Kladitis and Another v East African Cotton Co. (C.A. 18/1931.) [1931] EACA 4 (1 January 1931)

### COURT OF APPEAL FOR EASTERN AFRICA.

## Before SIR JACOB BARTH, C. J. (Kenya), PICKERING, C. J. (Zanzibar) and THOMAS, J. (Kenya).

#### EMMANUEL KLADITIS and $1. \quad \dot{\phantom{0}}$

#### $2.$ JOHN SAMARAS.

(Appellants) (Original Defendants)

# EAST AFRICAN COTTON Co. (Respondents) (Original Plaintiffs). C. A. $16/1931$ .

# **Held** (4-7-31):—That where there is an agreement which in fact-<br>temporarily assigns a ginnery for a specific purpose for a considera-<br>tion, any breach of the conditions of the agreement creates a claim for damages and not for specific relief.

### Master for Appellants.

#### Atkinson for Respondents.

The Appellants (original defendants) were sued by the Respondents (original plaintiffs) on an agreement dated 27th. July, 1929, made between them for cash disbursed, interest thereon, further interest on the decretal amount until payment, and a declaration that the property described in the agreement together with all buildings and the ginnery thereon should be charged with the payment of the sums alleged to be due, and for an order for sale of the said properties in default.

According to the terms of the agreement the appellants, aslessors, agreed to place their ginnery, known as Moswero-Ginnery, at the sole disposal of the lessees, the respondents, for the purpose of ginning cotton for the 1929 season. It was further provided that only cotton, native or non-native, bought by the lessees (respondents), or bought by the appellants on behalf of the respondents, could be ginned at the ginnery. The charges for ginning were fixed in the agreement. The lessors. were to purchase native seed cotton at the ginnery on behalf of the lessees only at the prices offered and fixed by the lessees. The lessees undertook the financing of the purchase of only. all such cotton and the lessors were to be entitled to charge. a commission at the rate of Sh. 2 per 100 kilos only on seed cotton bought by them.

The lessees agreed to advance to the lessors a sum. of Sh. 100,000 with interest as stipulated in the agreement, and the lessors agreed to charge and mortgage the plantation at Moswero, and to execute at the cost of the lessors a properand legal mortgage when called upon to do so by the lesseesafter the money had changed hands. Accounts were to be madeup for the season's working, fifteen days after the ginning wascompleted, and all accounts were to be liquidated, including the said advance of Sh. 100,000, within ninety days of the same. All moneys outstanding were to be liquidated not later than 15th April, 1930.

In their defence the appellants stated that the respondents were satisfied to hold the title deeds of the defendants as security for the said advance, and that they were never called upon to execute a mortgage until 23rd December, 1929, i.e. after the cotton season had finished and when the loan of Sh. 100,000 had been paid off with the exception of Sh. 24,165/70. Thev denied that the sum claimed in the plaint was due or any sum at all and stated that all accounts between the parties had They asked for an order that their title deeds been settled. :so deposited should be returned.

The trial judge, who closely examined the evidence tendered as to the accounting which took place between the parties, held that there was due and owing by the appellants (defendants) to the respondents (plaintiffs) the principal sum of Sh. 17,305 with interest and costs, but did not deal with that part of the plaint claiming a right to a mortgage on the property.

The principal grounds of appeal were that the trial judge erred in his computation as to the amount of cotton ginned and as to certain figures in the accounts which were investigated by him, and the appellants prayed that judgment be entered for the respondents only for a sum of Sh. 3,791/75 and costs.

The principal point for decision in the appeal was whether, under the agreement between the parties providing that the ginnery was to be at the sole disposal of the respondents, the respondents were justified in charging the appellants at the rate of ten cents per kilo for ginning their (the appellants') cotton, and whether the fact that cotton other than that of the lessees (respondents) was ginned justified a claim by the respondents for recovery of the charges levied for such services.

Master.—The onus of proof of damage is on the respond-The appellants are not liable to pay the respondents in ents. respect of any shortage in the cotton ginned. Authorities -quoted : —

Indian Contract Act, sections 150, 152, 157, 212.

Boustead on Agency, Art. 56.

Bullen & Leake, 87 and 341.

(1861) 30 L. J. Com.: Pleas 232, Wilson v. L. & Y. Rly. Co.

(1887) 19 Q. B. D. 30, Schurtze & Co. v. Great Eastern $Rly.$ Co.

There is no allegation to the effect that there was delay in the ginning of the respondents' cotton owing to the ginning of appellants' own cotton.

Atkinson.—The weight of cotton conveyed to the ginnery for ginning purposes was not the same as the proportionate amount of cotton ginned. Clause 9 of the agreement provided that all cotton at the ginnery belonging to the lessees (respondents) should be properly stored by the lessors (appellants).

Appellants are liable for any deficiency. Considerable quantities of the cotton had been left in the open.

Master, in reply, quoted: $\longrightarrow$

S.73 Contract Act.

23 T. L. R. 258 Bullen v. Swan Electric Engraving Co.

With regard to storage of cotton in the open no damage had. been proved.

SIR JACOB BARTH, C. J.—This is an appeal from a judgment. of the High Court of Tanganyika in an action brought by the respondent against the appellants on a plaint which seems to have little relation to the issues eventually tried.

The facts are that the appellants agreed that their Moswero Ginnery should be used for ginning the respondents' cotton during the 1929 cotton season, the intention being that the ginnery should be at the sole disposal of the respondents. for the season and that the appellants should be the respondents' agent for buying cotton at the ginnery at prices to be fixed by the respondents. The agreement was financed by an advance by the respondents to the appellants of Sh. 100,000 bearing interest at 9 per cent per annum. The agreement between the parties was set out in a document dated 27th July, 1929, Ex. 1. Such agreement also set out the rates to be paid for ginning and the rate of commission on seed cotton purchased.

The respondents' claim was for Sh. 20,074/80, for various. sums for interest, and for a declaration of charge on certain specified property. The appellants' defence was that the Sh. 100,000 advanced and all other sums due to the respondents had been paid in full.

The appellants remained in possession of the ginnery and bought seed cotton for the respondents, received seed cotton bought by the respondents, and ginned such cotton.

The cotton received in the store amounted to $960,167$ kilos. The cotton was again weighed into the ginnery with the result that there was a difference of 16,207 kilos between the respective weights, only 943,950 kilos being weighed into the ginnery.

The shortage alleged from this difference in weights was in first and second grade and in plantation cotton and amounted in value to Sh. 8,857/82, vide the items of 12th December, 1929, in Exhibit 6. There was excess in grade three seed cotton. The appellants' contention is that the weight of seed cotton going into the ginnery was not taken for any other purpose than for the purpose of checking the percentage of lint obtained. It was not necessarily an accurate weight and further during fifteen days when 237,825 kilos were ginned the respondents alone were responsible for the weighing. The appellants resumed weighing when they received a receipt which was 34 kilos short. Meno Perdios has given evidence that he was working from 5 a.m. to 10 p.m. and that all the cotton received passed through the He has stated that he was never given orders that ginnery. the weights into the ginnery should be kept very accurately in order to test the weight of cotton taken into the store. This view of the purpose of weighing the cotton into the ginnery is in accordance with the evidence of the respondents' manager This witness stated that such weighing was for S. M. Patel. ginnery purposes rather than for testing the amount purchased.

Perdios' duties appear to have been strenuous. He had to buy cotton, pay natives for it, and weigh cotton into the ginnery during the rush season.

The weighing machine used for weighing cotton going into the ginnery was manipulated by a native.

A fair test of the amount of cotton ginned would be the lint produced. In this case the percentage was 31.82, and evidence has been adduced that this would be a fair return on 960,157 kilos. A further point for the appellant is that there is evidence of a usual loss of $\frac{1}{2}$ per cent in weight from the time the cotton is bought to the time it is ginned. The appellants were in the position of bailees of the respondents' cotton and as such had a duty to exercise reasonable care. In my view the evidence of loss in view of the fact that for fifteen days the respondents alone were responsible for the weighing, in view of the evidence regarding the purpose for which the weighing into the ginnery was done and the method of such weighing, and in view of the percentage of lint obtained, is insufficient to prove that the alleged shortage of 16,207 kilos did in fact occur. There has been no proof of negligence or want of reasonable ware, and in my judgment the appellants should succeed on the item of Sh. $8,857/82$ .

The next item on which the appellants appeal is the sum of Sh. 3.441. In the store were placed about 186 bales of the appellants' cotton (34,410 kilos) which owing to a partition breaking fell on fifteen bales of the respondents' cotton. $\ln$ order to get at these bales the appellants ginned their own cotton before these fifteen bales.

On the ground that the ginnery was under Ex. 1 (the agreement between the parties) to be at the sole disposal of the respondents, they have charged the appellants with 10 cents per kilo for ginning their (the appellants') cotton.

In my opinion the only claim available to the respondents on the facts would be one for damages and no damage has been proved, therefore in my judgment the appellants succeed on this item for Sh. 3,441 which should be disallowed.

The appeal should in my judgment be allowed. I am in agreement with the order for amending the decree and for costs appearing in my brother Pickering's judgment.

THOMAS, $J.-I$ agree.

PICKERING, C. J.—This suit was instituted to recover Sh. 20,074/80 together with interest at 9 per cent thereon alleged to be the unpaid balance of an advance of Sh. 100,000 advanced by the respondent to the appellant under an agreement dated the 27th July, 1929. The respondent further claimed a declaration that any unpaid balance was charged upon the appellants' ginnery and plantation, and that an order for the sale of those properties should be made. This portion of the claim was based upon the contents of paragraph 12 of the said agreement. $An$ account was lodged with the plaint which showed that the 100,000 advanced by the respondents had been duly Sh. accounted for, but that the respondents on the 23rd December, 1929, had sought to debit the appellants with a further sum of Sh. 19,511/63. The defence lodged simply stated that nothing was due. The suit came on for hearing, and there is no note upon the record indicating that any discussion of issues other than those arising upon the pleadings took place before each party adduced evidence. At the hearing of this appeal it has appeared that the bulk of the plaintiffs' claim rests upon the allegation that during August, September, October and part of November, 1929, the respondents' cotton was stored in the appellants' buildings, that a portion of the cotton disappeared, and that the appellants are liable to pay the full price for the quantity that disappeared. Whether this liability to pay was founded upon tort or contract did not appear upon the pleadings and was not considered during the hearing at first instance. Although the matter was not raised by the pleadings the learned trial judge would appear to have been of opinion that he could properly enquire whether a shortage of cotton had occurred, and further to have assumed that if a shortage had occurred the appellants were necessarily liable to pay the purchase price of the amount of such shortage.

In December the respondents under paragraph 15 of the agreement of the 27th July called upon the appellants to render accounts of the business transacted. One of the appellants'

clerks made up amongst other statements an account referred to as Exhibit 2, showing the quantity of cotton purchased by the parties and the weight of cotton ginned. From this account Exhibit 2 it appeared that the amount ginned was about 1.6 per cent less than the amount bought namely 16,207 kilos. The figures in Exhibit 2 were partly supplied by the respondents' servants, and it was not suggested at the trial that Exhibit 2 represented an agreed account of the various items it contained. Speaking of this account the learned judge directed himself: "Whereas this exhibit shows that the amount of cotton purchased and received was 960,157 kilos it shows that the amount of cotton weighed into the ginnery was 943,950 kilos. The defendants admit the accuracy of the figure 960,157 but say that the figure 943,950 is inaccurate. In the circumstances of the case it is for them to prove the inaccuracy." The learned judge then proceeded to consider the evidence adduced by the appellant in his attempt to show that the weighing into the ginnery was unreliable. He proceeded: "It seems to me impossible for the plaintiffs to show how or in what manner the cotton did disappear, if it did disappear, but it is to be remembered that the case of the defendants (appellants) is not that any cotton did disappear but that the weights arrived at in the ginnery must be inaccurate, and that they failed to prove. It seems to me that I have to accept Exhibit 2 as accurate, and in so doing the plaintiffs (respondents) are entitled to succeed on this head to the amount of Sh. 8,857/82."

With great respect to the learned judge I am unable to perceive how the circumstances disclosed in the evidence imposed the burden of establishing an inaccuracy upon the applicants: Of the total of 960,157 kilos of cotton purchased by the parties 324,997 kilos were bought by the appellants at Musowero and 635,160 kilos were bought by the respondents at other places and sent to the appellants' premises at Musowero for ginning. It is possible but improbable that the cotton bought by the respendents and sent to Musowero was re-weighed before it was placed in the appellants' stores. The appellants, however, were willing to agree 635,160 kilos as the weight of cotton purchased by the respondents, just as the respondents agreed and were willing to pay commission upon the basis that the appellants bought 324,997 kilos of cotton at Musowero. The weights may or may not have been accurate but the total was assumed to be correct. The appellants, however, were not willing to assume the accuracy of the second weighing which took place at the ginnery and the facts disclosed would seem to warrant their reluctance: At first appellants' clerk carried out the weighing at the ginnery. He said that he was never told that the second weighing was to be done accurately and it was never suggested that the ginnery weighing was to be used to

check the amount purchased. Whether the office and the ginnery scales were consistent we do not know. The variations of local scales is notorious. Whether at the ginnery the cotton was weighed in the bags in which it was carried from the stores. is not stated. The respondent himself said: "The weighing in the ginnery was for ginning purposes rather than for testing the amount purchased." After the appellants' clerk had weighed the ginnery cotton for about a month he was turned away on the 9th September as being unsatisfactory to the respondents and the respondents' man alone weighed at the ginnery up to the 28th September. He made a daily return of his total to the appellants. On the 28th September the appellants were in their turn unsatisfied and from that date onwards clerks of both parties interested themselves in the weighing at the ginnery. But even so the appellants' clerk says he was kept very busy buying at the office from hundreds of natives. In addition to these circumstances there were other reasons why the appellants were unwilling to be debited without further enquiry with the value of any difference between the purchase and ginnery weights. The respondent himself when giving evidence said: "There would be a waste of $\frac{1}{2}$ per cent or so when the cotton was weighed at the ginnery." This would result from evaporation. There would also be wastage as a result of rebagging at the store and transport along the road tothe ginnery.

In my opinion the burden of proving the accuracy of the ginnery weights lay upon the respondent (plaintiff). From what I have already stated it is in my opinion clear that the appellants. could not properly be ordered to pay for the whole of any difference in weights even though the ginnery weights were held to be accurate. But assuming that a loss of stored cotton was proved a further step was necessary in order to render the appellants hable. Their liability would, I suppose, be to make good any loss to the respondents arising out of the appellants' negligence as bailees. Now where goods are handed over to a warehouseman who assumes exclusive possession of the goods stored, a loss of goods in itself supports a finding of want of care. But in this case the warehouser did not have exclusive possession and I am unable to accede to the dictum of the learned judge that it was impossible for the plaintiffs to show how the cotton disappeared. The learned judge deliberately abstained from finding that cotton had in fact disappeared out of the appellants' custody. In this case both parties had access day and night to the stores and ginnery. The engineer employed was the respondents' own nominee. The respondent felt that (as he put it): "The ginnery belonged to us," and he said: 'I proposed that the entire charge of the ginnery should be given to my man who should have the locks and keys of the godowns also." It is stated that the appellants' boys used to

take the cotton to the ginnery at the appellants' expense, but paragraph 7 of the agreement ran: "All the transport for seed cotton, lint or cotton seeds must be arranged by the lessees," that is the respondents. I am satisfied that the respondents. and their employees went in and out of the appellants' premises at will and that the appellants cannot properly be regarded as having such exclusive possession as would render them primafacie liable in damages upon the mere proof of a shortage in the cotton stored. There is no suggestion that the conduct of business at the appellants' premises during August, September, October and November was other than was contemplated by the respondents when the agreement of the 27th July was made. The respondents made that agreement with the knowledge that one store was unfinished and that the appellants had already bought and stored cotton on their own account. $\mathbf{I}$ $\mathbf{n}$ the circumstances obtaining in this case the question as to whether the appellants had been negligent as bailees called for the most careful consideration; but by reason of the form in which the suit was brought that issue was never in the mind of the Court and was not referred to throughout the proceedings. The informal attempt to change the character of the suit in this respect has failed and the findings should not be allowed to stand.

Next item allowed by the learned Judge was Sh. 3,441. The finding in respect of this item is as follows: "In my opinion on the 22nd August, 1929 (this is an error for 22nd November), the season did not end within the meaning of the agreement, and the defendants were not entitled to gin their own cotton at the ginnery before the opening of the 1930 season without the permission of the lessees. On this item of Sh. 3,441 I accordingly find that the plaintiffs are entitled to succeed." Now in my opinion the wording of paragraph 1 of the agreement is difficult of construction, but for the purposes of this appeal it is not necessary for me to consider that rights arose under that paragraph. Whatever may have been the meaning of the words used the postponement of the ginning of fifteen bales of respondents' cotton from the 23rd November to the 7th December could not give to the respondents the right to claim the. profit earnings of the ginnery between these dates. The only claim which could arise would be for compensation for any damage consequent upon the delay in ginning the fifteen bales of seed cotton. No evidence of damage was given. Indeed there was evidence that at that time the price of lint was. rising, which would indicate that the respondents stood to gain rather than lose by the delay. No part of the evidence of Mr. Kladitis amounts to an agreement as to the measure of damage for any delay at the end of November. The item of Sh. 3,441 must for these reasons be disallowed.

A further item of Sh. 3,100 was allowed as interest. This part of the judgment resulted directly from the form in which the suit was brought. The respondents' claims if properly understood were claims for damages for breaches of contract and lack of care. So far as I am aware it is not usual to allow interest upon an amount awarded as damages. Interest was allowed in this case because the sum for which judgment was given was regarded as being an unpaid balance of the Sh. 100,000 advanced by the respondents. This error prevailed although the judgment in the Court below was based upon the fact that the parties both agreed that the figure 960,157 kilos represented the weight of the cotton actually purchased. If that agreement be acted upon then the appellants have accounted for the money advanced to them.

There are three other items included in the decree. These would appear from the judgment to have been admitted by the appellants at the hearing. They are Sh. 2,324/75, Sh. 1,200 and Sh. 267.

In my opinion the decree in the High Court should be varied to one for Sh. $3,791/75$ with interest at 9 per cent, from the 22nd July, 1929, to the date of the High Court decree and costs on that amount up to and including the first day of the hearing, and further that the respondents be ordered to bear the appellants' costs of this appeal, and of any costs of hearing subsequent to the first day of the trial in the High Court.