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Present: The Hon. Sir Joseph T. Hutchinson, Chief Justice,and Mr. Justice Middleton.
PLESS POL v. DE SOYSA et al.
D. C., Kandy, 17,549.
Building agreement—Damages for delay in completion of works—Liqui-dated damages and penalty—Roman-Dutch Law—English Law.
Where the defendants agreed to grant to the plaintiff a lease ofcertain premises, and also undertook to effect and complete certainalterations and improvements to the premises before May 15, 1905;and in default to pay the plaintiff Rs. 150 a day, as liquidateddamages, for each day after that date, and, where default havingbeen made by the defendant, the plaintiff sued for the recovery ofthe damages stipulated,—
'Held, that the amount agreed upon must be considered asliquidated damages and not penalty, and that the plaintiff wasentitled to recover the same.
PPEAL by the defendants from a judgment of• the DistrictJudge of Kandy (J. H. Templer, Esq.). The facts sufficiently
appear in the judgments. ,
H. Jayewardene (with him H. J. C. Pereira), for the defendants,appellants.
Bawa (with him VanLangeriberg), for the plaintiff, respondent.
Cur. ado. vuU.
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1909. March 4, 1909. Hxjtchinson C.J.—
March 4.The claim in this action is for damages for breach of an agreement
in writing between the plaintiff and the defendants dated February17, 1906, by which the defendants agreed to grant to the plaintiffa lease ot premises called “ Haramby House ” at Kandy for tenyears from June 15, 1905, and to complete certain alterations andimprovements to the premises before May 15, 1905, and in default- to pay the plaintiff Rs. 150 a day for each day after that date thatthe work was unfinished. The District Court gave judgment forthe plaintiff. The judgment is appealed against on several grounds.
On the issue, “ Whether the plaintiff requested the defendantsto make certain additions to and deviations from the works specifiedin the agreement, and whether the completion of the work was•thereby delayed,” the District Judge has found that the plaintiffdid so request the defendants, but that none of the alterations ordeviations was requested after June, 1905, at the latest, and that“ the work was thereby very slightly delayed, if at all.” And hehas found, in answer to the second issue, that the plaintiff extendedthe time for completion of the work to September 1, 1905, andwaived his claim to damages up to that date ; and he was of opinionthat this extension was due more to the plaintiff’s anxiety to get aloan from the defendant, J. W. C. de Soysa, than as any concessionto the lessors in consideration of the additions and deviations. Theextension was granted by a letter (J 1) dated July 25, 1905, fromthe plaintiff to J. W. C. de Soysa. The defendants pleaded thatthe plaintiff from time to time extended the time for the completionof the work after September 1, and consented to the defendantshaving such time as they might require for the completion. TheDistrict Judge has found that no additions or deviations was made,at the plaintiff’s request, after September^, and that the plaintiffdid not grant any further extension of the time for completion. Iam. not at all convinced that any of those findings of fact wasmistaken. And the result is that the time for completion was byagreement of the parties extended from June 15 to September 1,and no longer.
On the issue, “Was the work completed on December 31,1905, and did the plaintiff take possession of the house on or aboutthat date ? ” The District Judge has found that the work was notcompleted on December 31, 1905, in terms of- the agreement, andthat the plaintiff never took possession of it. He said: “ Therecannot be the least doubt that, even if there had been no additionsor deviations on the works contemplated by the agreement,Haramby House, even up to the present date ” (March 11; 1907)“ has not been completed and finished, fit for habitation or use;neither has the work been done in a good, substantial, and work-manlike manner, nor were fit and proper materials used, nor wasproper deligence employed in the construction of the works.” The
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evidence, especially that of Speldewinde (including his reports onthe buildings dated February 19, 1906, R 4) fully bears out thatfinding.
In that part of his judgment which refers to the state of thebuildings in December, the Judge, speaking of the five extra bed-rooms which he thought were the principal additions that the plaintiffrequired, said : “ Although I was unable to enter these roomswhen I visited the premises on September 28, 1907 ” (with theparties and their counsel during the trial), “ I had, as a matter offact, been over Haramby House in December, 1905, when thebuilding was still in the hands of De Soysa, and went into most ofthose five rooms; and, as far as I can remember, Iconsidered themso small, ill-ventilated, and ill-lit that no European would everdream of occupying one if he could get a room elsewehere ; ” and hedescribes their dimensions. The appellants urge that the Judgewas wrong in importing into the case knowledge acquired by himin the absence of the parties long before the trial, and making thatknowledge one of his grounds of decision ; and that they wereprejudiced by his doing so, and are therefore entitled to a new trial.I can hardly take that objection seriously. It would have beenbetter if the Judge had forgotten that he had ever seen the placebefore he inspected it in the presence of the parties; but, after all,his judgment as to the condition of the whole of the buildings inDecember, 1905, wets not founded on his recollection of the sizeand condition of those five rooms, but on the evidence as to thewhole of the buildings.
I think the Judge was right in finding that the plaintiff nevertook possession. Some of the furniture and other things which hehad bought for the purpose of the proposed hotel were stored insome of the rooms, and it seems that the keys of these rooms, orsome of them, were kept by the plaintiff or his clerk; but the thingswere stored there at the suggestion of De Soysa’s agent, so thatthere might be some security for the money which De Soysa hadlent to the plaintiff ; and it is clear that the plaintiff did not takepossession of the premises before he brought this action.
The judge awarded the plaintiff damages at the rate of Rs. 150a day from September 1 to December 19, when the action wascommenced, and also a further sum of Rs. 60,000 as damages fromDecember 19 to the date of judgment. Two objections are takento this award:—(a) The award is founded on the 5th clause of theagreement, by which it was agreed that “ if the lessors shall notcomplete all the said works in the said Schedule B hereto oh orbefore May 15, 1905, the lessors shall pay or cause to be paid to thelessee a sum of Rs. 150 per day for each and every, day beyond thatdate that the said works or any of them shall be and remainunfinished and incomplete, such sum to be so payable to be deemed,not as a penalty, but by way of liquidated damages.”
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The appellants say in their answer that, assuming that there wasany breach of contract on their part, the plaintiff is entitled only torecover such damages as he may have actually sustained, and thathe in fact sustained no damage. There was no issue as to whetherhe had sustained no damage other than the general issue : “ Whatdamage, if any, is the plaintiff entitled to recover ? ” The appel-lants contended that the evidence showed that towards the end of1905 the plaintiff was hopelessly impecunious and could not haveopened and oarried on the hotel for which the buildings were designed,if they had been perfectly complete for the purpose at that time;and that therefore he actually suffered no damage. They say thatby the Roman-Dutch Law the sum fixed by the parties in an agree-ment as the amount of damages in oase of breach cannot be recoveredif it turns out that it was excessive, “ ingens''; in support of thisstatement of the law reference was made to Voet, 45, 1, 13; VanLeenwen's Censura Foremis, Bk. 4, Ch. 15 (page 110 of Berwick'stranslation); Ramanathan (1820), 39; Ramanathan (1877), 362,371; 4 N. L. R. 285; Pothier 1, 207; Maasdorp on Obligations,252 ; Nathan, 2, 669-674. They admit that at the time when theagreement was made it could not have been said that the amountfixed was excessive, but say that it turned out afterwards that the 1plaintiff would not have had the means to take up the lease andmake a profitable use of it, and therefore the amount was provedto have been excessive.
My opinion is that, where it is impossible to say beforehand whatthe amount of damage will be, if the contract is broken, and theparties in the contract agree on the amount and say that it shall betaken to be liquidated damages and not a penalty, the authoritiesshow that that amount is recoverable, unless it appears from thecontract itself that the amount is excessive, and was really intendedby the parties to be a penalty. In this same agreement there is aclause providing that if the lessee shall not accept the lease, heshall pay to the lessors Rs. 7,000, “ such sum to be deemed also,not as a penalty, but by way of liquidated damages.” In bothcases it seems to me clear that the parties meant what they said, andwere bound by it. If the lessors had carried out their part of theagreement and the lessee had not accepted the lease, and they hadsued him for the Rs. 7,000, he would not, in my opinion, have beenable to escape payment by proving that the lessors had suffered noloss, because, for example, they could have let the propertyto some one else at a higher rent. But if my opinion on thatpoint is wrong, and it was a good defence to the present action toprove that Re. 150 a day was excessive, it has not been proved.There was no express issue on this point, and it is not proved that,if the buildings had been ready on September 1, the lessee would nothave been able to obtain funds to take up the lease and carry on thehotel.
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With regard to. the damages awarded for the period fromDecember 19 to the date of judgment, it seems that in strictnessthe Judge should have awarded much more than he has done, forRs. 150 a day would amount to a great deal more than Rs. 60,000.The respondent has not, however, pressed that objection, and Ithink that the award should stand. And with regard to the state-ment in the judgment that the agreement is determined as from thedate of the judgment, that does not appear in the formal decree,and I need say nothing more about it.
In my opinion the decree of the District Court should beaffirmed with costs.
This was an action for breach for an agreement in a contractdated February 15,1905, by which defendants agreed at their owncharges and expenses on or before May 15, 1905, to erect, build,complete, and finish, fit for habitation and use, in a good, substan-tial, and workmanlike manner, with fit and proper materials certainworks to Haramby House in Schedule B of the contract (beforeMay 15,71905). If not complete, the defendants agreed to pay theplaintiff Rs. 150 a day, not as a penalty, but by way of liquidateddamages. The defendants further agreed to let the said premisesfor ten years to the plaintiff when so complete, and the plaintiffagreed to pay Rs. 7,000 as liquidated damages if he did not acceptthe said lease.
Judgment was given for the plaintiff for Rs. 16,500 as damagesfrom September 1, 1905, as and being the date to which the time forcompletion was extended till December 19, 1905, the date of actionat Rs. 150 a day, and further for a lump sum of Rs. 60,000 to coverall damages sustained by plaintiff from December 19, 1905, to thedate of the judgment. The judgment at the same time assumedto declare the agreement at an end, but the decree contained nostatement to this effect. The defendants appealed.
The principal points raised in appeal were (1) that the DistrictJudge had imported his own personal knowledge of the premisesinto the case, and had given judgment without support from otherevidence in the record and ignoring the correspondence, and there-fore defendants were entitled to a new trial; (2) that the DistrictJudge was wrong in holding that there was no extension of timegranted to the defendants after September 1, 1905; (3) that thepremises were in fact ready for use and occupation in December,1905; (4) that the District Judge should have held that the damagesagreed upon were “ ingens ” and in the nature of a penalty, andaccording to Roman-Dutch Law should have reduced them to theactual damages sustained, taking into consideration the fact thatthe plaintiff was not in a pecuniary position to open the premises asa hotel, even if they had been ready for occupation ; (5) generally
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that the damages were excessive ; (6) that the District Judge hadgone outside the pleadings in declaring the contract at anend.
The District Judge has found on issue (2) that the plaintiffdid request the lessors to make certain additional bedrooms, devia-tions as to the storerooms, minor alterations such as that .to theporch, and others of a trifling nature after the agreement wassigned, but that none of these alterations or deviations were askedfor after June, 1906, and that the work was thereby very slightlydelayed, if at all, the' real delay arising from the impossibility ofcompleting the original work within the short period of three monthsallowed by the contract. I see no reason for holding on the evidencethat this finding is not substantially correct.
As regards issue (3), the District Judge holds that the plaintiffdid extend the time for completion of the work to September 1,1905. This, I think, is clear from J1 dated July 25,1905, although,as the District Judge says, it may have been granted on the groundshe suggests.
The finding also on issue (3|) that plaintiff waived his claim fordamages up to September 1,1905, appears to me also ancilliary toand consequent upon the finding on issue (3).
No facts have been put forward on appeal to show that the DistrictJudge was wrong in holding on issue (4) that no additions ordeviations were made by the request of the plaintiff after September
1905, nor under issue (4£), that the completion of the work wasnot thereby delayed.
As regards issue (4|), under which the District Judge has foundthat the time for completion was not extended after September 1,1905,by the plain tiff for any period whatever. Neither the plaintiff’sletter X 31 of October 27, 1905, nor his letter X 35 of December
1905, show that any extension was granted, but rather thatthe plaintiff was groaning under the delay arising from the inertness
of the defendants’ arrangements in the carrying out of thecontract.
As regards the point that the learned District Judge had importedhis own personal knowledge of the state of the building in December,1905, and had formed an opinion on the case before trial and hadgiven judgment upon it. On issue (5); as to the completion of thework on December 31, 1905, 26, Weekly Reporter (P. C.) 55 wasrelied on.
It is clear from the District Judge’s note at the commencement ofthe trial that the parties desired and agreed to his personal inspectionof the premises. There is, further, the evidence of Speldewindeembodied in his report R 4 given upon his inspection in Februaryand May, 1906, which shows that the several works, buildings,alterations, and improvements agreed to be done under Schedule Bhad not been completely finished and made fit for occupation on
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those dates even. It is objected for the appellant that Speldewinde’sreport and evidence do hot show any omission of structural require-ments upon this inspection, but the agreement was that thingsshould be completely finished and made fit for occupation, andSpeldewinde shows clearly this was not the case. There is also theletter J. W. C. 8 of December 11, 1905, from plaintiff to Charles deSoysa, which alleges that “ such a lot of work is to be done atHaramby House that you will not be able to hand me overthe premises even on January 18 proximo.” There is also theadmission made to the District Judge at page 91 of the record thatthe laying of water to bathrooms and kitchens had not been carriedout. In my opinion no premises to be used as a house or hotelcould be deemed fit for occupation without a proper water supplysurely implied in the contract.
It is true that the letter J. W. C. 7 of August 28, 1905, fr<?mplaintiff to Charles de SoySa states the work is nearing the finaltouches, and the letter J. W. C. 10 of 31st (the date is absent) states“ I am also hurrying with my front works, and have now but verylittle to be done.” These letters, however, in my opinion, refer tothe work which the plaintiff himself had undertaken to do, and notto that which the defendant had agreed to perform. Independently,therefore, of the evidence the District Judge is said to have personallyimpprted into the case, there was sufficient evidence, in myopinion, to justify his decision.
As regards part- (2) of issue (5), I have no doubt that the DistrictJudge was right upon the evidence, and his inference therefrom inarriving at the conclusion that the plaintiff did not take possessionof the premises on or about December 31, 1905.
It has been sought by counsel for the appellant to show thatissue (6) left it open to the Court to decide whether the plaintiff wasentitled to recover from the defendant the daily amount stipulatedfor in the contract as liquidated damages or as a penalty, andDumonlius’ opinion as given in Vol. I. of Pothier, p. 209; Voet, Book45, 1, 13; Ramanathan, 1877, Mr. Berwick's judgment at pages371, 372, were relied on.
Assuming this to be so, although I think in reality it was notthe case, or the question would have been raised by a more specificissue, we have to consider what was the intention of the parties inmaking the stipulation, and whether.that intention must be takento be subordinate to what is intended for the appellant in theRoman-Dutch Law on the point.
In the first place, I think that the contract itself shows that theparties rather , intended to be governed by the English Law on thequestion, and stipulated for Rs. 150 a day damages for delay as notbeing an unreasonable sum to impose in a case where there would bemuch difficulty in correctly estimating the amount of compensationwhich would be due. This sum, I think, was agreed upon as
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1909. liquidated damages, and there is no unreasonableness in its amountMarch 4. to lead one to a contrary opinion.•
Middleton As I read the authorities relied upon for the appellant, they go
J.no further than showing that under the Roman-Dutch Law a viewvery much in accordance with the principle prevailing ih Courts ofEquity in England on the question was prevalent, and the courtwas bound to determine from the circumstances of the case whetherthe intention of the parties was that the sum agreed upon was to betreated as a penalty or liquidated damages to use English legalphraseology. This view is strengthened by the reference to Maas-dorp, Vol.III., p. 252, Nathan, Vol. III., pp. 1,460, 1,461, relied onby counsel for the respondent, and is not, I think, affected by thebroad proposition enunciated at p. 670 of Nathan, Vol. II. which,
I think, must be governed by the ascertainment of what was theintention of the parties. In my opinion, therefore, the parties hereare bound by the stipulation they made in their contract thatRe. 150 a day was a fair and reasonable amount of liquidateddamages to be paid in case of unfulfilment.
We then come to the question whether, if alterations and deviationsare agreed to be made by the party bound to complete a contractwithin a specified time under a stipulation to pay liquidated damagesin case of non-completion, he is thereby relieved.from the obligationto do so. According to the rule in Holme v. Guppy,1 he would be sorelieved if the time requisite for finishing the work was necessarilyincreased. There was no provision in the contract here that otherwork might be ordered, or that if it were, the defendant wouldnevertheless complete the work within the time originally limited.
The parties, however, agreed that new work should be done.The court has found that none of this new work was asked for afterJune, 1905; that the completion of the original work was notthereby delayed ; that no additions or deviations were made at therequest of the plaintiff after September 1, 1905 ; that the plaintiffdid extend the time for completion of the work till September 1,1905; and that the rime for completion was not extended afterSeptember 1, 1905, by the plaintiff for any period whatever.
On these findings, I think, the defendant was not prevented fromperforming his part of the contract by any act of the plaintiff, andhe is liable for his default. Comyn’s Digest, Condition L. (6); seeLord Esther’s judgment in Dodd v. Churton.2
I must hold, therefore, that the plaintiff is strictly entitled torecover the amount stipulated for as liquidated damages as andfrom September 1,1905, to the date of judgment.
Again, on the question of damages, no issue was specifically agreedto as to whether the damages agreed on were excessive, nor is thereany evidence on the record to show that is the case. As to theargument that the plaintiff is not entitled to damages owing to the‘3 M. and W. p. 387.* 1 Q. B. D. 462.
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foot that he was not in a position to open the premises as a hoteleven if they had been ready, this does not appear to me to be sound.Moreover, the evidence has left the impression on my mind that hispecuniary difficulties arose in a great measure from the delay thathad occurred on the defendants’ part in completing the contract.
The District Judge in giving the plaintiff Rs. 60,000 as damagesfrom December 19 to the date of judgment, has, in foot, awardeda very much lower sum than the agreed damages' would amount to,and exception can hardly be taken to this by the appellant. Asregards the District Judge’s declaration in respect to declaring thecontract at an end, the decree does not include this.
I would therefore dismiss the appeal with costs.
PLESS POL v. DE SOYSA et al