Merali Hirji and Sons v General Tyre (E.A.) Ltd 1983 Tlr 175 (Hc)

MERALI HIRJI AND SONS v GENERAL TYRE (E.A.) LTD 1983 TLR 175 (HC)

Court Court of Appeal of Tanzania - Dar Es Salaam

Judge Nyalali CJ, Makame JJA and Kisanga JJA

April 27, 1984

CIVIL APPEAL 24 OF 1983

Flynote

Contract - Formation - Agreement made verbally - Arrangement lasted for five years - D Whether valid contract.

Contract - Agency - Agent incurs expenses to run the business - Nature of agency.

Contract - Agreement carries no terms - Duty of the Court.

Contract - Agency - Contract carries no terms - Termination - Whether court to imply reasonable notice of termination.

-Headnote

The appellant company was appointed the sole dealer in selling and distributing the respondent company's tyres and tubes in Rugwe and Kyela districts. The appellant used to buy the goods from the respondent at a 15% discount and transport them to his premises. The appellant dealt in the respondent's goods only. Five years later the respondent unilaterally terminated the five-year-old commercial relationship without notice and without assigning any reason for doing so.

The whole arrangement was made verbally. The High Court held that the arrangement was one of agency, that the respondent was not obliged to give any notice for terminating the agency and therefore that there had been no breach. On appeal it was argued in favour of the appellant that given the nature of the relationship between the parties and the appellant's commercial dealings the court should have imported reasonable terms into the contract and held that a reasonable notice was necessary to terminate the relationship.

Held: 

(i) There was a valid contract between the parties proved by their conduct over the years:

(ii) the contract was one of agency; 

(iii) given the nature of the relationship in this case the appellant was not a commission agent, as such was entitled to a reasonable notice of termination of the contract;

(iv) since the contract did not provide for terms the court had a duty to imply reasonable terms;

(v) the respondent was legally obliged to give notice;

(vi) given the circumstances of the case six months' notice is reasonable and justified.

Case Information

Appeal allowed.

Cases referred to:

1. Martin-Baker Aircraft Co.Ltd. and Another v Canadian Flight Equipment, Ltd. [1955] 2 All E.R. 722.

2. Motion v Michaud (7) (1892) S.T.L.R. 253 D

M.A. Lakha, for the appellant.

R.J. Rweyemamu, for the respondent.

[zJDz]Judgment

Makame, J.A. read the following considered judgment of the court: Sometime in 1975 the appellant company was appointed the sole dealer in selling and distributing the respondent company's tyres and tubes in the Rungwe and Kyela Districts after one C.V. Patel had ceased to function as such. The appellant would purchase the said goods on cash at a 15% discount, and collect them himself from the respondent company's premises in Mbeya Township. His assertion that he was to sell the tyres and tubes of only the respondent company, and that he was the only one permitted to do so in the two district, was not controverted in evidence.

By a letter dated 15th August, 1980, the respondent company unilaterally terminated the five-year old commercial relationship, without any prior notice and, apparently, without providing any reason for doing so. The appellant felt that the respondent company's H action was high-handed and unreasonable, that the said action had caused him loss of profit, and that gave him a right to damages. The appellant accordingly sued in the High Court for Shs. 150,000/= damages, contending that could cover a reasonable notice, for six months, at the rate of shs. 25,000/= per month. Mr. Lakha, learned advocate, appeared for the appellant in this appeal before us, as he did also in the court below. At I the original hearing the respondent company was represented by Mr. Rweyemamu, learned counsel from the Tanzania Legal corporation, who appeared also before us.

It was common ground that the communication giving rise to the alleged relationship between the parties was merely verbal. It was the appellant's case that, that notwithstanding, what was thereby formed was a valid contract proved by the conduct of the parties over the year. Admittedly no specific provision was made for circumstances which would entitle either party to terminate the contract or for the necessary length of notice in the event. In such a case, Mr. Lakha maintained, the court had to import reasonable terms: in the instant case he reckoned that six months' notice would have been reasonable.

Mr. Rweyemamu for the respondent company argued that the arrangement was ad hoc, that no contract was in fact entered into, and so there was no obligation to issue the alleged or any notice.

Mr. Msaky, the only witness for the respondent company, told the trial court that his company did not normally give notice to their dealers when the company wanted to terminate a dealership; there were simply no rules.

The learned Jaji Kiongozi who tried the suit was satisfied that "there was some understanding between the parties regarding selling of tyres of the defendant in Mbeya (sic) and Kyela Districts" and went on, further, to hold that there was an irresistible inference that the appellant was the respondent company's agent in Tukuyu (sic). We respectfully agree that the appellant was the respondent company's agent as alleged, and we did not permit Mr. Rweyemamu to endeavour to persuade us otherwise, because there was no cross-appeal on the issue.

Having found that the appellant was the respondent company's agent the learned Jaji Kiongozi was nonetheless of the view that the respondent company was not obliged to give any notice terminating the agency, and therefore there had been no breach. The learned Jaji Kiongozi referred to some authorities, chiefly the case of Martin-Baker Aircraft Co. Ltd And Another v Canadian Flight Equipment Ltd [1955] 2 all E.R. 722. He was of the view that because there was allegedly no Master and Servant relationship in the present case, and, as unlike in Martin Baker's case, there was herein not "the highest degree of mutual trust and confidence between the parties", there was no need for a notice. The learned Jaji Kiongozi referred to two other authorities, Birtley's and Bellshill's cases, and said that the decision in Bellshill's case overruled those in I Birtley and Martin-Baker. With great respect, we have grave doubt as to the relevance of Bellshill's case, and it is clearly incorrect to assert that Bellshill had over-ruled Martin-Baker. Martin-Baker is not mentioned even in passing in Bellshill's case.

We have had to look at Martin-Baker's case closely to get the kernel from the husks. We do not read the case the way the learned Jaji Kiongozi appears to have done. The rival contentions in Martin-Baker were different from those in the present case. In Martin-Baker a great deal of discussion was spent on whether the relationship was permanent. i.e. terminable only by mutual consent, or whether it could be terminated by party on reasonable notice to the other. That is where reference was made to high degree of mutual trust or a relationship akin to Master and Servant, the argument emerging therefrom being that, if there was some such relationship, involving a high degree of mutual trust etc, it would be unreasonable to hold that the relationship is permanent; continuing to be binding despite the breach of trust etc. Such a relationship would be terminable by either party. Our present problem is different: It is not whether it would be permanent or terminable by one of the parties but rather, whether is determinable at will and without notice at all, or whether it can only be terminated with reasonable notice and, if it is the latter, what is reasonable notice. The slant is thus different and it is when one appreciates that, that one really understands Mr. Lakha's complaint that the case law used was misapplied.

The facts in the present case are also different from Motion v Michaud (7) 1892 S.T.L.R. 253, which concerned an independent merchant who undertook to sell the defendant's brandies, like he had been selling other people's wines and champagne, on a commission basis. He got the consignments of brandy without paying for them and was getting his cut after the sales. He was only involved the office expenses.

In the present case the appellant was expending his own cash to buy the goods, he collected them himself from Mbeya, transported them to his shop, and the evidence was that he had an outfit for selling the respondent's goods. He was not a commission agent who had virtually no risk and who did not have to tie up his capital. What he got was a discount on the cash payment, not a commission for only whatever he sold. One has to look at the particular facts and circumstances of each case. In the present case the appellant had geared himself to selling only the respondent company's tyres and tubes and to selling them alone, without competitors. All of a sudden he would get no more I supplies, was no more a dealer for the respondent company and, obviously, if he was inclined to secure another tyre and tube agency, it would take him time and effort, and possibly some resources, to cultivate one. It is quite true that, as McNair, J. said in Martin - Baker, it is not the function of the court to make a reasonable contract between the parties but, as the learned judge also observed, and with him we respectfully agree, it is the duty of the court to imply reasonable terms. It is our considered view that in the present case the respondent was legally obliged to give notice and that, on the evidence, the learned Jaji Kiongozi should have so held. Mr. Rweyemamu for the respondent, eventually conceded as much, but he urged that one-month notice would have been reasonable and enough. In our view the six months' notice the appellant asked for is reasonable and justified in the circumstances. We accordingly allow the appeal to that extent, with costs, here and in the court below.

Regarding the quantum of damages, we are at a disadvantage. We would naturally need data for this, and what Mr. lakha furnished us with cannot take us far enough. He has included in the record before us the respondent's sales documents for only August 1980, the last month the parties transacted business with each other immediately before the termination. We are aware that at the High Court a lot more documents were produced and we trust that the present omission by Mr. Lakha was merely fortuitous and not by design. The trend of sales between the parties over the whole tract of time the parties did business together would tell the story better when it comes to assessing the damages. For that reason we remit that aspect of the suit back to the learned Jaji Kiongozi for F assessing the quantum of damages and awarding the same accordingly.

Appeal allowed

1983 TLR p179

H