M/S SOUTHERN HIGHLAND v M/S TANZANIA OXYGEN LIMITED 1989 TLR 187 (HC)

 

M/S SOUTHERN HIGHLAND v M/S TANZANIA OXYGEN LIMITED 1989 TLR 187 (HC)

Court High Court of Tanzania- Mbeya

Judge Mwaikasu J

13 October, 1989

Flynote

Contract - Agency - Termination - Terminable at instance of either party by three

months G notice - Termination by principal - No evidence that termination notice

served on or received by agent - Effect.

Contract - Agency - Termination of authority of - When it takes effect. H

Contract - Agency - Termination of authority of agent - Onus of proof.

Contract - Agency - Terminable by notice - Wrongful termination by principal -

Agent claims damages in lieu of notice - Measure of damages. I

1989 TLR p188

Contract - Agency - Termination - Express or implied contract that agency to be

continued A for a period of time - Wrongful termination - Consequences.

-Headnote

The plaintiff entered into and executed the defendant's standard form contract of

agency B for the distribution of the defendant's full oxygen gas cylinders at an

agreed commission. The contract had a termination clause providing for a three

months termination period at the instance of either party. While the contract was

subsisting the Managing Director of the plaintiff company went abroad on a private

mission. C

He however, entrusted the management of the business of the plaintiff company to

another person. While the said Managing Director was absent, the defendant

terminated the agency contract by three month notice. The notice termination was

not addressed in D the plaintiffs company's business name but was addressed to the

person entrusted with the management of company's business. The defendant alleged

that the termination of the contract was prompted by the plaintiff's breach of the

contract. The plaintiff incurred loss of profit and claimed shs. 300,000/= as relief in

lieu of notice. In an action before the E High Court by the plaintiff for breach of

contract arising out of the defendant's termination of the agency contract.

Held: (i) Since the notice of termination was not addressed to the plaintiff company as

the contracting party and in its business name, the said notice, if it ever reached its F

destination in the absence of the plaintiff company's Managing Director, was and

must have been treated as a private affair by the care-takers of the plaintiff company's

business in respect of the plaintiff company so that should the notice have come to

the knowledge of the Managing Director on his return, it could not be properly taken

as a G proper business communication with the plaintiff company, and plaintiff

would therefore be entitled to ignore it;

(ii) in terms of section 160 of the Law of Contract Ordinance, Cap. 433

termination of the authority of an agent does not so far as regards the agent, take

effect H before it become known to him. The onus of proving that such notice of

termination of the agency had come to the knowledge of the agent, in this case the

plaintiff company, rests with the principal, in this case the defendant company;

(iii) the plaintiff having had no evidence to show how damages to the tune of

I shs.300,000/= were arrived at, the only reasonable

1989 TLR p189

MWAIKASU J

amount to be claimed as relief in lieu of notice must be the amount which ought to

have A been due to the plaintiff company by way of commission;

(iv) in terms of section 157 of the Law of Contract Ordinance where there is

an express or implied contract that the agency should be continued for any period of

time, B the principal must make compensation to the agent for any premature

revocation or renunciation of the agency without sufficient cause.

Case Information

Judgment for plaintiff. C

[zJDz]Judgment

Mwaikasu, J.: By the defendant's standard form of contract, Exhibit P.1, on 16th day

of October 1978, the plaintiff entered into and executed a contract of agency for the

distribution of the defendant's full gas cylinders, to its customers in Mbeya, at an

agreed fee. The gas was oxygen for welding and medical purposes. D

The contract continued to be in force for seven years until it was terminated by the

defendant as from 31st August 1986, by a purported three month's notice dated

19/5/86.

It is now the contention of the plaintiff that such contract was wrongfully terminated

and E therefore breached by the defendant for want of the contract three months'

notice as clearly stipulated under clause one of the contract. Hence the plaintiff's

claim for the reliefs as prayed in his plaint.

That, however, has been categorically denied by the defendant.

Thereupon the following issues were agreed by the learned counsel for the parties: F

(a) Whether or not the defendant had issued to the plaintiff notice of

termination of the agency relationship on 19/5/86; G

(b) Whether or not, if such notice had been so issued the same was in

accordance with the procedure agreed under the contract between the parties;

(c) If agency relationship was then still existing, whether the defendant

paid the plaintiff the agreed commission. H

(d) What reliefs, if any, are the parties entitled to.

The case for the plaintiff company centres on the only evidence of its proprietor, the

P.W.1, one Mr. Vinod K. Babla, a businessman resident of the Municipality of Mbeya,

I at short street, Block L. Plot 52.

1989 TLR p190

MWAIKASU J

His evidence is to the effect that he is the proprietor of the Plaintiff Company, known

as A Southern Highlands Motors Ltd., situated along Karume Avenue, within the

Municipality of Mbeya, registered as Limited Company in 1982.

While the contract in question between the parties was still in operation, in March

1986, B the P.W.1 went abroad for marriage, and returned in August 1986. In his

absence his business through the plaintiff company was then left in the hands of his

secretary one Miss Mourine Nyondo. It is further his testimony that on his return

from abroad, he did not receive any notice of termination of the plaintiff company's

agency relationship with C the defendant, nor was he aware that in his absence his

secretary received such notice. He has added that on his departure for his marriage

abroad, he wrote a letter to the defendant company and personally handed it to an

official of the Defendant Company in D Dar es Salaam, one Rwegoshora notifying

them of his absence, and that he would be back in three months time. It would also

appear that the defendant company was also informed that in his absence his office

would remain open and taken care of by his friend one Thaker. On the P.W.1's return

the said Thaker could not inform him anything as to E whether a notice or the

termination of the agency relationship between the plaintiff and the defendant

company had been received from the defendant business transactions did then

continue as usual until sometime in August 1986, when a truck carrying full cylinder

gas that called at the company premises had to be diverted by an official of the F

defendant company called one Nkondo, (D.W.1) and sent the consignment to another

person; within the Municipality. That is when the plaintiff company came to know

that the agency had been terminated by the defendant company. He went on to

testify that he G used to get a commission for the sale of the defendants gas,

dependant upon the amount of gas cylinders supplied by the defendant company.

That, however, is said to have ranged between shs.4,000/= and shs. 8,000/= paid

monthly.

On the other hand, it is the defence case, inter alia, as testified the D.W.l, one Juma

s/o H Nkondo, a Mechanical Engineer working with the defendant company, and

the D.W.2, one Dr. Asajile s/o Kapungu, being the medical officer i/c., of Isoko

Hospital, that following the absence of the P.W.1, while abroad for marriage, there

developed deteriotion in the agency services rendered by the plaintiff company

because the plaintiff I company could not make regular distribution of full gass

cylinders particularly for hospital oxygen, as the person left to act for the P.W.l called

at the premises part

1989 TLR p191

MWAIKASU J

time, leaving the plaintiff company's office premises closed often times. That then

forced A the medical customers, as the D.W.2 once did, to follow the gas to the Head

quarters in Dar es Salaam. According to the D.W. 2, such problem of supply became

more acute between the months of March, April and May 1986.

Thereupon on account of such deteriotion in the plaintiff company's agency service

with B the defendant company, on 19/5/86 the defendant company issued a three

months' written notice to the plaintiff company for the termination of such agency

contract between the parties. Such notice was tendered before this court as Exhibit

D.1, and is C also Annexure "C" to the written Statement of Defence. According to

the D.W.1, such notice is unreferenced; it was not addressed to the plaintiff company,

but to one Mr. Babla, the P.W.l in person, of Southern Highlands Motors, P.O. Box

252, Mbeya, it was sent by post but the D.W.1 could not tell whether it was by

ordinary or registered post. D

It was then on the basis of such notice that on the expiration of the three months

period of notice, on 31st August, 1986, the contract was brought to an end.

On being cross-examined, the D.W.1 has maintained that such termination of the

contract was justified on the ground that the plaintiff company had committed several

E breaches contrary to the provisions under clauses Nos. 4, 5, 9 and 21. The D.W.1,

however, admitted that there was no evidence to show that the notice had

SOUTHERN HIGHLAND v. T.O.L. (Mwaikasu, J.)been received by the plaintiff

company, and that F Mr. Babla (P.W.1) was not a party to agency agreement, adding

that before the P.W.1 went abroad, there was no business problem with the Plaintiff

company. He went on to say that there was no prior communication between the

plaintiff company and the defendant company regarding dissatisfaction of the

defendant company's customers, with G the plaintiff company's agency services

rendered. He could not also tell how much earnings had been lost by the defendant

company during the absence of the P.W.1. Neither could he say how many deliveries

had been made to the plaintiff and sales made during the absence of the P.W.1 as he

had no documents to support the same, nor could H he produce any when time was

given to the purpose.

From the above evidence it is evident that the contracting parties to the contract of

agency the subject of this suit were Southern Highlands Motors Ltd., a limited

company registered under Companies Ordinance and Tanzania Oxygen Ltd. The

contract was I concluded on 16/10/78 and continued to be in force up to 31/8/86.

1989 TLR p192

MWAIKASU J

It is also common ground that in March 1986, the P.W.1, one Vinod K. Babla, the A

proprietor and managing director of the plaintiff company had to travel abroad for his

marriage, leaving his business in the hands of his secretary one Miss Maurine

Nyondo, and Thaker, who worked part time. I also find as an established fact that

during the B P.W.1's absence while he was abroad, his business premises were not

regularly kept open to his customers. However, in absence of any documentary

evidence to show the volume of business in respect of the oxygen gas, between the

plaintiff and defendant companies, this court is unable to accept the evidence for the

defendant and say that any C of the alleged breaches of the agency agreement

clauses were actually so committed by the plaintiff company.

Nevertheless, any party was at liberty to terminate the contract at any time after

giving a D three months notice to the other as provided for under clause I of the

agreement.

Under Clause I of the agreement the parties agreed in the following terms and I

quote:

I. This agreement shall be deemed to have commenced on the 16th day of

October 1978 and shall continue until terminated by either party giving to the other

three months E notice in writing of its intention so to do or as provided in clauses 23

and 24.

Clause 23, of the agreement provides: F

If there shall be any breach by the Distributing Agent of any provision of this

Agreement or if the Distributing Agent shall commit an act of bankrupting the

company may forthwith terminate this agreement.

Under Clause 24 of it is there provided as follows: G

In the event of either party thereto selling or ceasing to carry on its business

they shall have the right to terminate this agreement by giving one month's notice in

writing.

In my view, the import of the above clauses is that, the contract could be terminated

in I either one of the three situations: first, on the decision of either party, as he

pleases, to end the contract agreement, when, in terms of clause I, he would then be

required to give a three months' notice to the other party; second, whenever the

Distributing Agent, in this case the plaintiff, breached any of

1989 TLR p193

MWAIKASU J

the provisions of the agreement, in which case in terms of clause 23, the Principal, in

this A case the Defendant company, would be entitled to terminate the agreement

immediately without prior notice to the Distributing Agent; and third, whenever

either party happened to sell or cease to carry on his business, in which case the other

party would be entitled to terminate the contract after giving a one month's notice. B

It is clear in the instant case that it is the first option under Clause I of the agreement

that the defendant invoked in terminating the contract of agency with the plaintiff

company.

The issue in respect of such three months' notice is whether the same was properly

and C actually served upon the plaintiff company.

According to the evidence that is before this court, it is clear and undisputed that the

purported notice dated 19/5/86 was not addressed to the plaintiff company as the D

contracting party as such, but was addressed to one Mr. Bable of Southern Highlands

Motors, P.O. Box 252. As such notice, if it ever reached its destination in the absence

of the P.W.1, the Company's managing director, was and it must have been treated as

a private affair by those left to look after the P.W.1's business in respect of the

plaintiff company. For it was not addressed in the business name of the contracting

plaintiff E company. So that should that have come to the knowledge of the P.W.1

on his return, it could not be properly taken as a proper business communication with

the plaintiff company, and therefore would be entitled to ignore it. F

On the other hand it is the P.W.1's contention which could not be effectively

challenged by the Defendant company that such alleged notice was not brought to his

notice and he did not in fact receive it.

The defendant company has been unable to prove that such notice was actually

received G by the plaintiff company or that it was aware of it in any way. For no

proof could be offered as to how the posting of such notice was effected, and whether

it actually reached the plaintiff company.

Yet in terms of s.160 of the Law of Contract Ordinance Cap. 433, the termination of

the G authority of an agent does not so far as regards the agent, take effect before it

comes known to him. The burden to prove that such notice of termination of the

agency had come to the knowledge of the agent, in this case, the plaintiff company,

rests with the principal, in this case, the defendant company. That the defendant

company has failed to I discharge. It

1989 TLR p194

MWAIKASU J

follows, therefore, that the termination of the agency contract with the plaintiff

company A must be regarded as wrongful.

The consequence of such wrongful breach of such contract of agency between the

parties is to be found under the provisions of s.157 of the Law of Contract Ordinance.

It is there provided thus: B

157. Where there is an express or implied contract that the agency should be

continued for any period of time, the principal must make compensation to the agent

... for any previous revocation or renunciation of the agency without sufficient cause.

C

I also accept as an established fact, as it was not at all challenged by the Defendant

Company during the trial of this suit and as also laid down in Clause 19 of the

agreement, that the plaintiff company used to be paid a commission by the Defendant

D Company for the oxygen gas cylinders sold. It does not appear that such

commission was paid to the plaintiff company for the period of September 1986 to

October 1987, when this suit was instituted following such wrongful termination of

the contract by the defendant company. E

I now proceed to consider the reliefs claimed. The first is for shs.56,000/= being loss of

profits. I consider the same to be founded and it is accordingly granted. Then there is

the second relief of shs.4,000/=, per month as loss of profits from the second relief of

shs.4,000/=, per month as loss of profits from the month of November 1987, a month

F following the institution of this suit to the day of judgment. That as well appears to

be merited. It is accordingly granted. On the other hand, I find it hard to understand

the basis for the relief of shs.300,000/= as prayed in item (c). For no evidence has been

led G for the plaintiff company to show how such amount of loss has been arrived at.

Nor does the agreement have any provision to such effort. The only reasonable

amount to be claimed as relief in lieu of notice must be the amount which ought to

have been due to the plaintiff company by way of commission. Thus for the requisite

three months' notice the H plaintiff company is entitled to shs.18,000/=, in lieu of

such notice, being the average of commission of between shs.4,000/= and shs.8,000/=

that could be paid to the plaintiff per month.

In the final analysis judgment is entered for the plaintiff and it is hereby ordered that

the defendant do pay the plaintiff as follows: I

1989 TLR p195

(a) Shs.56,000/= being loss of profit for the period of 14 months from

September 1986, to A October 1987, at the rate of shs.4,000/= per month.

(b) Shs.76,733/= being loss of profits for the period of November 1987 to

13th October 1989, at the rate of shs.4,000/= per month, for 24 months and 13 days. B

(c) Shs.18,000/= being payment in lieu of three months' notice.

(d) Interest at the rate of 12% on the decretal amount from date of

judgment to full settlement of the decretal amount.

(e) Costs of the suit. C

Order accordingly

1989 TLR p195

D