SAIDI SALIM BAKHRESSA & CO LTD v VIP ENGINEERING AND MARKETING LTD 1996 TLR 309 (CA)

 SAIDI SALIM BAKHRESSA & CO LTD v VIP ENGINEERING AND MARKETING LTD 1996 TLR 309 (CA)

Court Court of Appeal of Tanzania - Dar es Salaam

Judge Makame JJA, Kisanga JJA and Ramadhani JJA

F

CIVIL APPEAL NO 39 OF 1994 G

17 April 1996

(Appeal from the decision and decree of the High Court of Tanzania, Dar es Salaam,

Mapigano J.) H

Flynote

Contract - Fraud - Effect - Judgment obtained on basis of fraud by one of the parties -

Decision set aside on appeal

-Headnote

The appellant company was the defendant in a suit in the High Court in which the

respondent sued it for breach of contract arising from the purchase of consignments

of I rice. The Court held that the ultimate oral agreement between the parties was an

agency agreement and that the

1996 TLR p310

appellant, on whom the onus had been placed, had not discharged the onus of proving

A that it had fully paid the contract price by showing that it had re-sold the suit rice

to the respondent. On appeal the appellant contended that the judgment had been

obtained by fraud and that if the trial judge had been in possession of all the

information the decision would not have gone against the appellant. B

Held:

(i) It was clear that the learned judge was not aware that the respondent

had concealed that 63,600 bags out of 74,000 bags of rice had been sold and that

proceeds of the sales had not been accounted for to the appellant and the fraud had

directly affected the reasoning of the court. C

(ii) The fraud, concealment and deception on the part of the respondent

entailed that the judgment so obtained could not stand.

Case Information

Appeal upheld.

Cases referred to: D

1. Meek v Fleming [1961] 3 All ER 148

2. Transport Equipment Ltd v D P Valambhia Civil Application No 18 of

1993 (unreported)

Mr Said El-Maamry, Mr Chandoo and Mr Kisusi for the appellant E

Mrs Rwebangira and Capt Kameja for the respondent

[zJDz]Judgment

Ramadhani, JA:

The appellant company, Saidi Salim Bakhressa & Co Ltd, which was the defendant,

was adjudged by Mapigano, J to pay US $1,847,527,32 to the respondent company,

VIP F Engineering and Marketing Ltd, which was the plaintiff. The appellant is

aggrieved by that decision and hence this appeal.

Three different suits have been filed between these two parties on different aspects of

basically the same subject matter. In the Court of Appeal there have been three G

applications apart from this appeal. It is, therefore, going to be necessary at certain

junctures in this judgment to pause and give some brief account of the other two suits

or the three applications as the case may be.

The appellant concluded two contracts with the respondent under which the

appellant H was to buy from the latter some rice described as `Vietnamese Long

Grain White Rice 15 per cent broken'. The rice was packed in bags of 50 kgs and

labelled `VIP Long Grain White Rice'. So, the rice has interchangeably been referred

to by either of the above two descriptions. I

The first contract was signed on 30 November 1992 for 5,000 metric tons (MT) to be

delivered in Dar es Salaam on 10 January

1996 TLR p311

RAMADHANI JA

1993. The total price was US $1,650,000 payable in Tanzanian shillings. Upon signing

A the contract, the appellant was to pay US $330,000. However, the consignment did

not arrive until 15 March 1993, that is, two months and a few days after the agreed

date. At that time, also, the appellant had only paid a total of US $293,355.44, that is,

$36,644.56 short of the amount agreed on. It is important to note that both parties

were in breach. B

Curiously enough, despite what has been narrated above, the parties entered into a

second contract on 26 January 1993, that is some 16 days after the failure to deliver

the rice under the first contract. The second contract was for the sale of another 5,000

MT C of similar rice but at a higher price of US $1,750,000. Delivery was to be on 25

February 1993.

Both lots of rice were transported in the same ship which arrived in Dar es Salaam on

15 March 1993. On that day some misunderstanding arose between the parties which

D was resolved by a third agreement which will be referred to in this judgment as

the oral agreement. The existence of the oral agreement has never been disputed. The

parties, however, do not agree upon the content of the oral agreement.

Before we proceed, we want to make it abundantly clear that both parties have

breached E the two written contracts. So, it is idle for either party to accuse the

other of being guilty of breach. In our view the breaches were condoned and hence

the conclusion of the second written contract and the oral agreement.

Both parties agree that the first lot of 6,047,05 MT of rice was taken by the appellant

and F that the suit rice was taken by the respondent. The dispute surrounding the

suit rice is as to the capacity in which the respondent took that lot. Did he take it as

an agent of the appellant or as an owner of the lot? That was the issue before

Mapigano, J who then had to decide what was owed and to whom. G

Before us and on behalf of the appellant were Messrs Said El-Maamry, M Chandoo

and Kisusi, learned advocates. The respondent had the services of Mrs M K

Rwebangira and Capt A K Kameja, learned advocates.

With respect to the suit rice, as already said, the dispute is in what capacity the H

respondent handled it. The appellant claims that it sold back that lot to the

respondent, that is, the respondent was the owner. The respondent, on the other

hand, maintains that it was the agent of the appellant. All this boils down to what

were the terms of the oral agreement. I

It is necessary to explain briefly how the oral agreement was disclosed in this

litigation.

1996 TLR p312

RAMADHANI JA

The respondent in the plaint mentioned the two written contracts, when they were

A entered into and the schedule of payment, but said nothing about the delivery

date. The plaint went straight to mention that the appellant took delivery of the rice

on 15 March 1993 and that the plaintiff (the respondent) claims US $1,882,391.66. In

the WSD the B appellant disclosed the existence of the oral agreement and alleged

that the suit rice was resold to the respondent at a price of Shs 8,400/= per bag of 50

kg and that the proceeds were to be deducted `from the funds of the plaintiffs'. In the

reply to the WSD the respondent denied the resale and alleged that there was an

agency agreement and C that the respondent was the agent of the appellant for

selling the suit rice.

The learned judge then framed the first issue:

`Whether the oral agreement entered by the parties on 15 March 1993 was an

agency agreement, as D averred by the plaintiffs, or an agreement for resale, as

averred by the defendants.'

One wonders with Mr Chandoo why such an important material fact of agency was

not pleaded in the plaint. This is especially so when the respondent was aware of the

appellant's assertion of resale since 6 May 1993 at the meeting in the office of Dr Idris

E Rashid (PW2) then of the NBC. Why was that point not pleaded in the plaint

drawn on 15 July 1993?

Be it as it may, the learned judge held that `where the execution of a document and

receipt of consideration are admitted, but satisfaction or discharge of the debt is F

pleaded, the onus of proving the plea is on the defendant, which gives the defendant

the right to begin'.

So, the appellant, though it was the defendant, started to prove its case that it had

fully paid the contract price by showing that it had resold the suit rice to the

respondent. At G the end of the day the learned judge came to the conclusion:

`I have considered and weighed the evidence carefully and in the last analysis

I consider that the scales are evenly balanced. The rule is that where the evidence on

both sides is equally balanced, H the onus is not discharged. The defendant on

whom the onus has been placed must accordingly fail. The suit thus succeeds.'

It was thus held that the oral agreement was an agency agreement. I

The appellant is aggrieved and has three grounds on this aspect of how the issue of

oral agreement came up in the pleadings and how it

1996 TLR p313

RAMADHANI JA

was disposed of. In ground five the appellant submits that the reply of the respondent

to A the WSD ought to have been struck out because leave of the Court was not

sought in accordance with Order 8 Rule 13 of the Civil Procedure Code, 1966.

Alternatively, in ground six, the appellant seeks to expunge para 8 of the reply which

introduced the B notion of agency to the oral agreement for being inconsistent with

the plaint. If either of the two grounds succeeds, then the issue of the appellant being

with the burden of proof would not arise. So, in ground two the appellant argues that

the learned judge erred in shifting the legal burden of proof to the appellant and that

the plaint ought to have been dismissed for lack of proof. C

In the alternative the appellant submits in ground seven that if there was agency it

has not been proved that there is a custom requiring the principal to compensate the

agent for losses incurred in selling the rice. Again, in ground eight the appellant

contends that the respondent is guilty of breaching the alleged agency agreement and

so they should D not have succeeded.

However, in the first ground, the appellant submits that there was fraud, deception

and concealment of facts on the part of the respondent which misled the High Court

to deciding in its favour. This contention is very serious and, if upheld, it would

render the E other grounds superfluous. So, we intend to deal with it first.

The contentions in ground one of the appeal directly concern the order by Mackanja,

J in Misc Civil Application No 117 of 1993. It is therefore necessary to deal with that

application in order to appreciate the contention in ground one of the appeal. F

While the main suit, Civil Case 112 of 1993, the subject of this appeal, was in progress

the respondent opened Misc Civil Application 117 of 1993 on 8 September 1993

seeking for an order to dispose of the suit rice by sale. The picture painted before

Mackanja, J was that the suit rice was in the physical possession of the respondent,

that not a single G bag had been sold, that its continued existence caused

inconvenience to the owners of go-downs and that it could deteriorate. Mackanja, J

ordered sale by auction. The learned judge also ordered that the proceedings in Civil

Application 117 of 1993 form part of Civil Case No 112 of 1993. H

Let us pause here and digress a bit. The last quoted order of Mackanja, J indicates

what ought to have been the case. Rather than there being a separate application for

the sale of the suit rice there ought to have been an application for interlocutory

orders within the main suit. We wonder why the respondent chose to multiply

application unless it was to I confuse the Court and thereby derive some advantage.

1996 TLR p314

RAMADHANI JA

To go back to the subject, after the order of Mackanja, J the Court broker advertised

in A Uhuru indicating that the suit rice was in Mwanza, Kigoma and Bukoba and

showed how much was where. That made the appellant suspicious and caused it to

make enquiries at the Tanzania Harbours Authority, as a result of which it applied to

this Court to take B additional evidence under Rule 34(1)(b) in Civil Application No

18 of 1995. That application was granted.

The appellant filed affidavits by 16 different persons adducing additional evidence.

The respondent, on the other hand, filed nine counter-affidavits, seven of which were

sworn C by Mr J B Rugemalira (PW1) in reply to seven additional witnesses of the

appellant. Two other persons filed a counter-affidavit each corroborating two

counter-affidavits of Mr Rugemalira.

The picture painted by the additional evidence is so vivid and revealing. The whole of

the D rice which was brought was 200,000 bags of 50 kg each. The appellant took

possession of 120,911 bags. As 721 bags were shortlanded, the respondent took 78,360

bags. Out of that lot 74,000 bags were sent up-country. So, the picture that the 10,400

bags which the Court broker found up-country was the entire consignment sent E

there was smashed to pieces. The broker was only told of suit rice being sent to

Bukoba, Mwanza and Kigoma. He was not told that 16,000 bags were sent to Arusha

and that 10,000 bags were sent to Mtwara. All the bags sent to those two towns were

completely sold, contrary to the story given to Mackanja, J that not a single bag had

been F sold. So, a total of 48,000 bags were sent to Bukoba, Mwanza and Kigoma.

Most of those bags were sold except the 10,400 bags which were found by the Court

broker.

Another revelation is that from Mtwara the respondent received Shs 78/= million

while G from Kigoma he got Shs 15/= million. Until the time Mr Rugemalira swore

his counter-affidavit on 3 August 1995, the respondent was still awaiting Shs

17,754,000/= from Kigoma. The amounts realised from the sales in the other places

were not given. H

Mr Rugemalira in his seven counter-affidavits admits what has been stated above. He

explained that the whole of the suit rice sent to Arusha and Mtwara and those bags

which were sold in Bukoba, Mwanza and Kigoma were constructively transferred

back to Dar es Salaam. Thus, Mr Rugemalira deposed, more bags were found by the

Court I broker in Dar es Salaam than what should have been. The broker found

68,659 bags instead of 4,368.

1996 TLR p315

RAMADHANI JA

Mr Chandoo submitted that all the information given above was within the full

knowledge A of the respondent who deliberately decided to conceal it. So, the

learned advocated contended, Mackanja, J decided the application before him without

being fully seized of all the facts and that the respondent obtained the order in his

favour by fraud, deception B or concealment. Mr Chandoo cited Meek v Fleming (1)

as authority for the proposition that a decision so obtained is void and cannot be

allowed to stand.

Capt Kameja started by submitting that the accusation of fraud is misconceived. He

contended that if there was any fraud it was committed before the High Court and so

it C cannot be a ground of appeal. The learned advocate submitted that what the

appellant should have done was to file a fresh suit in the High Court to set aside the

judgment allegedly obtained by fraud. Alternatively, Capt Kameja submitted, the

respondent could D have asked the High Court to review that decision. He cited our

decision in Transport Equipment Ltd v P Valambhia (2) as authority for that

submission.

Secondly, Capt Kameja contended that the rice sold by the Court broker was the suit

rice. He reminded the Court that the suit rice was described as `Vietnamese Long

Grain E White Rice 15 per cent Broken' and that it was placed in bags inscribed

`VIP Long Grain White Rice'. Capt Kameja pointed out that the Court broker

auctioned `3952.95 metric tons of VIP Long Grain White Rice'. He argued that what

was auctioned was the suit rice.

The learned counsel conceded that some of the suit rice sent up-country was sold F

before the auction but he reiterated the argument of constructive transfer. Capt

Kameja explained that as the respondent had received his own 14,000 MT of similarly

described rice in Dar es Salaam, then for every bag that was sold up-country the

respondent allotted another bag in Dar es Salaam from his lot and gave it to the

broker to auction. G That, the learned advocate said, is what they meant by

constructive transfer.

Thirdly, Capt Kameja contended that there was no concealment deliberately or

otherwise, because the respondent had no duty or obligation to disclose that

information. This, he said, was because of the matter in issue in the suit before

Mapigano, J; agency H or resale. The learned advocate submitted that where the rice

was and how much was realised from the sales pertained to the manner of executing

the agency relationship and not whether there was agency or resale. In addition to

that Capt Kameja submitted that the appellant knew or had opportunity to find out

those facts now claimed I to have been concealed. He pointed out that at the hearing

1996 TLR p316

RAMADHANI JA

of the suit Mr El-Maamry cross-examined PW3 on the sale of the suit rice upcountry.

A The answer, he said, was `I do not know if any bag has been sold by our

sub-agent. PW1 probably knows.'. Capt Kameja argued that Mr El-Maamry did not

pursue the matter any further. He pointed out that the learned advocate ought to

have recalled PW1 B for further cross-examination on that. This, Capt Kameja

submitted, tallies with the stand taken by the appellant that there was a resale for

then where the rice was and how much had been realised was of no concern to the

appellant.

Alternatively, Capt Kameja argued that even if thee was concealment of such facts

there C was no miscarriage of justice occasioned. The facts said to have been

concealed, the learned advocate contended, would not, if known, disprove agency but

would go to show that there was a breach of agency duties by the respondent. Capt

Kameja argued that D as the issue was not whether there was breach or not, then the

concealment, if any, did not occasion injustice to the appellant. The learned advocate

submitted that Meek v Fleming (supra) is distinguishable as the matters concealed in

that case, unlike in the present one, were directly in issue.

We listened to Capt Kameja anxiously but at the end of the day we were not

persuaded E by his arguments. It is not easy to see why the respondent should take

this implacable stand in the veritable presence of that which they deny. The

ingenuous coinage of the concept of constructive transfer betrays them, to say the

least.

A Concise Law Dictionary by P G Osborn defined `constructive' as: F

`A right, liability or status created by the law without reference to the

intention of the parties; eg a constructive trust or constructive notice.' G

We are not aware that the law has created such `a right, liability or status' as

constructive transfer. But we are also not saying that the categories of `constructive'

are closed. However, we have not been persuaded to canonize this novel concept

because it departs from the general basis of the presently known concepts of

constructive. The H basis of the existing concepts is that the subject must exist and

then the law merely construes its implication. There has to be malice, for instance,

which the law will then imply to have been directed against the unintended victim in

constructive malice. But here what was said to be constructively transferred was the

rice which had already been I sold and so was not existing. We do not think that this

point should detain us.

1996 TLR p317

RAMADHANI JA

We are of the opinion that the rice sold by the Court broker was not the suit rice

except A for the 10,400 bags found up-country. This fact was concealed from

Mackanja, J. Since the learned judge ordered that the proceedings before him, Civil

Application No 117 of 1993 should form part of the proceedings of Civil Case No 112

of 1993 before Mapigano, J, the subject of this appeal, then the deceit was carried

over. However, that B does not portray the whole situation. Mr Masilingi, in his

written submission to Mapigano, J on behalf of the respondent, said `suit rice was not

sold until the plaintiff obtained an order of the Court'. That, with the hindsight, is

patently false. C

Mapigano, J also in his judgment said:

`They (respondents) took 3952.95 metric tons of the goods and sent part of the

lot to their sub-agents at Mwanza, Bukoba and Kigoma. But the whole goods

consigned to the sub-agents were not sold. D The sub-agents reported that the price

of Shs 8,400/= was no longer available. This situation was occasioned by an influx of

the same goods which other traders had imported and released into the market at Shs

8,000/= per 50 kg. This information was relayed to DW1 and he was asked to reduce

the price to Shs 8,000/=. But he insisted upon a price of Shs 8,400/='. E

The learned judge did not know that out of 78,368 bags taken by the respondents,

74,000 bags were sent up-country. Had he known that he would not have said a `part

of the lot' was sent to sub-agents. The learned judge was also not aware that apart

from F the three towns he named there were Arusha and Mtwara which had

received a total of 26,000 bags. Then he was taken for a ride when he gulped hook,

line and sinker the concoction that `the whole goods consigned to the sub-agents

were not sold'. The G respondent concealed from him the fact that 63,000 bags out

of 74,000 bags had been sold and that proceeds from the sales have not been

accounted for to the appellant, the so-called principal.

So, the deceit and/or the concealment though perpetrated before Mackanja, J directly

affected the reasoning of Mapigano, J. We entertain no doubt that if Mapigano, J was

H seized with the truth he would not have held that the scales were evenly balanced

and that the appellant had failed to prove his case. The new evidence would

undoubtedly have tilted the scales in favour of the appellant. I

We agree with Mr Chandoo that the facts revealed go to show the conduct of the

respondent with resect to the suit rice. That conduct

1996 TLR p318

RAMADHANI JA

is material in determining the issue of whether the respondent was an agent of the A

appellant or was the owner of the suit rice, that is, there was a resale.

We are satisfied that there was fraud, concealment and deception on the part of the

respondent. It is trite law that judgment so obtained cannot be allowed to stand. B

However, there is a question posed by Capt Kameja and that is whether it is proper

for this Court to annul the judgment of the High Court on the grounds of fraud

committed in the High Court. This present appeal is distinguishable from that of

Transport Equipment C Ltd v Valambhia (supra). In that appeal there was mere

allegation of fraud. Here leave was asked for and was granted, as already said, to

adduce additional evidence which has revealed beyond doubt, and the respondent has

conceded as much, that material facts which were within the knowledge of the

respondent were concealed. The D respondent could have sought a reference from

the decision of the single judge allowing additional evidence. That was not done.

Additional evidence is now before this Court. So, this Court can decide the issue. E

The decision of Mapigano, J that:

`There will, therefore, be a decree granted to the plaintiffs for US

$1,847,527.32, payable in Tanzania Shillings at the National Bank official rate ruling

on the day of payment, less the net amount to be realised from the auction sales; for

interest at the bank rate from 15 March 1993 until final payment; and for costs ...' F

is set aside because it was obtained by fraud.

Now we go to the 6,074.05 MT of rice whose ownership is not disputed and so the

appellant is duty bound to pay for it.

The respondent in his plaint said that the appellant on 15 March 1993 took delivery

of the G 10,000 MT of rice worth US $3,400,000. The respondent then went on to

describe the terms of payment as being 20 per cent of the contract price on signing of

the contract, 30 per cent on the arrival of the ship in the port of Dar es Salaam and

that the balance was to be settled 60 days from the date of the arrival of the ship. The

respondent H complained that the appellant failed to honour that agreed schedule of

payment and concluded in para 12 of the plaint:

`The plaintiff claims from the defendant the sum of US $1,882,391.66 or the

equivalent in Shs I 836,162,328.40 as per the official exchange rate ruling on 14 July

1993.'

1996 TLR p319

RAMADHANI JA

The appellant, on the other hand, in para 6 of the WSD stated: A

`... All in all, all payments have been made to the plaintiff for the 6047.05 tons

of rice within the stipulated time from the date of arrival of the ship.' B

In his reply, the respondent in para 8 did not categorically deny the allegations of the

appellant that the latter has fully paid for the 6,047.05 MT. The respondent merely

stated:

`As regards para 6, the original payment schedule had to change following the

oral agreement C entered into to facilitate quick sales in order to enable the

defendants pay the price by 7 May 1993 (the date the plaintiffs were liable to the

bank for the loan) ... But the defendants did not pay the balance by 7 May 1993, nor

did they pay by 15 May 1993 which was 60 days from the date of the ship's arrival

when they were contractually supposed to have paid the full balance.' D

The respondent recapitulated his claim for US $1,882,391.66 in paras 10 and 11 of his

reply.

In Court when giving his evidence on oath, said Bakhressa (DW1) stated again: `I

paid for the 6,047.05 MT which I bought from the plaintiffs.' DW1 was not

contradicted in E cross-examination.

That the position of the appellant has consistently been that it has fully paid for the

lot it has taken is attested to by Suleiman Abdallah Abubakar (PW3), a director of the

respondent. He said in examination-in-chief: F

`We subsequently wrote defendants about his indebtedness to us. They

replied, maintaining that they had fully paid the price of the rice.' G

The learned Trial Judge (Mapigano, J) did not make a finding one way or the other on

this. He divided the rice into the two lots mentioned above and found that the first

lot of 6,047.05 MT was taken by the appellant and that the suit rice was the one in

dispute. He H finally decided that the appellant is liable to pay US $1,847,527.32 less

any amount that would be realised from the sale by auction of the suit rice. The

learned judge did not show how that figure was arrived at. That is attacked by the

appellant in ground nine of appeal. I

But in all fairness to the learned judge the payment for the non-suit rice was not an

issue before him. Two issues were framed:

1996 TLR p320

A (1) Whether the oral agreement entered by the parties on 15 March 1993

was an agency agreement, as averred by the plaintiffs, or an agreement for sale, as

averred by the defendants.

(2) To what reliefs are the parties entitled.

Now, the determination of the first issue, that is, whether agency or outright sale B

pertained to the suit rice (the 3,952.95 MT) and not to the 6,047.05 MT, the non-suit

rice. The reliefs to which the parties were entitled, in our opinion, also related to the

suit rice.

No issue was framed with respect of the 6,047.05 MT of rice. In any case the appellant

C asserted that it had fully paid for that lot and that was not controverted.

Finally, there are a number of grounds argued by Mrs Rwebangira for affirming the

decision of Mapigano, J, but with respect, we agree with Mr Chandoo that those

grounds cannot stand since the ground of fraud has been upheld. D

The appeal is allowed with costs for three counsel.

1996 TLR p320

E