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MUSTAFA, J.A.
[1] The appellant at the material time was the owner of a farming ranch
known as Osinye Farm in Kenya. The respondents were businessmen resident in
the United States of America. The appellant was also a professional hunter
and Louis, one of the respondents, was his client. They became friends.
Louis evinced an interest in having a share in the appellant's ranch. The
appellant needed money for the development of his ranch which he had
purchased for £26,800.
[2] The appellant had told Louis that he had paid £10,000 towards the
purchase price, and that the ranch was mortgaged in favor of the previous
owner to secure the balance of £16,800, such sum being payable by yearly
installments of £750. The appellant needed £8,000 for development and for
the purchase of stock to make the ranch viable.
[3] The appellant did not have the money. The respondents agreed to provide
that sum. For reasons connected with income tax avoidance in the States the
respondents did not want to remit the sum of £8,000 direct to the appellant.
Instead the respondents adopted the following method. They were to arrange
for a bank in the states to provide an irrevocable letter of credit for
£8,000 to the appellant's bank in Kenya.
[4] The respondents were to deposit a sum equivalent to £8,000 with the bank
in the states as security.
[5] The appellant would be entitled to have overdraft facilities to the tune
of £8,000 with his bank in Kenya, and if the appellant did not repay the
overdraft, the bank in Kenya would be paid by the bank in the states on the
letter of credit.
[6] At this stage it will be convenient to set out the letter the
respondents sent to the appellant on 13th August, 1962. It reads: �
"PATIO FOODS INC.
SAN ANTONIO, TEXAS
LOUIS H. STUMBERG,
PRESIDENT.
August 13, 1962.
Mr. Theo Potgeiter,
The Ridge,
P.O. Timau,
Kenya Colony, East Africa.
Dear Theo:
After a number of meetings we have come with the following method of setting
up our association on the ranch and farm:
1. We will supply a letter of credit for 8,000 pounds to your bank which
they can draw against in the event that your 18 month loan is not paid and
which this letter of credit acts guarantee. If you will have your bank send
us the form of the letter of credit that they would like our bank to issue
we will follow their suggestions. All they have to do in the case of failure
of payment is to draw against this letter of credit, an equivalent amount of
money having been deposited in our bank to guarantee it.
2. Have your attorney draw up an option for Louis H. Stumberg and H.E.
Stumberg, jr. to buy within two years at 500 pounds one-half interest in
your ranch and farm and we can apply the 500 pounds against the note for the
money you have already invested in the ranch or whatever other equitable
arrangements. There are to be two separate transactions for legal purposes.
Our tax people tell us in this way we have the best tax advantage under U.S.
Law. We can decide at the time we exercise the option as to setting it up as
a company, a corporation, or partnership or have it owned by U.S.
Corporation. In the meantime for all practical purposes you will be the full
owner of all of your land and stock.
The 18 month loan should read from your bank to you that this money is for
the development and stocking of your ranch. I think it gives you exactly
what you wanted and is completely in line wi0h what we discussed. The only
thing we tried to do is to look at it from the best tax angle. We may even
set up an American Corporation owning all of the land and stock and then you
would own one half of the American Corporation. If you and I feel that we
would have a better chance in dealing with the Kenya Government on this
basis. We are ready to submit the letter of credit to your bank as soon as
we have the option and the form of the letter of credit that the bank
desires.
I tell you from the bottom of my heart that I look forward to being with you
on this venture. If it goes well at the end of the six or eight months we
might leave the letter of credit with the bank after the 18 months loan so
as to acquire additional land and stock.
My understanding is that you have 8,000 pounds in the ranch and when we
exercise the option you would be given a note for this amount so that you
would get your money out of it as well. If there are any questions on this
or if I am not quite clear drop me a line immediately and we will straighten
it out to our mutual satisfaction. I assure you that you and I will never
have a misunderstanding and I do not know of a nicer friend that I would
rather be associated with and I know you will pay the loan as due. You might
set it up in part payments over the 18 months.
Best regards to Hazal and the children.
Sincerely yours,
LHS/dlh. Sgd. Louis H. Stumberg.
[7] An option agreement in the terms mentioned in the said letter of 13th
August, 1962 was drawn up and executed by the parties. The bank in the
states duly issued an ir�revocable letter of credit to the appellants bank
in Kenya enabling the appellant to overdraw to the extent of £8,000. This
letter of credit was renewed from time to time. It would seem that it was
intended that both the appellant and the respondents would respectively
recover £8,000 from the profits of the ranch, and that they would re-invest
such sums for further development. The respondents in that event would be
able to have a half-share in the ranch by the exercise of the option to buy
without having to put in any money into Kenya apart from the sum of £500
mentioned in the option agreement.
[8] The appellant promised to pay the money so guaranteed into a special
farm account and that the sum would be used solely for development and the
buying of stock. There was also the purchase of a coffee farm in 1963 by the
respondents with which matter however, this appeal is not concerned.
[9] During 1964 it seemed the respondents ware dissatisfied with the way the
appellant was running the ranch. The appellant had not opened any special
farm account as he had promised, and despite repeated requests the appellant
had failed to keep the respondents informed of the progress of the ranching
venture.
[10] The respondents then arranged for a new agreement of option to be
executed. It is in the following terms and is dated 19th September, 1964.
"THIS AGREEMENT is made the 19th day of September One thousand nine hundred
and sixty four BETWEEN PHEODORE WYNAND POTGIETER of Timau Kenya (hereinafter
called �the vendor' which expression where the context so admits shall
include his personal representatives and assigns) of the one part and LOUIS
HERBERT STUMBERG and HENRY EDWARD STUMBERG both of San Antonio Texas in the
United states of America (here�inafter together called 'the Purchasers'
which expression shall where the context so admits include their respective
personal representatives and assigns) of the other part.
WHEREAS
1. The Vendor is the registered proprietor of all that piece or parcel of
land situated at Timau aforesaid comprising ten thousand nine hundred and
forty six (10,946) acres more or less being L.R. No. 9840 registered as I.R.
No. 5861 together with all buildings improvements and movables including the
livestock now or hereafter being thereon (hereinafter together called 'the
Farm');
2. The Vendor has charged the said piece or parcel of land by Legal Charge (hereinafter
called 'the Mortgage') dated the First day of August One thousand nine
hundred and sixty one to Albert Boaz Bartlett, Frederick G. Bartlett, Robert
Edwin Bartlett and Mrs. Anne Bosfield (formerly Bartlett) (therein described
and there is still owing by the Vendor on the foot of the Mortgage the sum
of approximately Pounds Fourteen thousand five hundred (£14,500) repayable
annually by the installments and with the interest as therein provided;
3. The Purchasers have guaranteed to the Standard Bank Ltd. banking
overdraft facilities for the benefit of the Vendor (hereinafter called 'the
Overdraft') to the extent of Pounds eight thousand (£8,000);
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:
1. The Vendor in consideration of the here�inbefore recited guarantee given
by the Purchasers hereby grants unto the Purchasers the option to purchase
at any time prior to the Thirty first day of March One thousand nine hundred
and sixty seven an undivided one half share in the Farm at the price of
Pounds three thousand (£8,000) payable as provided in paragraph 2
hereinbelow.
2. In the event that the Purchasers exercise thehereinabove described option,
the said purchase price of Pounds three thousand (£3,000) shall subsequently
be paid to the Vendor out of the profits to be thereafter earned from the
operation of the Farm which profits shall be applied in the following
priority:
Firstly, towards the annual capital and interest payments provided in the
mortgage
Secondly, towards the liquidation of the overdraft;
Thirdly, towards payment of the said Pounds three thousand (£3,000) to the
Vendor.
3. The Vendor covenants that he will
(a) reduce the overdraft
(i) to Pounds five thousand five hundred(£5,500) or leas by the thirty first
day of March One thousand nine hundred and sixty five.
(ii) to Pounds three thousand (£3,000) or less by the thirty first day of
March One thousand nine hundred and sixty six.
(iii) entirely by the thirty first day of March One thousand nine hundred
and sixty seven.
(b) Create no further encumbrances over the Farm or any part thereof without
the prior written consent of the Purchasers who shall be entitled to
register a caveat claiming a mortgagee's interest over the lands comprising
the Farm.
4. In the event of the Purchasers exercising the option to purchase
hereinbefore referred to and at such time or subsequently thereto the
overdraft has not been reduced as provided in Clause 3(a) hereof the
Purchasers shall have sole and unfettered discretion to appoint Gilfrid
Astley Powys or Charles William Powys as manager for the Farm for the
complete control and operation of the Farm on behalf of the Vendor and
themselves;
5. In the event of any serious disagreement arising between the Vendor and
the Purchasers after the said option to purchase has been exercised then the
Purchasers shall be entitled at any time to give written notice to the
Vendor offering to sell to him their full undivided half share in the Farm
at a figure to be quoted by them and the Vendor shall elect within ten days
of the date of receipt of such notice to accept or reject such offer. Should
Vendor fail to make an election during said ten-day period, his silence
shall be considered as a rejection of said offer. In the event of the Vendor
rejecting such offer then the Vendor shall be bound to sell his own
undivided half share in the Farm at the same said figure to the Purchasers
and the Purchasers shall be bound to buy said share. The Completion of the
sale and purchase shall in either event take place within Ninety (90) days
of the date of election as aforesaid by the Vendor.
IN WITNESS whereof the parties have hereunto set their hands the day and
year first herein written
SIGNED by the said THEODORE )
WYNAND POTGEITER in the )
presence of Sgd. R.D.C. Wilcock, ) T.W. Potgeiter
SIGNED by the said LOUIS )
HERBERT STUMBERG in the )
presence of Sgd. Dan C. Glenn )
Notary Public, Bexar ) Louis Herbert Stumberg
County, Texas. )
SIGNED by the said HENRY )
EDWARD STUMBERG in the )
presence of Sgd. Dan C. Glenn )
Notary Public, Bexar ) Henry Edward Stumberg
County, Texas. )
[11] The appellant apparently still failed to supply information to the
satisfaction of the respondents and no reduction of the overdraft was being
made. The respondents eventually were called upon to meet the overdraft
which they did by payment of slightly over £8,000. The respondents decided
to exercise their option in terms of the agreement of 19.9.64 which they did
through their advocates M/S Archer and Wilcock, who wrote a letter dated
26.10.65 to the appellant reading as follows:
"ARCHER & WILCOCK ADVOCATES
OUR REFERENCE S/25l/l/W
Mutual Building, Nairobi
REGISTERED
Theodore Wynand Potgeiter, Esq.,
P.O. Timau.
Dear Sir,
L.R. No. 9480 (Previously known as L.R. 9840; Timau.
We write formally on behalf of Mr. Louis Herbert Stumberg and Mr. Henry
Edward Stumberg to advise you that they hereby exercise the option given to
them under the terms of an Agreement bearing date 19th September, 1964 to
purchase an undivided half share in the above property together with all
buildings improvements and movables including improvements and movables
including the livestock at the price of £3,000. The said purchase price will
be paid in the manner provided in paragraph two of the above mentioned
Agreement.
In as much as the overdraft has not been reduced in accordance with the
provisions of Clause 3(a) of the Agreement Mr. L.H. Stumberg and Mr. L.E.
Stumberg have power to appoint Mr. Gilfred Astley Powys as Manager for the
farm but it is not their intention to exercise this right, at any rate for
the time being.
We would, however, call for your assurance that you will not sell, charge or
otherwise part with possession of the property or any of the movables
including the livestock thereon without the prior approval of Messrs.
Stumberg and will cause all proper statements of account concerning the
operation of the farm to be submitted to them.
Yours faithfully,
Sgd. ARCHER & WILCOCK
[12] The appellant, during 1966, sold livestock from the ranch and paid the
proceeds into his wife's bank account. Some time in March 1966 the
mortgagees foreclosed on the ranch and sold it as the appellant had failed
to keep up his installment payments. The respondents, in May 1966, filed an
action in the High Court, claiming that as a result of their exercising the
option on 26th October, 1965 they had become partners in the ranching
business. They claimed dissolution of the partnership and an order for
accounts.
[13] The plaint was subsequently amended to include an alternate claim as
joint owners in equal shares with the appellant in the land, livestock and
movables of the ranch. The case went on trial, and the trial judge found
that no partnership between the respondents and the appellant was
constituted by the exercise of the option. However he found that on
exercising their option the respondents became joint owners in equal shares
with the appellant in the livestock and movables. He held that the contract
was not frustrated by the disappearance of the ranch through sale as that
occurred after the respondents had become joint owners of the stock and
movables. He made an order that the appellant lido account to them (respondents)
for the sale and disposal of all the livestock and movables which were on
the ranch on 26th October, 1965 and to judgment against the defendant (appellant)
for the sums found due in respect of the plaintiff's (respondents) one-half
share".
[14] From that decision the appellant appeals. The grounds of appeal can
broadly be summarised under four heads.
1) that the option agreement was frustrated due to the sale of the ranch and
had become impossible of performance.
2) there was no consensual act of the appellant to change the sole
possession and ownership of the livestock into a joint one.
3) an account if to be taken must be an overall one and not confined to
livestock only.
4) the order for costs was wrong.
[15] Mr. Khanna for the appellant submitted that the option agreement was
frustrated and impossible of performance because of the disappearance of the
ranch as a running business. In terms of the said agreement the purchase
price of £3,000 was to be from the profits to be earned from the operation
of the ranch. It was payment in a qualified manner. That would have been
impossible with the disappearance of the ranch.
[16] However the ranch was sold because the appellant had failed to pay the
installments due to the mortgagees. There was hardly any evidence adduced by
the appellant to show why he defaulted in paying the installments resulting
in the foreclosure and sale of the ranch. On the evidence, I am of the view
that the sale of the ranch was due to the fault of the appellant himself.
[17] Frustration can be successfully set up if after the formation of a
contract, certain sets of circumstances arise, which owing to the fault of
neither party, render the contract ... impossible
� ...� see C.A. Howard & Co. (Africa) Limited v. Burton [1964] E.A. 554.
[18] Here the frustration was in a way induced by the appellant. In the
circumstances I am of opinion that the defence of frustration fails. What
was the effect of the exercise of the option by the respondents on 26th
October, 1965?. In terms of the agreement of 19th September, 1964, the
appellant granted to the respondents "the option to purchase at any time
prior to 31st March, 1967 an undivided one half share in the farm at the
price of £3,000 payable as provided in paragraph 2 hereinbelow".
[19] The farm was to include "land, all buildings, improvements and movables
including livestock now or hereaft0r thereon". The respondents, by their
advocates' letter of 26th October, 1965 exercised their option "to purchase
an undivided half share in the above property with all buildings
improvements and movables including the livestock at the price of £ 3, OOO".
[20] The trial judge held that the exercise of the option did not constitute
a partnership in itself.
[21] He however held that � "on exercising that option the plaintiffs became
joint owners in equal shares with the defendant in the livestock and
movables. No act of delivery was required and no prior payment. Such was
clearly the intention or the parties".
[22] He also said� ''further steps were required to complete the purchase of
an undivided half share of the land. Those steps wore not taken."
[23] And again� "Joint ownership of the stock and movables took effect from
the exercise of the option, not from the payment of the price".
[24] As I understand it, an option is no more than an offer, which given for
consideration may be irrevocable, and if accepted becomes a complete
contract which either party is entitled to enforce. In English law an option
to have a right to call for a conveyance of land creates an interest in land,
but it is not so in Kenya, see section 54 of the Indian Transfer of Property
Act which applies to Kenya.
[25] When the respondents exercised their option a complete contract came
into existence which the respondents could enforce by action. So on 26th
October1 1965 there was a complete contract between the respondents and the
appellant for the purchase of a half share in the ranch.
[26] In view of the judge's finding, I will restrict the purchase to a half
share in the livestock and movables. The judge found that after the exercise
of the option, the respondents did not by
themselves or their agents, carryon the ranching business jointly with the
appellant.
[27] The appellant took no steps to carry out the contract of purchase.
There was no act of transfer of the half interest in the livestock and
movables. No steps or acts were taken by the respondents to indicate that
they had acquired a half share in the livestock or movables. The appellant
throughout had claimed that he was the sole owner of the animals.
[28] The appellant had at no stage consented to the respondents being a
joint or co-owner with him of the livestock and movables. In fact no
transfer or vesting of the half interest In favour of the respondents took
place. Even if the exercise of the option can be equated to a contract of
sale on the peculiar facts of this case, did the property in the livestock
pass to the respondents on 26th October, 1965 or at any subsequent date?
[29] Mr. Salter for the respondents referred the Court to sections 19 and 20
of the Sale of Goods Act Cap.31. However, these sections refer to specific
or ascertained goods and specific goods as defined in the said Act means
goods identified and agreed upon at the time a contract of sale is made.
�Ascertained' probably moans identified in accordance with the agreement
after the time of a contract of sale is made�
[30] Re Wait (1927_) 1 Ch. 606; per Lord Atkin, L.J. at p. 630. Here the
livestock would not be specified or ascertained goods in terms of the Sale
of Goods Act. There was nothing in the
agreement, express or implied, to provide for the passing of the property in
the livestock to the respondents automatically without somO:1ct of delivery
or consent.
[31] The respondents did not take physical or constructive delivery of the
livestock, did not identify or list the animals, in fact did not know how
many animals there were on the ranch on 26th October, 1965, or if there were
any animals at all. Nothing happened subsequently to alter that state of
affairs.
[32] I am of the view that no property in the livestock passed to the
respondents on 26th October, 1965 or on any subsequent date.
[33] I believe all that the respondents had against the appellant was a
claim for damages for broach of the contract to sell, since the appellant
had put it out of his power to fulfill the terms of the contract.
[34] Consequently they were not entitled to an account from the appellant.
In view of this finding it will be unnecessary for me to deal with the other
grounds of appeal.
[35] I would therefore allow the appeal, set aside the judgment and decree
of the High Court, and substitute therefore an order dismissing the
respondents' claim.
[36] I would award the appellant costs in the High Court as well as costs of
this appeal.
[37] I would certify for two advocates.
DUFFUS P.
[38] This matter started out as a transaction between friends and perhaps
largely due to this, the arrangements between the parties became involved
and difficult to under�stand the facts have been fully set out by Mustafa,
J.A in his judgment
[39] The plaint suffered many amendments but eventually the plaintiffs
claimed under two alternatives: the first being a claim in partnership
asking for the dissolution of the partnership and an order for the accounts;
or in the alternative the plaintiffs claimed to be joint owners with the
defendants in the land, livestock and movables as set out in the option
agreement of the 19th September, 1964, and averred that the defendant had
sold their joint property and not accounted for it and also asked for
accounts. The option agreement was in respect of a farm which term included
the land, buildings and movables on the farm and included all the livestock
the learned trial judge found for the plaintiffs on the alternative claim.
He found against the existence of the partnership but held that by the
exercise of the option by the plaintiffs on the 26th October, 1965, they
became the joint owners in equal shares with the defendant of the livestock
and movables on the farm and he ordered that the defendant do account for
the sale and disposal of all the livestock and movables on the farm at the
date of the exercise of the option and he decreed that the plaintiffs do
have judgment for such sum as may be found due and awarded the plaintiffs
the cost of the action.
[40] He made no order with regard to the land as he found that no steps had
been taken after the exercise of the option to complete the purchase and
that the land was in fact sold by the mortgagees after the exercise of the
option. The defendant now appeals against that order Mr. Khanna, for the
defendant fully and ably argued various grounds of appeal but his main
grounds were that the option agreement had been frustrated and could not be
carried into effect and further that the ownership in the cattle and other
movables on the farm had never been transferred. He also advanced several
grounds of appeal on the matter of the order for costs.
[41] The option agreement of the 19th September, 1964, was undoubtedly a
legal and enforceable agreement made for valuable consideration. It set out
what had been agreed between the parties at that stage of the various
arrange�ments made between themes. The option was exercised by the
[42] Letter of the 26th October, 1965. The defendant admitted receiving this
letter and it is not in dispute that the firm of advocates, Messrs. Archer
and Wilcock, had the necessary authority to act on behalf of the plaintiffs.
The option having been exercised the agreement of the 19th September, 1964,
then became a contract for the sale of the land and of the movables and
livestock on the land. The sale of the land was never completed and the
mortgagee sold the farm in March, 1966.
[43] The contract for the sale of the land having been concluded the
plaintiffs acquired an enforceable right but in fact the land was apparently
sold at a price insufficient to cover the amount due on the mortgage. The
following extract from the letter from Archer and Wilcock to the defendant
dated 22nd March, 1966, is of relevance as showing the position on that date:
"I have received a copy of the registered letter sent by Kaplan & Stratton
to you, confirming that the farm has been sold to P.G. Grattan for £15,000.
You will see that, so soon as Land Board consent has been given, he will
wish to take possession.
[44] Since presumably, it will not be possible for you to move the livestock
and movable assets to a neighboring farm, you will have to affect a complete
sale in the very near future. As you will appreciate, all the movables,
including livestock, are partnership property. Out of the proceeds of sale,
there will have to be discharged the current bank overdraft, the shortfall
on the mortgage in the sum of approximately shs. 36,000/�and the current
farm debts. Thereafter the balance of the proceeds of sale will be divided
equally between you and the Stumberg brothers.
[45] I have discussed this with you on various occasions when you have
visited me and you have confirmed that you will ensure that very full
details of every sale made by you are passed to John Story. I must emphasize
that it is essential that this is done.�
[46] The plaintiffs would appear to have had no further interest in the land
and the only question that might arise is whether the "shortfall" of the
mortgage debt is to be paid out of the proceeds of the sale of the movables
and livestock but this is a matter that could be considered when the
accounts are being settled. The judge dealt with the agreement of sale of
the movab1esand livestock separately and I would here quote from that part
of his judgment where he summarised his findings on this matter:
[47] I am however satisfied that on exercising their option the plaintiffs
became joint owners in equal shares with the defendant in the livestock and
movables. No act of delivery was required and no prior payment. Such was
clearly the intention of the parties and the relationship between the
parties prior to the exercise of the option is I think immaterial. Whatever
the true relationship may have been the exercise of the option replaced any
prior Agreement. The option agreement provided the plaintiffs with some
security for their guarantee should the need arise and I see no reason to
find that it did not contain all the terms agreed between the parties.
[48] Further steps were required to complete the purchase of an undivided
half share in the land. These steps were not taken because it became known
that the mortgagees were contemplating foreclosure, the defendant having
failed to meet his obligations and in fact they sold the ranch in March,
1966.
[49] This sale effectively prevented further running of the farm but it did
not, as submitted on behalf of the defendant, frustrate the con�tract since
it occurred after the plaintiffs became joint owners of the stock and
movables. In agreeing the consideration of £3,000 account was taken of the
amount put into the farm by the defendant by way of development not of the
value of the land. The fact that this sum had not been paid at the time of
the sale of the farm by the mortgagees does not frustrate the agreement.
Joint ownership of the stock and movables took effect from the exercise of
the option not from payment of the price. Account will, of course; have to
be taken of the non-payment of this amount in any final settlement between
the parties.
[50] I can see no reason for holding that the option agreement did not
constitute a binding contract. The consideration may not have been stated
with complete accuracy but was well under�stood by both parties to be the
guarantee arranged by the plaintiffs which enables-the defendant to obtain
overdraft facilities."
[51] One of the main issues in the case was whether any property in the
movables and livestock passed to the plaintiffs. Section 19 of the Sale of
Goods Act (Cap.31) applies. This states:
"19. (1) where there is a contract for the sale of specific or ascertained
goods, the property in them is transferred to the buyer at such time as the
parties to the contract intend it to be transferred. .
(2) For the purpose of ascertaining the intention of the parties, regard
shall be had to the terms of the contract, the conduct of the parties and
the circumstances of the case.�
[52] It is a question of fact in each particular case. In my view the
movables and livestock in this instance were definitely ascertained and
known goods. On the exercise of the option the plaintiffs obtained an
undivided half-share in all the movables and livestock then on the farm
belonging to the defendant. The plaintiffs themselves might not have known
exactly, what these goods were but these were definite goods known to the
defendant and could be proved by evidence 0 It was not a question of
plaintiffs purchasing only some of the livestock and movables but the
plaintiffs purchased.' an undivided half share in all the livestock and
movables on the farm at the time of the exercise of the option. These were
definite and ascertained goods and in my opinion the plaintiffs immediately
on the option being exercised acquired a joint interest and the property
passed to theme
[53] The Court ascertains the intention of the parties from the terms of the
contract, the conduct of the parties and the circumstances of the case. The
option agreement of the 19th September? 1964, in effect provided that the
farm should continue to be run as a going concern and the profits were to be
applied in the manner shown. It was clear that the defendant should remain
in charge of the farm but clause 4 provided that the plaintiffs could, in
certain circumstances appoint another person as manager and to have complete
control and operation of the farm. The letter of the 26th October, 1965,
exercising the option also showed that it was the intention of the parties
that the defendant should remain in physical control of the movables and
livestock although the property, that is Plaintiffs joint ownership in the
property, immediately vested in the plaintiffs.
[54] There was evidence to show that in fact the defendant understood this
to be the position
and undertook to account for all sales The evidence of Mr. Wilcock, senior
partner in Messrs Archer & Wilcock, the advocates dealing with the matter,
is to this effect and this is borne out by the extract I have quoted from
their letter of the 22nd March, 1966.
[55] The learned judge was in my view fully justified in his finding that on
the exercise of the option the plaintiffs became joint owners in equal
shares in the livestock and movables.
[56] I agree also with the trial judge that the doctrine of frustration
cannot apply here. The defendant alleges frustration because with the sale
of the land, the farm could no longer be run, and the running of the farm
was required as the condition of the option agreement, but as the judge
points out the option had already been exercised and the plaintiffs then
became joint owners with the defendant
[57] There can be no doubt that the defendant sold off all the movables and
the livestock and paid the amount realised into his wife's account and that
he used these profits personally. He freely admits this in his evidence.
[58] I quote
"Ever since August, 1965, ranch receipts were paid into my wife's account.
That is possible.
I paid my income tax out of these receipts from cattle, wool, etc. I paid
school fees, everything, personal debts. All my money went into these
accounts. Wilcock told me it had to be separate account. I took no notice. "
[59] The plaintiffs were entitled to an order for an account and to judgment
for any balance found to be due in respect of their interest in the property.
Mr. Khanna also raised the question that the accounts should be overall and
not be confined only to the livestock. The accounts are ordered as from the
date of the exercise of the option and in my view correctly relate only to
the disposal of the livestock and movables which were on the farm at that
date. I can see that difficult questions may arise as to what debts or
liabilities are a proper charge against any of the amounts realised but this
question does not now arise. I note the trial judge reserved liberty to the
parties to apply for directions as to how the account was to be taken.
[60] There remains the question of costs. Both Mr. Khanna, for the defendant,
and Mr. Morrison, for the plaintiffs, referred to the judgment of this Court
in Raja vs Swaran Singh (1962) EA 288 at 299. In his judgment in this case
Forbes, V-Po set out the principles which would equally well apply here
"Costs are a matter in the discretion of the court and this Court will not
interfere unless satisfied that the lower court acted on a wrong principle.
The proviso to sub-so (1) of s.27 of the Civil Procedure Ordinance (Cap.5)
provides that: 'the costs of any action, cause or other matter or issue
shall follow the event unless the court or judge shall for good reason
otherwise order�
[61] The reason "The reason given by the learned judge here for his order is
that the appellant 'failed on four issues and succeeded on one' I have
already mentioned the grounds advanced by the appellant in support of his
motion to have the award set aside on which he failed. With re�spect to the
learned judge, I feel bound to agree with Mr. Khanna that these grounds are
not 'issues' within the meaning of the proviso to s.270 In Reid, Hewitt & Co.
vs Joseph (7), (1918) A.C 717 at p.742 Viscount Haldane ,in relation to a
similar provision in the English rules of court then in force, defined an
issue within the meaning of the rule as 'an issue which has a direct and
definite event in defeating the claim to judgment in whole or in parte'
[62] I do not think the grounds on which the appellant failed fall within
this definition. I therefore think that the learned judge erred in principle
in ordering each party to pay his own costs of the motion to set aside the
award on the ground that the appellant had failed on four 'issues' while
succeeding on one."
[63] Mr. Khanna's argument is that the main issue was the partnership and
that the judge found against the plaintiffs on this issue. Mr. Morrison's
answer was that the real issue was for an order for the defendant to account
for the livestock and movables that he sold after the plain�tiffs had
acquired a joint interest. I think it clear in this case that the plaintiffs
were seeking to recover their share as joint owners of the movables and
livestock and it was for this purpose that they asked for an order for
accounts. The judge made no order with regard to the land but this was due
to the fact that the land had been sold by the mortgagees and the entire
proceeds absorbed by the mortgagee
[64] I agree that the main issue in this case was that the plaintiffs were
seeking to recover what was due to them, and this could only be done by the
taking of the accounts. Mr. Khanna also argued that when the accounts were
taken, it may be found that after payments of such debts as may be properly
deducted from the proceeds of the sales that there is nothing left for the
plaintiffs. This is very doubtful, but even if it were so, the plaintiffs
would still be entitled to the order for accounts and this order has been
consistently resisted by the defendant.
[65] In my view the plaintiffs were entitled to have the costs of the action
and the judge was justified in the order he made.
I would therefore dismiss the appeal with costs and I would allow the
respondent costs for two advocates.
[66] As Lutta, J.A. also agrees it is so ordered..
LUTTA J.A.
[67] The facts of this appeal are fully set out in the judgment of Mustafa,
J.A., which together with the judgment of my Lord the President, I have had
the advantage of reading in draft and I consider it unnecessary to restate
them here.
[68] One of the main questions here was whether on the exercise of the
option the respondents acquired an undivided half share in the loose assets
including livestock on the farm.
[69] The letter of 22nd March, 1966 from Messrs Archer and Wilcock to the
appellant states that "all the moveables, including livestock, are
partnership property". The moveables, including livestock,
on the farm, were specific goods and clearly known by the appellant, if not
identifiable by him at the material time.
[70] It is in respect of these that the respondents purchased an undivided
half share when they exercised the option, and under section 19 of the Sale
of Goods Act (Cap.31) property in them was transferred at such time as they
intended it to be transferred.
[71] If the intention is obscure, section 20 of Cap.31 contains rules which
assist in discovering the same.
[72] Thus rule (a) of section 20 provides that
"Where there is an unconditional contract for the sale of specific goods, in
a deliverable state, the property in the Goods passes to the buyer when the
contract is made, and it is immaterial whether the time of payment or the
time of delivery or both be postponed;".
[73] In my opinion, property in the moveables, includinG livestock,
passed to the respondents when they acquired an undivided half share and
exercised the option as per the letter of 26th October, 1965 from Messrs
Archer and Wilcock to the appellant and I agree with my Lord the President
that the respondents were entitled to an order for an account, in view of
the sale by the appellant of all the moveables and the livestock.
[74] Accordingly I would dismiss this appeal, and I concur in the order
proposed by my Lord the President. |
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