ROMANIS, Appellant, and SHERMAN DE SILVA & CO., LTD. Respondent

013-NLR-NLR-V-60-ROMANIS-Appellant-and-SHERMAN-DE-SILVA-CO.-LTD.-Respondent.pdf


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WEERASOORIYA, J.—Romania v. Sherman de Silva is Go., Ltd.
1958 Present: Weerasooriya, J., and H. N. 6. Fernando, J.1
ROMANIS, Appellant, and SHERMAN DE SILVA & CO., LTD.
Respondent
S. G. 225—D. G. Colombo, 24,8-U
Sale of Goods Ordinance (Cap. 70)—Section 50 (2) (3)—Non-delivery of goods—•'Available ma/rhet—Measure of damages—Relevancy of a contract for sub-sale.
In assessing damages for non-delivery of goods under a contract of sale where. , there is‘Ig# available market, the Court will not take into account an inter-mediate contract entered into with a third party for the sub-sale of the goods.The fact that the buyer under the sub-oontract claims no damages for non-_ delivery to him is not a good ground for awarding as damages to the buyerunder the main contract anything less than the full difference between thecontract price and the market price at the date of the breach. .To adopt themarket price as the measure of damages in such circumstances, irrespectiveof any dealings in regard to the goods which the buyer may have had with athird party, is not in conflict with sub-section 2, and is in accordance withsub-section 3, of section 50 of the Sale of Goods Ordinance.
A ‘ '
jTxPPEAL from a judgment of the District Court, Colombo.
,t
Thiagalingam., Q.C., with J. M. Jayamanne and T. Parathalingam,for defendant-appellant.
N. K. Ghoksy, Q.C., with V. A. Kandiah, for plaintiff-respondent.
Cur. adv. vult.
January 27, 1958. Weerasooriya, J.—
This action was filed by the plaintiff-respondent claiming from thedefendant-appellant the sum of Rs. 77,862 as damages for breach of acontract dated the 21st April, 1950, (P6), under which the defendant had
it
WEERASOORIYA, J.—Romanis v. Sherman de Silva <S> Go., Ltd.
S3
bound himself to supply to the plaintiff on or before the 31st December,1950, 10,000 lbs. of No. 1 white grade papain at Rs. 6*75 per lb. Thecontract also provided for the goods being delivered by the seller in air-tight tins and “ guaranteed on landing at New York ” to be equal inquality to a specified sample.
The plaintiff is a limited liability company. The evidence indicatesthat the plaintiff required the papain for sub-sale to one or more buyersin New York, and that the defendant was so informed at or about the timeof the contract. Jt is common ground that out of the contract quantityonly 4536 lbs. were made available to the plaintiff at Rs. 6*75 per lb. Thedamages sued for are claimed in respect of the balance 5464 lbs. computedon the difference per lb. between the contract price and the sum of Rs. 21said to represent “ the current available market rate ” at which the goodscould have been obtained after the 31st December, 1950.
Two defences were taken by the defendant to this claim in his answer.The first defence is that the contract as embodied in P6 was subject to a“ contemporaneous separate oral agreement constituting a conditionprecedent to the attaching of any obligation under such contract ”,and that such separate oral agreement provided, inter alia, that shouldthe market price of the goods rise above Rs. 6*75 per lb. the contract pricewould be increased by a corresponding amount in respect of any quantityover and above 6000 lbs. The case for the defendant on this defenceis that as he knew that he would be able to supply only about 6000 lbs.of papain from his own plantations he safeguarded himself against lossfrom any unexpected rise in the market price in respect of the balance(which he would necessarily have to obtain from other sources) by insistingon this stipulation which; though not reduced into writing, he said wasaccepted on behalf of the plaintiff by Mr. N. R. de Silva, one of thedirectors of the plaintiff, firm ; that the market price subsequently rosefrom Rs. 6*75 per lb. to Rs. 15'50 per lb. but the plaintiff failed and neg-lected to comply with the terms of the oral agreement as regards paymentand was therefore precluded from maintaining the present action.
The second defence is that in any event “ the contract sued on stoodrescinded, abandoned and was otherwise concelled in or about the 22ndSeptember, 1950 ”, that there was substituted in its place a fresh contractbetween the parties (which too was not reduced into writing) where-under the plaintiff agreed to pay Rs. 6-75 per lb. for papain produced fromthe defendant’s own property and Rs. 15*50 per lb. for papain obtainedby him in the local market for supply to the plaintiff and that the plaintifffailed to take delivery of part of the goods tendered under this newcontract.
After trial the teamed District Judge rejected both these defences asfalse, and he gave judgment for the plaintiff in a sum of Rs. 56,006 withcosts. Prom this judgment the defendant has filed the present appeal.Although one of the grounds of appeal is that the trial Judge was wrongin rejecting the first of these defences, Mr. Thiagalingam who appearedfor the appellant stated at the hearing before us that he was not pressingthat ground. As regards the rejection by the trial Judge of the seconddefence, after Mr. Thiagalingam had concluded the appellant’s ca^e we
2*J W. B 8208 (10/68)
'4 WEEKASOOKIYA, J.—Romanis v. Sherman de Silva <S> Co., Ltd.
saw no reason to take a different view from that of the trial Judge whosefindings of fact having a bearing on that defence are amply supported bythe evidence. We accordingly intimated to Mr. Choksy who appealedfor the plaintiff-respondent that we did not wish to hear him except on thequestions of law and fact appertaining to the issue of damages, thosebeing, in our opinion, the only substantial matters arising for decisionin this appeal.
In awarding the sum of Rs. 56,006 as damages the trial Judge wenton the basis that section 50 (3) of the Sale of Goods Ordinance (Cap. 70)applied to this contract. He held that Rs. 17 per lb. fairly representedthe market or current price of the goods in December 1950 or January1951 being the time when, in his view, the plaintiff should have startedbuying against the contract, and he gave the difference per lb betweenthat price and the contract price on the shortfall of 5464 lbs. Mr. Thia-' galingam strenuously contended that the evidence in the case did notjustify a finding that there was an available market for the goods inDecember 1950 or January 1951 or subsequently. But on this pointthere is not only the evidence of the witness Pilapitiya, to which the Judgehas specifically referred in his judgment, but also the evidence of thedefendant himself that there was enough papain in the market in De-• cember 1950 and January 1951 and that the price was Rs. 15andRs. 15-50per lb.
Mr. Thiagalingam next contended that even if there was an availablemarket at which the plaintiff could have obtained the goods when thedefendant defaulted in delivering the balance quantity under the con-tract, the learned trial Judge was wrong in having recourse to section 50 (3)of the Sale of Goods Ordinance in the special circumstances of this ease.Before I deal with the submissions of Mr. Thiagalingam on this aspectof the ease it will be necessary to refer briefly to such evidence as there isin regard to the destination of the goods purchased under the contractP6 and the position of the plaintiff vis a vis the American buyers.
Mr. Sherman de Silva, the managing director of the plaintiff company,stated that the plaintiff was under contract for the supply to at least oneAmerican buyer of 8000 lbs. of the same grade of papain as formed thesubject matter of the contract with the defendant. He also stated thatat the time when the defendant defaulted in the performance of hiscontract P6 the plaintiff had already supplied to the American buyerabout 4000 lbs. under the sub-contract, representing almost the entirequantity which the defendant had given the plaintiff. This included700 lbs. purchased by the plaintiff from the defendant outside the contractP6 on the 2nd October, 1950, at Rs. 15-50 per lb. which according to Mr.de Silva was the prevailing local market price and which he consented topay as a special favour in order to enable the defendant to minimise tosome extent his losses under the contract P6. Mr. de Silva said that afterthe defendant defaulted attempts were made by the plaintiff to obtainthe shortfall from other quarters but no papain was available until the26th June, 1951, when the plaintiff entered into the contract P28 withPilapitiya for the supply of 3000 lbs. No. 1 white grade papain at Rs. 21per lb… The plaint filed in this case is dated the 27th June, 1951, and
WEKfiA'SOORIYA, J.—Romania v. Sherman de Silva <Ss Co., Ltd. 55
the amount claimed as damages represented the difference between Rs. 21and Rs. 6*75 on 5464 lbs. Mr. Thiagalingam suggested that the contractP28 was a bogus and collusive transaction intended to bolster up theclaim for damages made in the plaint. But although Pilapitiya wascalled as a witness for the plaintifF and stated that the full quantity men-tioned in P28 was supplied by him to the plaintiff and that he receivedpayment at the rate of Rs. 21 per lb. he does not appear to have beencross-examined on the basis that the transaction was other than agenuine one.
While according to Sherman de Silva he was not able to obtain suppliesof the required grade of papain in the local market until June 1951, theevidence of Pilapitiya and the defendant (to which reference has beenmade earlier) is that supplies were available in the local market in De-cember 1950 and January 1951. Sherman de Silva’s evidence as regardsthe availability of supplies and also the need for entering into the contractP28 is conflicting and unsatisfactory. At first he stated that the 3000 lbs.purchased from Pilapitiya were despatched to New York to fulfilthe plaintiff’s outstanding obligations under the contract with theAmerican buyer. On a subsequent occasion he appears to have takenup the position that all that was sent to the American buyer was onlysuch quantity as was made available to the plaintiff by the defendantprior to the latter’s default, namely about 4000 lbs.; and as regards thebalance quantity due under the sub-contract, he said that althoughrequested by the plaintiff to purchase it elsewhere against the sub-contract the American buyer was unable to do so, and he did not, there-fore, make any claim on the plaintiff for damages.
Mr. Thiagalingam submitted that on this evidence he was entitled toask the Court to hold that the plaintiff in fact sustained no damagesat all by reason of the defendant’s default or, if the plaintiff suffered anydamages, they were only in respect of the 700 lbs. purchased at the specialrate of Rs. 15*50 per lb. He urged that since sub-section 3 of section 50of the Sale of Goods Ordinance is only a prima facie application of theprinciple laid down in sub-section 2, the evidence of Sherman de Silvaenables the Court to estimate in terms of sub-section 2 the loss directlyand naturally resulting, in the ordinary course of events, from the de-fendant’s breach of contract without recourse to the method adopted insub-section 3 of assessing the damages on the difference between thecontract price and the market price.
In short, according to learned counsel for the defendant-appellant,in the assessment of the damages to which his client became liable byreason of the breach of contract, the position between the plaintiff andthe American buyer in regard to the sub-contract is an extremelyrelevant consideration. But it seems to me that notwithstanding adegree of plausibility in the arguments adduced by Mr* Thiagalingam,the question of damages has to be answered in the light of certain Englishdecisions which were brought to our notice in the course of the argumentand to which I shall refer presently. Section 50 of the Sale of GoodsOrdinance, I may state, is in the same terms as section 51 of the EnglishSale of Goods Act, 1893.
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WEERASOORIYA, J.—Romanis v. Sherman de Silva tb Co., Ltd.
The leading English case as to the assessment of damages for non-delivery of goods under a contract of sale where there is an availablemarket is Rodocanachi v. Milbum and the following passage from thejudgment of Lord Esher, M. B., in that case has been repeatedly adoptedas correctly stating the law on the point: “ It is well settled that in anaction for non-delivery or non-acceptance of goods under a contract ofsale the law does not take into account anything that is accidental asbetween the plaintiff and the defendant, *as for instance an intermediatecontract entered into with a third party for the purchase or sale of thegoods ”. In William Brothers v. Edward T. Agius Ltd.2 the facts, in sofar as relevant for the purpose of the present case, were that a cargo ofcoal had been sold forward at 16s. 3d. a ton and the buyer in the expecta-tion of the contract being performed entered into a contract with a thirdparty for the sale of similar goods at 19s. a ton. The seller defaultedunder the main, contract and the market price at the date of the breachwas 23s. 6d. The contention on behalf of the seller that the true measureof the buyer’s damages for non-delivery was the difference between thecontract price (16s. 3d.) and the price at which the goods were re-sold(19s.) and not the difference between the contract price and the marketprice (23s. 6d.) was rejected by the House of Lords which approved thedecision in Rodocanachi v. Milbum {swpra). Again, in Slater v. Hoyle<k Smith Ltd. 3 the Court of Appeal, following the decision in Rodocanachiv. Milbum (supra), held that the fact that no damages had been claimedby the buyer under the sub-contract for non-delivery was not a goodground for awarding as damages to the buyer, in respect of his seller’sbreach of contract., anything less than the full difference between thecontraot price and the market price at the date of the breach.
Mr. Thiagalinga'm relied strongly on the opinion of the Privy Councildelivered by Lord Atkinson in Wertheim v. Chicoutimi Pulp Co.4 asdeparting from the rule laid down in Rodocanachi v. Milbum (supra).But it is to be noted that in Lord Atkinson’s own speech in the House ofLords in Williams Brothers v, Edward T. Agius Ltd. (supra) he distin-guished the two cases on the ground that the one (Wertheim’s case)dealt with a claim for damages for late delivery of goods while the other(Bodocanachi’s case) was a claim for damages for non-delivery. Be-ferring to the latter case, Lord Atkinson stated that as an authority it“ has been many times recognised and never questioned ”. As observed,however, in Benjamin on Sale (8th edition, page 964) it is difficult toreconcile Wertheim’s case with the principle of Bodocanachi’s case,and in Slater v. Hoyle <fe Smith Eld,, (supra) the Court of Appeal seemedto be of the opinion that Wertheim’s case was wrongly decided.
Having regard to these decisions I am unable to accept the contentionof Mr. Thiagalingam as to the measure of damages. The trial Judge hasfound that there was an available market for the goods at the relevanttime. I see no reason to disturb this finding. Applying the decisionswhich 1 have discussed (other than Wertheim’s case) to this finding itis clear that the measure of damages should be the difference between
(1888) 18 Q. B. D. 67.(1914) A. O. 510.
s (1920) 2 K. B. 11.4 (1911) A. O. 301.
WEERASOORIYA, J.—Romanis v. Sherman de Silva <fc Co., Ltd.
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the market price and the contract price and the fact that plaintiff’sAmerican buyer has made no claim against the plaintiff for damages isnot relevant to the question of damages as between the plaintiff and thedefendant. I do not think that a decision of the case on these linesinvolves any conflict between sub-sections 2 and 3 of section 50 of the'Sale of Goods Ordinance. As observed by Salter, J., in Patrick v. Russo- .British Grain Export Go., ltd.,1 when a seller of goods fails to deliverhe should pay to the buyer the value of the goods at the time when theyshould have been delivered. This, it appears to me, is the normal measureof damages even on the basis of sub-section 2 of section 50 of the Saleof Goods Ordinance. Again, as stated by Salter, J., in the same case,if at the date of the breach there is an open market for the goods then themarket price is obviously their value to the buyer. To adopt the marketprice as the measure of damages in such circumstances, irrespective ofany dealings in regard to the goods which the buyer may have had with athird party, is in my opinion not in conflict with sub-section 2 and is inaccordance with sub-section 3.
Yet another consideration is that when there is a market for the goodsno question of the buyer’s loss of profit on the re-sale can arise as it isalways open to him to fulfil his obligations under the re-sale and securehis profit by buying the goods in the market. If in such a case the buyeris not entitled to recover damages bom a defaulting seller according tothe higher profit on the re-sale, but is confined to the market price, itseems unjust, said Lord Esher, M. R., in Rodocanachi v. Milbum {supra)that where the re-sale price is less than the market price the re-sale priceshould govern the case.
Apart from the decisions considered above, Mr. Thiagalingam referredus to several other authorities where in the assessment of damages theprice on the re-sale was not regarded as immaterial. But it is notnecessary to deal with them individually as they are all cases where therewas no available market. Obviously in such a situation a Court wouldhave to look at such other circumstances relating to the entire transactionas would enable the value of the goods to the buyer being ascertained,and a re-sale price may, but not always, be evidence of such value. Thedecisions in those cases cannot, therefore, be taken to apply to a casewhere there is an available market for the goods.
There remains to be considered the amount of damages which theplaintiff is entitled to on the basis of the difference between the marketprice and the contract price. In fixing the market price in December1950, or January 1951, at Rs. 17 per lb. the trial Judge went on certainevidence given by the witness Pilapitiya, but from the extracts of hisevidence which have been quoted in the.judgment of the trial Judge itwould seem that Pilapitiya was by no means definite that the price at thetime was Rs. 17 per lb., seeing that he has also specifically stated thatthe price in January 1951 may have been less than Rs. 17, while earlierhe had said that in the same month the price was about Rs. 15 andstarted moving up to about Rs. 20 in June. That the prido in January1951 was about Rs. 15 per lb. is also the evidence of the defendant.
1 (1927) 2 K. B. 537.
•")Sif. N. G. FERNANDO, J.—Jaraki v. Goonelilleke
I do not think, therefore, that the trial Judge was justified on thisevidence in fixing the market price in January 1951 as high as Rs. 17,and I fix it at Rs. 15 per lb. The plaintiff would then be entitled indamages to the difference between Rs. 15 and Rs. 6'75 (the contractprice) on 5464 lbs., that is to say, a sum of Rs. 45,078, which figurewill accordingly be substituted for the sum of Rs. 56,006 awarded asdamages in the judgment and decree of the Court*below. Subject tothis variation the appeal will stand dismissed, but as the defendant-appellant has succeeded in obtaining a substantial reduction in thedamages he will have half his costs of appeal paid by the plaintiff-respondent.
H. N. G. Fernando, j.—I agree.
Decree varied.