INCAR TANZANIA LTD v MAGUGU FARM LTD AND COOPERATIVE AND RURAL DEVELOPMENT BANK 1995 TLR 8 (CA)

 INCAR TANZANIA LTD v MAGUGU FARM LTD AND COOPERATIVE AND RURAL DEVELOPMENT BANK 1995 TLR 8 (CA)

Court F Court of Appeal of Tanzania - Dar Es Salaam

Judge Kisanga JJA, Ramadhani JJA and Lubuva JJA

G CIVIL APPEAL NO 30 OF 1993

July 13, 1994

(From the decision of the High Court of Tanzania at Arusha, Nchalla, J.)

Flynote

H Sale of Goods - Contract of sale of unascertained goods by description - When

property passes from seller to buyer

Sale of Goods - Passing of property - Goods appropriated to the contract but seller has

yet to do pre-delivery service and to obtain customs clearance certificate for the goods

- Whether property in the goods passes. I

1995 TLR p9

KISANGA JA

-Headnote

In a contract concluded in Arusha the appellant agreed to sell a set of farm A

implements to the first respondent, delivery of the same to be effected in Dar es

Salaam. Part of the contract price was paid through a loan from the second

respondent. After payment of the contract price the first respondent's Managing

Director travelled to Dar es Salaam to take delivery of the goods but he could not

because they were not yet ready for collection; some pre-delivery services had to be

done to them and a customs clearance certificate obtained. He was asked to B go and

come back a number of times and each time the implements were not ready. He even

threatened to rescind the contract. Finally, the implements were consigned to the

appellant's office in Arusha, with the first respondent's Managing Director, anxious to

speed up the process, giving a lot of assistance. The railway C wagon carrying the

consignment to Arusha had an accident on the way causing damage to a tractor,

which was part of the implements bought, and on account of which the first

respondent refused to accept the goods. The respondents sued for breach of contract

before the High Court and were successful. On appeal the appellant sought to

convince the court that when the accident occurred, property in the goods had

already passed to the first respondent. D

Held:

(i) Where there is a contract of sale of unascertained goods by description

and goods of that description in a deliverable state are unconditionally appropriated

to the contract, property in the goods thereupon passes to the buyer; E

(ii) The contract in this case was for the sale of unascertained goods by

description but their appropriation to the contract was not unconditional; it was

subject to the appellant doing some pre-delivery services to them and obtaining a

customs clearance certificate, and property in the goods, therefore, did not pass from

the appellant to the first respondent; F

(iii) Since the consignor of the goods was the appellant's office in Dar es

Salaam and the consignee was the appellant's office in Arusha, the appellant remained

the owner of the goods notwithstanding that the said goods had been appropriated to

the contract; G

(iv) As the appellant company failed to deliver the farm implements in

accordance with the terms of the contract, it was in breach of the contract.

Case Infomation

Appeal dismissed

No case referred to. H

R.C. Kesaria and J.C. D' Souza, for the appellant

M. Maira and W.A.L. Mirambo, for the respondent

[zJDz]Judgment

Kisanga, J.A.: delivered the following considered judgment of the court: I

1995 TLR p10

KISANGA JA

A This appeal arises from the decision of the High Court (Nchalla, J) allowing the

respondents' claim based on a breach of contract for the sale of goods. The

background to the case may be summarized briefly as follows: Under a written

contract, Incar Tanzania Ltd, Arusha, the appellant in this appeal, agreed to sell a B

set of farming implements to the first respondent company. The implements consisted

of a Fiat tractor, a harrow and a chisel plough. The contract was concluded at Arusha

and delivery of the equipment was to be effected in Dar es Salaam. The contract price

was paid partly through a loan of Shs 4,000,000/= C from the Co-operative and Rural

Development Bank (CRDB), the second respondent, and partly from the first

respondent's own resources in the sum of Shs 202,000/=. After the contract price was

paid PW1, managing director of the respondent company, travelled to Dar es Salaam

to take delivery of the D implements there only to find that the items were not

ready for collection. There was yet to be done pre-delivery service to these

implements and a customs clearance certificate in respect of them was yet to be

obtained. It was not possible to register the tractor before a customs clearance

certificate was obtained in E respect of it by the appellant company. The respondent

was asked to go and come back a number of times but on each occasion he found the

implements not yet ready for collection. Out of frustration he treatened to rescind the

contract and demanded a refund of the purchase price which he had paid at Arusha;

but in vain.

F Thereafter the appellant company alleged that PW1 decided to take delivery of

the implements despite the absence of a customs clearance certificate. PW1, however

stated that a new arrangements was reached whereby he was to travel back to Arusha

and the appellant company was to transport the implements to its Arusha branch

where he (PW1) was to take delivery of the same. The Trial Judge believed the

version of PW1; we think he was entitled so to do. G

Again the appellant company asserted that on PW1's own request, it took the

implements to the railway station, Dar es Salaam and loaded them on a railway wagon

chosen by PW1 himself, for transportation to Arusha. The consignment so H loaded

included a trailer sold by the appellant to one Mr Mario Gikas of Arusha. The

appellant claimed that before PW1 left Arusha for Dar es Salaam, Mr Gikas had

arranged with him (PW1) to transport his trailer to Arusha. On the basis of such

arrangement, the appellant went on, it (the appellant) handed over the trailer to PW1

in Dar es Salaam who duly made his own arrangements to transport it to- I

1995 TLR p11

KISANGA JA

gether with his own implements to Arusha. PW1, however, denied completely A

making the alleged arrangement with Mr Gikas, adding that at the time material to

this suit Mr Gikas was not an acquaintance of his. Yet Mr Gikas was not called in

support of the alleged arrangement with PW1 for the transportation of his trailer.

According to PW1, however, it is the appellant company which undertook to B

transport the implements to Arusha, but as he was anxious that the implements

should reach Arusha as soon as possible he did a number of things, on being asked by

the appellant company, in order to facilitate or speed up the process. Thus for

instance he was sent to look for a railway wagon on which to load the C implements,

although the one he found proved to be too small and the appellant had to look for

another one as an alternative. He also paid the charges for hiring the wagon and for

the guard to escort the goods on a promise that these payments, altogether amounting

to Shs 81,220/=, would be refunded to him by the appellant's office at Arusha. Upon

making those payments, he signed a D consignment note which shows the sender of

the goods to be Incar Tanzania Ltd Dar es Salaam and the consignee to be Incar

Tanzania Ltd Arusha. The consignment note also shows the goods to have been

loaded by the sender. PW1 E took the consignment note to the appellant's office in

Dar es Salaam. There he was instructed to take the said consignment note together

with the cash receipts in respect of payment for transport and escort charges and the

contract documents to the appellant's office at Arusha where the implements would

be delivered to him. He did as instructed. Upon handing over the documents to the F

appellant's office at Arusha he was asked to go away and that the office would take

delivery of the implements, register the tractor in the name of his company and

CRDB and then deliver it to him. In the meantime PW1, on behalf of his company

entered into a contract to plough 200 acres of land for one Mr K Patel. G He did this

in anticipation of the new tractor because although he had seven other tractors these

were old and were not enough to carry out the ploughing contract. The learned Trial

Judge accepted PW1's account in preference to the claim by the appellant that PW1

received the implements in Dar es Salaam and took it upon H himself to transport

them to Arusha. He found that it is the appellant company which sent the

implements in question together with Mr Gikas's trailer as a single dispatch consigned

from the appellant's office in Dar es Salaam to its Arusha office.

Following the handing over of the documents by PW1 at the appellant's office in

Arusha, a representative of the appellant's of- I

1995 TLR p12

KISANGA JA

A fice there visited the Railways Office at Arusha a number of times to inquire if

the consignment had arrived, and at least on one occasion he also telephoned their

head office in Dar es Salaam which confirmed that the goods had been dispatched.

Subsequently he was informed by the Railways Office Arusha that the wagon

carrying the consignment had sustained an accident at a place called B Hedaru, a

long distance away from Arusha. He drove all the way to Hedaru to view the scene

for himself without asking PW1 to accompany him or informing him about the

accident. He noticed that the tractor had been damaged in the course of the accident.

C After the consignment had reached Arusha, the railway authorities duly advised

the appellant as the consignee to collect the goods. The appellant did so, after

showing some reluctance, and also paid demurrage charges arising from the delay in

collecting the goods. The appellant then asked PW1 to take delivery of the D

implements but according to the appellant PW1 refused to do so because of the

damaged tractor. The damage was estimated at Shs 300,000/= being the cost of

purchasing the necessary spares, plus about a half that amount being labour charges.

PW1 was asked to bear the cost of buying the spares while the appellant would bear

the labour charges. PW1, however refused and insisted on replacement of the tractor,

and since no agreement could be reached, the respondent brought this suit alleging

breach of contract and asking for the following reliefs: E

`(i) The plaintiff claims specific performance by the defendant of

the plaintiffs written contract to deliver the said TRACTOR, HARROW and CHISEL

PLOUGH as specified in the contract marked annexture `A'. F

(ii) Damages for loss of use of the said farm implements by the

plaintiffs at the rate of Shs 20,000/= per day from the day of non-delivery to the date

of judgment.

(iii) Damages for loss of contract of ploughing 200 acres between

M/s Magugu Farm Ltd and Niru Patel at the rate of Shs 2,000/= per acre totalling Shs

400,000/= see attached copy of contract between M/s Magugu Farm & Niru Patel. G

(iv) Costs of this action.

(v) Interest at court rate in damages and costs from non-delivery till

payment in full. H

(vi) Any other relief or further relief as the nature of this action may

admit.'

Upon finding that the appellant had failed to deliver the implements in accordance

with the terms of the contract, the Trial Judge gave reliefs set out in the decree as

follows: I

1995 TLR p13

KISANGA JA

`It is ordered that the plaintiffs are entitled to, and are awarded the following

reliefs: A

(1) Specific performance, if the same is feasible, plus general and special

damages, including costs and interest as claimed and set out here below; or

(2) Refund of the Shs 4,283,420/= to the 1st plaintiff (PW1) being prepaid

price, plus the B difference between the prepaid price and the full market price of

the goods as at 15.8.89 with interest at bank rate from the date of payment of the

purchase price on 24.7.89 till final payment. Thereafter if PW1 finds it reasonable to

purchase similar goods elsewhere because the type and make of the goods (New Fiat

tractor 100 horse C power) he had contracted for is or may not be available, he can

do so with the money refunded to him, excluding the interest on the purchase price

or principal sum and he may charge the defendant company with the difference, if

any, in price; and D

(3) Special damages under head (ii) of the reliefs. These damages are to be

computed in the following manner, that is to say Shs 20,000/= per day from 15.8.89 to

31.12.89. And thereafter for each succeeding year till the date of full payment,

computation shall be Shs 20,000/= per day from July, to December, respectively. It is

considered that during E the months of April to June annually, ploughing almost

ceases in Arusha zone, and transportation dwindles, hence the reduction to Shs

10,000/= from the Shs 20,000/= daily rate earnings for that period. Also there will be a

deduction of 40% from the total sum to be realized under this head to cater for

mitigated damages and for service of the tractor; and F

(4) Special damages in the amount of Shs 400,000/= for loss of ploughing

contract (Exh P7) as indicated under head (iii) of the reliefs, however, less 50% to

cater for mitigated damages; and

(5) Costs to be taxed; and G

(6) Interest on damages and costs at court rate and in the appropriate scale

effective from the date of filing the suit on 7.10.89 till full payment; and

(7) General damages which deem fit and just to assess and award basing on

the H devaluation of our Tanzania shilling pegged to the US Dollar and the resultant

inflation rate. In 1989 when PW1 paid the purchase price to the defendant company,

the rate was about Shs 110/= to the dollar. Today the current exchange rate is about

Shs 302/= to the dollar. If my mathematical calculations serve me right, our shilling

has from 1989 to 1992 fallen down to the dollar by about 274%. For I

1995 TLR p14

KISANGA JA

A this reason, and under the circumstance of this case, I award to PW1

30% of the said devaluation and inflation rate annually on the purchase price or

principal sum of Shs 4, 2823,420/= from 15.8.89 till full satisfaction.'

B It is against that background that this appeal has been preferred.

Before us the appellant was represented by Mr R C Kesaria and Mr J C D'Souza while

the respondent was represented by Mr M Maira and Mr W A L Mirambo. Counsel for

the appellant filed a total of 26 grounds of appeal and at the hearing we also granted

them leave to argue another four additional grounds. Essentially the C issue raised in

these grounds is that the appellant duly delivered the farm implements to PW1, or to

the railways (the carrier) at Dar es Salaam for transmission to PW1, in accordance

with the terms of the contract, and that once that was done then property in the

goods passed so that the appellant was no D longer responsible for the damage

caused to the goods while in transit to Arusha. Counsel for the appellant took the

view that this was a contract for the sale of unascertained goods which was governed

by the provisions of Rule V of s 20 of the Sale of Goods Ordinance (Cap. 214). He

therefore criticised the Trial Judge for E failing to hold that `where there is a

contract for the sale of unascertained goods by description and goods of that

description, and in a deliverable state are unconditionally appropriated to the contract

(as was the case here) the property in the goods thereupon passes to the buyer.'

F We agree with learned counsel that this was a contract for the sale of

unascertained or largely unascertained goods by description. This was so because the

tractor which formed part of the goods was ascertained only by its chassis and engine

numbers. That was not sufficient to ascertain it because it was not known that the

body looked like or what colour it was. What is more the G other two implements,

namely, the harrow and the chisel were completely unascertained. We also agree that

the goods were appropriated to the contract when they were pointed out to PW1 in

the appellant's workshop at Pugu Road in Dar es Salaam or at the time of loading

them on the wagon at the railway station Dar es Salaam for transmission to Arusha.

H

However, we do not agree that the appropriation was unconditional. Our view is that

the appellant had reserved the right of disposal of the goods, and this made the

appropriation conditional thereby preventing the property in the goods from passing

to PW1. Section 21(1) of the Sale of Goods Ordinance provides that: I

1995 TLR p15

KISANGA JA

`Where there is a contract for the sale of specific goods, or where goods are

subsequently A appropriated to the contract, the seller may, by the terms of the

contract or appropriation, reserve the right of disposal of the goods until certain

conditions are fulfilled. In such case notwithstanding the delivery of the goods to a

buyer, or to a carrier or other bailee or custodier for the purpose of transmission to

the buyer, the property in the goods does not pass to the buyer until the conditions

imposed by the seller are fulfilled.' B

It is clear from the evidence that when PW1 arrived in Dar es Salaam the goods were

not ready for collection because there was a pre-delivery service to be done on them

and a customs clearance certificate to be obtained in respect of them. C DW2 clearly

stated that it was the duty of the appellant to obtain the certificate and DW1

demonstrated to PW1 the futility of collecting the goods without such certificate.

This is what he said: D

'I told him (PW1) that so long as the customs documents were not ready then

it was not possible for him to collect and register the tractor. PW1 knew this very

well.'

Consistent with that stand, the appellant must have decided that in order to avoid E

further inconvenience of keeping PW1 longer in Dar es Salaam and in order to avert

the threat by PW1 to rescind the contract, he (PW1) could return to Arusha and take

delivery of the implements there after the appellant had done the needful. In other

words the appellant, appreciating its obligation to carry out pre-delivery F service to

the implements and, in particular, to obtain a customs clearance certificate without

which it was useless for PW1 to take delivery of the implements, appropriated the

goods to the contract but reserved its right of disposal thereof pending the doing of

the two things. It was necessary to reserve the right of disposal thus in order to enable

the appellant to take delivery of the goods at its Arusha branch for the purpose of

doing those two things. G

The Trial Judge rightly rejected the appellant's claim that PW1 insisted on, and

eventually succeeded in, taking delivery of the implements at Dar es Salaam. For that

would be a useless exercise, and according to DW1 he (PW1) knew it. Then H why

should PW1 engage in such a useless exercise? Again if he had taken delivery of the

implements at Dar es Salaam, what was the point of consigning them to the appellant

at Arusha instead of to himself?

It is true that PW1 did a number of things in connection with the I

1995 TLR p16

KISANGA JA

A dispatch of the goods to Arusha. For instance, he initially looked for a railway

wagon on which to load the implements. He paid the transport charges including

paying for the escort; he signed the consignment note. His explanation was that he

did these things, upon being asked by the appellant, in order to facilitate the whole

exercise because he was interested to see that the implements reach Arusha as soon as

possible. We can find no ground for saying that the Trial Judge should B have

rejected that explanation.

Counsel for the appellant strenuously contended that there was unconditional

appropriation of the goods to the contract when the appellant handed over the C

implements to the railway authorities for transmission to Arusha. Learned counsel

further contended that following such unconditional appropriation, the property in

the goods passed to PW1 so that even if it is held that the appellant continued to be in

possession of the goods, it did so as a mere bailee. No doubt, this view is based on the

provisions of Rule V(2) of s 20 of the Sale of Goods Ordinance which says that: D

'(2) Where in pursuance of the contract the seller delivers the goods to the

buyer or to a carrier or other bailee or custodier (whether named by the buyer or not)

for the purpose of transmission to the buyer, and does not reserve the right of

disposal, he is deemed to have unconditonally appropriated the goods to the contract.'

E

But as already demonstrated, this was a case of conditional appropriation of goods to

the contract by reason of the appellant reserving the right of disposal. F

This view is reaffirmed by the provisions of s 21(2) of the Sale of Goods Ordinance

which provides that:

G '(2) Where goods are shipped, and by the bill of lading the goods are

deliverable to the order of the seller or his agent, the seller is prima facie deemed to

reserve the right of disposal.'

H Since the appellant consigned the goods from its Dar es Salaam office to its

Arusha office, it is prima facie deemed to have reserved the right of disposal. The

appellant gave no explanation to rebut that presumption, and on the evidence we

could find none. On the other hand the presumption is confirmed by the appellant's

intention to take delivery of and repossess the implements at Arusha in order to do

pre-delivery service and obtain the requisite customs clearance certificate in respect

of them. Because of such reservation of the right of disposal, therefore, the property

in the goods did not I

1995 TLR p17

KISANGA JA

pass, and the appellant remained the owner after appropriating the goods to the A

contract.

Indeed the conduct of the appellant after appropriating the goods to the contract was

consistent with its ownership of those goods. The evidence shows that PW1 took the

consignment note in respect of the implements in question to the appellant's

representative at its Dar es Salaam office, whereupon the said B representative in

turn instructed him to take it to the appellant's representative at its Arusha office for

action and he did so. The Trial Judge accepted that evidence and we could not fault

him. The consignment note shown the consignor of the goods to be the appellant's

office at Arusha. Neither the appellant's representative at Dar es Salaam office nor at

Arusha expressed surprise that the goods were consigned by its office in Dar es Salaam

to its office at Arusha. Quite clearly such C conduct is consistent with the view that

although the appellant had duly appropriated the goods to the contract, it was still the

owner of those goods. In fact, upon the goods arriving at Arusha, the railway

authorities there completely D refused to recognize anyone else but the appellant as

the owner of the goods.

The acts of the appellant's representative rushing to the scene of the accident at E

Hedaru which is so far away without informing PW1 about the accident, the

appellant's taking delivery of the goods at Arusha and paying demurrage charges in

respect thereof are consistent with the appellant's ownership of the goods. If the

appellant was not the owner of the goods why should it take delivery of the goods and

pay demurrage charges in the sum of Shs 376,000/=? And why has it (the appellant)

not lodged a claim against PW1 for a refund of this sum? F

There is yet another matter to be alluded to in this respect. The Trial Judge rightly

accepted the evidence that there was no arrangement between PW1 and Mr Mario

Gikas to transport the latter's trailer from Dar es Salaam to Arusha. That goes to G

confirm that the whole consignment comprising PW1's implements and Mr Gika's

trailer had been sent by the appellant. That is to say the appellant was the owner of

the whole consignment, and that is why it (the appellant) accepted the responsibility

of repairing at cost Mr Gika's trailer which was damaged in the H accident. Now, if

the appellant was the owner in respect of the trailer, how come that it was not the

owner in respect of the implements comprised in the very same consignment?

The evidence on record, therefore, amply justifies the finding that upon appropriating

the goods to the contract, the appellant re- I

1995 TLR p18

KISANGA JA

A served the right of disposal. That rendered the appropriation only conditional and

thereby prevented the property in the goods from passing. The appellant remained

the owner of the goods to-date.

We heard lengthy arguments on whether or not there was any binding variation of B

the written contract to change the place of delivery from Dar es Salaam to Arusha,

and whether or not the goods were in a deliverable state. We were also referred to

numerous authorities in that regard. However, those questions are of little or no

relevance now once it is held that there has been no transfer of ownership from the

appellant, because the claim is that the appellant has failed to deliver the goods,

whatever state they be in and whether at Dar es Salaam or at Arusha. C

It was also submitted that after the accident which caused damage to the tractor, PW1

wrongly refused to take delivery of the tractor at Arusha when the damage caused to

it was only slight, the evidence being that PW1 was asked to bear the D cost of

buying the necessary spares amounting to Shs 300,000/= while the appellant was to

bear the labour charges. PW1 denied any such offer having been made to him. But

even if the appellant's version is accepted that PW1 refused the E offer and insisted

on replacement of the tractor, such refusal in our view cannot be said to be

unreasonable. For, there is no legal basis for making PW1 responsible for damage

caused to the tractor at a time when that tractor was owned by, and in the possession

and care of, someone else.

F Thus on the evidence we are satisfied that the appellant failed to deliver the farm

implements to PW1 in accordance with the terms of the contract and therefore the

learned Trial Judge was justified to find that the appellant was in breach of the

contract.

As regards the award, counsel for the appellant criticised the Trial Judge for giving G

the respondent an option to purchase a new tractor of similar type on an option to

purchase a new tractor of similar type on an open ended price scale and to charge the

price difference to the appellant. The learned judge was also criticised for allowing

the respondent to recover the difference between the pre-paid purchase price and the

market price obtaining on the day of the accident when H there was no evidence of

any such difference. We think that there is merit in the complaint. Accordingly, that

part of the award is varied as follows: The appellant is to refund to the first

respondent (PW1) Shs 4,483,420/= being the pre-paid purchase price with interest at

bank rate from the date of payment of the purchase price till final payment.

Counsel criticised the aware of special damages for loss of use at I

1995 TLR p19

KISANGA JA

the rate of between Shs 20,000/= and Shs 10,000/= per day without proof thereof. A

In support of his claim for special damages PW1 said:

'To-date I have not been supplied with the tractor, harrow and chisel plough. I

have sufferred great loss thereby. I used to realize 20,000/= per day from ploughing 20

acres per day at B 1,000/= per acre at the material time. I used to transport sand,

stones, sugar cane. This is on hire basis. Each trip cost Shs 7,000/=. At the material

time I had contracted to plough 200 acres for Mr Patel who had paid me Shs

400,000/= in advance. Due to lack of tractor I could not plough those acres.' C

That evidence was not controverted and therefore the learned Trial Judge rightly took

it into account when assessing the award. However, we could find no evidence to

support his using different rates per day in computing the damages payable for loss of

use depending on the different seasons of the year. With that in D mind, we think

that a uniform rate of reckoning the damages would be appropriate.

Accordingly we vary this part of the award to the extent of allowing the respondent

(PW1) to recover damages for loss of the use at the rate of Shs 10,000/= per day E

plus interest at court rate from the day of non-delivery i.e. October, 1989 till the date

of judgment.

Counsel objected to the award of Shs 400,000/= on the grounds that PW1 had F

entered into the ploughing contract prematurely, that he had other tractors and

ploughs and that in any event the award was a duplication in the light of the award

for loss of use already given.

We find merit in the objection on this head especially on the ground that this was a

duplication. The award of Shs 400,000/= damages was in respect of loss sustained for

the period during which PW1 would have executed the ploughing contract. That

period is not ascertainable; it might have been ten or fifteen days, for instance. But

such period is included in the award already made for loss of use and calculated at Shs

10,000/= per day from the day of non-delivery to the day of G judgment. Such award

is clearly a duplication which ought not to be allowed. We would accordingly set

aside the award of Shs 400,000/=. H

Once the awards which we have upheld were made, we think that the award for

general damages, taking into account devaluation and inflation, are no longer

justified. The award under that head is accordingly set aside. I

1995 TLR p20

KISANGA JA

A We now come to the question of costs. As stated earlier on in this judgment, both

sides were represented by two advocates. At the conclusion of the hearing of the

appeal each side asked for a certificate of costs for two counsel. The B application has

merit. The case was long and obviously complicated. It required a great deal of effort

and patience to analyse the issues involved and to look up the relevant provisions of

the law. Accordingly, for the reasons set out herein before, the appeal is substantially

dismissed, with a certificate of costs for two counsel. C

1995 TLR p20

D