Principles

·  Civil Procedure—Framing of issues—Prejudice—Surprise—Issue framed at time of judgment Contract—Public policy—Employment contract subjecting employee to liability without fault—Not void as against public policy

    Plaintiff manager was employed at one of defendant company’s branch shops in Omdurman, under a contract which allowed the company to draw money at any time from a deposit made by manager, to make good any loss to the company caused by the manager’s misconduct or negligence. When a sum of money was discovered missing under circumstances suggesting conversion by the manager, the company obtained statements of admission from him and proceeded to draw on the deposit. The manager brought this action to recover the amounts withdrawn.
The District Judge gave judgment for the manager, holding, inter alia, that the contract clause upon which the company relied was void as against public policy, since it allowed damages without fault. The holding was on an issue framed by the District Judge when he wrote the judgment.
 
On application for revision of the High Court’s summary dismissal of plaintiff’s application for revision
 Held:, I. An issue framed at the time of judgment is prejudicial, since there is no opportunity to adduce evidence or argument.
ii. A contract is not void as against public policy “merely because one of the parties has, by his own volition, subjected himself to liability without fault.”

Judgment

Advocates: Yahia Ahmed                    ……………………………………. for applicants

                   Abdel Wahab El Khidir ……………………………………... for respondent

            Babiker Awadalla J. October 9, 1961:—This is an application against the decision of the honourable judge of the High Court, dismissing summarily an application to him for revision of the decree of the learned District judge, Khartoum in CS-2813-1959

 By virtue of a written agreement made on July 1, 1958, the Bata Company appointed respondent as manager of one of their branches in Omdurman. The relevant clauses of this agreement, in so far as the present dispute is concerned, are hereunder given in full:

*court: M, A Abu Rannat C.J. and B Awadalla J.

“Clause 7: The manager shall manage and be responsible for all stocks at the business premises and shall make good to the company all losses and shortages howsoever the same shall arise.

 “Clause 22: As a condition of this agreement, the manager shall deposit with the company the sum of £S200.000m/ms (two hundred). This amount shall be placed to his credit in his personal account with the company and shall be liable to be drawn upon by the company in any of the events herein mentioned where the manager becomes liable to the company.

  “Clause 26: If at any time during his employment by the company the manager becomes guilty of any misconduct, of which the company shall be the sole judge, or fails or neglects to discharge his duties or sells the goods at other prices than prescribed by the company or makes false reports or statements or disobeys or neglects any order or directions of the company or does any act or omission prejudicing the interests of the company, then in each such case, without assigning any reason, the company shall be at liberty to terminate the manager’s services forthwith without any notice or payment in lieu thereof and shall also be entitled to take physical possession of all stocks of goods at any time through its officers and the manager shall not be entitled to object to the same, nor to compensation or damages, for or in respect of such acts of the company and the company shall be entitled to recover any loss suffered by it by deducting the same from the balance of the manager’s personal account with the company, or otherwise and during the continuance of this agreement the company reserves the right to call upon the manager to dismiss staff engaged by him who, in the opinion of the company, fail to comply with the requirements, or who do not possess the capabilities for the successful conduct of the company’s business.” (Italics added.)

On the eve of the Corban Bairam in 1959, the manager had in his charge a sum of £S 349, being the proceeds of sales for the two days preceding the Bairam. This amount, which was alleged by the manager to have been kept for safe custody in a drawer in the shop, disappeared in. circumstances suggestive of theft. The police accused the manager of misappropriating the money and engineering the events pointing to a theft, but the manager was ultimately acquitted of the charge. It appears that the company, too, suspected foul play on the part of the manager and on the day the loss was discovered a representative of the company procured from the manager Documents 2 and 4. In Document 2, the manager admitted shortage of £S 277.780m/ms in his safe “after deducting his commission,” and stated that the amount represented the price of goods sold on credit, and that he is “criminally” responsible to settle

The same. In Document 4 the manager stated that he had received the price of all goods sold by him, and that there were no debts outstanding. The implication when the two documents are put together is that the manager had converted the proceeds to his own use. On receipt of these documents, the company immediately proceeded to deduct the amount from deposits held by them on account of the manager, under clause 22 of the agreement, amounting to £S271.

The manager instituted this suit before the District Court, Khartoum, claiming recovery of the amount deducted by applicants as above, plus his commission under the contract. In their defence, the company relied on the written admissions made out by the manager and also on clause 7 of the agreement. The manager contended that Documents 2 and 4 were obtained from him under duress or undue influence, and the following issues were framed:

i.                     Was the deduction by defendants of the sum of £S 349 made pursuant to the agreement and the written admissions of plaintiff?

ii.                   Was the loss of the money due to the negligence of plaintiff?

iii.                  Are defendants legally entitled to deduct the sum of £S 349 from plaintiff’s account?

iv.                 To what extent can plaintiff succeed in his claim?

The case was thereafter taken over by Hamdi D.J., who, after hearing the evidence and calling for written submissions, proceeded to write his judgment and in the course of that judgment amended the above issues so as to read as follows:

i.                     Was the deduction by defendants of the sum of £S 349 from plaintiff’s account in pursuance of clause 7 of the agreement and the written documents in which plaintiff admitted liability?

ii.                   Was the document dated June 15, 1959 obtained from plaintiff under compulsion of duress?

iii.                  If the answer to (ii) is in the affirmative, is clause 7 of the agreement or any part thereof valid in law so as to entitle defendants to deduct the amount claimed without recourse to the courts?

 It is to be noted that the third issue was completely new and finds no support either in the evidence adduced or in the written submissions of the parties. The learned District Judge found for the manager on both issues (ii) and (iii). On issue (ii), he found that the document was obtained both under duress and undue influence. On issue (iii), he found that the clause was contrary to public policy in that it imported upon the manager an absolute liability to cover any deficit in the property in his charge even though it were the result of circumstances beyond his control. He also found that even assuming the validity of the clause, it did not entitle defendants to take the law into their own hands and deduct the deficit

From the deposit kept by them. He accordingly gave judgment to plaintiff for claim and costs.

The company applied to the honourable judge of the High Court for revision of this decree, and the honourable judge of the High Court dismissed their application summarily on the grounds (a) that there was undue influence, (b) that there was no consideration for the manager’s act in authorizing the company to deduct the amount from the deposit held by them, and (c) that the manager could not be made responsible in the absence of any fault on his behalf. Against this decision the company sought recourse to this court.

Before us, the company (hereinafter referred to as applicants) were represented by advocate Yahia Ahmed and the manager (hereinafter referred to as respondent) by advocate Abdel Wahab El Khidir. We regret to say that both advocates were highly unprepared for the occasion, and the job of this court was rather hampered than facilitated by their presence.

As far as I can make out, advocate for applicants seems to base his application on the following grounds:

(a) The learned District Judge was wrong, in law in amending the issues at the last stage of the proceedings and without consideration as to whether their content was covered by the evidence or submissions. He argues that applicants were greatly prejudiced in their defence by the introduction of an issue or issues which took them by surprise.

(b) The learned District Judge was wrong in law in finding that clause 7 was contrary to public policy. Citing Fender v. Mildmay [1937]3 All E.R. 402, he contends that the “categories of public policy are closed,” and that to refuse to enforce a contract simply because it imposes upon the promisor an absolute obligation would be to establish, contrary to authority, a novel head of public policy.

(c) The learned District Judge was wrong in law in finding that applicants were not entitled to make the deduction without seeking the aid of the Courts: such deduction, the learned advocate submits, was rightly made pursuant to clause 26 of the agreement.

The learned advocate for respondent replied as follows:

As regards (a)

 The issues as amended contained merely the substance of those originally framed, and in any case there is nothing to preclude the court from making any amendments to the issues, a power reserved to it by Civil Justice Ordinance, 1929, s. 72.

As regards (b):

 The decision of the learned District Judge was based on the invalidity of Documents 2 and 3, either because they were obtained under duress or because they lacked consideration, and even assuming that the decision was based on clause 7 of the agreement, then the said clause is illegal as being contrary to public policy. The contention that the categories of public policy are closed is, in his submission, unacceptable.

The principle involved here is in his opinion analogous to that which entitles a court in the Sudan to reopen a money lending transaction under Civil Justice Ordinance, 1929, s. 6.

As regards (c):

   The suggestion that clause 26 of the agreement authorizes deduction save in those cases where there was a breach by the respondent of his obligations is unsound.

 As regards the first point, I entirely agree with the learned advocate for applicants that it was wrong for the learned District Judge materially to alter the issues at the judgment stage, so as to take the parties by surprise. Whether an issue arises during the hearing or in argument or it is raised by the court, when it concerns the legality of the contract, the principle is the same, i.e., the party or the parties entitled to lead evidence or to make submissions must not be prejudiced in the conduct of their case. In this case, the issue as to the legality of clause 7 of the contract was only framed by the court in the course of its judgment and was decided against applicants without affording them any chance to argue the point Such a procedure is obviously unfair and was condemned in India in T. N. S. Firm v. P. S. Mohamed Hussain and Others (1933) A.I.R. Madras 756 as highly irregular.

As regards the second point, I entirely agree with the learned advocate for applicants that the learned District Judge was wrong in deciding that clause 7 of the agreement was void as contrary to public policy. The learned District Judge bases his decision on the ground that the clause imports upon respondent an absolute responsibility, contrary to the general rule, for his own wrongdoing.

 Without going into the adequacy of the suggestion by the learned advocate for applicants that “the categories of public policy are closed,” which was doubted n England, I think I can safely say this much: that it was never suggested at any time that a contract is void merely because one of the parties has, by his own volition, subjected himself to liability without fault. The idea behind invalidating contracts against public policy is not the interest of the individual concerned but that of the public at large, and if no public interest is involved, the freedom and sanctity of contract are paramount The suggestion by the learned advocate for respondent co assimilate the present contract to those of money lending under Civil Justice Ordinance, 1929, s. 6, is unacceptable. Both here and in England the power to reopen harsh and unconscionable transactions is statutory. Horwood v. Millar’s Timber and Trading Co. [1917]. I K.B. 305, cited by the learned District Judge, has no bearing on the subject of this case. The decision there was grounded on the deprivation of the personal liberty of the covenanter, which is not the case here.

Having found that clause 7 of the agreement is valid and binding upon respondent, I do not want to go into the question whether Documents 2 and 4 are valid or otherwise.

  I now come to the last point, viz., whether applicants were entitled to make the deductions under clause 26 of the agreement. Applicants have no doubt suffered a serious loss to their business through some activity, the true nature of which is known to respondent alone. It may be that had the theory of theft been substantiated, applicants would never have adopted the course they have taken by deducting the loss from moneys held by them on account of respondent, but in view of the highly suspicious circumstances surrounding this unhappy affair, applicants were no doubt justified in calling upon respondent to refund the loss, and, if he fails, to consider him as failing in his duty under clause 7. That being so, they were quite entitled to make the deduction which clause 26 entitles them to make.

 This application is therefore allowed with costs and the decree of the learned District Judge, Khartoum, is hereby set aside.

M. A. Abu Rannat C.J. October 9, 1961: —I concur.