Karia and Company Limited v Dhamani (Civil Appeal No. 45 of 1968) [1969] EACA 1 (21 March 1969)

Full Case Text

IN THE COURT OF APPEAL FOR EAST AFRICA AT NAIROBI

(Coram: de Lestang, V-P., Duffus and Law, JJ. A.)

## CIVIL APPEAL NO. 45 OF 1968

#### **BETWEEN**

A. J. KARIA & COMPANY LIMITED. $\bullet$ $\bullet$ $\bullet$ $\bullet$ $\bullet$ APPELLANT

#### AND

RAISHI MEGHJI DHANANI . . . . . . . . . . . . . RESPONDENT

(Appeal from the judgment and decree of the High Court of Kenya at Nairobi (Trevelyan, J.) dated 7th June, 1968

Civil Case No. 460 of 1967)

JUDGMENT OF DE LESTANG, $V-P$ .

The facts giving rise to this appeal are not in dispute and are the following. The appellants whom I shall call the sellers carry on business in Kampala, Uganda. The respondents whom I shall call the buyers carry on business at Thika, Kenya. On or about the 1st December, 1966, the sellers contracted to soll to the buyers 50 tons of Uganda mixed beans at 35/- per bag of 200 lbs. gross f.o.r. Kampala, delivery to be during February/March 1967. At the time of the contract, the exportation of beans from Uganda was prohibited except under licence issued by the Minister. On 26th January, 1967, the buyers requested the sellers to consign the goods to Nairobi Station. On 6th March, they changed their instructions and asked for the goods to be railed to Thika Station. Meanwhile, on 2nd March, the sellers who held several export licences including one for the export of 50 tons of beans to Kenya received a letter from the /Ministry...

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f,:inistry of Commerce and Industry, the relevant parts of

which read as follows:

"Ref: S.l'RE/41/02 MINISTRY OF COMMERCE .nm INDUSTRY, P. O. Box 2900 **1** Kl. MP/;. L,�, UGANDA.

2nd March, 1967.

Messrs. A. J, Karia & Co, **1** P,O. Box 3127 1 Kl,ViPAL.:.

Gentlemen,

# Cancellation of Licences Issued to Cover the Export of Produce/Foodstuff

I am directed to cancel with effect from today, 2nd March, 1967 1all unutilised licences issued for the export of produce/foodstuff from Uganda to any destination.

2. according to my records the licences detailed below had been issued to you in good faith. Please treat them as cancelled.

(Then follows a list of licences)

3. This action is being taken as a precautionary measure to protect Uganda's food situation,

**Youre** faithfully,

(signed) J. S, J'lusoke for PERl':Ii. NENI' SECRET,iRY MINISTRY OF COl-HERCE :. ND INDUSTRY **11**

On receipt of the letter, the sellers on 10th March wrote to the buyers informine them of the cancellation of their

licences and said:

"Under such circumstances, it is not possible for us to rail the contracted 50-tons Mixed Beans to you and there is no other way but to treat the said contract as cancelled. "

On receiving that letter the buyers cabled to the sellers:

**11**PLE;.'\. SE tELIVER 50 TONS UGa.,ND,: MIXED BR,NS CONTR.:,CT 2645 TO G..."1. RDEN FRESH LTD. BOX 3647 K.[i. MFi,Lii. ;. GI�INST Pil. YJ\ENI'**11**

They followed their telegram with a letter in these terms: /"Re: 50 Tons .••••

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### "Re: 50 Tons Uganda Mixed Beans Contract 2645

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In reply to your letter dated 10th March, 1967 regarding 50 tcns of Uganda Mixed Beans, we would like to inform you that we have sold these to M/s Garden Fresh Ltd., P. O. Box 3647, Kampala at the price of $\frac{4}{3}$ . 63/- per bag of 200 lbs gross for KAMPALA. We shall be most grateful if you would kindly deliver to M/s Garden Fresh Ltd. immediately."

The sellers refused to deliver the goods as instructed, whereupon the buyers instituted proceedings in Kenya in which they claimed damages for breach of contract owing to the sellers' failure to deliver the goods to the buyers or to their nominees at Kampala. The sellers resisted the suit on the ground that $(1)$ by the revocation of the licences the contract became impossible of performance and was frustrated and (2) the buyers were not entitled under the contract to require the delivery in Kampala otherwise than f.o.r. Kampala. The learned trial judge as I understand his judgment which with respect is far from clear, held that there was no frustration because it was not proved that the licences had been validly cancelled. He appears to have hold that the buyers' instructions to the sellers to deliver the goods to Garden Fresh Ltd., Kampala though incompatible with an f.o.r. contract did not constitute a breach of contract. Anyway, he found in favour of the The sellers appealed and the buyers cross-appealed. buyers. The first question for decision is whether or not the letter of the 2nd March, 1967 already quoted, validly cancelled the sellers' export licence. Cn this aspect of the case, the learned judge said "there was no cancellation for that which was purported lacked validity for no-one but the Minister concerned could effect it". In other /words $...$

words he held that to be effective the cancellation must be under the hand of the Minister himself which it was not. With respect, I am unable to agree, The letter has already been set out, It is clearly an official letter emanating from the Ninistry of Commerce and Industry and signed by one Musoke on behalf of the Permanent Secretary of that Ministry. The writer purports to act on the direction of the Permanent Secretary. In my view any communication emanating from a :Ministry must, a.t any rate until the contrary is �roved, be taken to be the act of the Minister and to convey his decision. It is but commonsense that a Minister c3nnot dO everything personally. He must act through other officials of his linistry and this is what has been done here, The letter merely convoys the Minister's decision to cancel licences, The buyers admitted �s much when their advocate in allowing thEl letter to go in at tha trial I said "I acccr-t the letter as being the official latter of the Uganda Government purporting to be what it is, **11**I am of tho view therefore that the licence was validly cancelled,

The next question is whether or not the contract w�s frustrated by the cancellation of the licence. It is ccntended for the sellers that in an f, o.r, contract like the r:resent one I it is the duty of the seller to transport the goods to the railway stetion, rail them and consign them to the dastination nominated by the buyer, that in the r·resent case the buyers were not entitled to have the goods delivered in Kampala or elsewhere excert f.o.r. Kampala and consigned to the declared destination, and that consequently the sellers did not commit a breach of contract in refusing to comply with the buyers' instructions to deliver the goods to Garden Fresh Ltd. in Kampala.

/For the., .•

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For the buyers it is contended that there was no frustration because in the absence of srecial provision in the contract I the sellers 1t1ere either under an absolute li�bility to deliver the goods f.o.r. Kampala come what may, or under a duty to make every effort to obtain a licence which they did not do; th3t the instructions to deliver to Garden Fresh Ltd. in Kampala were in accordance with the contract and that the buyers were absolved from nominating any other place as the sellers had signified their intention not to deliver anywhere in Uganda.

I think that the last contention can be disposed of in a few words. On 17th March, 1967 1the sellers informed the buyars by letter that they "could not deliver the goods in Uganda according to your instructions**11 •** The buyers instructions were to deliver the goods to **11**Mossrs. Garden Fresh Ltd. imm.adiat ely against payment **11•** This was not a term of the contract and the sellers were entirely within their rights to refuse to comply. The other letter in which the sellers informed the buyers that they were not bound to deliver in Uganda was written on 14th April long after the time for delivery had ex�ired, irrelevant in these proceedings. It is accordingly

*!1s* regards the other contentions, I think that I with the excertion of the two discussed below, those of the sellers are to be preferred. There is no dis�ute that in a f.o,r. contract it is a duty of the seller to deliver the goods at a named railway station and consign them to a destination nominated by the buyer. It is the duty of the buyer to declare a legal destination. In the present case the buyers did declare at least two destinations before the embargo was rlaced on the exrort of the goods and long before the time for /delivery ..•••••

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delivery had elapsed. On being informed of the embargo, the buyers instead of withdrawing the existing destination and declaring a legal one, instructed the sel lers to deliver to Garden Fresh Ltd. at Kampala. This the buyGrs were not entitled to do as the contractual place of delivery was f. o. r. Kampala. ii. condition in a contract relating to the r,lace of delivery enures for the bmefit of both parties to the contract and cannot be waived by one party without the c0nsent of the other. as Bailhache, J. said in Maine Spinning Co. v. Sutcliffe & Co. (1916-17) Al l E. R. Rep. at page 539:

11It is quite true, of course, that where a condition in a contract is whol ly for the benefit of, and entirely for the benefit of, one of the parties to the contract, such a condition may be waived by the person for whose benefit, entirely and solely, it was inserted in the contract; but where one of the terms of the contract is the mode of delivery, it is not a condition which the other party may waive, but it is a rart of the contract which has to be fulfilled by tho soller making delivery at that rarticular place and the buyer receiving delivery there, and it is not a condition which is ,:mtirely for the benefit of either �arty to the contract, and neither r-arty can waive it without the ccnsent of the other .11

It is argued for tho buyers that the duty to obtain the necessary licence was on the sellers �nd that as the contract was not expressly made 11subject to licence" the sellers were absolutely bound to perform the contract and in failing to do so were in br�ach. It is al so contended that in any case the sellers had a duty to take all re�sonable steps to obtain the licence and failed to do so.

There is nothing in the contract as to who was to obtain the licence but having regard to the provisions of the External Trade �et and to the fact that it is the ex�crt that is licensed it seems to me that it was for the sellers to obtain the licence. Also from a commonsense and �ractical roint of view, it was much easier for the sellers to do so than for the buyers. I do not think however that because

/nothing, .,.

- 6 - nothing was said about licences in the c0ntract the liability of the sellers must be held to be absolute. The parties must have known in the present case from their previous de�lings that a licence was necessary and it is significant that the buyers on being informed of the embargo did not seek to hold the sellers absolutel,;; liable but tried instead to change the mode of delivsry.

As regards whether the sellers took �ny reasonable steps there is no evidence that they did. In Karachi Gas Co. Ltd. v. Issag (1965) E. A. 42, a case in which the duty to obtain the necessary licence or rermit was on the buyer and his plea of frustration failed, Sir Charles Newbold, P. said at rage 54:

**11** 1 am satisfied that under this contract thore wa8 a duty upon the buyer to take all reasonable stcrs to obtain these r-ermits. In fnct the permits were not obtained and the buyer has put forward as an excuse for the failure to obtain them the fact that if he had made the necessary arrlications prior to repudiating the contract he would not have obtained them. Whero a person is under a duty to do something and he fails to do it and he puts forward as an excuse for such failure the fact that if he had sought to do it he w�uld not, for reasons beyond his control, have succeeded, then a he�vy onus is cast on him to explain his failure. On the facts cf this case the buyer had failed to aprly for the necessary permits and the only way in which he can excuse that failure is if he can satisfy the court that any application for such permits would have been 'foredoomed to failure. "

It was argued on behalf of the sellers that as this was a case of cancellation as opposed to one of refusal of a licence and as the buyers acted as if the contract to exrort was off, it was not necessary for them to do more. I am unable to agree. The licence was cancelled on the 2nd March, 1967 and the reason for cancellation was to protect Uganda's food situation. This suggests a temporary embargo only. Indeed it did not last for long as on the 20th �pril, 19671 tho sellers exrorted to oth�r buy�rs in Kenya 140 bags of mixGd beans. In the circumstances it is impossible /to say •••••

to say that any representation which the sellers could have made to the Minister was foredoomed to failure. It is interesting to note that at the time of delivery the price of beans had nearly doubled and one cannot help thinking that, having made a disastrous bargain, the sellers were quite content to do nothing hoping to be relieved of their obligation under the contract. Indeed their first reaction was to treat the contract as cancelled. That being the rosition, the sellers failed in my view to prove frustration of the contract.

I would accordingly dismiss the appeal, The crossarreal was argued together with the appeal and succeeds on one ground only viz the very ground on which the appeal failed. In these circumstances I would dismiss the appeal with costs and allow the cross-appeal also with costs subject to there being one bill of costs only.

> Dated at Naircbi this 21stday of March, 1969.

> > M. C. N. DE LESTANG VICE-PRESIDENT

$\sqrt{ip}$

# IN THE COURT OF APPEAL FOR EAST AFRICA AT NAIROBI

(Coram: de Lestung, $V-P$ ., Duffus, and Law, JJ. A.)

# CIVIL APPEAL NO. 45 OF 1968

**BETWEEN**

A. J. KARIA & COMPANY LIMITED. APPELLANT $\cdots$ A N D

RAISHI MEGHJI DHANANI . **RESPONDENT** $\cdots \cdots$ $\sim$

> (Appeal from the judgment and decree of the High Court of Kenya (Trevelyan, J.) at Nairobi dated 7th June, 1968

> > in

Civil Case No. 460 of 1967)

# JUDGMENT OF DUFFUS, J. J.

$\mathbf{1}$

I have had the advantage of reading the judgment of the learned Vice-President which fully sets out the facts in this appeal.

The relevant contract provided for the delivery of 50 tons of Uganda mixed beans F. O. R. Kumpala during the months of February/ March, 1967. The exportation of beans from Uganda is prohibited by the External Trade Act (Cap. 103) of the laws of Uganda except under an Export Licence issued by the Minister of Commerce and Industry. 'The appellant company, the sellers of the beans, then had the necessary export licence but due to a food shortage in Ugamda this export licence was cancelled as set out in the letter from the Permanent Scoretary of the Ministry dated the 2nd March, 1967. The trial judge found that the cancellation had not been satisfactorily proved but I entirely agree with the Vice-President that the evidence before the trial court clearly established that the export licence had in fact been validly cancelled. The contract for sale provided for the delivery of the beams F. O. R. Kampala and the contract could therefore have been performed by the delivery of beans at the Kampala Railway Station for delivery to a destination within Uganda. The appellant company however, apparently regarded the contract as one providing only for the export of beans

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from Uganda and accordingly by its letter registered to the respondent buyers on the 11th March, 1967, the company after referring to the prohibition of the export of all types of produce from Uganda and to the cancellation of all export licences stated that in these circumstances it treated the contract with the respondents as cancelled. The cancellation of the contract was at this stage premature as (i) the contract could still have been performed by the delivery of the beans in Uganda (ii) it was, as the learned Vice-President has pointed out, the duty of the seller to try and obtain an export licence and there was still time for such a licence to have been obtained, the cancellation of export licences appeared to have been only a precautionary and temporary measure intended to protect a local food shortage and in fact there is evidence that the appellant compay obtained a new export licence the following month.

The cancellation of the contract by the appellant company's letter of the 11th March, 1957 amounted to a wrongful repudiation of the contract and the respondent buyers could have immediately treated this as a breach of contract and sued for damages. The respondents however, elected to truat the contract as being still in existence and attempted to have delivery of the beans made in Uganda. They did this by their telegram of the 13th March followed by their letter of the 14th March, 1967 asking for delivery to be made to M/s Gardon Fresh Ltd. in Kampala. The appellant company replied by its letter registered on the 18th March, 1967 stating inter alia:-

> "and regret to inform you that we cannot deliver the goods in Uganda according to your instructions."

The meaning of this sentence is not clear. It could mean either (a) a definite refusal to deliver the beams in Uganda or (b) refusal to deliver the beams according to the instructions of the respondents, that is to deliver to Garden Fresh Ltd. in Kampala.

On this latter point the argument is that the delivery must be made to the railway and not to some other address in Kampala. If this was the meaning intended by the appellant company then I

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would have expected the company to point this out in its letter or to ask for further directions; however, on referring to the further correspondence between the parties and also to the evidence of one of the directors of the appellant company at the trial, it appears clear that the meaning intended was that of a definite refusal to deliver the beams in Uganda and this was the meaning understood by the parties. I would refer here in particular to the appellant company's letter of the 14th April, 1967 in reply to the letter from the respondents' advocate dated the 7th April, 1967.

I agree that the appellant company have failed to establish that the contract was frustrated in that the company made no attempt to obtain a new export licence. Apart from this it is my view that the refusal to effect delivery in Uganda when taken together with the statement in the appellant company's letter of the 11th March, 1967, that the contract was cancelled, amounted to a definite repudiation of the contract such as entitles the respondents to damages for breach of contract as claimed in this suit.

I agree therefore with de Lestang, V-P. that the appeal be dismissed and the cross appeal allowed and also with his proposed order for costs.

Dated at Nairobi this 21st day of March.

W. A. H. DUFFUS $\cdots \cdots \cdots \cdots \cdots$ 1969.

JUSTICE OF APPLAL

$J. A.0.$

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#### IN THE COURT OF AFPELL FOR EAST AFRICA AT NAIROBI

(Coram: de Lestang, V-P., Duffus and Law, JJ. A.)

CIVIL APPEAL NO. 45 OF 1968

#### BETWEEN

A. J. KARIA & COMPANY LIMITED . . . . . . . . . . APPELLANT

$AND$

RAISHI MEGHJI DHANANI . . . . . . . . . . . . . RESPONDENT

(Appeal from the judgment and decree of the High Court of Kenya at Nairobi (Trevelyan, J.) dated 7th June, 1968

Civil Case No. 460 of 1967)

JUDGMENT OF LAW, J. A.

I have read the judgment prepared by the learned Vice-President. I agree with it in every respect, and I concur with the order proposed.

Dated at Nairobi this 21st day of March. 1969.

> $E. J. E.$ LAW <pre>........ > JUSTICE OF APPEAL</pre>

$\boldsymbol{I}$ certify that this is a true copy of the original

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