Mohamedali Virji Walji v. Shinyanga African Trading Company, Limited (hc) Civ. Case 18-D-68, Biron, J.

Mohamedali Virji Walji v. Shinyanga African Trading Company, Limited (hc) Civ. Case 18-D-68, Biron, J.

Plaintiff sued a limited company of which he was formally the managing director for unpaid salary, repayment of advances, and the price of goods sold by him to the Company. The defendant company had been formed by plaintiff and another group to distribute beer, plaintiff having already been engaged in the beer distribution business in a different region. After disputes arose between plaintiff and other group, all the directors agreed to authorize a firm of accountants to audit the books and records of the company to ascertain the amounts due to plaintiff and his controlled companies by defendant. The accounting firm found that Shs.23, 695. 25 was owed to plaintiff and plaintiff sought to recover this amount. Defendant defended and counterclaimed on the grounds (1) it had authorized

An account to be stated by the accounting firm at a time when it did not know of facts constituting fraud by plaintiff and therefore the account stated was not binding; (2) plaintiff could not recover any loans made to the company after incorporation; (3) plaintiff could not recover any sums advanced prior to the incorporation of defendant; and (4) plaintiff had defrauded defendant by causing defendant to purchase beer from plaintiff’s controlled companies.

            Held: (1) At the time plaintiff caused beer to be purchased by defendant from companies in which plaintiff was interested, defendant was unable to purchase beer directly from its supplier brewery because of shortages. The price paid by defendant was reasonable, and in fact was the price fixed by the brewery for resale’s by plaintiff’s companies. At the time of the purchase defendant’s other directors were aware that the purchases were being made and approved of them. The court noted that the Defendant’s Memorandum of Association authorized defendant to deal with interested directors as long as such interest was disclosed to the Board. Therefore it held that no fraud was committed. (2) As to the loans made after incorporation, the Court held that the defendant’s Memorandum and Articles authorized borrowing, and the original agreement between plaintiff and other group required plaintiff to make loans to defendant when it was formed. (3) With respect to the money advanced before incorporation (which was used to purchase a vehicle) the Court did not pass on the question whether the use of the vehicle constituted a new agreement to pay by the plaintiff, but held that, since defendant had entered into a new agreement to have the accounting firm resolve the disputes between plaintiff and defendant, defendant became liable for the resulting balance found to be due, even though in computing the balance, the accounting firm could take into account a debt which might not otherwise be separately enforceable. (4) Consideration for the agreement to submit the dispute to the accounting firm was supplied by the mutual and reciprocal promises by each party to forego their claims and accept the account to be stated, citing the Contract Ordinance (Cap. 433) Section 2(1). (5) Since no fraud was proved against plaintiff the court did not have to reach the question whether there was a unilateral mistake of fact sufficient to avoid the contractual obligation to submit the dispute to the accounting firm. (6) Judgment was awarded to plaintiff with interest at 9% per annum the court noting some dissatisfaction with interest at this high rate in an action for a liquidated amount, but stating that it was the general practice to award interest at this rate and that it was not excessive in light of prevailing economic conditions.