M/S KANYARWE BUILDING CONTRACTOR v THE ATTORNEY GENERAL AND ANOTHER 1985 TLR 161 (HC)

M/S KANYARWE BUILDING CONTRACTOR v THE ATTORNEY GENERAL AND ANOTHER 1985 TLR 161 (HC)

Court High Court of Tanzania - Mwanza

Judge Mwalusanya J

31 July 1986

CIVIL CASE 18 OF 1985 G

Flynote

Contract - Frustration - When doctrine of frustration may be invoked.

Contract - Repudiation - Circumstances under which a partymay be said to have

repudiated a contract.

Contract - Damages - Remoteness - Installation of water tank where water was scarce

to H facilitate performance of the contract - Contract terminated - Whether

damages in respect of construction of the water tank recoverable.

-Headnote

The plaintiff sued the first defendant and the Regional Engineer of Works, Kagera I

Region (2nd Defendant) for damages for breach of contract.

1985 TLR p162

The plaintiffs were awarded two contracts. The first was to build T.P.D.F. staff A

residential quarters at Biharamulo and the second to construct a T.P.D.F. office block

and repairing some 19 residential quarters at Rwamishenye.

In April 1983 one of the directors of the plaintiff was detained as an economic

saboteur and some building materials and two tipper lorries of the plaintiff were

confiscated. In B addition the plaintiff's bank account was stopped. The plaintiffs

informed the second defendant by a letter about these developments whereupon the

latter ordered the former to stop continuing with the projects on the grounds of

either frustration or repudiation of the contract by the plaintiffs. By the time they

were stopped the plaintiffs had performed C a substantial part of the contract for

part of which they were not paid.

It was argued in favour of the defendants that the letter of the plaintiff to them

showed that the plaintiff had repudiated the contract or that the contract was

frustrated because of the developments that took place. D

Held: (i) The doctrine of frustration may be invoked where events occur that make

the performance of the contract impossible and these frustrating events are not the

fault of either party; E

(ii) the facts that one of the directors of the plaintiff company was detained,

the company's bank account was stopped from operation and some company's

building materials had been confiscated could not ground the invocation of the

doctrine of frustration because these developments did not make it impossible for the

plaintiff company to continue with the contracts; F

(iii) the plaintiff company did not repudiate the contracts because they did

not either expressly or impliedly intimate that they would not honour their side of

the bargain;

(iv) the building of a water tank, because of the scarcity of water at

Biharamulo G was a matter which the defendant knew or as a reasonable man ought

to have known as likely to happen and therefore damages claimed were not remote.

Case Information

Judgment for the plaintiff H

Cases referred to:

1. Twentsche Overseas Trading Co. Ltd. v Uganda Sugar Factory, Ltd.

[1945] 12 E.A.C.A. 1 (P.C.)

2. Alibhai Gulam v Mohamed Yusuf [1946] 13 E.A.C.A. 25 (k)

3. Fibrosa v Fairbairns Lauson Combe Barbous Ltd. [1943] A.C. 32. I

1985 TLR p163

MWALUSANYA J

4. Howard & Co. (Africa) Ltd. v Burton [1964] E.A. 540 (C.A.) A

5. Isakiroglou & Co. Ltd. v Noblee Thorl [1962] A.C. 93.

6. Maclaine Watson & Co. Ltd. v Kanji Meghji Shah [1956] 23 E.A.C.A.

366.

7. Rashid Moledina & Co. (Mombasa) Ltd. v Hoima Ginners Ltd. [1967]

E.A. 645 (C.A.) B

8. Hadley v Baxendale [1854]9 Exch. 341

9. Woodruff v Dupont [1964] E.A. 404

10. Suisse Atlantique Societe d'Armament Maritime S.A. v N.V.

Rotterdamsche Kolen Contrale [1966] 2 W.L.R. 944.

Kahangwa, for the plaintiff. C

Swai, State attorney, for the respondents.

Judgment

Mwalusanya, J: The plaintiff M/S Kanyarwe Building Contractors Ltd. D is suing the

two defendants namely the Attorney General (1st Defendant) and the Regional

Engineer of Works, Kagera Region (2nd Defendant) for damages for breach of

contract. He is claiming a total sum of shs. 3,250,111/= as damages. Both defendants

have denied that they were in breach of the contract in question and prayed that the

suit be dismissed with costs. E

In view of the pleadings, the first issue that was framed was as to whether the

contract was lawfully terminated by the defendants in August 1983. In other words

were the defendants entitled in law to read the plaintiff's behaviour as anticipatory

breach as to F release them from further obligations? And that leads me to briefly

summarise the evidence on the matter. It is common ground that the plaintiff

company entered into contracts with the 2nd defendant on 20/1/1983. The first

contract for a sum of shs. 9,193,100/= was for the plaintiff company to build T.P.D.F.

staff residential quarters, consisting of four big blocks and four small units at

Biharamulo. And the second G contract for Shs. 1,426,100/= was for the plaintiff

company to construct a T.P.D.F. office block and repairing some 19 residential

quarters at Rwamishenye in Bukoba District. According to the terms of the two

contracts Exh. A1 and Exh. A2, both projects were to be completed within 20 months

effective from 20/1/1983; which means H they were to be completed by 20/8/1984.

The plaintiff did not complete the contracts as it was terminated by 2nd defendant in

August 1983 on the ground that plaintiff had repudiated the contracts or that the

contracts were at an end due to the doctrine of frustration.

The circumstances which led the 2nd defendant to terminate the two contracts were

as I follows. The plaintiff company proceeded with its part of the contract until

9/4/1983 when one of the directors of the plaintiff

1985 TLR p164

MWALUSANYA J

company Mr. Haji Yusuf Amir (P.W.1) was detained as an economic saboteur under

A the Economic Sabotage (Special Provisions) Acts No. 9 and 10 of 1983. By then a

great part of the contracts had been executed. This is evidenced by the

uncontroverted evidence to the effect that by 5/4/1983 at Rwamishenye Project some

50% of the work had been done and the plaintiff was duly paid by the 2nd defendant

for that work; and B for the Biharamulo Project by 19/2/1983 some 6% of the work

had been executed and the plaintiff company was duly paid Shs.587,846/40 for that

work done. According to the testimony of PW.1 when he started to execute the

contract on 20/1/83 he had bought a lot of building materials for the two projects and

these included cement, bricks, C stones, timbers and nails etc. He also said that the

plaintiff company had two tipper lorries for the projects. Not that after the detention

of PW.1 work on the projects was at a stand still, because the other director of the

plaintiff company Mr. Haji Alli Kakurwa continued with the work. In any case at

both projects the actual construction of the D buildings was assigned to subcontractors.

At Biharamulo there was a sub-contractor named Alfred s/o Isack

(PW.2) who continued with the job until he was stopped in August 1983 by the 2nd

defendant. And at Rwamishenye the sub-contractor was one Wilfred s/o Kazimoto

(PW.4) who testified that he continued the construction with his labourers until he

was stopped in August 1983. And according to the storekeeper of the E plaintiff

company Mr. Lobenti s/o Mshahili (PW.3) he was in August 1983 chased away from

both building sites without being allowed to take away the building materials of his

employer.

The 2nd defendant does not dispute the fact that it was he who had ordered the F

plaintiff's sub-contractors to stop work in August 1983. He said that he was justified

to do so as the plaintiff had repudiated the contract or else the contract was at an end

due to frustration as disclosed in the plaintiff's letter dated 20/8/1983 which was

accepted as Exh. B at the trial. The letter is written in Kiswahili and when freely

translated into G English it reads:

That I would like to inform you that Mr. Haji Yusuf Amir one of our directors

of our company has been arrested and detained as an economic saboteur under the

Economic Sabotage (Special H Provisions) Act of 1983. Among the property of our

company that has been taken by the government on suspicion that it belongs to the

detained director are: Corrugated iron sheets, cement, nails, paints and several other

minor building materials. Besides being deprived of those essential items for our two

building projects, the bank account of our company has I been stopped from

operation

1985 TLR p165

MWALUSANYA J

by the government such that we can't withdrawal our Shs.507,111/45 lying in

the bank so that A we use it in our projects. Moreover it should be noted that costs

keep on rising considerably whenever any delay is made in executing the contracts.

And mind you the company has to pay the sub-contractors and its employees who

carry on the work at the two B projects. This company is willing and capable if the

government will open the company's Bank Account; and if the company is given back

its building materials confiscated and for which we are ready to produce cash sale

receipts to establish that it is company property and not personal property of the

detained director. As we do not know when the detained company C director will

have his case disposed of, we fear that there might be a delay in finishing our part of

the contract. So we pray that our company's bank account be immediately opened

and the company's building materials as well as vehicles used in the construction

business be released please. D

The letter was written to the Regional Tender Board which had awarded the two

contracts to the plaintiff company and was inter alia copied to the 2nd defendant.

And according to the 2nd defendant Peter s/o Kajuna, in July 1983 he once visited

both E building sites and found that work had stopped or as he said no work was in

progress at the sites. So he testified that when he received the letter quoted above

and his own observations at the site in July 1983, he came to the conclusion that the

plaintiff company had repudiated the contract or else the contract was at an end due

to the doctrine of F frustration. So he advertised another tender for a new building

contractor.

Let me first deal with the issue as to whether on the facts of this case there was a

'frustration of the contract'. It was argued by the defendants that because one of the

directors of the plaintiff had been detained and the company's building materials had

G been confiscated, then the contract was at an end due to the doctrine of

frustration. The doctrine of frustration states that where events occur that make the

performance of the contract impossible and these frustrating events are not the fault

of either party then the contract is brought to an end with neither party at fault. That

doctrine is contained in s. H 56 (2) of the Tanganyika Contract Act, Cap, 433 which

states:

A contract to do an act which after the contract is made becomes impossible,

becomes void when the act becomes impossible. I

1985 TLR p166

MWALUSANYA J

At the outset let me point out that our courts do not readily invoke the doctrine of A

frustration unless it is shown that the contract as originally conceived, bears little or

no resemblance to the new state of things. It is not sufficient merely to show that

conditions have changed so that one party is in a more onerous position, financially or

personally. It should be shown that it is now impossible to perform the contract not

merely more B difficult or expensive. In Twentsche Overseas Co. Ltd v Uganda

Sugar Factory Ltd. (1945) 12 E.A.C.A. -1 (P.C.) Lord Wright of the Privy Council had

expressed the matter in much more eloquent terms when he said: C

It (frustration) is a sort of shorthand: it means that a contract has ceased to

bind the parties because the common basis on which by mutual understanding it was

based has failed. It would be more accurate to say, not that the contract has been

frustrated, but that there has been a failure of what in the contemplation of both

parties would be the essential condition or D purpose of the performance.

Then in Alibhai Gulam v Mohamed Yusuf (1946) 13 E.A.C.A. 25 (K) Sir Joseph

Sheridan C.J. cited with approval the passage of Viscount Simon L.C. in Febrosa v

Fairbairns Lauson Combe Barbour Ltd. [1943] A.C. at p. 40 where in referring to E

frustration he said:

The principle is that where supervening events, not due to the default of either

party, render the performance of a contract indefinitely impossible and there is no

undertaking to be bound in F any event, frustration ensues.

I have underlined the phrase 'indefinitely impossible' for emphasis. Then we have Sir

Samuel Quashie - Idun P. who expressed the doctrine in much more telling terms in

the case of Howard & Co. (Africa) Ltd. v Burton [1964] E.A. 540 (C.A.) (K.) where G

after citing with approval the decision of the House of Lords in Isakiroglou & Co. Ltd.

v Noblee Thorl [1962] A.C. 93 he stated that:

The fact that it has become more onerous or more expensive for one party

than he thought is H not sufficient to bring about a frustration. It must be more

than merely more onerous or more expensive. It must be positively unjust to hold the

parties bound. It is often difficult to draw the line. But it must be done. And it is for

the courts to do it as matter of law. I

1985 TLR p167

MWALUSANYA J

With those few examples articulating what circumstances amount to frustration, I

think A now it is crystal clear that the doctrine was wrongly invoked by the 2nd

defendant. With the factors that plaintiff company had disclosed in his letter the

execution of the contract would have been more onerous but not impossible. A much

more close example is the B Kenyan case of Maclaine Watson & Co. Ltd. v Kanji

Meghji Shahs (1956) 23 E.A.C.A. 366. That was a contract for selling rice. The

government refused to issue an import licence for rice. With the ban it became very

expensive to execute the contract. The buyer argued that the contract was frustrated

but the court thought not even though it agreed that it had become more expensive to

execute it. C

There is also a further ground supporting a view that there was no frustration. The

plaintiff is a corporate body with a certificate of incorporation No. 10191. So it is a

separate legal entity quite distinct from its members. And as a company works

through D its members and employees, then the detention of a member or director,

would not deter the company to continue to work through its other members and

directors. I am therefore not persuaded that the 2nd defendant was entitled to invoke

the doctrine of frustration.

Next let me now consider the second point as to whether the plaintiff company had at

E any time repudiated the contract. Repudiation occurs where one party either

expressly or impliedly intimates that he will not honour his side of the bargain. This

happens before the end of the contract period. The doctrine is contained in s. 39 of

the Tanganyika Law of Contract Act, Cap. 433 which provides: F

When a party to a contract has refused to perform or disabled himself from

performing his promise in its entirety, the promisee may put an end to the contract,

unless he has signified, by words or conduct, his acquiescence in its continuance. G

The test for repudiation where there has been no expressed intention to repudiate, is:

was the conduct such as to have caused a reasonable person to come to the conclusion

that the person did not intend to or was unable to fulfil his contract? A clear example

is demonstrated by the case of Rashid Moledina & Co. (Mombasa) Ltd. V. Hoima H

Ginners Ltd. [1967] E.A. 645 (C.A.)(K). In that case X contracted to sell coffee to Y.

X was in short supply and unsuccessfully tried to come to some agreement with Y. X

failed to deliver to other parties and Y, knowing of this failure claimed it amounted to

repudiation. It was held by Court that X's behaviour could be treated by Y as I

repudiation. In the words of Duffus J.A.:

1985 TLR p167

MWALUSANYA J

The test must be whether ... the conduct of the respondent through its

representatives was A such as to have caused a reasonable person to come to the

conclusion that the company did not intend to or was unable to fulfil its contracts.

Applying that test to the facts of this case, I am unable to agree that the plaintiff

company B had repudiated the contract either expressly or by conduct. The letter

that I quoted above does not in so many words state that the plaintiff company would

not go on with the contract but it states simply that they would find it more difficult

to perform or rather that there may be a delay in completion of the same. After all

the director was detained C on 9/4/1983 and some building materials confiscated on

the same day, and yet construction at both projects continued in full swing until the

sub-contractors were stopped in August 1983. I don't agree with the testimony of the

2nd defendant that in July 1983 work at both building sites had come to a stand still.

On the whole no D reasonable person could, on reading the letter Exh. BI, have

come to the conclusion that the plaintiff company intended or was unable to fulfil its

part of the contract. The 2nd defendant was wrong to have had reached that

conclusion.

In any case even if 2nd defendant had reached the conclusion that the plaintiff had E

repudiated the contract yet as correctly submitted by plaintiff's counsel Mr.

Kahangwa, the 2nd defendant was precluded from making preemptory determination

of the contracts as it was contrary to the agreed stipulations contained in the General

Conditions of Contracts and both contracts Exh. AI and Exh. A2 clearly provide that

the F two contracts are subject to the General Conditions of the Contract. Now

clause 32 of those General Conditions of the Contract provides:

32. Determination of Contract by Employer. G

(a) Default: If the Contractor shall make default in any of the following

respects, viz:

(i) If without reasonable cause he wholly suspend the works before

completion;

(ii) If he fails to proceed with the works with reasonable diligence;

H

and if he shall continue such default for fourteen days after a notice by

registered post, specifying the default has been given to him by the Principal

Secretary (works), the Employer I may without prejudice to any other rights or

remedies, thereupon by notice by

1985 TLR p169

MWALUSANYA J

registered post determine the employment of the Contractor under this

Contract: A

Provided that notice in pursuance of this clause shall not be given

unreasonably or vexatiously. B

Those conditions clearly provide that in case of default the employer has to write a

notice by registered post to the contractor informing him the particulars of the

default. And if within 14 days after the first notice the contractor says that he is

unable to continue with the contract or the default that was pointed out persists then

the employer C may determine the contract and this has to be done by registed post.

However none of that procedure was followed by the 2nd defendant. The 2nd

defendant acted unreasonably in determining the contract without notice to the

contractor. The notice would have put him in the clear picture if the contractor was

willing and capable of going D on with the contract despite the temporary

drawbacks that had cropped up. In the event then I hold that there was no

repudiation of the contract by the plaintiff company. It was the 2nd defendant who

was in breach of the contract and so liable in damages. So issue No. 1 is answered in

favour of the plaintiff company.

For the moment we skip issue No. 2 and proceed to issue No. 3. Now issue No. 3 E

concerns compensation payable to the plaintiff company for the work done and not

paid for, up to the time the contract was put to an end by the defendants. The

defendants conceded at the commencement of the trial that they were liable for not

more than F shs.179,840/40 for the work done at Biharamulo Project but that they

were not liable for any work done at Rwamishenye Project. However evidence was

brought by the plaintiff company concerning the work done at both projects and that

evidence was given by PW.2, PW.2, PW.3 and PW.4. There was unchallenged

evidence adduced for the Biharamulo Project indicating that the buildings under

construction had all G reached four feet high at the time of the determination of the

contract and this is about 20% of the contract sum of shs.9,193,100/= and that comes

to Shs. 1,838,620/= and less Shs. 587,846/40 paid out to the plaintiff on 19/2/1983

there remains Shs. 1,238,620/= which plaintiff company now claims. I can see no

valid reasons as to why H the defendants concede to pay Shs.179,840/40 only for the

Biharamulo Project and not the full sum of shs 1,238,620/=. It is my finding that shs.

1,238,620/= claimed for the Biharamulo Project is a reasonable sum and so I accept it.

As for the Rwamishenye Project there was uncontroverted evidence from the witness

PW.1, PW.2., PW.3 and PW.4 that about 70% of the contracted work had been done,

in that 17 of the 19 I residential staff quarters had been substantially repaired as

1985 TLR p170

MWALUSANYA J

contracted; and as regards the office block the same had already been erected only A

awaiting the finishing touches. In view of the fact that defendants did not offer any

challenge to that evidence I accept it and agree that it was 70% of the whole work.

As on 5/4/1983 he had done 50% of the work and got paid half of the contracted sum

of shs. 1,426,100/= for the Rwamishenye Project, now he is entitled to shs. 285,220/=

B being the 20% of the work done between April 1983 and August 1983. I

accordingly award shs.285,220/= as compensation for the Rwamishenye Project. Total

award for both projects is Shs1,523,840/=

Issue No. 4 and 5 concern compensation payable to the plaintiff company for the

building materials (issue No.4) and building tools (issue No.5) that had been left

behind C at both building sites after the plaintiff company had been chased away

from there. As regards issue No. 4 and 5 the plaintiff's counsel Mr. Kahangwa

submitted that compensation was payable as there was enough evidence indicating

that tools and building materials to the tune of shs. 123,391/= were left behind.

According to PW.1 D and the storekeeper Libent s/o Mshahili (PW.3) the building

materials and tools left behind at both sites was as per the list Exh. A3 prepared by the

plaintiff company on 29/5/1984. The two sub-contractors PW.2 and PW.4

corroborated that fact. The defendants did not offer any evidence on the matter but

in the written statement of E defence it is alleged that building materials were paid

for by the 2nd defendant and that as for building tools the same are in custody of the

Commander of Biharamulo T.P.D.F. Camp. No evidence was led as to how the

building materials were paid for and so I reject outright that contention. As regards

the building materials, the defendants cannot F escape liability by claiming that a

third party might be having them. When notice to sue was sent it was the duty of the

defendants to collect those building tools if they were there and hand them over to

the plaintiff company in order to avoid liability. Otherwise they are liable in law. I

accordingly award the plaintiff company the sum of G shs.123,391/= as indicated in

the list which is Exh. A3 in court.

Now issue No. 2, 6 and 7 concern the quantum of damages that plaintiff company is

entitled to, after having won the case. For issue No. 2 the plaintiff company claims

shs. 1,585,380/= or ordinary damages being 15% of the total sum of the contract sum

and that being the anticipated reasonable profit that plaintiff company would have

got on the H two projects. Issue No. 6 is a claim also of ordinary damages for shs.

17,500/= for the installation of a water tank at the Biharamulo. And issue No. 7

concerns any other relief that plaintiff company may be entitled to. I

I will start with issue No. 6 concerning ordinary damages of shs.

1985 TLR p171

MWALUSANYA J

17,500/= for the water tank that was installed. It is uncontroverted that the plaintiff

A company built a water tank at the Biharamulo Project because water there is

scarce. The defendant did not dispute the fact that shs. 17,500/= was a reasonable sum

for constructing a water tank, but contended that the damages were not payable

because B they were remote. But plaintiff company submitted those damages were

not remote. It is trite knowledge that our law draws a line somewhere and says that

damages incurred beyond a certain limit are too remote to be recovered. Damages in

contract must therefore be proximate. The modern law regarding remoteness of

damages in contract is C founded upon the English case of Hadley v Baxendale

(1854) 9 Exch. 341 which case is authority for the statement that damages in contract

will be too remote to be recovered unless they are such that the defendant, as a

reasonable man, would have foreseen them as likely to result, according to the usual

course of things or because of D special facts made known to him. That decision is

incorporated in s. 73 (1) of our Tanganyika Contract Act Cap. 433. And the doctrine

received explicit judicial recognition in East Africa through the decision of E.A.C.A.

in Woodruff v Dupont [1964] E.A. 404. Applying the above doctrine, it is my

considered view that the building of a water tank, because of the scarcity of water at

Biharamulo, was a matter E which defendant knew or as a reasonable man should

have known as likely to happen, and so defendant is liable.

Concerning the ordinary damages of Shs. 1,585,380/= on issue No. 2, I think there is

little controversy on the principle of law applicable. Damages are intended to put the

injured party in the same financial position as he would have been if the contract had

F been performed according to its terms. Therefore the plaintiff company as of right

has a claim to the profit that would accrue to him after deducting his expenses, if the

contract had been fulfilled. The plaintiff company has put the profit that would have

accrued at G 15% of the contract sum. It was the plaintiff's case that normally for

building contracts 15% of the contract sum accrue to the contractors and that it is

reasonable sum. In my considered view the claim appears a reasonable sum, more so

that the defendants did not offer any evidence to contradict that point. The plaintiff's

advocate Mr. Kahangwa H cited the English case of Suisse Atlantique Societe de

Armement Martime S.A. v N.V. Rotterdamsche Kolen Centrale [1966] 2 W.L.R. 944

in support of his contention on this leg. But I am afraid the case is of no assistance as

it concerned a matter of remoteness of damages - that is whether loss of profits was

reasonably foreseeable or not. That was a case where plaintiff hired out his ship for

carrying of goods for two years and it was agreed that he would be paid a certain sum

per trip I made. The ship was to make a number of trips for the two years of

1985 TLR p172

contract. The ship failed to make up an anticipated number of trips in the two years

and A plaintiff alleged that it was due to the negligence of the defendants. He

claimed inter alia loss of profits he would have made if the anticipated number of

trips for two years, damages for loss of profits would have been payable but not in the

present case where there was no such contract and so no profit was payable. That

case is distinguishable B from the present case in that, that case concerned the issue

of remoteness of damages that is whether loss of profits was reasonably foreseeable or

not; but in our case at hand the issue is simply one of assessment of a quantum of

damages which are conceded not to be remote. And as I said earlier I am satisfied

that a claim of 15% of the contract C sum amounting to shs. 1,585,380/= is a

reasonable sum and I awarded that sum on this head.

Before I sign off I should put on record that it was conceded by the 1st defendant that

if the 2nd defendant was in breach of the contract, then 1st defendant would be

vicariously liable for the sins of his employee the 2nd defendant because it is common

knowledge D that 2nd defendant throughout acted in the usual course of his

employer's business.

Be that as it may, the plaintiff company succeeds in toto in its claim. I enter judgment

for the plaintiff in the sum of shs. 3,250,111/= as claimed plus costs of the suit. E

Order accordingly.

1985 TLR p172

F