in the first suit and must accordingly "be deemed to be a matter directly and substantially in issue in such suit "within the meaning and by virtue of Explanation IV to section 6 of the Civil Procedure Decree of Zanzibar".

- Held (20-7-56).—(1) While the appellants might have pleaded the allegation of fraud in the first suit it could not be said that they ought to have done so when, at that time, they had no knowledge of the existence of the cablegrams on which they were relying in the instant suit. - (2) In the first trial the issue as to whether the price paid was fraudulently misrepresented as £830 per ton at best was not heard and decided.

Appeal allowed, case remitted to High Court for hearing on the merits.

Case referred to: Krishna C. G. N. Deo v. Challa Ramanna, A. I. R. (1932) P. C. 50. O'Donovan and Mukri for appellants.

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Talati for respondent.

BACON, J. A.—This is an appeal from the judgment and decree of H. B. M. Court of Zanzibar (in the High Court) in Civil Case No. 26 of 1955, whereby it was held and decreed that the plaintiffs', the present appellants', claim, must be dismissed in *limine* on the ground that their suit was barred as being res judicata in Civil Case No. 86 of 1953. I shall refer to those proceedings commenced in 1953 and 1955 as "the first suit" and "the second suit" respectively.

The history of the matter is as follows.

The appellant and respondent firms are dealers in cloves. Having shipped 11 tons from Zanzibar in June, 1953, the appellants made some oral arrangement with the respondents with a view to the sale of the consingnment c.i.f Semarang, an Indonesian port. Eventually the consignment, while still afloat, was sold by the appellants to the respondents at £830 per ton less 2 per cent, and the respondents accounted to the appellants on that footing.

On 8th October, 1953, the appellants filed the first suit on the basis that by an oral agreement with the respondents they had engaged the latter to act as their agents for the sale of the cloves, that the respondents had been guilty of misconduct as such agents and that they had failed to account in full for the proceeds of the transaction. By their plaint the appellants claimed an account, payment of the amount found to be due (which they estimated at approximately Sh. 24,000) and interest. The respondents denied the alleged contract of agency. averred that the transaction was one of sale by the appellants to themselves at the price of £830 per ton less 2 per cent and contended that there was accordingly nothing due or owing from them to the appellants.

There was no-or at any rate certainly no full and proper-discovery of documents during the pendency of the first suit. Consequently a number of cablegrams between the respondents and their representative in Djakartakota were produced at the trial, but a number of other such telegrams did not then come to light. The partner in the appellant firm who had dealt personally with the respondents in this transaction testified, *inter alia*, to having been given allegedly false information by the respondents as to the selling price, and to having, as he said, been refused a sight of the letter of credit sent from Indonesia and been tricked into providing the respondents with an invoice showing a sale of the cloves by the appellants to them. Those accusations were no doubt admitted in evidence on the strength of the allegations of misconduct by an agent contained in paragraph 5 of the plaint.

In his note of the proceedings in the first suit the learned trial Judge. Robinson, C. J., wrote at the outset of the hearing (at p. 22 of the record) "Sale or Agency?". No other issue was noted as having been framed or agreed, and it appears that that was the basic and indeed the only question which the Court proposed to decide in that suit. It was the basic question raised by the pleadings, and the judgment proceeded on the footing that it was that upon which the Court was required to adjudicate, for the first paragraph of the judgment (at page 41) ended with the sentence "So the issue in the case is, was it an agency transaction or a sale", and the judgment ended thus: "I believe the plaintiffs sold their cloves to the defendants and therefore the cause of action for accounts on the footing of agency does not arise. The agreed purchase price has been paid. The case is dismissed with costs".

A few months later, in April, 1954, the appellants by chance became aware that a further series of relevant cablegrams, not disclosed at the trial of the first suit, had passed between the respondents and their Indonesian representative who had effected a further sale of the cloves by the respondents to a buyer in Diakartakota. Eventually the appellants somehow obtained copies thereof,

exhibited them to an affidavit sworn in July, 1954, and gave notice of motion in this Court for an order that they be at liberty to adduce additional evidence as to the contents of ten such cablegrams.

Meanwhile the appellants had lodged an appeal (Civil Appeal No. 46 of 1954) against the judgment of Robinson, C. J. The notice of motion was accordingly put on the file of that appeal, and the motion and the appeal itself were both heard on 28th July, 1954. By a ruling given that day this Court rejected the motion. The reasons for so doing, recorded in writing (now at p. 93 of the record), were as follows: $-$

"It is sufficient for me to say that the fresh evidence now sought to be admitted was available to the appellants at the trial, ... It has been suggested that the new evidence should be now admitted on the ground that there was a fraud on the Court of trial by the suppression of these documents. We do not consider, however, that there was any active suppression of documents so as to constitute such a fraud in the absence of any request for their production or denial of their existence."

At that time, of course, the appellants still sought to persuade this Court to reverse the judgment of Robinson, C. J., and to hold that their transaction with the respondents had been as between principal and agent. This court rejected the appellants' motion because the real reason why the appellants had been driven to seeking what was an indulgence at that stage was their own failure to obtain discovery or to issue the appropriate subpoena.

This Court then heard the appeal on the merits and dismissed it on the ground that it had now come down to questions of fact and no reason had been shown for disturbing the findings of the learned trial Judge. The result of the first suit therefore was an adjudication that the respondents had not acted as the appellants' agents, but that the appellants had sold the cloves to the respondents at £830 per ton less 2 per cent discount. Since the respondents had accounted to the appellants on that footing before the first suit was filed the suit was dismissed.

In May, 1955, the appellants filed the second suit. By their plaint they alleged that they had been induced by a fraudulent misrepresentation on the part of the respondents—namely "that on or after the 10th day of July, 1953, the best market price operative in Semarang was £830"—to sell the cloves to the respondents at that price and had thereby suffered a loss of Sh. 22,678/42. Accordingly they claimed that sum as damages. The claim was, of course, on the footing of the decision in the first suit that the transaction between the parties was one of sale and purchase. By their written statement of defence the respondents denied the fraud, denied that the sale was induced thereby, again averred (as was the fact) that they had paid the price of £830 per ton less 2 per cent and pleaded that the suit was barred as *res judicata*.

The learned trial Judge heard argument on the preliminary point as to res judicata and reserved his decision thereon. His judgment (at p. 65) upheld the respondents' plea, and he accordingly dismissed this second suit. His reason was that the appellants' allegation of fraud inducing a sale by them at a grossly depressed price was a "matter which might and ought to have been made ground of ... attack" in the first suit and must accordingly "be deemed to have been a matter directly and substantially in issue in such suit" within the meaning and by virtue of Explanation IV to section 6 of the Civil Procedure Decree of Zanzibar. In a word, he held that the newly alleged fraud had been constructively in issue in the first suit and thus could not be raised in the second.

Section 6 is identical with section 11 of the Indian Code of Civil Procedure. The parts of the section which call for consideration at the moment are these:—

"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 ..., litigating under the same title, in a Court competent to try such subsequent suit ... and has been heard and finally decided by such Court.

... Explanation III.—The matter above referred to must in the former suit have been alleged by one party and either denied or admitted, expressly or impliedly, by the other.

Explanation IV.—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".

The combined effect of the body of the section and of Explanations III and IV seems to me to be that the decision in the instant appeal must turn on whether the fraudulent misrepresentation which is alleged by paragraphs 7 to 10 of the plaint in the second suit and is thereby put "directly and substantially in issue" was or must be deemed to have been similarly in issue in the first suit and was therein "heard and finally decided".

I first compare the allegations of misconduct as an agent contained in the first plaint—that is to say, in paragraph 5 thereof—with the fraudulent misrepresentation alleged in the second plaint, viz. in paragraph 7 thereof. The former allegations embodied only one alleged falsehood said to have been stated by the respondents to the appellants, namely "that the cloves realized £830 per ton". For the rest, the appellants in effect averred that the respondents had concealed the full information to which they (the appellants) were entitled as principals and had not accounted for all the moneys received for the cloves. But the alleged fraudulent misrepresentation pleaded in the second plaint is quite different from that, for its subject matter is not the price which these particular cloves in fact realized, but the best market price operative at the material time in Semarang.

Now, it is true that if the appellants' suspicions had been sufficiently aroused before they filed their first plaint they could then have pursued the inquiries which ultimately led to their procuring copies of the cablegrams which have now assumed such importance. If they had done so, they "might" (within the meaning of Explanation IV of section 6) have pleaded in the first suit the fraud which they now allege. But I am unable to go so far as to say that they "ought" to have done so when in fact at that stage they had no knowledge of the existence of the essential evidence, that is to say of the means by which, as they now aver, they had been defrauded.

It is, however, arguable that, had the appellants sought to obtain proper discovery in the first suit they would have succeeded in forcing the respondents to disclose the whole series of cablegrams in question and "might and ought to" have amended their plaint by including as an alternative "attack" the case set out in the second plaint. But I think it is impossible to assume that any step short of a subpoena duces tecum on the manager of the Zanzibar Branch of Cable and Wireless Ltd. would have brought to light all the cablegrams recently discovered to have passed, and by the time such a subpoena had produced that result the first trial would have been part-heard. In that event the appellants would have been obliged to apply to the learned trial Judge for leave to amend the plaint by adding at a very late stage a plea of fraud, and in my view it cannot now be said that they must necessarily have succeeded in such an application at that stage; I do not think it is even probable that they would have so succeeded; it follows that in my opinion it is impossible to hold that the appellants "might and ought to" have raised the new issue at the first trial.

$\mathbf{1}$

Another aspect of the question is this. Assuming that the appellants had been fully aware of all the potential evidence when they filed their first suit, believing as they did that their true case rested on the relationship of principal and agent they would have had to plead an alternative case which was inconsistent with that view. The result might well have been that their case as a whole would have appeared to be perilously insubstantial, for their only witness (other than the manager of Cable and Wireless Ltd.) would have been obliged virtually to admit that he did not really know what agreement he had made with the respondents. The presentation of his complaint in such as elusive form might well have detracted considerably from his credibility when it came to his bearing the entire burden of proving the grave fraud now alleged. In those circumstances I think that to hold that the appellants were under an obligation so to weaken their case would involve unjustifiably straining the terms of section 6 against them.

Finally, there is the second limb of the question which we have to decide, namely whether the issue raised in the second plaint was "heard and finally decided" at the first trial. By virtue of section 6 that issue must have been so heard and decided if res judicata is to be established. But, if it was so heard and decided, it matters not whether it was properly raised by the first plaint if both parties chose to contest it at the trial, as was held by the Privy Council in Krishna C. G. N. Deo v. Challa Ramanna, A. I. R. (1932) P. C. 50. In my view, though there was some evidence relating to the market price of cloves in Semarang at the material time, it is abundantly clear that the issue as to whether that price was fraudulently misrepresented by the respondents to the appellants as £830 per ton at best was not tried or decided. In his judgment Robinson, C. J., said (at p. 43): "There is no allegation of fraud in the plaint", and throughout that judgment there is no suggestion of a decision on the fraudulent misrepresentation now alleged.

For those reasons I would allow this appeal with costs, set aside the judgment and decree in the second suit, remit the case to the High Court for hearing on the merits and order that the costs of the hearing of the preliminary point be paid by the respondents in any event.

WORLEY, President.—I also agree. An order will be made in the terms proposed by the learned Justice of Appeal.

BRIGGS, Acting Vice-President.—I agree and have nothing to add.