Weerakoon v. Hewamallika

018-SLLR-SLLR-1978-79-V2-Weerakoon-v.-Hewamallika.pdf


CA
Weerakoon v. Hewamallika
97
Weerakoon
v.
Hewamallika
COURT OF APPEAL.
SOZA, J. AND VICTOR PERERA, J.
C.A. (S.C.) 371/67 (F)—D.C. COLOMBO 62408/m.
NOVEMBER 6, 7, 8, 1978,
Contract—Arbitrationclause—Whethercondition precedent to
instituting action—When ouster of Court’s jurisdiction.
Damages—Anticipatory breach—Party to contract announcing intentionnot to perform—Does this amount to rescission—Measure of damages.
Adjournment of trial—Application to trial Judge—Refusal—Exercise ofdiscretion vested in trial Judge—When will Appellate Court reviewexercise, of stuch discretion.
Held
iThe discretion whether to adjourn the hearing of a case on anapplication made by a party is in the trial Judge and an Appellate Court!though it has the power will normally not interfere with the exerciseof such discretion. In the. present case the refusal of the application onbehalf of* the defendant for the adjournment of the trial did not resultin a denial of justice to the defendant and the Appeal Court would notinterfere merely because a better case might have been presented onbehalf of one of the parties if an adjournment had been granted.
The contract between the parties in the present case did not makearbitration a condition precedent to the institution of an action in Court.The mere use of phraseology that the award of the arbitrators shall befinal and conclusive and binding on the parties does not oust the Court’sjurisdiction; such a clause must be one that operates to regulate theaccrual of the cause of action.
Where one party to a contract announces that he will not performit, this does not amount to rescission of the contract unless the otherparty also accepts such renunciation. The latter can then treat thecontract as at end and sue for damages for breach of contract. Thecontractor’s stoppage of work in April 1962 constituted a renunci-ation of his obligations under the contract. The finding of the- learnedDistrict Judge was that the contract was terminated in June 1962 andtnis was supported by an averment in the contractor’s own amendedanswer. In the circumstances of the contractor’s renunciation of hisobligations it could therefore be safely assumed that the owner hadaccepted the renunciation and the contract was terminated1. The con-tractor could not in any event now make out a different case after plead-ing June 1962 as the date of renunciation in his answer—section 150, ex-planation (2) of the Civil Procedure Code.
In the present case where it was a building contract entered intobetween the parties the damages will include the difference if anybetween the price of the work as agreed upon in the contract,and theactual cost to the owner of its completion substantially as originallyintended and secondly any loss of rent on the building or any Toss ofuse of the building. The right to recover the second item of damage isdependent upon whether the use for which the building was intendedwas within the contemplation of . the parties at the time the contractwas made. The contractor was therefore liable in damages from the dateof rescission, namely, June 1962, in the present case and for overholdingthe site as well ss for the loss of prospective rents.
I*—A 56844 (81/05)
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Per Soza, J.
“We might remember here the fact that in Roman-Dutch Law themere fact of breach does not entitle the injured party to claim damagesin the absence of some actual loss sustained. The true damnum in contractis compensation for patrimonial loss. In this respect our law differs fromthe English law. The measure of damages will consist of the actualloss the owner has sustained as well as such future loss as may be thenecessary consequence of the breach. The injured party has the rightalso to claim by way of damages the reasonable profits which he haslost (damnum emergens et lucrum cessans). As far as money can do if,the damages awarded will be commensurate to place the innocent partyin the position in which he would have been had the contract beenperformed. ”
Cases referred toEvans v. Bartlam, (1937) 2 All E.R. 646.
Gardner v. Jay, 29 Ch. D. 50.
Maxwell v. Koun, (1928) 1 K.B. 647.
Amerasekera v. Cannangara, (1940) 41 N.LJt. 333.
Ford v. Clarksons Holidays Ltd., (1971) 1 W.L.R. 1412; (1971) 3All E.R. 454.
Scott v. Avery, (1856) 5 H.L. Cases 811; 25 L.J. Er. 308 ; 28 L.T.
(O.S.) 207.
Bradley v. Newson Sons & Co., (1919) A.C. 16; 88 L.J. (K.B.) 35;119 L.T. 239 ; 34 T.L.R. 613.
Universal Cargo Carriers Corporation v. Vitati, (1957) 2 Q.B. 401;(1957) 2 All E.R. 70; (1957) 2 W.L.R. 713.
Johnstone v. Milling, (1886) 16 Q.B.D. 460; 54 L.T. 629 ; 2 T.L.R.249.
Hochster v. De La Tour, (1853) 2 E. & B. 678 ; 22 L.J. (Q.B.) 455 ;
22 L.T. (O.S.) 171.
Frost v. Knight, (1872) L.R. 7 Exch. Ill ; 26 L.T. 77.
The Mersey Steel and Iron Co. Ltd. v. Naylor, Benzon & Co., (1884)9 A.C. 434 ; 51 L.T. 637 ; 53 L.J. (Q.B.) 497.
Dodd y. Churton, (1897) 1 Q.B. 562 ; 76 L.T. 438; 66 L J. Q.B. 477.
Heyman and another v. Darwins Ltd., (1942) A.C. 356; (1942) 1All E.R. 337; 166 L.T. 306; 58 T.L.R. 169.
Michael v. Hart, (1902) 1 K.B. 482; 86 L.T. 474; 18 T.L.R. 254 ; 71
L.J. (KB.) 265.
The Holland Ceylon Commercial Co. v. Mahuthoom Pillai, (1922)24 N.L.R. 152.
Alawdeen v. Holland Colombo Trading Society Ltd., (1952) 54. N.L.R. 289 ; 51 C.L.W. 82.
Sinhalese Film Industrial Corporation Ltd. v. Madanayake, (1971)74 N.L.R. 89.
Salih v. Fernando, (1951) 53 N.L.R. 465.
Dodwell & Co. v. U. S. Shipping Board Merchant and Fleet Corpora-tion, (1934) 36 N.L.R. 1.
APPEAL from the District Court, Colombo.
C. Ranganathan, Q.C., with Joe Weerasekera, tor the defendant-appellant.
W. Jayawardene, Q.C., with H. C. Per era and Lakshman Perera, forthe plaintiff-respondent.
Cur. adv. vult.
February 2, 1979.
SOZA, J.The original plaintiff-respondent instituted this suit on a buildingcontract entered into by him with the defendant-appellantseeking to recover certain overpayments and damages for breach
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Weerakoon v. Hawamallika (Soza, J.)
of contract. The original plaintiff-respondent died when thisappeal was pending'and the present added respondents weresubstituted in his room. Foq'r questions arise for our determi-nation namely:-
Whether the trial judge had exercised his discretion
correctly when he refused an adjournment of the trial.
Whether the failure to go to arbitration bars the present
proceedings.
Whether there Was a breach of contract by the contractor
in that before the day for completion when the workwas a long way from being completed, he evinced hisintention not to fulfil it.
Whether damages have been correctly assessed.
The defendant-appellant had made a claim In reconventionwhich was dismissed. But that part of the decision was notcanvassed^before us.
The facts of this case may he briefly stated as; follows: On16.li.1961 the original plaintiff-respondent (whom I will callthe owner) by Articles of Agreement Pi entered into a contractWith the defendant-appellant (whom I will call the contractor)for the construction of a four-storeyed building comprising16 maisonnettes. ClausC 23 of the Schedule of Conditionsattached to the Articles Of Agreement provided thatthe work would be “ entirely completed ” oh or- before the 16thMay, 1963,, subject to the provision for extensions contained inthe contract document PI. By this clause time was Stated to beof the essence of the contract..; • ; .
It was found however that the building site had suffered somedimunition owing to encroachments by neighbours and hencecertain adjustments were made to the building and reductions.in the money payable by the owner to the contractor see P8 (a)and P8. After the contract Pi was'enteral into the owner madecertain payments totalling Rs. 47,000 to the contractor—see' P2,P3, P4, P6, P7, P9 and PlO. There was some difficultyregarding windows hut this appears to have been ironed out—seePll to P14./
The owner was not satisfied with the work or, its progress andon 3.4.1962 wrote letter P5 to the contractor pinpointing! variousdefects, and shortcomings which he said amounted to a repudia-tion or breach of contract. There was a stoppage of work for theSinhalese NeW Year holidays and thereafter, as it eventuallyturned out, the contractor failed to resume work despitereminders (see Pllj by the owner. On 17.5.1962 the contractor
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wrote letter P12 to the owner asking for a six-month extensionof time on various grounds and stating he would otherwise haveto stop work. The extension was flatly refused by the owner byhis letter P14 of 28.5.1962 wherein he charged the, contractorwith trying to make out a case for an extension to cover his ownlapses and default. He warns the contractor that if he stops thework it would be at his own risk. From here the contractor’slawyer took over the correspondence and the parties tradedaccusations against each other—see P15 to P24. On behalf ofthe contractor it was stated in P15 of 1.6.1962 that the work wasnot stopped but was being continued and that the question of theextension would be referred to arbitration as provided for inparagraphs 8 and 9 of the Articles of Agreement PI.
Appropriate steps were not taken to refer the dispute betweenthe parties to arbitration. The contractor agreed to hand overthe site after the work done was valued. Mr. H. £. Gonsal anarchitect nominated by the owner and Mr. W. A. Fernand anarchitect nominated by the contractor valued the work doneand their reports are before Cburt—see P25, P27 (not to beconfused with letter P27 of 22.12.64 so marked obviously by anerror) and P32. On 23.1.1964 the owner’s Proctor wrote P25 tothe contractor’s Proctor demanding that the site be handed backand that the overpayment of Rs. 22,230.87 be repaid. Finally on5th March, 1964, long after stipulated date of completion, the sitewas handed back to the owner—see P28 and P29. On 14.3.1964the owner’s demand for Rs. 22,230.87 was reiterated by letter P31.The contractor’s lawyer wrote P30 of 25.3.1964 denying theowner’s claim and demanding Rs. 30,940 for extra work doneand loss suffered. On 30.4.1964 the plaintiff instituted this suitfor the recovery of the overpaid sum of Rs. 22,230.87 and a sumof Rs. 29,900 as damages for delay in completing the work.Damages were calculated at the rate of Rs. 1,300 per month forthe 23-month period from 11.4.1962 when the work was stoppedup to 5.3.1964 when the site was handed back. When PI wasdrawn up the rate of Rs. 1,300 had been agreed on by the partiesas the basis for computing liquidated damages. In any event thisrate was claimed as a reasonable estimate of the owner’s loss.The contractor while denying that the owner was entitled to anypayment claimed Rs. 21,812.49 in reconvention. I
I will now take the first question for determination. This casewas first taken up for trial on 22.1.67 and on this day Mr. E. G.Wikramanayake, Q.C., with Mr. P. N. Wikramanayakeappeared for the owner while Mr. Adv. Jayasuriya appearedfor the contractor. Eleven issues were raised. It was on this daysubmitted that the contractor had done extra work valued at
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Rs. 30,940 while the owner had to his credit a sum of Rs. 9,127.51■on the advances. This latter sum was not deposited as it had beendeducted from the amount due to the contractor. After issueswere framed the case was fixed for further trial for 25 Lh July,1967. On this day the same counsel appeared for the owner. Forthe contractor however, the appearance of Mr. N. E. Weerasooria,
Q.C., was marked with his own appearance as junior counselby Mr. S. W. Jayasuriya. Mr. Weerasooria was not present inCourt as he had been suddenly taken ill that very morning andentered to hospital. Mr. Jayasuriya asked for an adjournmenton the ground of Mr. Weerasooria’s illness. The Court refusedthe application and directed that Mr. Jayasuriya who wasjunior counsel should carry on the case. Mr. Jayasuriya thenstated that he was not able to proceed with the defence becausemost of the documents—in fact all the documents—were withMr. Weerasooria. The Court refused an adjournment and thetrial proceeded. The owner gave evidence and was cross-examined. He also called as a witness Mr. Gonsal who had valuedthe work done on the premises. On behalf of the defencethe contractor called as his witness Mr. W. A. Fernand. Inappeal learned counsel for the appellant contended that therefusal of an adjournment had resulted in grave prejudice andinjustice to the contractor.
The discretion to adjourn the hearing of a case is in the trialJudge. On the question of the exercise by a Court of adiscretion vested in it there is the leading case of Evans v.Bartlam (1) decided by the House of Lords. In this case LordWright had occasion to make the following observations atpage 655:
“A judge’s order fixing the date of trial or refusing togrant an adjournment is a typical exercise of purelydiscretionary powers, and would be interfered with by theCourt of Appeal only in exceptional cases, yet it may bereviewed by the Court of Appeal".
In the same case Lord Atkin explained the attitude an appellatetribunal would take when invited to consider the question of theexercise of a discretion vested in an original court (at pages 480and 481) :
“while the appellate court in the exercise of its
power is no doubt entirely justified in saying that normallyit will not interfere with the exercise of the judge’s discretionexcept on grounds of law, yet if it sees that on other groundsthe decision will result in injustice being done, it has boththe power and duty to remedy it ”.
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In the case of Gardner v. Jay (2) decided by the Court ofAppeal Bowen, L.J. considered the discretion of a Judge to decideupon the mode of trial and stated as follows :
“That discretion, like other judicial discretions, must beexercised according to common sense and according to justice,and if there is a miscarriage in the exercise of it, it will bereviewed, but still it is a discretion, and for my own part Ithink when a tribunal is invested by Act of Parliament or byRules with a discretion, without any indication in the Act orRules of the grounds upon which the discretion is to be exer-cised, it is a mistake to lay down any rules with a view ofindicating the particular grooves in which the discretionshould run, for if the Act or the Rules did not fetter the dis-cretion of the Judge why should the Court do so ? ”
In the case of Maxwell v. Koun (3) the Court of Appealreversed the trial Judge’s order refusing an adjournment to theplaintiff who was absent on the ground that plaintiff’s action ormost of it would fail owing to such absence and justice wouldnot be done. In this case, Atkin, L.J. said as follows at page 653 :
“ I quite agree that the Court of Appeal ought to be very-slow indeed to interfere with the discretion of the learnedJudge on such a question as an adjournment of a trial, andit very seldom does so ; but, on the other hand, if it appearsthat the result of the order made below is to defeat the rightsof the parties altogether, and to do that which the Court ofAppeal is satisfied would be an injustice to one or other ofthe parties, then the court has the power to review such anorder, and it is, to my mind, its duty to do so ”.
The limits within which the Appellate Courts will act whencalled upon to review the exercise of a discretion vested in a trialjudge as set out in these cases are applicable in Sri Lanka too.A discretion necessarily involves a latitude of individual choice.As Soertsz, S.P.J. said in Amerasekera v. Cannangara (4) :
“ There are no hard fast rules, and where a trial Court hasexercised .the discretion vested in it substantially in a mannerconducive to justice, a Court of Appeal will not interferemerely because if it had been the original Court it wouldhave exercised this discretion differently. ”
In the instant case the refusal of an adjournment did not resultin a denial of justice to the contractor. He was represented by asenior member of the Bar, Mr. Jayasuriya. It was this samecounsel who had appeared for him earlier too on the day issues
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were framed. Mr. Jayasuriya was counsel of the contractor'schoice and would have conducted the case had the trial not beenadjourned after the issues were framed on 22.01.1967. It is truethat on the trial date owing to the illness of Mr. Weersooriajunior counsel for the contractor was handicapped in that he didnot possess the documents. But even junior counsel must beproperly briefed and possess at least copies of the documents andbe ready to carry on the case in the absence of senior counsel.If Mr. Jayasuriya as junior counsel was not posted with copies ofthe documents it must be regarded as a lapse on the part of theinstructing Proctor. Mr. Jayasuriya was counsel retained by theProctor and not brought into the case by the senior counsel andhe should have been given as complete a brief as his senior. Forfailure to do so the contractor’s Proctor has only himself to blame.The Court is not prepared to condone laches or extend its indul-gence to those who have been negligent in getting ready for trial.In any event, these documents could easily have been fetchedwithin a short time. In fact the case was heard over the wholeday and there was ample time to get the documents down fromMr. Weerasooria’s residence. I do not think it can be said fromwhat has transpired in this case that there was a denial of justiceto the contractor. His case was well presented and argued byMr. Jayasuriya. The owner and his witness were duly cross-examined. So also the evidence of a witness was led on behalfof the contractor. It cannot be said that the case has suffered asa result of Mr. Jayasuriya having to conduct it. This Court willnot hesitate to interfere where in the exercise of the discretionof the trial Judge injustice has been caused ; but I do not thinkthe facts and circumstances of this case call for interferencewith the order refusing adjournment of the trial. The Court willnot interfere merely because a better case might have beenpresented if an adjournment was granted especially where thereason for this is that junior counsel had not been properlybriefed.
The next point for consideration is whether the contractbetween the parties made arbitration a condition precedent to theinstitution of an action in Court. I cannot say I agree with thelearned Judge’s views that there was an arbitration. There wasin fact no arbitration and I will examine the question on thatbasis. What has to be determined is whether paragraph 8 of theArticles of Agreement PI is what is commonly called a Scott v.Avery clause making arbitration compulsory before the filingof a suit. All that paragraph 8 says is that all disputes should bereferred to arbitration, and that the award of the arbitrators
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or the umpire, as the case may be, shall be final and conclusiveand binding on the parties and may be made a decree of Courtin accordance with the provisions of the Civil Procedure Code.It is well settled that an arbitration agreement not expresslypurporting to oust the jurisdiction of the court is not to be readas doing so. The standard phrase that an arbitrator’s award shallbe ‘final and binding’ does not oust the court’s jurisdiction—seeHalsbury’s Laws of England (1973) 4th ed. Vol. 2 p. 277 paragraph543. In Ford v. Clarksons Holidays Ltd (5) the court consideredan arbitration agreement which said that in the event of anydispute “ the decision of a mutually acceptable independant arbi-trator shall be accepted by all parties as final This provisionwas held by the Court of Appeal not to oust the jurisdiction ofthe Court. It is open to the parties to a contract to covenantthat no action shall be brought except upon an award, or (whatamounts to the same thing) that the only obligation arisingout of a particular term of the contract shall be to pay whateversum an arbitrator may award—see Russel on Arbitration (,1963)17th ed. p. 37. This rule has evolved from the decision in Scott v.Avery (6) where the House of Lords held that while it isa principle of law that parties cannot by contract oust the courtsof their jurisdiction any person may covenant that no breachof the contract shall occur till a third person has decided on anydifference that may arise between himself and the other party tothe covenant; in other words, the right of action shall arise onlyon what that third person decides. The distinction to be bornein mind was clearly explained in that case by Lord Cranworthin his speech from the Woolsack (p. 848) :
“ If I covenant with A to do particular acts, and it isalso covenanted between us that any question that may ariseas to the breach of the covenants shall be referred to arbi-tration, that latter covenant does not prevent the covenanterfrom bringing an action. A right of action has accrued, and itwould be against the policy of the law to give effect to anagreement that such a right should not be enforced throughthe medium of the ordinary tribunals. But if I covenant with
B. that if I do or omit to do a certain act, then I will payto him such a sum as J.S. shall award as the amount ofdamage sustained by him then, until J.S. has made his award,and I have omitted to pay the sum awarded, my covenanthas not been broken and no right of action has arisen. Thepolicy of the law does not prevent parties from socontracting ”.
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A Scott v. Avery clause operates as a covenant regulating theaccrual of the cause of action and not as a covenant ousting thejurisdiction of the Court. In the instant case the arbitration clausedoes not seek to regulate the accrual of the cause of action. Evenby implication the provision for arbitration does not measureup to the requirements of a Scott v. Avery clause. I thereforehold that arbitration was not a condition precedent to the institu-tion of this suit.
No application was made during the course of the case for stayof proceedings to enable reference of the dispute to arbitrationand this aspect of the matter does not therefore arise for consider-ation.
I will now turn to the question of the breach of contract. Theagreed date of completion was 16th May, 1963, and time was ofthe essence of the contract. What is alleged against the con-tractor is that he is guilty of an anticipatory breach—an expres-sion at times condemned as infelicitous—see for instance thecomments of Lord Wrenbury in the case of Bradley v. Newsom,Sons & Co. (7) on the use of this expression. But as Devlin, J.observed in Universal Cargo Carriers Corporation v. Citati (8)
anticipatory breach ”
“ means simply that a party is in breach from the momentthat his actual breach becomes inevitable. Since the reasonfor the rule is that a party is allowed to anticipate an inevi-table event and is not obliged to wait till it happens, it mustfollow that the breach which he anticipates is of just the samecharacter as the breach which would actually have occurredif he had waited
The expression “ anticipatory breach ” was first coined by LordEsher, M.R. in the Court of Appeal case of Johnstone v. Milling,
and, coming as it does from such distinguished mint, enjoysunabated currency in this field of the law.
The case for the owner is that before the day fixed for com-pletion of the work the contractor unequivocally and absolutelyevinced his intention not to fulfil it. Such an intention may beevinced by an announcement or declaration—Hochster v. De laTour (10), Frost v. Knight (11), or by conduct Universal CargoCarriers Corporation v. Citati (supra), The Mersey JSteel andIron Co. Ltd. v. Naylor, Benzon & Co. (12). In the instant casethere was no renunciation by announcement or declaration. Butdeeds speak more eloquently than words and the stubborn factis that the contractor did not work after 11.4.1962.
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As Lord Devlin said in Universal Cargo Carriers Corporationv. Citati (supra) at p. 436:
“The test of whether an intention is sufficiently evinced
by conduct is whether the party renunciating has acted in
such a way as to lead a reasonable person to the conclusion
that he does not intend to fulfil his part of the contract
The contractor by his letter P12 of 17.05.1962 applied for anextension of time to complete the work and declared he wouldstop work if this was refused. It was refused by the owner by hisletter P14 of 28.05.1962 wherein he accused the contractor ofhaving already stopped work. Both parties were alive to theprovision for arbitration but there was a deadlock with the con-tractor claiming that only the question of the extension shouldbe referred ior arbitration and the owner insisting that all thedisputes arising from the contract should be so referred. Despitehis protestations the contractor did no work after 11.04.1962.
No doubt if an extension was justified owing to extra workand defaults of the owner then that would be relevant on thequestion of the contractor’s failure to keep to the date of com-pletion. The principle involved here is that where one partyto a contract is prevented from performing it by the act of theother (e.g. by imposing extra work) he is not liable in law forthat default—see Dodd v. Churton (13). ^ In the case before us,the contractor alleged delays because of—
alterations in the specifications resultant on encroach-
ments which had reduced the extent of the site,
the laying of drainage mains holding up the work,
alterations in the type of windows, and
the insistence on a seven day curing period for R.C. C.
columns.
The owner rightly dismissed these grounds as speciousexcuses put forward by the contractor to cover his own defaults.The alteration in the extent of the site if anything reduced thesize of the building and the work entailed; if anybody wasresponsible for delay over the laying of the drainage mains itwas the contractor himself as this should have been attendedto before he started on the main building; the proposal to havea different type of windows came from the contractor himselfand the curing period for R.C.C. columns was according toP.W.D. standards. It is patent there was no substance in thegrounds put forward by the contractor. He was trying to take
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refuge in an application for extension as he knew he would notbe able to keep to the completion date. The contractor had, touse another word which though not wholly apt is firmlyentrenched in our legal parlance ‘ repudiated ’ the contract. Thelegal effect of such ‘ repudiation ’ may best be described in thelanguage of Lord Macmillan in Hey man and another v. DarwinsLtd. (14):
“Repudiation, then, in the sense of a refusal by one ofthe parties to a contract to perform his obligations there-under, does not of itself abrogate the contract. The con-tract is not rescinded. It obviously cannot be rescinded bythe action of one of the parties alone. But, even if the socalled repudiation is acquiesced in or accepted by the otherparty, that does not end the contract. The wronged partyhas still his right of action for damages under the contractwhich has been broken, and the contract provides the mea-sure of those damages. It is inaccurate to speak in suchcases of repudiation of the contract. The contract stands,but one of the parties has declined to fulfil his part of it.There has been what is called a total breach or a breachgoing to the root of the contract and this relieves the otherparty of any further obligation to perform what he for hispart has undertaken”.
*
Therefore an announcement by one party to a contract thathe will not perform it does not of itself amount to a breach ofcontract or a rescission of it. The two parties must rescind—seealso Michael v. Hart (15). As Viscount Simon pointed out inHeyman and another v. Dar'wins Ltd. (supra) (p- 361) —
“ repudiation by one party standing alone does not termi-nate a contract. It takes two to end it, by repudiation on theone side, and acceptance of the repudiation, on the other ”.
On the wrongful renunciation of the contract by the contrac-tor there were two courses of action open to the owner. Hecould accept the renunciation, treat the contract as at an endand sue the contractor for damages as for breach. But he isnot bound to accept the renunciation. He may attend upon hiscontract and wait for the time of performance still holding itas prospectively binding for the exercise of this option whichmay be advantageous to the innocent party and cannot be pre-judicial to the wrongdoer. This means he may keep thecontract alive for the benefit of the other party as well as hisown ; he remains subject to all his own obligations and liabili-ties under it, and enables the other party not only to complete
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the contract, if so advised, notwithstanding his previous repudia-tion of it but also to take advantage of any superveningcircumstance which may justify his declining to complete it.These principles were laid down in 1853 by Lord Campbell, C.J.in Hochster v. De la Tour (supra) and their correctness hasnever since been doubted. They have been approved in SouthAfrica (Wessels’ Laws of Contract in South Africa (1951) 2nded. Vol. 2 page 794 paragraphs 2935 to 2939) and in Sri Lanka(Weeramantry’s The Law of Contracts (1967) Vol. 2 pages 879 to881). Bertram, C.J. accepted these principles in The HollandCeylon Commercial Co. v. Mahuthoom Pillai (16). Gratiaen, J.adopted them in Alawdeen v. Holland Colombo Trading SocietyLtd. (17). and in the Privy Council judgment delivered byLord Diplock in Sinhalese Film Corporation Ltd. v. Madanayake(18) we have the latest formulation :
“ It is common ground that the legal consequences of ananticipatory breach of an executory contract are the samein Roman-Dutch law as at common law. Where one partyto an executory contract makes it manifest to the otherparty that he does not intend to perform an obligationimposed upon him by the contract which is fundamentalto it, his conduct constitutes an anticipatory breach orwrongful repudiation of the contract by him. The otherparty may then elect either to ignor^the wrongful repudia-tion and to treat the contract and the obligations which itimposes upon him as well as upon the repudiating partyas still binding upon them, or to treat the contract and theobligations which it imposed upon each party as no longerbinding on them, save as respects the liability of therepudiating party for damages for non-performance. Al-though the latter choice is often described as an election torescind the contract, their Lordships would observe, thatthe non-repudiating party’s obligation to perform the con-tract any further is terminated by operation of law and notas the result of-any agreement between the parties torescind it”.
In the case before us did the owner treat the renunciation asan immediate breach or stand upon his contract ? In his letterP14 of 28.5.1962 the owner wrote to the contractor as follows:
“ Now that you have threatened to stop work I may addhere, if you do so, it will be solely at your risk. I mustknow definitely within three days from date hereof if youare unable to carry on with this work”.
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CA
Within these three days there was no meaningful responseby the contractor and no tangible steps were taken by him totender performance. Instead he drew the red herring of a claimfor extension of time across the track. His conduct consideredagainst the background of stoppage of work from 11.4.1962clearly and unequivocally constitutes a renunciation of hisobligations under the contract.
I must now consider the question whether the owner acceptedthe renunciation. The learned District Judge has held that thecontract was terminated in June 1962. This finding is supportedby the contractor’s averment in his own amended answer that“ in or about June 1962 the parties mutually agreed to terminatethe contract owing to various differences that arose betweenthem in or about May 1962”. One thing is clear from thisaverment. The contract was at an end by June 1962 save(though the contractor would not admit it) as respects theliability of the contractor for damages for non-performance. Itis not necessary to look for the date of termination in thecorrespondence. In the circumstances of the renunciation ofhis obligations under the contract by the contractor it cansafely be presumed that the termination was achieved by theowner’s acceptance of the renunciation. Having pleaded June1962 as the date of renunciation, it is not open now to thecontractor to contend that the contract was kept alivetill the date of completion fixed in the Articles of Agreement—see explanation 2 to section 150 of the Civil Procedure Code.
The date of rescission of the contract was therefore June 1962and the question of damages must be examined with referenceto this date. We might remember here the fact that in Roman-Dutch Law the mere fact of breach does not entitle the injuredparty to claim damages in the absence of some actual losssustained. The true damnum in contract is compensation forpatrimonial loss. In this respect our law differs from theEnglish law. The measure of damages will consist of the actualloss the owner has sustained as well as such future lossas may be the necessary consequence of the breach. Theinjured party has the right also to claim by way of damages thereasonable profits which he has lost (damnum emergens etlucrum cessans). As far as money can do it, the damagesawarded will be commensurate to place the innocent party inthe position in which he would have been had the contract beenperformed—see WesseVs Law of Contract in South Africa (’bid)pages 859, 895, Salih v. Fernando (19), Dodwell & Co. v. U 8,Shipping Board Merchant and Fleet Corporation (20).
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Sri Lanka Law Reports (1978-79) 2 S.L.R.
In the type of case we are considering the damages willinclude first the difference, if any, between the price of the workas agreed upon in the contract and the actual cost to the ownerof its completion substantially as originally intended, andsecondly any loss of rent on the building or any loss of use ofthe building. The right to recover the second item of damageis dependant upon whether the use for which the building wasintended was within the contemplation of the parties at the timewhen the contract was made—see Halsbury’s Laws of England(1973) Vol. 4 page 651 paragraph 1277.
In the instant case the contractor knew he was building 16flats for the purpose of letting them out to tenants. Even in1967 when the owner gave evidence the building was not whollycomplete. However damages are not being claimed against theactual cost of completion.
The damages claimed in this case are for loss of prospectiverents and for failure to hand up possession of the site. Forloss of rents the rate claimed is Rs. 1,300 per month. In factthis was the rate agreed on by the parties for calculatingliquidated damages. The learned District Judge calculated theloss of rent at Rs. 3,740 per month which speaking for myselfseems doser to the realities of the matter. It was strenuouslyargued for the contractor that the loss of prospective rentsshould not have been calculated for any period prior to 16thMay, 1963, the agreed date of completion. Ordinarily prospec-tive rents can be awarded only from the agreed date of com-pletion. But here we cannot overlook the fact that the owneris entitled under the contract itself to receive back possessionof the site if the work was unreasonably stopped and the con-tract terminated. One ground on which damages are beingclaimed is the overholding of the site by the contractor. Thestoppage of work coupled with the overholding of the site pre-vented the owner from completing the building himself at atime when there was a greater availability of building materials.As a result of the contractor’s delay in handing back the sitethe owner found himself severely hampered not only by asteep rise in prices but also by a dearth of building materialsand in fact he could not complete the building even by 1967.If as the contractor himself says the contract was terminated inJune 1962 he should not have delayed nine months to handback the site. If he handed over the site when the contractwas terminated it would have cut costs and time for the owner.If he did not, he must pay for it. He must make good the lossto the owner in costs and time. Loss of time involves loss of
CALiyanage v. Attorney – General111
prospective rents. This is directly attributable to overholdingthe site. The contractor is therefore liable in damages fromJune, 1962. In fact in law damages are recoverable from thedate of rescission. The rate of Rs. 1,300 per month as damagesfor overholding the site is in my view eminently reasonable.But this should be calculated from June 1962.
The contractor must count himself lucky that there was nota more formidable formulation of the claim for damages.
The owner is entitled to damages at Rs. 1,300 per month foroverholding the site and loss of prospective rents. The damageswill have to be calculated from the date of breach namely, June1962 until 5th March, 1962, in view of the basis on which theowner has advanced his claim. This will entail a reduction ofRs. 2,600 from the amount awarded under this head.
On the claim for the return of the overpayment ofRs- 22,230.37 the learned District Judge acted on the evidenceof the plaintiff and Mr. Gonsal, an architect. Further thecontractor himself has not pursued his claim in reconventionbefore us. In these circumstances the award of the learnedDistrict Judge under this head must stand.
I therefore affirm the judgment and decree entered by thelearned District Judge subject to a reduction of Rs. 2,600 in theprincipal sum awarded. Subject to this the appeal is dismissedwith costs.
VICTOR PERERA, J.—I agree.
Appeal dismissed.