Fazel and Ors. v Ally and Ors. (Civil Appeal No 52 of 1971) [1972] EACA 12; (15 March 1972)

IN THE COURT OF APPEAL OF EAST AFRICA

AT MOMBASA

CORAM: (DUFFUS, P. LAW & MUSTAFA JJA.)

CIVIL APPEAL NO 52 OF 1971

 

BETWEEN

F.H. FAZEL}

G.A. FAZEL}

H.S. SOMJI trading in part­nership as

FIDAHUSSEIN AND COMPANY (KENYA)………………..APPELLANTS

AND

ABBASBHOY MOHAMED ALLY }

SHEFUDDIN MOHAMED ALLY }and

MOIZ ABBASBHOY trading in partnership as

"A MOHAMEDALLY & COMPANY" …………………………….RESPONDENTS

[Appeal from a judgment and decree of the High Court of Kenya at Mombasa (Mosdell In) dated 19^th August, 1971 in Civil Case No 131 of 1969]

 

15^th March, 1972

---

The following judgments were read:-

LAW,J .A.

This appeal arises out of a suit tried in the High Court of Kenya (Mosdell J.), The plaintiffs, who are the respondents in this appeal, are merchants carrying on business in Singapore. They claimed damages, for breach of an alleged contract to deliver six tons of cloves, from the defendants, who are merchants trading in Mombasa. The learned judge found that there had been a breach of contract on the part of the defendants, and awarded damages against them which he assessed at Shs 80,197/40, together with interest and costs. From this judgment the defendants have appealed and I shall refer to them henceforth as the appellants.

The memorandum of appeal fell into two main parts. First, it challenged the finding that there ever was a concluded contract between the parties and secondly, it disputed the quantum of damages awarded.

When the appeal opened before us, Mr. A.A. Lakha for the appellants began by informing us that he no longer contended that the judge had erred judge had erred in finding that a binding contract had been concluded between the parties. This was conceded, and the appeal was confined to the measure of damages awarded.

The contract price for the cloves was agreed at £875 per ton, to include carriage, insurance and freight (C.I.F.). The cloves were to have been shipped on the M.V "Madras Maru", which according to the plaint was due to sail on 8^th February, 1969. On the 22^nd February, 1969, the appellants wrote to the respondents repudiating the contract. This letter would in the normal course of events have reached the respondents by the 1^st March, 1969.

The respondents refused to accept this repudiation, and insisted, by letter dated 1^st March, 1969, that the cloves be shipped by the 15^th March. They also extended their relevant letter of credit to the 31^st March, 1969, in order, as they said, to give the appellants a further opportunity of fulfilling their contract. By a letter dated 10^th March, 1969, the appellants made it clear that they adhered to their view that there was no binding contract, and that they had no intention of shipping the cloves. On the 1^st April, 1969, in order to fulfill contracts entered into by them for the resale of the undelivered cloves, the respondents had to buy, in Singapore, 6 tons of cloves at £1660-10-7 a ton. The learned judge awarded them damages on the basis of the difference between £1660-10-7 and the contract price of £875 per ton.

The relevant statutory provision regulating the measure of damages for non-delivery of goods under a contract is to be found in section 51 of the Sale of Goods Act, Cap 31, which reads:­

"51

1. Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery.
2. The measure of damages is the estimated loss directly and nltural1y resulting, in the ordinary course of events, from the seller's breach of contract.
3. Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the current or market price of goods at the time or times when they ought to have been delivered, or, if no time was fixed, then at the time of the refusal to deliver."

Mr. Lakha, relying on sub-section (3) above, which appears to apply to this case, submitted that the material "time or times" when the goods ought to have been delivered was the 8^th  February, 1969, the date confirmed by the appellants as being the sailing date of the m.v. "Madras Maru", the named vessel on which the cloves were to he shipped in accordance with the contract.

In support of this proposition, Mr. Lakha cited the case of Melachrino v. Nickoll and Knight (1920) I.K.B. 693, in which it was held that, where the time for delivery is fixed by reference to the happening of an event, it is " fixed" within the meaning of section 51(3) of the Sale of Goods Act, 1893, which is identical with section 51(3) of the corresponding Kenya Act. The event, in Mr. Lakha's submission; was the sailing of the M.V "Madras Maru”.

Alternatively, relying on C. Sharpe and Co.Ltd. v Nosawa and Co. (1971) 2 KB 815, Mr. Lakha submitted that the material date was the date on which the shipping documents relative to the cloves could reasonably have been expected to have reached the respondents, say the 15^th February 1969, had the cloves been shipped on the M.V "Madras Maru".

Whichever of these dates applied, there was no evidence as to the market price of cloves on these dates in Singapore, although he had specifically cross-examined the respondents’ witness on this point. In these circumstances, Mr. Lakha submitted that although the respondents might have satisfied the court that the appellants' breach of contract had caused them a loss, the amount of that loss had not been proved, and only nominal damages should be awarded. He relied in this respect on MAYNE AND MCGREGOR ON DAMAGES, 12th Ed, page 202, paragraph 203, where the following appears:-­

"Nominal damages may also be awarded where the fact of a loss is shown but the necessary evidence as to its amount is not given.”

Mr. Mansur Satchu for the respondents supported the learned judge's choice of the 1^st April, 1969, as the material date for the assessment of damages, and he pointed to paragraph 9 of the defence, in which the appellants had pleaded, as an alternative ground of defence based on impossibility of performance, that the shipment date of the contract goods had been extended to 31^st March, 1969. This ground of defence, which was specifically withdrawn at the outset of the proceedings in the court below, was based on the respondents' unilateral act in extending the relevant letter of credit to the 31^st March. This unilat­eral act would clearly not, in my view, have had the effect of extending a contract of which the appellants were already in breach, without the concurrence of the appellants, which was neither sought nor obtained.

As regards the alternative material dates propounded by Mr. Lakha, Mr. Satchu complained with some justification that this aspect of the case was not properly canvassed at the trial, which was mainly concerned with the issue as to whether a binding contract had ever been concluded.

I have some sympathy for Mr. Satchu in this appeal.

The main ground of appeal, relating to the finding that a contract had been concluded,was dropped at the last minute, and the appeal was confined to the issue of damages which played a relatively minor part at the trial, and the grounds argued by Mr. Lakha on appeal were stated in very general terms in the memorandum of appeal; Mr. Satchu was clearly taken by surprise at the turn of events on the hearing of the appeal.

The view I have formed as a result of the arguments addressed us is that there is merit in Mr. Lakha’s submissions. In a case such as to this, where a seller in Kenya contracts, on the basis of an exchange of cables, to sell goods C.I.F. to a buyer in a foreign country, the goods to be shipped on a named ship, the material date for the assess­ment of damages for non-delivery should, in my opinion, be related to the probable date of constructive delivery by tender of the shipping documents after shipment under the contract.

I accept as the material date for this purpose the date suggested by Mr. Lakha, that is to say the 15^th February, 1969.

The learned judge found that the date of the breach of contract was the date of the appellants' letter of repudiation, the 22^nd February, 1969. Even if that was the correct material date, which I doubt, there was no evidence as to the market price of cloves on that date. In any event, with respect, I do not think the learned judge was right in taking the market price in force on the 1^st April, 1969 as the basis for his assessment of damages, as on any view the appellants were already in breach of the contract on some date in February. The question now arises, to what damages are the respondents entitled on the basis of a breach of contract by the appellants for non-delivery on 15^th February, 1969.Mr. Lakha submitted that there was no evidence at all as to the current or market price of cloves on that date, and the burden of proof being on the respondents as plaintiffs, they were entitled to nominal damages only.

With respect, I consider this argument to be an over-simplification of the position.

There was evidence by the respondents' witness that, relying on the contract, they re-sold the cloves in Singapore on 27^th January, 1969, at £961-19-3 a ton. The same witness deposed that in order to meet this commitment, the respondents were forced to buy cloves in the open market in Singapore on 1^st April, 1969, at £1660-10-7. It is true that this witness also deposed that during this period the price of cloves fluctuated, but in view of the sharp rise in price it seems to me to be safe, on a balance of probabilities, to assume that any fluctuations downw3.rds must h::1ve been minimum, and that the general trend of fluctuations must necessarily have been upwards. On the 3^rd March, 1969, the State Trading Corporation in Zanzibar were quoting £1643 per ton C.I.F. Singapore, and on the 8^th March another Mombasa merchant quoted £2000 per ton. Bearing in mind that it was for the respondents to prove their loss, and their complete failure to adduce evidence as to the actual market price of cloves on 15^thFebruary, 1969, I am nevertheless satisfied that on that date the price cannot have been less than £96l-19-3 a ton, and I would assess the damages to which the respondents are entitled on that basis.

In any event, sub-section (3) of section 51 of the Sale of Goods ACT only provides a prima-facie, or rebuttable, method for the measurement of damages in cases where there is an available market. It does not purport to provide the exclusive method, and it is open to a plaintiff to rely, if he prefers, on sub-section (2) and prove the loss which directly and naturally resulted from the breach. In this case the respondents fully proved a loss of profit on the re-sale of the cloves of £521-15-6, and they are in my view clearly entitled to recover this sum, but not the sum claimed by them on the basis of what they had to pay for cloves, six weeks after the breach of contract.

It follows that in my view this appeal succeeds. I would amend the judgment and decree appealed from by reducing the damages awarded from Shs.80,797/- to Shs.10,435/50, with interest at 8% from 14^th July, 1969, to 19^th August, 1971, together with the costs of the suit. I would give the appellants the costs of this appeal.

DUFFUS, P.

The facts have been fully set out in the judgment of Law, JA. There was admittedly a breach of contract and the main issue on appeal was whether there was sufficient evidence on which the court could assess the damages.

Section 51 of the Sale of Goods Act, (Cap.31) applies and states;-­

“51.

1. Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery.
2. The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract.
3. Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was fixed, then at the time of the refusal to deliver.”

It is agreed that there was an available market for the goods in question but the apellants aver

1. that the time at which the market price of the goods should have been fixed has not been ascertained and
2. that there is no evidence of the market price of the goods at such time.

The market price is fixed in accordance with sub-suction (3) of section 5l at the time when the goods ought to have been delivered, or if no time was fixed, then at the time of the refusal to deliver.

Mr. Lakha for the appellants submitted that a definite time for the delivery had in fact been fixed but that no evidence had been given which could enable the court to fix that time.

He referred to the appellants' cable to the respondents of the 31^st January, 1969 stating If arranging ship “Madras Maru". This arrangement was accepted by the respondents and formed part of the contract.

This was a C.I.F. contract, and delivery under this contract would have been effected after shipment of the goods on the Madras Maru by delivery of the bill of lading and other relevant documents to the respondents.

There is no evidence to show when the Madras Maru sailed and again no evidence when these documents of title would have been delivered to the respondents in the due course of post.

The learned judge in considering damages said inter alia:-

“All that the plaintiffs are entitled to is the difference between the contract price and the market price at the time of the defendants' re­fusal to deliver which would appear to be 22.2.69, vide Ex. IA5. We know the contract price was £8 875 per ton. I think the market price may be taken as £B 1660.10.7 per ton. The price of cloves at the material time was rising."

The learned trial judge fixed the market price as at the time of the appellants' refusal to deliver and in doing so he accepted this time as the date of the letter written by the appellants and not as the date at which the letter was received by the respondents.

The letter was dated and apparently written by the appellants Ion 22^nd February,1969 but was not received by the respondents until the 1^st March, 1969.  On this question Law, J.A. agrees with Mr. Lakha's submission that the correct date for ascertaining the market price would be the date to when the shipping documents should have been delivered to the respondents.

Mr. Lakha then further suggested that this date should be the 15^th February, 1969. With respect I can find no evidence to establish this date. It is the date mentioned in the letter of credit dated 24^th January, 1969 as the latest date by which shipment should have been effected, but there is in fact no evidence to show when the Madras Maru sailed and no evidence to show when,the shipping documents would have been received by the respondents.

Both parties agree that there was considerable fluctuation in the price of cloves around this time. The respondents' witness Mr. Moiz Abbasbhoy in the course of the examination said this:­

"We-sold the cloves on 27.1.69. On 15.2.69 I don't know what the price of cloves was in Singapore. Nor on 1.3.69. The price of cloves in Singapore fluctuates considerably from day to day."

There was very little evidence given on this aspect of the case but we do know that the price of cloves in the first contract between the parties on the 22^nd January! 1969,was £800 per ton.

On the following day, 23^rd January, 1969 the appellants sent off a cable offering the six tons the subject of this contract at £875 per ton. A rise of £75 in one day and then in another four days the respondents re-sold these cloves at a price of £961 19s. 3d. and then that on the 3^rd April, 1969 the respondents purchased the cloves in the local market at £1,660 10s. 7d. per ton.

There is also in evidence a cable from the State Trading Corporation Zanzibar of the 6^th March, 1969 quoting £1,643 cost and freight Singapore and also a letter from other exporters in Mombasa, Hasanali Lakhani & Brothers Ltd. dated 8^th March, 1969 quoting £2,000 per ton c. & f Singapore.

The market was said to be a rising market and the prices I have quoted show very great variations in the prices. The amount of damages to be calculated in accordance with the method laid down in section 51(3) (supra) would depend on the exact date of the breach and the then market price of cloves.

There is in my opinion no definite evidence on either of these two matters. I agree that clearly the respondents have suffered damage but with great respect I find difficulty in agreeing with Law, J.A. on this matter.

He calculates the damages by taking the figure of £961 19s. 3d. as being the minimum market price for cloves which must have existed at the time that the cloves should have been delivered under the contract but there is in my opinion no evidence to support this proposition.

This figure £961 19s. 3d. is the amount that the respondents re-sold the cloves for. I do not know how this figure was arrived at, whether it included an amount for the payment of import duty or other expenses of landing the cloves and having them ready for sale in Singapore but apparently it included all these expenses as the deliv'3ry was to take place in the buyer's store in Singapore (see Ex.IV).

Another criticism of this figure is that this price is the arranged price of the cloves on the date of the ship's arrival in Singapore and not the date of the delivery of the shipping documents. Presumably the shipping documents would have been sent by air mail and although we have no evidence as to the duration either by the voyage by sea or of the time that would be taken by air mail, this Court must, I think, take judicial notice of the fact that Singapore is a considerable distance from Mombasa and that the arrival of the shipping documents by air mail must preceed the arrival of the ship by several days.

Two points arise here (a) that with the admitted fluctuation of prices, the difference of even a day might have considerably affected the market price and this might have been an increase or decrease in price and (b) in any event the market price was that of the cloves on a C.I.F. contract and not that of cloves already in Singapore. It would, therefore, in my view be unsafe and wrong to the figure set out in the contract (Ex. IV) as being the market price obtained on the day that the cloves should have been delivered.

Another aspect here is that the proposition was never the respondent’s case. The respondents did use the re-sale price, but the judge specifically disallowed this item of damages and there has been no  cross-appeal