Karamshi v De Souza (Civil Appeal No. 13 of 1940) [1941] EACA 1 (1 January 1941)

# COURT OF APPEAL FOR EASTERN AFRICA

Before SIR JOSEPH SHERIDAN, C. J. (Kenya), SIR NORMAN WHITLEY, C. J. (Uganda) and Sir HENRY WEBB, C. J. (Tanganyika).

## SHAH MOHANLAL KARAMSHI, Appellant (Original Defendant)

### T. A. DE SOUZA, Respondent (Original Plaintiff)

## Civil Appeal No. 13 of 1940

Appeal from decision of H. M. High Court of Kenya.

Contract-Evidence-Agreement-Execution of formal transfer of land as consideration for collateral agreement not referred to in the transfer deed-No inconsistency—Admissibility of evidence of the collateral agreement— Indian Evidence Act, section 92.

On 28-2-36 respondent owed appellant Sh. 4,000 on a mortgage of a plot of land and he agreed to transfer the plot to the appellant in extinction of the debt. At the same time it was agreed that the appellant would re-transfer the plot to the respondent on payment of Sh. 4,000 within the next four years. On this day the respondent executed a formal transfer of the land to the appellant in consideration of the Sh. 4,000 due on the mortgage. This document contained no reservation or reference to any option to re-purchase, but an informal document was made and provided that if the respondent paid the appellant Sh. 4,000 on or before 28-2-40 the appellant would re-transfer the plot to the respondent and that in the meantime the appellant was to collect the income in lieu of interest and he was to pay the outgoings. In 1937 the appellant sold the plot to a third party for Sh. 5,000. The respondent did not know of this transaction and on 8-2-40 he tendered Sh. 4,000 to the appellant and demanded a re-transfer of the plot.

In an action for specific performance judgment was given for the respondent: for Sh. 1,000 damages with costs.

Appellant appealed, his main contention on appeal being that by reason of section 92 of the Indian Evidence Act it could not be held that the execution of the transfer was the consideration for the option agreement and consequently this. agreement was *nudum pactum*.

Held (7-2-41).—That the circumstances showed clearly that the transfer was the consideration for the option agreement and that evidence of that agreement was admissible unless it:

was inconsistent with the transfer deed.

### Appeal dismissed.

Frith v. Frith (1906) A. C. 254 followed.

Figgis for the appellant.

Gautama for the respondent.

SIR JOSEPH SHERIDAN, C. J.-I am so much in agreement with the learned trial. Judge that I do not find it necessary to say much. It must be assumed that the parties intended to effect something when they entered into the document. Exhibit 1. For the appellant it has been contended that it is an unintelligbile document, whereas the respondent has given what to me seems a perfectly reasonable explanation of its origin. He said, "Yes, I transferred plot to defendant by Ex. 3 and by Ex. 1 he agreed to retransfer plot if I paid Sh. 4,000 within four years. If he had not agreed to re-transfer plot within four years I would not have signed Ex. 3". In short, the consideration for the execution of Exhibit 3 by the respondent was the agreement (Exhibit 1) on the part of the appellant to re-transfer

the plot. Because Exhibit 3 contains a consideration of Sh. 4,000 for the transfer of the land described therein, that fact does not exclude parol evidence to reveal the additional consideration for the execution of Exhibit 3 and thus make clear the origin and meaning of Exhibit 1 (Frith v. Frith (1906) A. C. 254). I would dismiss the appeal with costs.

SIR NORMAN WHITLEY, C. J.—This is an unusual and interesting case. The material facts are shortly as follows. In 1931 the respondent lent to the appellant Sh. 4,000 secured by a charge on a plot of land. He paid interest regularly, but in 1936 when the appellant applied for repayment the respondent was unable to find the money.

The parties were apparently on friendly terms and the evidence on the record satisfies me, as I think it satisfied the learned trial Judge, that the appellant who was anxious to get the Sh. 4,000 if possible even though he had to wait for it and did not really want the land, arranged with the respondent that if the latter would execute a transfer he the appellant would promise to re-transfer the land in the event of the respondent producing the Sh. 4,000 at any time within the next four years. On the 28th February, 1936, accordingly two documents were prepared and duly signed. One was a transfer of the land by the respondent to the appellant, the consideration stated being the Sh. 4,000 advanced in 1931 and still outstanding. The other was a very informal document drawn up by a friend of the respondent. The effect of this was that if respondent produced Sh. 4,000 in cash on or before 28th February, 1940, the appellant would transfer the land to him. If respondent was not able to produce this sum up to that date the agreement was to be regarded as cancelled. Meanwhile the appellant was to collect the rent "in lieu of interest". and to pay for necessary repairs, etc. It will be convenient to refer to this as the option agreement.

Thenceforward the appellant collected the rents. As to what happened between that date and February, 1940, there is a conflict of evidence. The appellant says that in October, 1937, he had an interview with the respondent at which the latter agreed to cancel or waive any rights which he had under the option agreement. The respondent denies this. It is not disputed, however, that the appellant in December, 1937, sold the land to a third party for Sh. 5,000. The respondent says that, he living in Eldoret and the land being at Kitale, he never heard of this sale and the learned trial Judge believed him.

On the 8th February, 1940, the respondent having the money available sent through his solicitor, Mr. Gautama, a letter to the appellant saying that he had the Sh. 4,000 now ready and asking to have the land re-transferred. Proceedings for specific performance were threatened in the event of an undertaking to transfer not being given within three days. The appellant did not give such an undertaking and this suit was instituted.

The learned trial Judge decided in favour of the plaintiff and awarded Sh. $1,000$ damages.

The principal point taken by Mr. Figgis on appeal was that by reason of the provisions of section 92 of the Indian Evidence Act the learned trial Judge was not entitled to find that the execution of the transfer was the consideration for the option agreement and that consequently this agreement being made without consideration was *nudum pactum* and could not be enforced.

The whole of the evidence and the circumstances point irresistibly to an arrangement between the parties whereby the respondent said that he would transfer the land, which he was not bound to do, in return for the appellant agreeing to re-transfer if the Sh. 4,000 could be paid in cash within four years. That being so the transfer was clearly the main consideration for the option agreement. The advantage to the appellant was the acquisition of the legal title to the land without the trouble and expense of mortgagee proceedings. Under the option agreement the appellant was also to have the rents which, it is in evidence, amounted to more than the mortgage interest.

In such circumstances the case of Frith v. Frith (1906) A. C. 254 is clear authority for holding that the Court may admit evidence as to the additional consideration and the present case is indeed stronger than that one inasmuch as the further consideration is here to be found in the other document, namely the transfer executed at the same time as the option agreement whereas in the English case. there was only oral evidence of the additional consideration. Section 92 really codifies the English law and the evidence as to this other contemporaneous agreement could only be excluded if it were inconsistent with the terms of the option. agreement which it is not. I am accordingly satisfied that the learned trial Judge: was right.

There remains the question of costs. It is contended that these should only have been on the Subordinate Court scale since the amount recovered was only Sh. 1,000. I think, however, that on the evidence and the findings of the learned trial Judge it was not unreasonable to claim specific performance, thus bringing the suit beyond the jurisdiction of a Subordinate Court. The Judge accepted the respondent's evidence, and the latter said that he was not aware that the appellant had sold the land. It would not be proper for us, even though the lawyer's letter was worded in peremptory fashion, to hold that the respondent knew of the sale. He lives in Eldoret and the land is in Kitale. The wording of the letter may have been due to an impression that under the terms of the option agreement the. re-transfer had to be completed by the end of the month. I would accordingly dismiss the appeal with costs.

SIR HENRY WEBB, C. J.—In February, 1936, the appellant was owed by the respondent the sum of Sh. 4,000 which was charged on a leasehold plot in Kitale belonging to the latter. On 28th February, 1936, by registered Transfer the respondent in consideration of the sum of Sh. 4,000 transferred to the appellant all his right title and interest in the said plot, and afterwards, on the same date. both parties signed an agreement by which the appellant agreed to sell the same lands back to the respondent for Sh. 4,000 cash on or before 28th February, 1940. and the respondent agreed to buy, but it was provided that should he be unable to pay the said sum of Sh. 4,000 up to 28th February, 1940, the agreement should be cancelled. Early in February, 1940, the respondent offered the appellant Sh. 4,000 and called upon him to carry out this agreement. Receiving no reply he sued for specific performance and other relief. In fact the premises had been sold for Sh. 5,000 to a third party in December, 1937. The learned Judge decided in favour of the respondent, but holding that in the circumstances a decree for specific performance could not be granted he awarded him Sh. 1,000 damages and costs.

The agreement sued on was clearly not a contract for sale but an option, and the main ground of appeal has been that as it shows no consideration moving from the respondent evidence of consideration was inadmissible and that therefore it was unenforceable. I was at one time inclined to accept this argument, but on consideration I have come to the conclusion that the correct view is that the evidence on both sides and, indeed, the defence itself, establish that the arrangement made between the parties in February, 1936, was that the respondent should discharge his liability to the appellant by transferring the premises to him on condition that he should be given an option to re-purchase them for the same sum within four years, and that the appellant agreed to this because what he really

wanted was, as he said, not the land but his money. And the only way in which such a transaction could be carried out was by first transferring the premises to the appellant so that he should be in a position to carry out his part of the bargain by granting the option: the transaction was all one, and the consideration for the execution of one document was the execution of the other. It is true that the agreement, which is inartistically drawn, omits to set out the consideration for it, but oral evidence of consideration may be given where, as here, that evidence is not in contradiction to the instrument itself; see Townend v. Toker, L. R.1 Ch. App. 446, re Holland (1902) 2 Ch. 360, Frith v. Frith (1906) A. C. 254.

The appellant also argued that the agreement had been cancelled by mutual agreement. This was a question of fact and after reading the evidence I am unable to say that the learned Judge was wrong in deciding it in favour of the respondent.

I agree that the appeal should be dismissed with costs.