njake oil co ltd vs the tanganyika farmers association ltd 2004 tzhccomd 49 7 december 2004

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM COMMERCIAL CASE NO, 18 OF 2004 NJAKE OIL COMPANY LIMITED.......... PLAINTIFF VERSUS THE TANGANYIKA FARMERS ASSOCIATION LIMITED................ DEFENDANT JUDGMENT KIMARO, J, The plaintiff is suing for a premature termination of an agreement executed between itself and the defendant. The agreement was terminated without notice in contravention of clause 12 of the agreement. The agreement was tendered and admitted in court as exhibit Pl. The facts of the case, albeit briefly is: The plaintiff entered into an agreement (Exh.Pl) with the defendant to supply fuel and related products to the defendant’s petrol station situated at Karatu township. The agreement was executed on 1st August 2000 and it was for five years. The agreement required the plaintiff at its own costs and expenses to install necessary equipments and machinery required to run and operate the petrol station before the supply of fuel. 2 The plaintiff avers that it made renovations particularly installation of fuel tanks and pumps together with other improvements like availability of an electric generating machine. It is also averred by the plaintiff that it was the mutual understanding of the parties that for the contract period, the defendant would take supply of all its fuel and related products requirements from the plaintiff in consideration of the functions discharged by the plaintiff at the station. In breach of the agreement, on or about August, 2003 the defendant refused delivery of the plaintiff’s fuel and related products and instead, it unilaterally took its fuel and related products from another supplier. The plaintiff is now suing for an amount of T.shs 88,348,874.37 being loss of profit, remaining value of 4 fuel tanks, three pumps and electric generating machine, unpaid fuel and general damages. While the defendant admitted execution of the agreement (Exh.Pl) it denied the plaintiff’s claims. Issues framed for the determination of the court are: 3 1. Whether the plaintiff provided equipments required to run and operate the petrol station as per the agreement. 2. Whether the plaintiff made the renovations and the installations as per the agreement. 3. Whether the defendant refused to accept the defendant’s cheques and also to make further deliveries. 4. Whether there was reduction of the credit period. 5. Whether the plaintiff is entitled to claim interest beyond the three months. 6. Whether the defendant continued to use the plaintiff’s equipment and whether the use value is T.shs 32,250,000/=. 7. Whether the defendant had a claim against the plaintiff entitling the defendant to a right of a set off. 8. Whether the defendant used the plaintiff’s business name for its transactions. 4 9. To what reliefs are the parties entitled to. In their final submissions the Learned Advocate appearing in this case, Mr. Lukwaro for the defendant and Mr. Mkoba for the plaintiff decided to combine issues 1 & 2. I take their decision to be a proper one because the two issues lead to one thing and that is the operation of the station. The evidence of the witnesses on there issues is as follows: PW1 - Ndekiro Arsel Maimi said that before the contract was signed BP was the supplier of fuel to the defendant. The defendant breached their contract with BP. The plaintiff contacted BP and they agreed on certain items. Instead of BP digging out their tanks, the plaintiff supplied them tanks and continued to use their tanks which they had installed at the petrol station. BP removed their pumps and the plaintiff installed their pumps. They also did other fittings and other modifications as well as calibration. The defendant’s witnesses on the other hand particularly Wilson Jacob Mallya (DW1) and Gertrudi Mdami (DW3) testified that the plaintiff did not do any renovations at all. In his final submissions Mr. Lukwaro for the defendant invited the court to make a finding that the plaintiff failed to 5 provide the equipments mentioned in paragraph 5 of the plaint. Mr. Lukwaro submitted further that there was also failure by the plaintiff to carry out the renovations as claimed in paragraph 6 of the plaint. He urged the court to take the evidence of DW2 - A.J. Macha as the only truthful evidence because PW1 failed to produce any witness or documents to substantiate the installation of the equipments and the renovation of the station. Mr. Mkoba for the plaintiff submitted that the evidence of DW2 on the removal of the BP pumps and installation of one tank supports the plaintiff’s evidence because it is not possible to imagine that the pumps which had no BP mark would be installed by BP people. On the submission by Mr. Lukwaro that the plaintiff ought to call BP people to confirm the exchange of tanks with the plaintiff, Mr. Mkoba said there was no need to do so because the question of ownership of the tanks does not raise any issue in the pleadings. On the omission for a prayer for repossession of the tanks Mr. Mkoba said the plaintiff has asked for the remaining value of the tanks in lieu of their repossession. Mr. Mkoba asked the court to take cognisance of the fact that the evidence tendered by the defence witnesses showed that the station was running up to July 2003 when the defendant terminated the agreement. This means that 6 equipment that were necessary to make the station operative were installed. Mr. Mkoba said it did not make any sense for the plaintiff to be blamed for failure to prepare annexture 1 to the agreement spelling out the items which were required to be fitted on the station because DW1 was the signatory to the Agreement. DW2 said he prepared the renovation which were required and handed them to the higher authorities but the higher authorities did not tell the court what happened to them. Mr. Mkoba made reference to the Agreement and said that what was required was necessary equipment to run and operate the station. Let me step in here to support Mr. Mkoba that clause 3 of the lease agreement spells out what was required to be done by the plaintiff. The clause reads: a NOW THEREFORE IT IS AGREED AS FOLLOWS: 3. The SUPPLIER shall at its own cost and expense provide to TEA and install at the STATION all the necessary equipment required to run and operate the STATION as is specifically provided for and itemized in the Annexure 1 to this Agreement. ” 7 The testimony of A.J. Macha, DW2, the Supervisor of the station was that there were pumps which belonged to BP and they were removed by a person from BP and other pumps were installed which did not have BP marks. One other pump was removed by the plaintiff and another one was installed. He admitted that there was no time the station stopped working. I would say that the evidence by the defence witness (DW2) shows that the plaintiff installed all the necessary equipment which were necessary to run and operate the station. He admitted that there was installation of pumps and the station was fully operating from August 2000 to July 2003. PW1 said he the plaintiff exchanged tanks with BP. In as far as clause 3 of the agreement is concerned the plaintiff fully discharged its obligation under the agreement because what it was required to do was to install necessary equipment required to run and operate the station. So long as the station kept or running from August 2000 to July 2003 and the plaintiff explained what it did to make it run and operate this court finds that the plaintiff did provide the equipments required to run and operate the station and it did the renovations and installations. The two issues are answered positively. 8 Regarding issue No. 3 Mr. Lukwaro made no comments. Mr. Mkoba for the plaintiff said the evidence is loud and clear that the plaintiff never prevented the defendant from performing the contract. The evidence of Wilson Jacob Mallya - DW1 is that the plaintiff refused to accept payment after the defendant deducted some amounts to off set their claims against the plaintiff and they had to pay the full amount. With such evidence it is clear that the answer to issue number three is negative. On issues Number 4 & 5 Mr. Lukwaro invited the court to look at the evidence of Getrudi Mdami (DW3) and make a finding that the refusal of the defendants cheques by the plaintiff when there was in existence a one month credit facility and refusal to make further delivery amounted to prevention from the performance of the agreement by the plaintiff and frustration by the defendant by the plaintiff thus disabling the defendant from performing its part of the agreement. The testimony of PW1 was that the contract started well and moved on smoothly until July 2003 when the plaintiff seized making orders from the plaintiff. On making a follow up, PW1 was informed that the defendant was been supplied with fuel from another source. This is information which was 9 received from one Mr. Barnes - the Financial Controller of the defendant. The witness tendered in court a letter which was written to the plaintiff and was admitted as Exh.P2. PW1 refuted that the plaintiff refused to supply 9000 litres of diesel and 4500 litres of super petrol to the defendant on 24/06/2003. Meanwhile, DW3 who was the Defendant’s Manager at Arusha and the Incharge of all stations inclusive Karatu was contradictory in her evidence. At first she said that the plaintiff supplied fuel to the defendant from August, 2000 to July 2003 and then they stopped supply for reasons not known to her. She said she was the one who used to make orders for Karatu. Later she changed and said it was the Head office which dealt with the plaintiff. While she told the court that she did not know what happened in June, 2003 she later changed her evidence and said she made an order from the plaintiff which she could not recall the quantity and the plaintiff failed to supply the fuel. In his submission Mr. Mkoba said that exhibits P2 tells what actually happened. The defendant decided to breach the contract and is now looking for justifications for doing so. I agree that this is what the defendant is attempting to do. DW3 who used to make the orders stated categorically that there was a supply of fuel from the plaintiff to the defendant from 10 August, 2000 to July, 2003. She attempted to tell the court lies when she said there was an order which was made in June and the plaintiff failed to comply with it. She could not remember the quantity ordered. If she was a truthful witness there would have been consistence in her evidence. The contradictions which manifest in her evidence is a sign of her lies. As such I would hold that she failed to prove that the plaintiff frustrated the defendant’s efforts to comply with the agreement by reducing the credit period. As correctly stated by Mr. Mkoba, if the plaintiff had not complied with the terms of the agreement, it would have been expected that the defendant would state so in exhibit P2. However, exhibit P2 contains an admission of the breach of the agreement and the blame is put on Mr. White and not on the plaintiff. The answer to issue No.4 is no. Issue No.5 is concerned with interest which the plaintiff can claim. Mr. Lukwaro’s opinion is that if at all the plaintiff is entitled to interest, the interest should not be stretched beyond three months because the agreement contained a clause for the termination of the agreement upon giving a notice of three months. Mr. Mkoba for the plaintiff submitted that since notice prior to the termination of the agreement was not given, the plaintiff is entitled to the reliefs sought together with interest. I 11 will revert to this issue later when determining the reliefs to which the parties are entitled to. I only have to mention here that the evidence on record show that the agreement was terminated without notice to the plaintiff. Exhibit P2 confirms that the defendant started to look for supplies elsewhere although the agreement stated that the plaintiff was to be and had all along since August 2000 to July 2003 being the main supplier. The issue which follows covers the use of the equipments at the petrol station after the termination of the agreement and whether the use value of the equipments is T.shs 32,250,000/ = . It is apparent that the equipments at the petrol station were not removed by the plaintiff upon termination of the agreement. They are still being used by the defendant. I do not agree with Mr. Lukwaro that the equipment belong to BP. PW1 was clear in his evidence. He exchanged tanks with BP and this gave the plaintiff the right not to dig out the tanks which were installed by BP. However, pumps belonging to BP were dug out and the plaintiff installed other pumps. DW2 admitted that the pumps which were installed did not have any BP mark. As such Mr. Lukwaro has no basis for claiming that the equipments belong to BP. Even in his pleadings, the defendant has not pleaded so. As for the continued use of the plaintiff’s equipments (tanks, pumps and a generator) Michael Mafikiri Maro (PW2) testified that their value is T.shs 32.2 12 million. Mr. Mkoba said that this evidence was not contradicted. In the agreement it is stipulated that the installations would have remained to be the property of the defendant after the determination of the contract. Unfortunately, the contract did not live up to its expiry time. It was prematurely and unlawfully terminated. The plaintiff is entitled to what it is claiming from the defendant. The issue which follows is on the set-off or counter claim by the defendant. Order VIII rule 6 of the Civil Procedure Code 1966 allows a defendant(s) who has/have been sued to raise a set-off or counter claim. Although the defendant mentioned in the Written Statement of Defence at para II that an amount of T.shs 4,339,225/17 was set off against various financial transactions between the parties, I can not strictly say that the defendant raised a set-off. Order VIII rule 6 (2) is very specific on how a set off should be raised. Mogha’s Law of Pleadings with precedents - Fourteenth Edition Eastern Law house says at pg 322: “ a claim for set off must.... give all the particulars of the set off the amount claimed, the cause of action for the amount, the person to whom and by whom it is due and the date on which it became due. ” 13 It was not enough for the defendant to mention an amount as it did. Particulars as given by Mogha’s Law of Pleadings had to be given and prayers made as well. It was not easy for the plaintiff to defend itself on what the defendant purported to be a set off in the written statement of defence. For purposes of this suit I entirely agree with Mr. Mkoba that the defendant can not claim to have raised a set off or a counter claim which has not been replied to. The other issue relates to use of a sign post which bore the names of the plaintiff and the defendant. As stated before the plaintiff is suing on an agreement for supply of fuel to the defendant’s petrol station. The agreement contain details of terms and conditions as well as obligations of each of the parties to the agreement. There is no condition for erection of a sign post by the plaintiff at the petrol station for purposes of advertisement of a joint venture. There was not even evidence led that the parties carried out a joint venture at the petrol station. The evidence on record shows that the plaintiff was a supplier of fuel and the defendant was the recipient. Terms of supply were clearly stipulated in the agreement. If the plaintiff erected a poster, it did so at its own peril when the defendant failed to honour the agreement. Lastly is the relief to which the parties are entitled to. 14 It is obvious from the evidence that the defendant breached the lease agreement by terminating the it without a prior notice of three months as stipulated in the agreement (Exh.Pl clause 12). According to DW1 the contract had to last on 31st July 2005. DW2 and DW3 confirmed that the contract came to an end in July, 2003. DW1 confirmed that the contract was terminated without notice. The plaintiff is praying for T.shs 11,636,538/= being a gross profit if the contract continued up to its determination. PW2 testified on how this figure was arrived at. The plaintiff is also praying for T.shs 32,250,000/= being total use value of four fuel tanks, three pumps and an electric generating machine to the time when the contract would come to an end. Evidence on this aspect was also given by PW2. Further relief which the plaintiff is praying for is T.shs 12,000,000/= for improvement and renovations carried out at the petrol station and T.shs 4,800,000/= which was still unutilized at the time the contract was breached. The testimony of PW2 was that T.shs 500,000/= was spent for backfilling and leveling. T.shs 1,500,000 was for the signpost - Njake/TFA. Electricity consumed T.shs 2,000,000/= while connection of pumps and calibration costed T.shs 8,000,000/=. Although the defence witnesses denied that the plaintiff did any renovations, my assessment of their credibility is that they lied after realizing that they messed up when they terminated the contract 15 unlawfully. Exhibit P2 is self explanatory. As stated before the installation of the signpost does not form part o the agreement. The plaintiff is therefore entitled to T.shs 10,500,000/= only. It is not entitled to the costs incurred for the signpost which is T.shs 1,5000,000/=. The plaintiff has also prayed for T.shs 4,339,225.17 being the cost of fuel which the plaintiff delivered to the defendant and the defendant has not paid for it. It is also entitled to this amount. Last on the list is a prayer for T.shs 15,000,000/= being general damages for continued use of the plaintiff’s business name. As stated before the plaintiffs suit is based on an agreement. In the agreement there is no clause which allowed the plaintiff to erect the sign post at the petrol station. The plaintiff did not even explain the circumstances that gave rise to the creation of the signpost. If this was not taken care of by the agreement upon which the suit is founded and the plaintiff has not explained the circumstances of erecting the sign post then it is not entitled to damages for this aspect. Given what this court has herein before approved, the plaintiff is granted judgment for T.shs 63,525,763/= only. The amount approved has taken into consideration the principle that a litigant in a suit for alleged breach of contracts comes to court for remedies that are of one nature: to be put into a position no worse nor better than if the breach had not 16 occurred. I refer to the case of Cooper Motors Corporation Limited Vs Moshi/Arusha Occupational Health Services [1990] TLR 96 where the Court of Appeal held that: “ The fundamental principal by which the courts are guided in awarding damages is “restituo in intergram. ” By this is meant that the law will endeavor so far as money can do it, place the injured person in the same situation as if the contract had been performed.” What has been granted to the plaintiff is what it would have earned if the contract was performed to the end. The plaintiff is also entitled to interest at the courts rate of 7% from the date of judgment till full satisfaction plus costs. N.P.KIMARO, JUDGE 7/12/2004 14.12.2004 Coram: Kimaro, J. For the Plaintiff - Mr. Ishengoma. For the Defendant - Mr. Lukwaro. CC: R. Abdalla. Court: Judgment delivered today. 17 Order: Judgment to the plaintiff for T. shs 63,525,763/=. Interest at 7% from the date of judgment till full payment plus costs. N.P.KIMARO, JUDGE 14/12/2004 3,667 - words jd-