3 July 1970

     
 

Criminal Appeal No. 17 of 1970

 
     

Court of Appeal for East Africa

     
     

Settlement Fund Trustees

 

v.

Nurdin Ismail Nurani

     
     
 

Judgment

 
     
 

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BEFORE:

VICE-PRESIDENT: Spry
JUDGES OF APPEAL: Law and Lutta

   

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http://www.worldcourts.com/eaca/eng/decisions/1970.07.03_Settlement_Fund_Trustees_v_Nurani.htm

   

Citation:

Settlement Fund Trustees v. Nurani, Judgment, File No. 17 of 1970 (CAEA, July 03, 1970)

Represented By:

 

Editor's Note:

Appeal from a judgment and decree of the High Court of Kenya at Nairobi (Harris, J.) dated 22nd July, 1969 in Civil Case No. 371 of 1967

 
     
 
 
 

LUTTA, J.A.

[1] This is an appeal by the defendant from a judgment of the High Court in a suit in which the plaintiff had claimed a total sum of shs. 38,355/- as damages for breach of contract, or, in the alternative, for breach of trust by the defendant. The facts are that the respondent (the plaintiff in the High Court) entered into an agreement (to which I shall refer as "the agreement") in writing with one Mrs. Jessica Eileen Marian Dickson (hereinafter referred to as the vendor") on 28th May 1962 under which the rights of cutting and taking bark from wattle plantations on the vendor's farm (Land Reference Numbers 8746 and 7613/3) situate at Eldoret (hereinafter referred to as "the 'land") were sold to the respondent for shs.17 ,875/-. It was also provided in the agreement, that for the purpose of exercising those rights, the respondent should have a right of entry on to the land until 31st December 1963.

[2] Pursuant to the agreement the respondent in the first half of 1963 entered on to the land to erect huts and latrines for the use of his laborers. During this period the vendor was negotiating the sale of the land to the appellants. On 8th August 1963 Messrs Shaw and Carruthers, Advocates for the vendor and respondent (to whom for convenience, I shall refer to as "the advocates") wrote to the Senior Executive Officer, Compassionate Farms, Central Land Board, Nairobi (hereinafter referred to as "the appellants") as follows:-¬

"The Senior Executive Officer,
Compassionate Farms,
Central Land Board,
P.O. Box 30445,
NAIROBI.
Dear Sir,
We refer to our letter to you of the 2nd instant written on behalf of Paulo Kibor arap Kemboi who is interested in purchasing the farms being acquired from Mrs. Dickson, namely L.R. Nos. 8746 and 10324. We enclose herewith recommendation from the District Agricultural Officer, Nandi.
We understand that your Mr. Knight called to see the writer regarding L.R. Nos. 8746 and 10324 with regard to Mr. Nurani's purchase of the wattle on the farm while Mrs. Dickson was in possession. We confirm that Mrs. Dickson did sell the wattle to Nurani on the 28th May 1962.
Yours faithfully,
For SHAW & CARRUTHERS"

[3] On 15th August 1963 the appellants replied to the above as follows:

"Shaw & Carruthers,
Advocates,
P. 0. Box 112,
ELDORET.
Dear Sir,
L.R. Nos. 8746 & 10324
Mrs. J. Dickson
Thank you for your above letter and the recommendation concerning Mr. Kibor. His been added to the waiting list and I will you concerning the resale of this farm has been advertised. I have noted on the valuation report for this farm that the sale of the wattle to Mr. Nurani is for the bark only and the 'Kuni' will belong to this Board. Can you please confirm that this is the true position?
Yours faithfully,
(A. Knight)
Senior Executive Officer
(Compassionate Farms)"

[4] On 17th August, 1963 the appellants made an offer to purchase the land and on 20th August 1963 the advocates wrote confirming that the sale of the wattle to the respondent was for bark only and the trees and brushwood remained the property of the vendor. On 28th August 1963, the vendor through the advocates wrote to accept the offer made by the appellants for the purchase of the land and forwarded the title deeds thereof to the Registrar of Titles. In the same letter the appellants were asked to note that the wattle was excluded from the sale. However, on 5th September 1963 the appellants wrote to the advocates pointing out that it was the bark of the wattle trees that had been excluded from the sale of the land. The land, among others, was advertised for sale in the East African Standard of Friday 13th September 1963. The advertisement contained, inter alia, the following information:

"Particulars of Farm:
L.R. No. 10324 and 8746
Acreage: 343.
Particulars: 75 acres wattle......
Sale price: £5300"
This advertisement made no reference to the fact that the wattle bark had been sold. On 16th October 1963, the advocates wrote to the appellants as follows:
"The Senior Executive Officer,
Compassionate Farms,
Central Land Board,
P.O. Box 30445,
NAIROBI.
Dear Sir,
Mr. N. I. Nurani has requested us to obtain from you a letter confirming that the wattle bark on L.R. Nos. 8746 and 10324 is his property. Please let us have the necessary letter.
Yours faithfully,
for SHAW & CARRUTHERS"

[5] On 17th October 1963, the appellants wrote to Mr. Paulo Kibor Arap Kemboi (to whom I shall refer as "the vendee") offering to sell to him the land which the vendor had already sold to them. In this letter the bark of the wattle trees was not excluded from the sale. The vendee accepted the offer through the advocates on 22nd October 1963. It is necessary to point out that the advocates were acting for the vendor, the respondent and the vendee. The vendee entered into possession of the land on 23rd October 1963, and according to the advocates' letter of 30th November 1963, he was informed that the said goods had already been sold to the respondent. That letter reads as follows:

"Mr. Paulo arap Kemboi,
P.O. Box 67,
KAPSABET.
30th November, 1963.
Copy to: The Senior Executive Officer,
Compassionate Farms,
Central Land Board,
P.O. Box 30445,
NAIROBI.
Copy to: Macdonald, Esq.,
Central Land Board,
Sosiani House,
ELDORET.
Dear Sir,
L.R. Nos.8742 & 10324
We have been informed by Mr. N.I. Nurani that you have entered into an agreement for the sale of wattle on the above farms. As you are aware, this wattle is not your property, it having been previously sold to Mr. N.I. Nurani, and you were informed of this when you took over the farm.
Yours faithfully, for SHAW & CARRUTHERS"

[6] Notwithstanding this letter attempts thereafter by the respondent to enter the land for purposes of cutting and stripping the bark of the wattle trees were unsuccessful, the vendee having prevented him from doing so. On 29th October 1963 the appellants replied to the advocate's letter of 16th October 1963 in the following terms:

"Dear Sirs,
Ref: Your letter GHC/DE 4322 dated 16th instant.
Thank you for your letter.
I herewith confirm the wattle bark on farm L.R.8746 and 10324 has been purchased by Mr. N.I. Nurani and forms no part of the assets which this Board includes in its purchase of this property, but the trees after having been stripped of their bark remain the property of the registered owner.
Yours faithfully,
(H. Goldsworthy)
For SECRETARY"

[7] It is not disputed that the bark of the wattle trees (to which, for convenience, I shall refer as "the said goods") in question was ripe enough during this period (May 1962 and December 1963) for cutting and stripping. The vendee entered into a contract with other persons for the sale of the wattle in November/December 1963. The respondent, until March 1964 attempted, in vain, to have access to the land in order to remove the wattle bark or to obtain compensation from the appellants for the loss of the cutting rights and in April 1967, filed a suit against the appellants claiming damages for breach of contract, or in the alternative, for breach of trust.

[8] The learned judge gave judgment in favor of the respondent for the loss of the original purchase price and damages. In that judgment the learned judge found that the said goods constituted "goods" within the meaning of section 2(1) of the Sale of Goods Act - Cap.31) (hereinafter referred to as "Cap. 31") and that failure to register the agreement under the Registration of Titles Act - Cap.281 (to which I shall refer as "Cap.281") did not affect its validity.

[9] He further found that the appellants were in breach of their contractual obligation to the respondent.

[10] From that decision the appellants lodged an appeal and the respondent has cross-appealed with a view to supporting the decision of the learned judge on the grounds that the appellants were trustees for the respondent in respect of the said goods and they were estopped from denying that they were bound by the agreement. At the hearing of this appeal, we gave leave to Mr. Slade, Counsel for the respondent, to amend his notice of cross-appeal to include an additional ground, namely, that there was novation of the contract “in such manner that the appellant took the place of Mrs. Dickson (the vendor) for all purposes of the contract".

[11] As I understand it, the argument of Mr. Morrison, for the appellants, is, firstly, that the agreement is an interest in land and as it was not registered under section 32 of Cap.281, it was not effectual to pass interest in the land to the respondent and was accordingly void. Secondly, he argues that in the agreement it was stipulated that the rights conferred on the respondent would endure for a fixed period, that is, for over a year, and thus the said goods were fructus naturales and not fructus industriales and accordingly the sale of the rights in respect thereof is not a sale of goods with¬ in the meaning of Cap.31 and therefore the test laid down in Marshall v. Green - (1875-6) 1 C.P.D. 35 should not have been applied by the learned judge to the instant case.

[12] For this proposition he relied on the case of Scorel v. Boxall - 148 E.R. 724. Thirdly, Mr. Morrison relying on the case of Fitzgerald v. Firbank (1895-9) All E.R. 445 argues that the respondent's rights under the agreement were in the nature of profits a pandre and did not constitute just a mere revocable licence and since the agreement was not under seal or not instrument a deed it would have to be converted into a registrable instrument/and registered under Cap.28l otherwise it would not be effective against a purchaser without notice.

[13] Fourthly, he argued that on the basis of the agreed facts novation of contract could not be inferred. He submitted that there was no release of the vendor from the agreement and that no consideration was given by the appellants. Fifthly, Mr. Morrison relying on the case of In re Blundell-. Blundell v. Blundell - (1889) 40 Ch.D. 370 argues that as the appellants were strangers to the agree¬ment, they did not assume the burden of the trust of the said goods for the respondent as a result of the agreement nor could that burden be imposed on them.

[14] Lastly, he argues that the appellants were not by their action or conduct estopped from denying that the land was transferred to them subject to the trust of the said goods for the respondent. He bases his argument on the case of Nurdin Bandali v. Lombank Tanganyika [1963] E.A. 304. Mr. Slade, for the respondent submitted that by reason of clause 17 of the agreement no interest in the land was created and that in any event, failure to register the agreement under section 32 of Cap.281 could not defeat the contractual rights of the respondent which he had acquired under the agreement. He referred us to the case of Clarke v. Sondhi Ltd. [1963] E.A. 107 and urged that the principle laid down in that case ought to be applied to the instant case.

[15] Referring to the definition of the term "goods" in section 2 of Cap.31 he submitted that that definition applied to the goods in the instant case. With regard to the question as to whether by novation, the appellants entered into a contract with the respondent by which the vendor extinguished her obligation to the respondent and assigned or transferred it to the appellants, Mr. Slade argued that consent of the parties should be inferred from their conduct.

[16] He contended that consent of the appellants to accept responsibility for the sale and delivery of the said goods to the respondent should be inferred from the letter of 29th October, 1963, (Exhibit 10) consideration being the release of the vendor and the payment of a lesser price. Mr. Slade further submitted, relying on the case of Marshall v.Green (supra) that the test therein applies to the instant case as the land was in the nature of a warehouse for the wattle trees during the material period, that is, 28th May 1962 to 31stDecember 1963.

[17] He argues that the respondent did not derive any benefits from the land during the material period and that in any event property in the said goods could only have passed to the respondent on their severance. In other words, property in the said goods remained that of the vendor or her successors in title and that as the vendor had been paid the purchase price in full, she became a trustee of the said goods for the respondent and her successors in title. He contends therefore that the appellants became constructive trustees of the said goods for the respondent. He referred to the case of Oughtred v. Inland Revenue Commissioners (1959) 3 All E.R. 623, to support this proposition.

[18] He further contended that the latter from the Secretary of the appellants dated 29th October 1963 (Exhibit 10) to the advocates amounted to a declaration of a constructive trust, if not an acknowledgement thereof. That is, that the appellants expressly recognized the existence of and "took over" the constructive trust. He asked us to give a meaning to that letter and submitted that only two meanings could be given to it; it was either a novation of contract or a declaration of a trust. It seems to me that the first question to be decided is whether the agreement was a contract for the sale of goods or a contract for the sale of an interest in land and therefore required registration under the provisions of Cap.281.

[19] In answering this question it is necessary to consider Mr. Morrison's second argument that the said goods were fructus naturales as opposed to fructus industriales. The learned judge found that the test laid down in Marshall v. Green (supra) applied to the instant case and held that the said goods were 'goods' within the meaning of Cap.31 and that the agreement was "a contract for the sale of goods within the contemplation of that Act and is to be construed in accordance with the Act". What right over the land did the respondent have? He had the right to enter the land for the specific purpose of cutting and stripping the said goods up to 31st December 1963. That right was limited to, as clause 1 of the agreement provides, "bark only the trees and brushwood shall remain the property of the owner". In other words, that right was limited to the produce of the wattle trees which stood on the land. Besides that right the respondent had nothing else to derive from the land - no benefit of any kind was to be derived from the land by him during the period between 28th May 1962 and 31st December 1963.

[20] In my view the agreement conferred on the respondent only the right to enter and cut and strip so much of the said goods as had been produced by the wattle trees comprised in 71.5 acres on the land by or during the material period. That is what was contracted for between the vendor and the respondent. No interest in the land was conferred on the respondent under the agreement. I think the case of Scorel v. Boxall (supra) can be distinguished in its details from the instant case. Briefly in that case, there was an action of trespass by the purchaser, and the question was, whether a mere verbal contract for the sale of such trees gave such possession to the purchaser as would entitle him to maintain trespass against the defendant for cutting and carrying the trees away.

[21] It was held in that case that the contract was for the sale of an interest in land and therefore it ought to have been in writing to give any interest to the purchaser. In the instant case, the agreement was for the bark which had been produced by the wattle trees and was to be cut and stripped or severed from the trees. It was not the standing wattle trees which were sold but what case of Marshall v. Green (supra) applies to the instant case. In that case, at page 39 Lord Coleridge, C.J. quoted from the notes in Williams' Saunders on an earlier case (Duppa v. Mayo) as follows: ¬

"The principle of these decisions appears to be this, that wherever at the time of the contract it is contem¬plated that the purchaser should derive a benefit from the further growth of the thing sold from further vegetation and from the nutriment to be afforded by the land, the contract is to be considered as for an interest in land but where the process is over, or the parties agree that the thing sold shall be immediately withdrawn from the land, the land is to be considered as a mere warehouse of the thing sold, and the contract is for goods. This doctrine has been materially qualified by later decisions, and it appears to be now settled that, with respect to emblements or fructus industriales, the corn and other growth of the earth which are produced not spontaneously, but by labour and industry, a contract for the sale of them while growing, whether they are in a state of maturity or whether they have still to derive nutriment from the land in order to bring them to that state, is not a contract for the sale of any interest in land but merely for the sale of goods.”

[22] Applying the test laid down in that case, my opinion is that as the respondent purchased the said goods with the intention of severing them ultimately (before 31st December 1963) under the agreement the effect of the definition of "goods" in section 2 of Cap.31 makes a sale of fructus naturales a sale of goods. In my view therefore the agreement was a contract for the sale of goods and I agree with the learned judge that Cap.31 would apply to it. There is therefore no need to consider the effect, if any, of failure to register it under Cap.28l. The next question is whether by novation the appellants entered into a contract with the respondent whereby the former accepted responsibility for the delivery of the said goods to the latter.

[23] In other words, the appellants stepped into the vendor's shoes and thereby accepted to discharge the vendor's obligation to the respondent. Novation is defined as "a transaction by which, with the consent of all the parties concerned, a new contract is substituted for one that has already been made" - see the Law of Contract by Cheshire and Fifoot, 7th Edition, page 473, and Halsbury's Laws of England, 3rd Edition, Volume 8, paragraph 298 at page 175, states as follows¬:

"One of the modes in which a contract may be discharged by a new agreement is called novation. This occurs where a third person undertakes the obligations of the contract and his liability is accepted by the promisee in place of that of the original promisor."

[24] It is thus clear that for novation to exist the following requirements must be complied with: firstly, there must be consent of all the parties. ¬ See Wilson and another v. Coupland and another (1921) ¬106 E.R. at page 1176 and secondly, there must be consideration for the extinquishment of the old obligation see the case of Ex parte Rivolta In re Conner - (1882) The Weekly Notes, page 76 - . Can it, in the circumstances of the instant case, be said that these requirements have been complied with?

[25] In other words, did the appellants assume the vendor's obligation and did the respondent agree to accept the appellants as his obligors and thereby discharge the vendor from her obligation? I do not think so.

[26] Consent cannot be implied from the acts of the parties here. The respondent through the advocates only sought confirmation from the appellants that the said goods had been purchased by him and were not therefore being taken over by any other person. He obtained that confirmation. No consideration was given by the appellants. Strictly, there were no dealings or transactions between the parties from which an inference could be drawn that a new agreement between them had been substituted for the old one.

[27] Had there been evidence of any transaction between the parties showing that the appellants adopted the obligation of the vendor and that the respondent had agreed to accept the obligation of the appellants and to discharge the vendor therefrom, I would have had no doubt that novation would have been inferred - see Rolfe v. Flower (1865-7). The Law Reports P.C.A.C. 27 and Ex parte Rivolta In re Conner (supra) and In re United Railways of Havana and RegIa Warehouses Ltd.- 1960 ¬ Ch.D.52.

[28] With the greatest respect to Mr. Slade, I am unable to draw an inference from the circumstances of the instant case that a new agreement was made under which the respondent released the vendor from her obligation and the appellants agreed to assume that obliga¬tion. In my view nothing turns on the letter of 29th October 1963. It merely stated that the appellants had not purchased the said goods and the wattle trees, after being stripped of their bark, remained the property of the owner of the land who at that time was the vendee. Accordingly this ground of the cross-appeal must fail. Turning now to the next question as to whether or not the appellants were constructive trustees of the said goods for the respondent it cannot be doubted that the legal title to the land and the wattle trees on it was vested in the vendor as at 28th August 1963 (the date the offer was accepted and title deeds transferred to the appellants).

[29] A trust relation already existed between the vendor and the respondent who had already paid the full purchase price of the said goods and was entitled, as his remedy, to the right of specific performance under section 52 of Cap.31 had there been a breach of the agreement by the vendor at any time before 28th August 1963 - See Oughtred v. Inland Revenue Commissioners (1959) 3 A.E.R. 623 at page 633. The letters of 15th August and 29th October 1963 not only show that the appellants had full knowledge that the respondent had purchased the said goods from the vendor but also amount to an acknowledgement that they took possession of the land subject to the respondent's right to cut and remove the said goods therefrom.

[30] They had knowledge of the trust relation between the vendor and the respondent. I have no doubt that they became constructive trustees of the said goods for the respondent, as the said goods were clearly already affected by the trust ¬ See Pooley v. Budd (1851) 51 E.R. page 200. I would go further on the basis of the principle stated in the latter case and say that the vendee, who acquired the land and the said goods from the appellants with full knowledge of the circumstances under which the latter obtained the same, would be compelled either to deliver the said goods to the respondent or account for the proceeds of the sale thereof. The appellants had full notice and knowledge of the agreement between the vendor and the respondent that the said goods had been sold to the latter.

[31] Notwithstanding this fact the appellants went ahead and sold the land and the said goods to the vendee without making any reference to the existence of the agreement.

[32] It was clearly their duty to protect the vested rights of the respondent under the agreement and as they failed so to do they cannot say that they had no notice of the vendor's trust. When they bought the land they assumed the same character as the vendor and they ought to have delivered or arranged with the vendee to deliver the said goods to the respondent. Their failure to do so was a breach of their trust and they are liable in damages. For these reasons I would dismiss the appeal with costs and allow the second and third grounds of the cross-appeal with costs to the respondent except for those costs which might have been occasioned by the adjournment by reason of the amendment of the cross-appeal, to which the appellants would be entitled.

LAW, J.A.

[33] This is an appeal from the judgment and decree in a suit decided in the High Court of Kenya (Harris, J.). The plaintiff, Mr. Nurdin Nurani, on the 28th May, 1962, entered into an agreement with a Mrs. Dickson, who, in consideration of the sum of shs.17,875 which was duly paid to her, sold to Mr. Nurani the right of cutting and taking bark from wattle plantations on land then in Mrs. Dickson's ownership, which land I shall refer to for the sake of convenience as ‘the farm". The agreement, which was in writing and had been drawn up by an advocate, and which referred to Mrs. Dickson as "the owner" and to Mr. Nurani as the "contractor", recited inter alia that¬:

"Whereas the said wattle plantations are ready for cutting and stripping before the end of December, 1963, and the owner does not wish to carry out this cutting and stripping, the owner has agreed to sell to the contractor her cutting and stripping rights in the said wattle plantations."

and went on to state that the owner agreed to sell and the contractor to purchase the cutting rights of the said wattle plantations, which rights were defined as being limited to the bark only, the trees and brushwood remaining the property of the owner. To enable Mr. Nurani to exercise these rights he was given a right of entry on to the land, and a right to construct huts for his labour thereon, and to remove murram therefrom and dig latrines therein. This right of entry was to expire on the 31st December, 1963, by which time the huts had to be removed, murram pits and latrines filled in, and the land generally returned to its natural condition. The effect of the agreement was that Mr. Nurdin bought and Mrs. Dickson sold the wattle bark on the farm; Mr. Nurdin was to do the felling of the trees and the stripping and removing of the bark, the trunks and brushwood being stacked and remaining behind as Mr. Dickson's property.

[34] Mr. Nurdin was given some 18 months in which to fell the trees and strip and remove the bark and to enable him to do this he was given the right, strictly limited in time, to enter and remain on the land together with his servants and motor vehicle. It is common ground that the farm consisted of land registered under the Registration of Titles Act (Cap. 281) and that the agreement between Mr. Nurdin and Mrs. Dickson was not registered under section 32 of that Act against the title to the land as being an instrument creating an interest in the said land. I may say in passing that the parties to the agreement had no intention that it should create an interest in the land; indeed specific provision to this effect was made in clause 17 of the agreement which reads:

"The contractor acknowledges that he has no right or interest in the land of the owner."

[35] This intention is however immaterial if the agreement in fact created a registrable interest. It is also common ground that by August, 1963, Mr. Nurdin had paid the purchase price stipulated in the agreement, and had taken certain steps preliminary to extracting the bark, such as building huts for his labour, but had not yet begun to fell the trees and strip the bark. At about this time Mrs. Dickson was negotiating for the sale of the farm to the Central Land Board, an agency of the Settlement Fund Trustees, under what was then known as the Compassionate Farms Scheme. The Central Land Board was in possession of a report on the farm drawn up by one of its officers and dated the 29th July, 1963. The last paragraph of this report reads as follows:

"Note that the standing wattle has been sold privately and I understand arrange¬ments will be made to have it out in the near future. Sale is for bark only and the kuni will belong to the Board."

[36] On the 17th August, 1963, the Central Land Board purchased the farm from Mrs. Dickson, and it is one of the agreed facts in this case that it did so with notice and knowledge of the agreement between Mr. Nurani and Mrs. Dickson. At some time during the month of October, 1963, the Central Land Board sold the farm to a Mr. Arap Kemboi and let him into possession on the 23rd October. It is an agreed fact that this sale was in terms of an advertisement which made no reference to the fact that Mr. Nurani had bought all the wattle bark on the farm, and it is common ground that the Central Land Board, although it had notice of the agreement, put Mr. Arap Kemboi into possession without making any arrangement with him by way of covenant, agreement, indemnity or other¬wise to protect Mr. Nurani's rights under the agreement. On the 29th October, 1963, the Central Land Board's secretary wrote to Mr. Nurani's advocates as follows:

"I herewith confirm that the wattle bark on (the farm) has been purchased by Mr. Nurani and forms no part of the assets which this Board includes in its purchase of this property, but the trees after having been stripped of their bark remain the property of the registered owner."

[37] When at about this time and subsequently, Mr. Nurani attempted to strip and remove the wattle bark which he had bought, he was prevented from doing so by Mr. Arap Kemboi, who in the words of an officer of the Central Land Board "has been most aggressive towards him (Mr. Nurani) with the result that Nurani is terrified of going near the place." Mr. Nurani was thus unable, by the time his agreement expired on the 31st December, 1963, to enter on to the farm and remove the bark purchased by him, so that he has lost the money paid for the bark, and the profit he would have made on its resale, and his out-or-pocket expenses, in all shs. 38,355/=. The question is whether, in these circumstances, Mr. Nurani is entitled to be compensated for his loss by the defendant, the Settlement Fund Trustees, whose agents the Central Land Board are. By his plaint, Mr. Nurani claimed this sum of shs. 38,355/= from the defendant, as damages either for breach of contract or for breach of trust.

[38] He pleaded firstly that there had been a novation of the agreement between Mr. Nurani and Mrs. Dickson in that the defendant had substituted itself for Mrs. Dickson in respect of all her obliga¬tions there under; and secondly that by reason of having been paid in full for the bark, Mrs. Dickson held the same in trust for Mr. Nurani, and that the defendant had assumed that trust in her place. The defence consisted firstly of an assertion that the agree¬ment was void for want of registration and not enforceable against the land, secondly of a denial that the defendant was liable under the agreement not being a party thereto or having become a party by nova¬tion, and thirdly that the defendant was under no duty towards Mr. Nurani so as to involve a breach of trust towards him on the defendant's part.

[39] On the question of registration, the learned trial judge held that wattle bark constitutes "goods" within the meaning of the Sale of Goods Act Cap. 31) that the agreement for its sale constituted a con¬tract for the sale of goods within the contemplation of that Act, and that the agreement did not create in favor of the plaintiff an estate or interest in land requiring compulsory registration under the Registration of Titles Act. Any rights to enter on the land were, in the learned judge's opinion, revocable licenses in respect to which the power of revocation was suspended by agreement until the 31st December, 1963; such licenses not being of such a nature as to constitute land or an interest in land within the meaning of section 32 of the Registration of Titles Act, and therefore not requiring registration.

[40] The learned judge made no finding on the two pleaded causes of action that the defendant was liable for breach of a contract to which it had become the party by novation, or that the defendant had assumed the fiduciary burden as a trustee for the plaintiff in the place of Mrs. Dickson and was liable to the plaintiff for breach of trust. Instead the learned judge found for the plaintiff on a ground which had not been pleaded or, so far as can be gleaned from the record, even argued. He did so by the purported application of the equitable doctrine enunciated in the case of Tulk v. Moxhay (1848) All E.R. Reprint 9 that if the owner of two pieces of land conveys one away, he can impose upon the part conveyed a restrictive covenant for the benefit of the land he retains, and the covenant will bind not only the immediate purchaser but all persons who thereafter take the land with notice, actual or constructive, of the covenant.

[41] The defendant, the Settlement Fund Trustees, to whom I shall henceforth refer as the appellant, now appeals against this finding on two main grounds which have been most ably and persuasively argued on their behalf by Mr. Morrison. These grounds are firstly, that the doctrine in Tulk v. Moxhay (supra) had no application to the facts of the case now under consideration; and secondly that the learned judge erred in holding that the sale of wattle bark in the circumstances of this case constituted a sale of goods, but that he should have found that the agreement for such sale created an estate or interest in land requiring registration under the Registration of Titles Act, and that failure to register the agreement rendered it unenforceable against a purchaser of the land for value whether he had notice of the interest created by the agreement or not. The plaintiff Mr. Nurani, to whom I shall refer henceforth as the respondent, has cross-appealed claiming that the decision of the learned judge should be supported on three other grounds, the first of which was added to the cross-appeal on an application made at the hearing, which was granted with the question of costs being reserved.

[42] The grounds are firstly, that the learned judge should have found there was a novation of the agreement with the result that the appellant took the place of Mrs. Dickson for all purposes in relation to the respondent; secondly that the appellant was a trustee for the respondent of the wattle bark the subject of the agreement; and thirdly that the appel¬lant was estopped by reason of the acknowledgement made in its letter of 23rd October, 1963, to which reference has been made earlier in this judgment, from denying that it was bound by the contract.

[43] On these grounds of cross-appeal we have had the benefit of hearing Mr. Humphrey Slade who represented the respondent. I will deal first with the appeal. Mr. Slade has not sought to support the decision in favor of the respondent on the ground relied on by the learned judge, that is to say by the application of the equitable doctrine in Tulk v. Moxhay (supra). I agree with Mr. Morrison and Mr. Slade that the learned judge was in error in applying that doctrine in this case, for the simple reason that the doctrine is dependent upon the retention by the covenantee of a dominant tenement, and at no time was the respondent the owner of such a tenement in rela¬tion to Mrs. Dickson's farm. The doctrine, in the words of Vaugham Williams L.J. in Formby v. Barker (1900-1903) All E.R. Reprint 445, is "something arising from the relation of two estates one to the other". Here we are only concerned with one estate, the farm. Clearly this ground of appeal must succeed.

[44] The second ground of appeal that the learned judge erred in holding that the agreement was for the sale of goods and did not create an interest in land requiring registration, raises questions of some difficulty. The definition of "goods" in the Sale of Goods Act (Cap.31) includes:

"all emblements, industrial growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale".

[45] The definition of "land" in the Registration of Titles Act (Cap. 281) includes¬:

"things embedded or rooted in the earth, or attached to what is so embedded...or permanently fastened to anything so embedded, rooted or attached, or any estate or interest therein...”

[46] Wattle bark, which is permanently attached to a tree rooted in the soil until the tree is felled and the bark stripped therefrom, could come under either definition. The question is, whether in the circumstances of this case, wattle bark is "an emblement or industrial growing crop" and therefore "goods" within the Sale of Goods Act, or whether a contract for its sale at a future date, together with a right of entry to the land on which it grows, constitutes a profit a prendre which is an interest in land requiring registration under the Registration of Titles Act if it is to be enforceable against a subsequent purchaser of that land. In coming to the decision that wattle bark was an emblement or industrial growing crop, the learned trial judge relied on Marshall v. Green (1875) 1 C.P.D. 35, in which it was held that a sale of growing timber to be taken away as soon as possible by the purchaser was not a contract for the sale of land, or of any interest therein, but a sale of goods.

[47] Mr. Morrison submitted that the learned judge misdirected himself in following Marshall v. Green (supra) because the contract in that case was for the immediate removal of the timber, whereas in the case now under consideration the parties contemplated that the bark should remain on the trees for a period which might extend to 18 months, during which time it would derive benefit from the land and become altered by virtue of what it draws from the soil (to use the words of Lord Coleridge C.J. in Marshall's case) so as to involve the acquisition of an interest in the land on which the trees were growing.

[48] This is an attractive argument, but after careful consideration I am of opinion that the learned judge's finding that the sale of the bark was a sale of goods and not of an interest in land should not in the circumstances of this case be distur¬bed. The sale was of a single crop of wattle bark, stated in the agree¬ment to be "ready for cutting and stripping before 31st December, 1963", which I take to mean ready for cutting and stripping at any time between the date of execution of the agreement and the end of 1963. The period of 18 months allowed for the taking of the bark was not primarily to allow it to derive benefit from the land and become altered, but to enable the purchaser to make the necessary arrangements for its exploi¬tation by building labor lines, latrines etc.

[49] I agree with the learned judge that the right of entry on the land conferred by the agreement was no more than a temporary licence not amounting to a registrable interest in the land. I would therefore dismiss the ground of appeal directed against the learned judge's finding that the agreement was for the sale of an industrial growing crop and therefore a sale of goods, in circum¬stances not creating an estate or interest in land such as to require registration under the Registration of Titles Act. The basis of the learned judge's award in favor of the respond¬ent having gone, that is to say the purported application of the doctrine in Tulk v. Moxhay (supra) it remains for consideration whether that award should be upheld on one of the grounds put forward in the cross-appeal.

[50] These are, briefly expressed, that there was novation of the contract so as to make the appellant liable as a party, that the appellant assumed Mrs. Dickson's obligations as a trustee for the bark, and estoppel arising out of the appellant's letter of 29th October, 1963. This last ground is purely incidental to the other two, as estoppel cannot found a cause of action. Mr. Slade relies on estoppel as precluding the appellant from denying that it stepped into Mrs. Dickson's shoes both as a contracting party and as a trustee.

[51] I think the ground of cross-appeal based on novation of the agreement can be shortly disposed of. To establish novation, it would be necessary for the respondent to establish clearly that the appellant had consented to assume Mrs. Dickson's obligations under the agreement.

[52] To do this, Mr. Slade relies on the appellant's letter of 29th October, 1963, which is reproduced earlier in this judgment. As I read that letter, it is no more than an acknowledgement by the appellant of the fact that under the agreement the wattle bark became Mr. Nurani's pro¬perty, but that the timber remained the property of the registered owner of the farm.

[53] I do not think that more should be read into the letter than appears on the face of it. I certainly cannot infer from that letter any consent on the part of the appellant to assume the burden of Mrs. Dickson's liabilities under the agreement. The letter appears to me to be no more than a statement of the appellant's opinion as to the factual effect of the agreement. There remains for consideration the ground of cross-appeal that the appellant is liable to the respondent as a trustee for breach of trust.

[54] For this Mr. Slade relies on the proposition expressed as follows in Lewin on Trusts, 16th Ed. at page 153:

“The moment you have a contract of sale of which specific performance could be obtained the vendor becomes in equity a trustee for the purchaser of the estate sold."

[55] The question arises whether a similar trust arises in the case of a contract for the sale of goods, when the goods have been paid for but not delivered. On this point, I refer to the following passage taken from Underhill's "Law of Trusts and Trustees" 11th Ed. at page 211-

"For instance, if the seller has been paid very penny that he was entitled to and had no claim or interest in the chattels, and the contract only remains unperformed to the extent that the chattel has not been delivered to the purchaser, the seller would then be a mere trustee of the chattel for the purchaser or his assigns.”

[56] If a trust be created, the circumstances that the subject matter of the contract is a chattel will not prevent a court of equity from enforcing the due execution of that trust see Pooley v. Budd 51 E.R. 200. In that case it was held that a seller of goods, who retained possession of the goods after having been paid in full therefore, became a mere naked trustee of the goods, denuded of all interest therein other than in his capacity as trustee.

[57] By analogy, Mrs. Dickson having been paid in full for the bark on her wattle trees became a trustee in relation to Mr. Nurani for that bark. A contract for the sale of goods is one which, by statute, a court may in its discretion direct shall be performed specifi¬cally, see section 52 of the Sale of Goods Act. In my view, a court would have ordered specific performance by Mrs. Dickson of her obliga¬tion to deliver the bark, had she refused delivery, and had Mr. Nurani sued her for specific performance rather than damages.

[58] Mr. Morrison however argues that even if Mrs. Dickson was in the position of a trustee the burden of that trust did not transfer to the appellant automatically on its acquisition of the land, and he submits that, to be liable as a trustee, there must be something to show that the appellant adopted that character. As to this, Mr. Slade again relies on the appellant's letter of 29th October, 1963, which Mr. Morrison says is no more than an ad¬mission that the appellant has no claim to the bark adverse to Mr. Nurani.

[59] Mr. Slade contends that the effect of this letter is a clear declaration of trust, that in it the appellant is saying "I own the trees, the bark is yours”, and that the appellant is estopped from contending otherwise. I have come to the same conclusion. When the appellant bought the farm, it did so with the knowledge that the wattle bark belonged to the respondent. It assumed, in relation to that bark, the same character as a trustee as had previously been held by Mrs. Dickson, and in particular assumed the obligation to deliver that bark to the respondent.

[60] It acknowledged that obligation in its letter of 29th October. In breach of that obligation, the appellant sold the farm to Mr. Arap Kemboi, together with the respondent's bark, without taking any steps to ex¬clude the bark from that sale, or otherwise to safeguard the respondent's rights in relation thereto. In so doing, the appellant was in my opinion guilty of a breach of trust towards the respondent, and is accountable to him for the loss he has thereby sustained. In my view, the cross¬ appeal succeeds on this ground. I would therefore dismiss the appeal and affirm the judgment in the court below, although on different grounds; and allow the cross-appeal. I agree with the order as to costs proposed by Lutta J.A.

 
 

 

 
     

 

 

 

 

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