085-NLR-NLR-V-28-WIJEWARDENE-v.-NOORBHAI.pdf
{ ±3° )
1987.
Present: Dalton and Lyali Grant JJ.
WIJEWARDENE ©. NOOBBHAI.
334-—D. C, Colombo, 18,402.
Liquidated damages—Contract for advertisement*—Tmniiuitiout-
expiration of period—Higher rates—-Penally.
Where the defendant entered into a contract with pi am till ini*the insertion of advertisements in a newspaper during the cour.-i'of one year at a fixed rate, and where it was further stipulated lh.iiif the defendant terminated the contract before ihe expirationof the period, the plaintiff was at liberty to charge for the advert la-ments at casual rates.
Held, that the stipulation to charge the defendant at the hitle rrale was merely a penalty, and that ihe plaintiff wns entitle'! 10claim only the actual damage sustained.
LAINTIFF, who is a newspaper proprietor, sued the defendant,who was the owner of a theatre to recover damages for bread)of contract. Two contracts were entered into between the partieswhereby the plaintiff undertook to publish advertisements of thetheatre in his two newspapers for a period of one year from May 4,1924, at rates set out in the contracts. In the event of the contractsbeing terminated before the expiration of the period through anydefault of the defendant, it was provided by clause 6 of the conditionsthat the plaintiff should be at liberty to charge for all the advertise-ments published under the contract at the casual rates, whichshould not exceed Rs. 2.50 per column inch. About the end-ofJanuary, 1925, defendant transferred his theatre and after that sentno more advertisements for insertion in the plaintiff's newspapers.Plaintiff claimed in the action for payment of the advertisementsactually inserted at the casual rates. The learned District Judgegave judgment for the plaintiff.
Garvin, for defendant, appellant.
H. H. Bartholomeusz, for plaintiff, respondent.
February 10, 1927. Dalton J.—
Plaintiff is a newspaper proprietor and defendant is or was theowner of a theatre. Two contracts were entered into between theparties whereby the plaintiff was to publish advertisements of thetheatre in his two newspapers for a period of one year at rates setout in the contracts. In the first contract plaintiff's quotationof 80 cents per inch per insertion for the first month, and Re. 1 perinch thereafter, three inches single column advertisement daily,
( ■«! )
In his English newspaper was accepted by defendant for one ryear
from May 28,1924. In the second contract, for insertion in a Dalton J.
Sinhalese newspaper, the price was 65 cents per inch, for three inches
single column advertisement daily for a period of one year *; from v* 'Noorbluti
June 3, 1924. In the event of the contracts being terminated
before the expiration of the contract. period through any default
of the advertiser, it was provided by clause 6 of the conditions that
the newspaper proprietor should be at liberty to charge for. all
advertisements published under the contract at the casual rates
which should not exceed Rs. 2.50 per. column inch.
About the end of January, 1925, defendant transferred his theatrebusiness by lease to one Fernando, but nothing appears to havebeen arranged between them about the advertisement contracts.
After that lease defendant sent no more advertisements for insertionin plaintiff's papers, but Fernando entered into two contracts withplaintiff in February (P 5 and P 6) to advertise the theatre in thetwo newspapers for a period of three months. The evidence doesnot show .when those advertisements began, but there is no doubtthat the three months were part of the twelve months during whichdefendant's contract was to run.
Plaintiff's claim in this action is against the defendant for paymentof the actual advertisements made by the defendant, in the Englishpaper between May 28, 1924, and February 3, 1925, and in theSinhalese paper between June 30, 1924, and January 31, 1925, atthe casual rates, which are claimed to be 50 cents and Re. 1 res-pectively per column inch, owing to defendant’s termination of thecontracts. *On the first contract defendant had paid Rs. 721.60.
At casual* rates on. default this would , amount to Rs. 1,135.50.
The sum of Rs. 413.90 was therefore claimed. On the second contractRs. 396.50 was paid, and at casual rates on default thiswould amount to Rs. 616. The balancp of Rs. 219.50 was thereforeclaimed on the second contract. The total amount of the claim isRs. 633.40,. and plaintiff has been awarded this sum by the trialJudge. The defendant now appeals.
The first point referred to by counsel for the appellant was that.Fernando,.was the agent of the defendant in entering into the threemonths’ contracts for advertisements a.nd therefore plaintiff sufferedno. damage at the. hands of defendant- whilst those contracts were inexistence.. There is no evidence of such agency, and this particularground of. ^appeal upon, which a claim for reduction of the damages.is based cannot be sustained. In. the result, however, this contractmifst.be .taken into consideration m estimating the damages sufferedby-plaijatiff.
-•The. principal ground., of appeal, was?([that, inasmuch as plaintiffhad not suffered , the amount of damages claimed as the result ofdefendant's breach, he could not recover that sum, but the actual28/31
( 432 )
1927.
Dalton J.
Wyewardenev. yoorbhai
damages suffered had still to be assessed. Mr. Garvin argued thatthe contract fixed something in the nature of a penalty, shouldthere be any breach on the part of the defendant. It was urgedfor the respondent (plaintiff) on the other hand that clause 6 of theconditions of the contract contracted for something in the natureof liquidated damages to be paid upon defendant’s breach. Mr.Bartholomeusz further argued that in fact the Eoman-Dutchlaw does not distinguish between penalty and liquidated damages,and all that was necessary to ascertain was whether the amountstipulated to be paid was excessive or disproportionate to thecircumstances of the case. He argued it could not be so saidhere.
It seems to me that there is no doubt at the present time as to thelaw on this question which the Courts have to administer. Whateverthe earlier or later Ceylon cases may have decided, the law as itexists to-day, has taken over the English distinction betweenpenalties and liquidated damages. (See Lee, Roman-Dutch Late.p. 250.) Appeals on this question have gone from both Ceylon andSouth Africa to the Privy Council, and in each case have been dealtwith by the Privy Council jon the footing that the distinction inEnglish law between penalty and liquidated damages is part of thelaw both of Ceylon and South Africa. That may be due to the fact,as pointed out by Middleton J. in Pless Pol v. De Soysa1 that theEoman-Dutch authorities set forth views on the question verymuch in accordance with the principle prevailing in Courts ofEquity in England.
The case of Commissioner of Public Works v. Hills 2 went to the
4S'
Privy Council from the Supreme Court of the Cape of Good Hope.One of the questions raised was as to whether certain sums wereliquidated damages or a penalty to cover damages if proved. Tothis question the Board applied the law laid down by the House ofLords in Clydebank Engineering and Shipping Co. v. Don Jose RamosYzquierdo Y Castaneda2 Lord Dunedin, who delivered thejudgment of the Board, says: —
The general principle to be deduced from that judgment seemsto be this, that the criterion of whether a sum, be it calledpenalty* or damages, is truly liquidated damages, and assuch not to be interfered with by the Court, or is truly aX>enalty which covers the damage if proved, but does notassess it, is to be found in whether the sum stipulated forcan or cannot be regarded as a ‘ genuine pre-estimateof the creditor’s probable or possible interest in the dueperformance of the principal obligation.’ The indicia ofthis question will vary according to circumstances.
* 12 X. L. R. 45.4 (1906) A. G. 398.
(1905) A. C. 6.
f 433 )
Enormous disparity of the sum to any conceivable losswill point one way, while the fact of the payment being interms proportionate to the loss will point the other. Butthe circumstances must be taken as a whole, and must beviewed as at the time the bargain was made.
The judgment of the House of Lords in the above case wasfollowed by the Privy Council in Webster, v. Bosanquet,1 an appealfrom Ceylon, the sole question there being whether the stipulatedsum was by way of liquidated damages fixing once for all the sumto be paid, or merely as a penalty covering the damages thoughnot assessing them. After setting out the principle set out above,Lord Mersey quoted with approval opinions expressed in thefollowing terms by Lords Hnlsbury and Davey: —
" It is impossible to lay down any abstract rule as to what it mayor may not be extravagant or unconscionable to insistupon, without reference to the particular facts andcircumstances which are established in the individualcase and
M You are to consider whether it is extravagant, exorbitant, orunconscionable at the time when the stipulation is made,that is to say, in regard to any possible amount of damageswhich may be conceived to have been within the contem-plation of the parties when they made the contract. ”
Applying these principles to the facts of the present case it is firstof all necessary to point out that clause 6 fixes no definite sum thatis to be paid. Mr. Bartholomeusz argues, however, that it is easilyascertainable, but as I understand the term “ liquidated damages, "its essential meaning is that the damages have already been fixedand assessed for very special reasons in a, definite sum between theparties to the contract. The term “ penalty " in this connection,on the other hand, would seem to be interchangeable with the term“ unliquidated damages ” (Sparrow v. Paris 2). The plaintiff quotedspecial rates to the defendant in view of the fact that the advertise-ments were to continue for one year. In the event of the defendantterminating the contract he was to be free to charge casual rates,and not the contract rates. Upon the facts it seems to me thatplaintiff's claim is extravagant and unreasonable, after a comparativeestimation of the figures of the contract, having regard to the possibledamages which one conceives to have been within the contem-plation of the parties when they made the contract. Can itreasonably be said that clause 6 did more than settle the methodby which the damages were to be assessed' or the amount ofthe penalty to be paid by defendant for his default was tobe arrived at ? It is admitted the sum awarded is considerably,
1927.
Daj/l'ok J.
Wtfetcardene
Xoorbhai
1 (1912) A. G. 394 ; 2$ A L. R. 125.
*22 L. J. Ex. 167.
( 434 )
1927.
Dalton J.
IK ijewardene•a Xoorbhm
having regard to the nature and terms of the contract and theperiod it was to run, in excess of the actual damage suffered, inview of the fact that the advertisements were continued during thecontract year for a period of three months by Fernando .after thetermination of the contract by defendant. There is not the leastdifficulty in arriving at the actual amount of the damage sustained.Further, according to the view of the plaintiff, the longer' thecontract ran, the greater would be the damages, if there was anybreach. That seems to me to show clearly that the damages wereunliquidated. I can find here no genuine pre-estimate or anypre-estimate at all, of the plaintiff’s probable or possible interestin the due performance of the contract. There is merely a'methodagreed upon by which the amount of the penalty or damages to bepaid by defendant was to be arrived at, should he make default incarrying out the contract. I might also point out here that thereis a finding of the trial judge that the parties intended the damagesshould be assessed according to the casual rates set out.
The judgment of the learned judge must therefore be set aside,and the case sent back for proof by the plaintiff of the actualdamages incurred by him as a result of defendant's default. Thiswill entail further evidence being led. Judgment thereafter will beentered in the sum then found to be due.
The appellant is entitled to hi6 costs of this appeal.
Lyall Grant J.—
I agree. In all these cases the question is what loss has theplaintiff suffered. Prima facie, plaintiff is not entitled to get morefrom the, defendant than he would have received had defendantduly completed his contract. Clause 6 affords no assistance. Itis clearly unreasonable as it increases the penalty imposed on- theadvertiser in proportion as he approximates to fulfilling his contract.The nearer he comes to fulfilment, short of completion, the greateris the penalty in failure to complete. In my opinion no effectshould be given to such a clause. ‘
What is not clear from th.e evidence is the exact number of daysduring the currency of the contract in which no advertisementappeared in the respective .papers. For that number of days .thedefendant should pay at the agreed.retes.
Further he must pay any loss incurred by the plaintiff owingto the fact that one of Fernando-s contracts provided for a lBwevrate ^ of payment than the corresponding contract entered" 1 intoby the ’ defendant.
I agree. 0that evidence must be tak$p to ascertain the amount ofdamages due on this footing,.
Set.aside.