Equator Sawmills Ltd v Patel (C.A. 16/1933.) [1933] EACJ 2 (1 January 1933)

COURT OF APPEAL FOR EASTERN AFRICA.

Before SIR JACOB BARTH, C. J. (Kenya), SIR JOSEPH SHERIDAN, C. J. (Tanganyika), and LUCIE-SMITH, J. (Kenya).

EQUATOR SAWMILLS, LTD. (Appellants) (Original Plaintiffs) $\overline{2}$

KASHIBEN MOTIBHAI PATEL (Respondent) (Original $Defendant$ .

C. A. $16/1933$ .

Contract of guarantee—Construction.

Held (20-6-33).-That where by means of a formal document a surety guarantees payment to a creditor for goods supplied to a principal debtor, such guarantee can refer to goods supplied prior to the<br>execution of the guarantee as well as to goods supplied prior to the<br>quent to the same, where there is evidence of the real agreement<br>having been entered into the formal document being merely in confirmation of the real agreement.

Hamilton for Appellants.

Patel for Respondent.

The appellants (plaintiffs) sued the respondent (defendant) for the price of timber supplied to respondent's husband, relying upon a contract of guarantee executed by respondent. $\frac{1}{2}$

The respondent denied liability on the ground that the timber had been supplied before the giving of the guarantee, and that the guarantee did not refer to this timber, but would only refer to such timber as might be supplied after the guarantee. In fact, no timber was supplied after the guarantee.

The trial Judge held that the respondent was not liable for the price of timber supplied before the guarantee was given.

The guarantee was a formal document purporting to confirm an agreement entered into some time before, to the effect that respondent would guarantee payment to the appellants up to Sh. 10,000 in consideration of their supplying her husband with timber.

Hamilton.—The date of the agreement was confused with the date of the guarantee; the letter of guarantee related back to the agreement which is admitted in defence. The timber was delivered after the agreement but before the letter of guarantee; defendant's husband ordered no timber after the letter of guarantee.

Patel replied:

SIR JACOB BARTH, P.—This is an appeal from a decree of the High Court of Tanganyika in an action brought by the appellant against the respondent on the footing of an alleged guarantee to recover a sum of money in respect of sales of timber to the respondent's husband by the appellants. A preliminary point was raised on behalf of the respondent that the order granted in an application to extend the time to give notice of the intention of the appellant to appeal was not made until 21st December, whereas the time for lodging the appeal under the Court of Appeal Rules expired on 17th December. The appeal was in fact lodged in time. The provision for giving notice of appeal is a local one, to be found in the Tanganyika Appeals to the Court of Appeal Ordinance, section 9. It enacts that when in civil proceedings a person desires to appeal he shall give notice to the Registrar of the High Court of his intention to appeal within thirty days of the date of the decree. Such date was, in this case, the 26th August, 1932. Sub-section (2) of the section gives the High Court power to extend the time for giving notice. In this case the appeal lies without leave. It is suggested that the failure to obtain an order for an extended time for giving notice until after the time for lodging the appeal has expired renders the appeal nugatory. In my opinion, this contention has no merits, the appeal

lying as of right under the Appeals to the Court of Appeal Ordinance and the Rules of that Court having been complied with, the fact that the time has been enlarged within which to give notice after the appeal had been lodged cannot affect the validity of the proceedings in appeal. It is true it is rather like putting the cart before the horse, but the notice appears to be a purely formal act effecting no very obvious purpose in the case of an appeal as of right without leave, and notice, although late. has been given.

On the merits of the appeal, I have had the advantage of reading the judgment of my brother Sheridan and agree with his conclusions.

SIR JOSEPH SHERIDAN, C. J.—The principal question for decision in this appeal is whether K. M. Patel, the wife of the respondent, is liable for the balance due in respect of timber supplied by the appellants to her husband in December, 1929. Her case is that although she did give a guarantee to the appellants, that was given subsequent to the delivery of the December timber and is referable to timber to be supplied in the future. The learned trial Judge held that as the guarantee was given on the 18th January, 1930 (Annexure C to the plaint), after which date no timber was supplied, no liability rests on the respondent. The case for the appellant is that Exhibit C was a formal document executed in pursuance of an agreement entered into in October or November, whereby the respondent in consideration of the appellant supplying her husband with timber guaranteed the payments therefor to the amount of Sh. 10,000. In a letter of the 20th November, 1929 (Exhibit 7), the respondent's husband wrote to the appellants through Mr. Baker Smith offering "any form of security your solicitors may consider desirable", and on the 28th November, 1929 (Exhibit 8), the appellants replied that they should like the guarantee from the respondent's wife to cover her husband's account to the extent of Sh. 10,000, as the title-deeds submitted were in her name. Up to this date, although an account had

been opened, no timber had been supplied. I think it is clear from Mrs. Patel's evidence that she was prepared to guarantee the price of the timber prior to its delivery, for in her evidence, at page 8, she said: "The deed of sale I signed to send to Nairobi was signed two or twoand-a-half months before the guarantee (Exhibit C) deed of sale was prepared by Mr. Baker Smith. My husband gave Baker Smith the instructions. . . . The title-deeds were sent to Nairobi to show people that I owned this property, so that my husband might receive supplies of goods. The object of sending title-deeds was not as security for goods supplied in October or November. but as security for goods to be supplied after receipt of title-deeds. I handed over title-deeds to my husband." On this evidence, and on the evidence of Mr. Baker Smith that "I have always regarded Patel as Mrs. Patel's agent; she has never objected to any instruction given me by him"? I am satisfied that Mrs. Patel approved of the title-deeds being sent to Nairobi as security for the supply of timber. In Exhibit 5, letter of the 10th November, 1929, Patel wrote to the appellants in connexion with his request to be supplied with timber: "As a security for this transaction, I am willing to send you for your reference the documents relating to a plot and building worth about Sh. 10,000, situate in the Moshi Township. If you accept

the above terms, please let me have a reply by a telegram, on receipt of which I will forward the documents through my advocate." My comments on this letter are that Patel, with the approval of his wife (vide her evidence) proposed to send title-deeds to the value of Sh. 20,000 as security for the supply of timber. In a telegram (Exhibit 6), the uppellants asked for the documents. The next step is on the 20th November (Exhibit 7). The documents were sent, so that it would appear that two months prior to the execution of the formal letter of guarantee the respondent had agreed to guarantee the price of the timber to be delivered. The evidence, oral and documentary, discloses that the attitude of Mrs. Patel might be summed up in the words: "Go ahead with the supply of timber, and I am prepared to pledge my property as security therefor."

The fact that the respondent entered into a formal guarantee on the 18th January, 1930, serves to confirm me in the view that she held herself out as guaranteeing the payment for the timber supplied in December.

Paragraph 4 $(a)$ of the plaint reads: "Plaintiff and defendant for due consideration agreed in October or November, 1929, that defendant would guarantee payment of the price of all timber supplied and to be supplied by plaintiff to the said Manibhai Lakhabhai Patel, together with all costs and expenses incurred in connexion therewith, to the extent of Sh. 10,000." On these issues were framed: " $(1)$ Was there any agreement as alleged in para. 4 of the plaint, that the defendant should execute a guarantee? (2) Does the guarantee (Exhibit C) extend to timber supplied or amount due for timber supplied on or before the date of the guarantee? (3) If the answer to (2) is 'ves', did defendant really consent to the guarantee as construed by the Court?" For the reasons I have given, these three issues may be answered by saying that the payment for the timber supplied was guaranteed by the respondent. The fourth issue reads: "Was there any agreement whereunder interest was due under the guarantee? " The respondent denied that there was any such agreement and I cannot discover on the record any evidence thereof. I would therefore answer this issue in the negative, and disallow the sum claimed for interest—Sh. 539/04. The fifth issue reads: "What costs and expenses, if any, have been incurred by plaintiff in connexion with the supply of timber, and is defendant liable for them?" These

costs and expenses amount to Sh. 270/65, but I am unable to find evidence of their having been incurred in connexion with the supply of timber. I would disallow these charges. The sixth issue reads: "Was there an agreement as alleged in para. 8 of the plaint, and if so were the parties purporting to act on defendant's behalf authorized to do so? " This issue refers to charges connected with obtaining a title for the respondent in respect of the Moshi plot, and are said to amount to Sh. $1,190/50$ . Completing the title was necessary for the purpose of furnishing the security for the payment for the timber, and consequently I find the respondent to be liable for the payment of such charges as are proved on this head. On this answer to the sixth issue, the seventh issue does not require an answer. The eighth issue reads: "Was defendant's title ever deposited by defendant with her consent or authority with the plaintiff as alleged in para. 11 of the plaint? Did such deposit, if any, constitute an equitable mortgage as alleged?" The trial Judge answered the first part of this issue in the affirmative, with which I agree. As for the second part, the learned Judge said that the deposit did not constitute an equitable mortgage, the previous consent of the Governor, as required by clause 2 of the Land Regulations, 1926, not having been obtained. It appears, however, that the deposit was made on the 1st December, 1931, at which date

clause 2 of the 1926 Regulations had been repealed, and the consent referred to was no longer necessary. I would therefore find the deposit constitutes a valid equitable mortgage. $\bold{For}$ the foregoing reasons, I would allow the appeal and direct that the case be sent back to the High Court for determination on the merits. The appellant will have the costs of the appeal and the costs in the Court below. The costs of the hearing on the merits will follow the event. It will not be open to the appellant at the hearing to adduce evidence as to Issues (4) and (5), which have been disposed of in this appeal.

LUCIE-SMITH, J.-I agree.