(COURT OF APPEAL)*

THE AFRICAN TRADING CO. LTD. v. ABDALLA IBRAHIM

AC-RE V-378-1966

 Principles

·  Company Law—Effect of memorandum and articles when registered—Company Ordinance, ss. 18 (1) and 20 (2)—Bind the company and its members—All trans actions must he consistent with them

·  Company Law—Presumption of the regularity of internal proceedings—Persons dealing with the company may assume such regularity

(1) According to the Company Ordinance, ss. 18 (1) and 20 (2), from the date of registration, the memorandum and articles of association bind the company and its members. All the transactions dealing with the company must be consistent with them.
(ii) Persons dealing with the company, that is, apparent agents of the company, may assume that all the transactions are done according to the regularity of the internal proceedings of the company. This presumption of law is eminently practical, for business cannot be carried on if persons dealing with the company are compelled to call for evidence that the internal regulations have been duly observed.

Judgment

Advocates:           Hanna George…………………… for applicant

Salah Mohamed Ahmed…………………………… for respondent

Osman El Tayeb J. April 9, 1967: —This is an application for revision from the order of Province Judge, Port Sudan, dated July 9, 1966, dismissing summarily a similar application to him from the decree of District Judge, Port Sudan, dated June 22, 1966, awarding plaintiff (respondent) the sum of £S.2, 550 with costs, by way of damages for wrongful determination of a contract of employment, against the defendant company (applicant).

Applicant is a company carrying on, in Port Sudan, the business of import, export and commission agent, and in this business it is handling cargo from and to ships in the harbour, and each parcel of any cargo has to be marked with an appropriate mark. For this marking the company employed respondent by virtue of a written document which reads:

“Abdullahi Ibrahim,

PORT SUDAN.

Dear Sir,

With reference to our verbal conversation regarding the above-mentioned subject, we beg to inform you that the company has the pleasure to appoint you her contractor, for all kind of marking. with effect from July I, 1964, to July I. 1969, contract for five years, with a consideration to the following:

(1) Your salary will be £S.10.000m—ms. (Ten pounds Monthly).

(2) The company will supply you with all the requirements for the marking operations.

(3) The company will not pay for any labourers, carrying out the marking operations, they will be paid by you.

Looking forward for your full co-operation, and we wish you best wishes and good luck.

FOR/AFRICAN TRADING COMPANY LIMITED

MANAGEMENT.”

It has been proved that this contract further included that the corn pan would pay to respondent two milliems for every parcel to be marked, and that he would pay one milliem for every parcel to the labourers engaged by him for the marking operations.

Respondent started to perform his duties under this contract until; at the end of March 1965, the company terminated the Contract without any apparent reason. Respondent claimed damages for breach of contract assessed at the loss of earnings for the unexpired period of the contract, which was fifty-one months. He alleged that he had been gaining £S.100.000m/ms. monthly from the performance of this contract. In evidence he produced some monthly bills for three months, viz., September. October and December 1964, that showed the sums that were paid to him for each one, and the average of which was £S.100.000m/ms. As he had to pay half of it to the labourers, the learned District Judge awarded him the sum of (51 months x £S. £S.2, 550.000m/ms.) ES.2, 550.000m/ms.

The defences that were made by the company in the court of first instance, and in Province Court and in this court are, in short, as follows:

(a) There was no contract, because, according to the rules of the company, there must be two signatures on any document in order to render it binding on the company, and the document of May 24. 1964, relied on by respondent was signed by one manager;

(b) If the said document was acceptable as a binding contract, then it had to be considered according to the meaning of its words: it meant that respondent was an employee receiving £S.10.000m/ms. monthly. No extrinsic evidence ought to have been heard as to the payment of two milliems per parcel marked;

(C) Lastly that the damages have been wrongly assessed, since, admitting the three bills produced by respondent, in some months no marking have been done, and those three months were the highest in business.

For the first point the company produced a notice stating that a Mr. Themillis was appointed a joint manager, and that his signature, specimen of which was on the notice, had to be observed. Further oral evidence was given that the management of the company had been carried out under those two signatures at the time when the document dated May 24, 1964, was written. It was submitted that as respondent knew or ought to have known of this state of affairs, he ought not to have accepted a contract signed by one manager; and so his purported contract was bad. On the other hand it was submitted on behalf of the respondent that he was not bound by the Internal proceedings of management of the company and the English rule known as the rule in Royal British Bank v. Turquand (I865) 6 B. & 3. 327 was relied on. Both the learned District Judge and Province Judge accepted this rule as being applicable in this case and decided the point in favour of respondent.

Unfortunately no reference was made in the case to the memorandum and articles of association of the applicant company, and no reference was made to the Sudan Companies Ordinance, 1925. However, in order to come to a decision on the applicability of the English rule in the Turqucind case, it is necessary to look into the position of the law in the Sudan.

According to the Companies Ordinance, 1925, ss. 18 (1) and 20 (2), from the date of registration, the memorandum and articles of association bind the company and its members; and it shall be a body corporate capable of exercising all the functions and powers therein contained. Persons dealing with the company have to observe those powers and functions and that no transaction is made with the company which is inconsistent therewith. The rule in Turquand’s case comes in here, arid since it is a common law rule, and fortunately the statutory laws in the Sudan and in England are still the same in this particular point, it may be accepted and applied in the Sudan as being reasonable, just and fair. It is stated in Palmer’s Company Law, 246 (20th ed., 1959), as follows:

“According to this rule, persons dealing with the company are bound to read the public documents of the company and to see that the proposed transaction is not inconsistent therewith, but they are not abound to do more, they need not inquire into the regularity of the internal proceedings ‘the indoor management ‘—and may assume that all is being done regularly.”

It has not been pleaded in this case that the making of the document of May 24, 1964, and in particular its signature by one manager, was inconsistent with the functions and powers of this company as contained in its memorandum and articles of association. It was said that as a matter of internal management, by resolution or otherwise, the company issued the above referred to public notice to the effect that every document binding on the company has to be signed by two managers.

In the first place, the said notice was not clear in that respect, it seems to me it only shows that a Mr. Themillis was engaged as a joint manager, and nothing more, and in the second place it was not proved that respondent had actual notice of it, since constructive notice in such a matter of internal management could not bind him.

Mr. Nicola Pathiris who signed the document of May 24, 1964, purporting to enter into a contract with respondents did so within his ostensible authority as a manager. There is no argument of any force against this. Respondent, as a person dealing with the company, was not bound to inquire as to whether Mr. Nicola Pathiris was properly authorized by the company to make that contract v him, and to sign it without another joint signature by another manager, because, it may be repeated, this was a matter of internal management.

The second point that the contract was one of employment for £S.10.000m/ms. monthly and that no payment of two milliems per parcel to be marked was included in it, the submission of advocate for respondent, that parole evidence may be admitted to supplement that written contract, is acceptable, when the omitted terms are not inconsistent with the written ones. The authority is Adam ,Abdel Gadir v. Mohamed 4bdel Gadir (1962) S.L.J.R. 131.

The company, as a company registered under the Companies Ordinance, may make, as regards form, any contract that private persons can make, and it may be amended in the same manner according to law, of the Companies Ordinance, 1925, s. 81.

The contract in question started by: “reference to our verbal conversation,” then it stated that respondent had to bring labourers and pay for them. It is sufficiently clear that something was omitted; it was that the company would pay to respondent two milliems per parcel to be marked and that he would pay out of it to the labourers. The evidence given by respondent to that effect is admissible.

Returning for a moment to the question of the functions and powers of the company in relation to the making of the contract in this case, it is important to state that the question of the signatures, ought not to have taken all the argument that I have dealt with, since, as it appears, the contract in question was not one that has necessarily to be made in writing, it was a simple contract that could have been made by verbal agreement. As it was written, the signature of a single agent of the company was sufficient for its validity.

The last point is about the damages. It is clear that the company made a contract with respondent for five years, and that by the termination of it, the company committed a breach entitling respondent to damages. But I can hardly agree with the learned District Judge as to the quantum of damages. In the first place the £S.10.000m/ms. monthly salary was not taken into consideration, it was a basic salary, in addition to any sums paid for the marking, when there was marking. In the second place reliance was placed on three bills for three months showing high figures, while the company contended that in some months no marking at all would be done. In the third place respondent has or is supposed to find for himself another job in order to mitigate the damages. In no circumstances will a court award damages amounting to the lose of earnings for the whole of the unexpired period of the contract, in a case of employment as the present. The earnings which he would have ear had he diligently taken steps to find another job and assuming that he so found one must be taken into consideration for mitigation of the damages.

I do not think that we are in a position permitting of assessing the damages in this case, and it has to go back to District Judge, Port Sudan, to reconsider on the above-mentioned opinions to assess the reasonable damages to be awarded to respondent. The learned District Judge may take any further evidence that may be brought by either of the parties.

This revision is dismissed in part and allowed in part; the decree of the court below is set aside and the case is sent back for reconsideration of the assessment of the damages. The costs shall follow the event.

El Fatih Awouda J. April 9, 1967—I cannot but agree with the judgment of my Honorable colleague, to which I have nothing to add.