Pascal Joseph Mlay v. Anthony Phoneas, Civ. Case 16-A-66, 28/10/67, Platt J

Pascal Joseph Mlay v. Anthony Phoneas, Civ. Case 16-A-66, 28/10/67, Platt J

Plaintiff and defendant agreed that plaintiff would purchase two farms held by defendant under a Government lease pursuant to the Freehold Titles (Conversion) and Government Leases Act, Cap. 523. Plaintiff agreed to deposit Shs. 10,000/- upon the signing of the agreement, (and did so in October, 1964), and to attempt to obtain credit for the remaining shs. 490000/- by January, 1965. A certain period of grace was provided for, whereupon the defendant would have the right to sell the land to another buyer; in the event of such sale, defendant would repay the deposit together with a sum to be agreed upon for the running expenses of the farm incurred by plaintiff in the interim. At the expiration of his time to obtain credit, and the period of grace, plaintiff was unable to pay, and defendant reclaimed the land. He did not resell it, however. Plaintiff entered a claim for the deposit and expenses in running the estate; on the latter claim, he alleged an understanding between the parties that such expenses would be refunded if the sale did not go through for any reason. In the alternative, he alleged that the entire agreement had been void for failure to obtain the consent to the disposition of the Commissioner, as required by section 19 of the Act; he argued that he was entitled to the deposit and expenses under section 65 of the Law of Contract Ordinance, Cap. 433, as “advantages” obtained under an agreement “discovered to be void.” The case originated in the High Court, and the defendant raised the preliminary objection that the plaint stated no cause of action.

            Held: (1)”Understandings” between the parties must be included within the written contract, where an agreement is reduced to writing and executed by them. Plaintiff’s claim cannot here be based upon the alleged “understanding”, which was not so included. (2) Under the Act, “disposition” includes “assignment, sub-lease, mortgage or settlement of the term whether in the whole leased land or a part thereof …….” A disposition “shall not be operative without the consent of the Commissioner.” [Citing Cap. 523, s. 19.] Section 20 of the Act provides that a disposition “shall become void” where the Commissioner refuses his consent, or merely does not give it within six months of the application. (3) Although the agreement here was called a “sale” by the parties, it was a transaction to dispose of the vendor’s whole interest in land held on a term of years; it was thus an “assignment” within the meaning of the Act, and therefore required the consent of the Commissioner to become operative. [Citing Williams and Eastwood on Real Property, 24^th ed., …. P. 112.] (4) Although the agreement here was not operative as a “disposition” --- i.e., could not operate to dispose of defendant’s interest in the land --- “the contract may well exist ….. with regard to collateral matters.” [Citing Patterson and others v. Kanji (1956) 23. E.A.C.A. 106; Patel v. Lawrenson (1957) E.A. 249; and Fazal Kassam v. Abdul Nagji Kassam (citation omitted), with extensive discussion.] Here, where the disposition is clearly inoperative, or “void”, the issue is whether plaintiff can claim for “advantages” –the deposit and the running expenses, matters covered in a separate provision of the instrument of disposition --- under section 65 of the Contract Ordinance, dealing with an “agreement….discovered to be void …..” (5) Section 65 of the Ordinance should be read to allow recovery of the deposit in cases such as this one, albeit the collateral provision covering plaintiff’s claim might in some circumstances not be “void”. Pollock and Mulla’s Commentary on the identical provision of the Indian Contract Act, 8^th edition, states;

“A transferee of property which from its very nature is inalienable is entitled to recover back his purchase money from the transferor, if the transfer is declared illegal and void.” In the Court’s opinion, it is Manifestly just” that there should be redress where the parties have altered their position with the understanding that the disposition may be held void or become inoperative. (6) If, upon the evidence, the running expenses amounted to an “advantage”, there is no reason in principle why they should not be recoverable “for the same reasons as a deposit is recovered.” Decision for plaintiff, to proceed to trial.

            The Court stated, obiter: “(B)y making a collateral agreement, the parties may very well preserve a greater degree of reimbursement than if they merely rely on section 65.” This does not affect the holding that plaintiff, in this case, also has a good cause of action based on section 65 of the Contract Ordinance.