Tarrant V. MaifikstT.
Present: Garvinand Akbar J.
TARRANT et al. v. MARIKAR.
340—D. C. Colombo, 43,262.
Wagering contract—Contract for sale of rubber—Agreement to pay the differencebetween contract price and market price—Bond granted to secure paymentof the amount of the difference—Contract unlawful under the Roman-Dutch law—Action on bond not maintainable—Injusta causa—Contractgoverned by Roman-Dutch law.
Where the plaintiffs and the defendant had entered into certaincontracts for the sale and purchase of rubber on the understandingthat there was to be no delivery of the rubber and that the contract wasto be performed by the payment of the difference between the contractprice and the market price, and where a bond was granted by thedefendant to the plaintiffs at their request to secure the repaymentof the amount of the differences which remained unpaid by thedefendant on the contracts,—
Held, that the agreement was in the nature of a wagering contractwhich was unlawful under the Roman-Dutch law, and that no actionwas maintainable on the bond.
Under the Roman-Dutch law a promise to pay a wager secured by thehypothecation of immovable property is unenforceable as it is not basedon a justa causa.
The question whether a wagering contract, though in form a contractfor the sale of goods or a claim in respect therefrom, is enforceable byaction must be determined with reference to the law of Ceylon.
HIS was an action on a mortgage bond No. 2,100 dated March 28,
to recover from the defendant a sum of Rs. 101,462.63with interest alleged to be money borrowed and received from theplaintiffs. The defendant admitted the execution of the bond but pleadedthat it was given for an illegal consideration and was void and was unen-forceable. It was specially pleaded that the defendant and the plaintiff hadentered into certain contracts for the purchase and sale of rubber underan arrangement by which there was to be no delivery or acceptance ofrubber and by which the contract was to be performed by the paymentof the differences between the contract price and the market price andthat the bond in suit was granted to the plaintiff to secure the paymentof money due from the defendant on the contracts.
The learned District Judge held that the real transaction between theparties was as alleged by the defendant, and that the contract amountedto a wagering contract which was illegal and unenforceable at law. Heaccordingly dismissed the plaintiff’s action.
Soertsz, K.C. (with him Garvin), for plaintiff, appellant.—This is a con-tract for the sale of rubber. It is not a wagering contract as there iswant of mutuality between the parties to regard it as such, although thedefendant may have had such intention. (15 Hals. 283, ss. 576-578;Thaker v. Hardy1; Carlill v. Carbolic Smoke Ball Co.2.)
-M1878) 4 Q.B.D. 685.
* (1892) L. R. 2 Q. B. 484, at 491.
Tarrant v. Marikar.
[Garvin J.—Though you had an intention of carrying out yourcontract, if you knew that the other party was speculating on the riseor fall of the market, are you not a party to a wagering contract ?]
No. There is no duty on plaintiff to refrain from entering into contract-with a person who intends it to be a betting transaction. A wageringcontract is a contract and here there is no consensus ad idem. Evenif it is a wagering contract an action is maintainable in Ceylon.
[Garvin J.—Is there any difference between English law andHoman-Dutch law ?]
At common law action is maintainable on wager if not contrary topublic policy. The Gaming Act, 1845, declared that wager was unenforce-able. The Statute declared what the public policy was. (Chitty on -Contracts 786.)
In Roman-Dutch law the position is the same as in English law. Roman-Dutch Common law did not regard a wager as null and void. Action ismaintainable on it (1932 A.D. 76; 3 Maas, 26). The District Judge relies on2 Nathan 613, para 768, but Voet XI. deals only with games of chance, e.g.,throwing dice and drinking bouts. Such gambling was prohibited byStatute in Roman-Dutch law. But when Grotius says “ It is establishedby us ” he refers to the by-laws of the. State of Amsterdam. (Grotius’
• Introduction, p. 303—5, Trans. Herbert, bk. III., ch. 3, s. 48.)
[Akbar J. referred to Van Leeuwen 101.—Is there any reason why theSouth African rule should not be followed in Ceylon ?]
The opinions of Roman-Dutch law text writers vary and are unsettled.South African law is generally against the enforcement of wageringcontracts. There is the South African Act 36 of 1902 reproducing theImperial Act which makes contract unenforceable. The matter is indoubt. In Transvaal and the Cape there are statutory prohibitionsagainst enforceability. Here we have no Statute law. 1932 A.D. 76 isbased on Act 36 of 1902.
[Garvin J.—Which system of law do you say applies to this case ?]
Whichever law applies, the position is the same. Even if the contractis unenforceable at law, this is an action on the bond.
[Garvin J.—If this is a wagering contract you must show a newconsideration and a new contract, if you are to succeed.]
There is new consideration. We intended to sue defendant to recoverthe money due. Defendant asked for time to pay. Forbearance ofplaintiff to sue at once. On bond, defendant got nine months* time topay. We continued to supply defendant with rubber.
[Garvin J.—Do you say that forbearing to sue on a contract which isunenforceable is consideration ?]
Yes. (Jayawiclcrama v. Amarasuriya ) Promise deliberately made'todischarge moral duty is enforceable at law. Causa in Roman-Butch lawis wider-than consideration. There is a difference between illegalityand unenforceability. Question of enforceability has to be decided
« 20 N. L. R. 2S9 at 292.
Tarrant v. Marikar.
later by Court of law. When we gave defendant time to pay/ we believedwe had an honest claim. The view of a Court of law later that it wasa wager makes no difference. Defendant himself believed our claim tobe an honest one, and asked for time and obtained it. This was newconsideration. (Anson (17th ed.) 99-100; Collisher v. Bischoffsheim' ;Cook v. Wright5; Miles v. New Zealand Alford Estate Coy. *.)
The promise stayed creditor’s hand.
f Akbar J.—Mere giving of time on unenforceable agreement is npconsideration.]
There is evidence that plaintiff supplied defendant with rubber aftergetting the mortgage bond. Plaintiff incurred further liability.Defendant got credit from us and other dealers. If plaintiff sueddefendant’s credit would have suffered. It was a distinct advantage todefendant not to be sued.
Apart from consideration there is good causa. The bond was enteredinto Serio ac deliberato animo (3 Maas, 35 et seq.), and is a new contract.
H. V. Perera (with him Gratiaen), for defendant, respondent.—The con-tracts of purchase and sale by plaintiffs are only colourable transactions.This is an action on the bond. Plaintiff has to rely on consideration otherthan the consideration on the bond. Actual consideration is disguised.Money is due on differences. Plaintiff must show fresh consideration.In English law motive is different from consideration. There must be anew agreement for good consideration. (Hyams v. Stuart King*.)
Every promise to pay a debt already .existing is not a new promise.It must be new in reality. There is here no new contract according toEnglish law. Mere refraining from going into Court is not considera-tion. New promise here replaces something that is worthless. Considera-tion must have some value, i.e., forbearing to sue when you can sue.
The contract is unenforceable as being contrary to public policy.A new promise does not make the contract enforceable. . Every debtmight be enforced in that way. There is no justa causa for the bond.Causa may be vitiated by other reasons, e.g., it may be against publicpolicy. (Kotze’s Causa in Roman-Dutch Law, p. 31.)
According to English law there is no fresh consideration. Accordingto Roman-Dutch law no fresh causa. There is no novation. Theremust be an independent promise supported by fresh considerationwithout reference to the original transaction.
Roman-Dutch law regarded wagering contracts as unenforceable asbeing contrary to public policy. Obligation must not be merely a moralobligation. It must also not be contrary to public policy.
Grotius’ expression “ established by us ” distinguishes Roman law•from Roman-Dutch law, and not the common law of Holland fromStatute law.
The South African law ought to be followed in Ceylon. It is notnecessary to consider whether the contract was unenforceable or contraryto public policy as there is no fresh causa. New promise to perform"
unenforceable contract is no consideration.
(1869) 5 Q. B. 449.
1 B. & S. 559.
3 32 Ch. D. 266.
* (1908) 2 K. B. 696.
GARVIN S.P.J.—Tarrant v. Marikar.
[Garvin J.—If the contract is not unlawful as being contrary to publicpolicy, is it enforceable?]
There is no statutory prohibition as regards unenforceability. By theRoman-Dutch common law contracts were unenforceable as beingimmoral or when they were against public policy. In Ceylon, legislaturehas only prohibited certain types of gaming. Therefore under ourcommon law, all contracts are enforceable unless there is a statutoryprohibition or unless they are contrary to public policy. If this contractis against public policy, no new promise can support former obligation.
[Akbar J. referred to Lipton v. Buchaman ]
The law as laid down by Grotius (Trans. Maas. p. 328) should befollowed. Every contract must have legal and moral possibility, musthave legal existence though it be legally unenforceable. There must be aproper or legitimate subject-matter. (Kotze’s Causa in Roman-Dutch Lawat 30 and 51.)
[Akbar J.—Is this a wagering contract or not?]
There is no way of getting away from the betting transactions. Plaintiffnever intended to take delivery of the rubber. Person may by longcourse of conduct manifest his intention. Intention may be declaredby conduct. Plaintiff knew that defendant would not perform hispart of the contract.
Defendant intended cross-sales. If plaintiff knew this, i.e., refusalto take delivery plus a cross-sale, so that the rubber was always withplaintiff, and yet entered into contract with defendant, he was a partyto a gamble.
There was a tacit understanding between the parties that contract wasto be performed in a different way. Such tacit understanding may bepresumed from past dealings between the parties.
Soertsz, K.C., in reply.—South African law ought not to be followedhere; Roman-Dutch law is different in different places. Grotius and otherwriters treat gaming and wagering separately. (Van Leeuwen’s Cens.For. 1,4*14,10-11).
Wagers are valid in themselves unless made in reference to dishonour-able subject or repugnant to morality. (Van der Keessel’s Select Thesis,s. 48, para. 514.)
Counsel cited Voet XL 5. 5.
Cur. adv. wilt.
March 28,1934. Garvin S.P.J.—
This is an appeal from a decree of the District Court dismissing withcosts the plaintiffs' action to recover from the defendant a sum ofRs. 109,112.59. The action as brought by the plaintiffs was in form anactioiTupon-a^bond bearing No. "2,100, dated March-20, 1930, whereby the_defendant bound himself to repay the sum of Rs. 101,462.63 alleged tobe money borrowed and received by the defendant from the plaintiffswith interest thereon at 8 per cent. The repayment of this sum wasfurther secured by the hypothecation of immovable property. Thedefendant admitted the execution of this bond but pleaded generally
» J0 N. L. B. 158.
GARVIN S-P.J.—Tarrant v. Marikar.
that it was given for an illegal consideration and was void and unenforce-; -able. It was specially pleaded that the defendant and the plaintiffs had'entered into certain contracts for the sale and purchase of rubber on thetinderstanding that there was to be no delivery or acceptance of the rubber,and that the contract was to be performed by the payment of the differencebetween the contract price and the market price, and that this bond wasgranted to the plaintiffs at their request to secure the repayment of theamount of the differences which remained unpaid by the defendant onthese contracts. Before the trial of the action Mr. N. Walsgrove, thesecond plaintiff, who was doing business in partnership with the firstplaintiff under the name and style of Tarrant & Co., was examined debene esse. The evidence given by Mr. Walsgrove showed conclusivelythat this bond was not given to secure the repayment of money “ borrowedand received by the defendant ” but for a different consideration whicharose out of certain contracts for the sale of rubber in respect of whichthe plaintiffs were claiming from the defendant sums of money allegedto be due thereon which with interest amounted at the date of the bondto Rs. 101,462.63. It was proved not only by the evidence of Mr. Wals-grove but by the evidence given at a later stage by Mr. Mack that theamount inserted in the bond was the total of the various sums which theplaintiffs allege becarpe payable to them up to that date on two contracts,the broker’s notes relating to which have been produced and marked P 1and P 28 respectively.
The contract evidenced by the broker’s note P 1, which is datedNovember 20, 1929, is a contract for the sale by the plaintiffs to thedefendant of 100 tons of rubber, FAQ sheet or crepe at 44 cents perpound, delivery to be made during January, 1930. Similarly, the contractreferred to in the note P 28 dated April 24, 1929, is a contract for the saleof 600 tons of rubber, FAQ sheet or crepe at 62 cents per pound, deliveryJanuary to December 50 tons per month. There is no dispute as” to theamount in the sense that it is not denied that if the plaintiffs’ action besustainable they would be entitled to judgment for this amount, but it isdenied that the plaintiffs are entitled to maintain action for the recoveryof this amount.
These contracts are in form bargains for the sale and purchase of rubber.The question for determination was whether they were in reality wageringtransactions intended to end only in the payment of differences, underthe appearance of contracts for the purchase and sale of rubber. At thetrial various issues were proposed by counsel representing the parties andafter discussion the Court framed the following issue:—*Was themortgage bond sued on granted for a consideration which was illegal andif so is it void and unenforceable? ” and the case proceeded to trial uponthat single issue. The real questions at issue were fully appreciated bythe parties and the whole of the evidence was directed to the questionwhether the contracts P 1 and P 28 were entered into by the parties forthe payment by the plaintiffs to the defendant or by the defendant to the „plaintiffs as the case may be of the difference between the market priceand the contract price according as the market price was above or belowthe contract price at the time appointed for the delivery of the rubber andwithout further obligation. The learned District Judge has come to the
GARVIN S.P.J.—Tarrant t>. Marikar.
conclusion that the real transaction between the parties was as alleged bythe defendant, that such a contract was a wagering contract, and thatthe claim of the plaintiffs was one which was unenforceable at law. Heanswered the first issue in the affirmative and accordingly dismissed theplaintiffs’ action.
The principal points taken in appeal are these: —
That the evidence does not support the learned District Judge’sfinding that these were wagering transactions and not, as they purport tobe, contracts for the sale of rubber.
Assuming that the District Judge was right in his view as to thereal nature of these transactions and that they were wagering contracts asknown to the law of England, such contracts were not obnoxious eitherto the Statute law or the Common law of Ceylon.
Even if a claim upon such a contract be unenforceable at law thisaction, which is an action on the bond, is sustainable under the Englishlaw as a claim upon a new contract for good consideration and alterna-tively under the law in force in Ceylon as a promise made for justa causa.
At the dates material to this claim the plaintiffs were doing business inpartnership in Colombo. The second plaintiff, Mr. Walsgrove, was in solecharge of the rubber business which was extensive and consisted in thepurchase, sale and shipment of rubber.
The defendant has been described as a well known rubber dealer. Hewas the owner of land planted with tea and rubber to the extent of 2,500to 3,000 acres and the rubber output of these plantations was approxi-mately 30-40 tons per month. He was not a shipper. He had beendoing business with the plaintiffs for several years.
Up to the year 1926 all his contracts were what are referred to as“ spot ” contracts. About 1926 he commenced to enter into forwardcontracts. The defendant refers to forward contracts as “ speculations ”—he did not intend to take delivery or make delivery of any rubber onsuch contracts the purpose of which was that he should pay or receive thedifference between the contract price and the market price. He enteredinto such forward contracts with other firms as well. All these contractswere put through by brokers, either H. B. .Philips or van Geyzel & Co.,and during the period 1927 to 1930 he had in this way dealt with theplaintiffs to the extent of 3,000 or 4,000 tons of rubber. His dealingswith the plaintiffs and other firms he says amounted to 500 to 1,000 tonsper month. “ All transactions ” said the defendant “ were on paper.Rubber was never brought or given out of stock. When I bought not apound of rubber came in and when I sold-not a pound of rubber went out.I am referring to forward contracts when I say that not a pound went inor came out ”. The learned District Judge has accepted the defendant’sevidence when he says that no rubber actually passed on these forwardcontracts. This is a finding with which I can see no reason to disagree.On the contrary there is ample evidence apart from that of the defendantwhich points to the conclusion at which the Judge has arrived. Not asingle pound of rubber passed on the contract P 1 which was for 100 tons;similarly, on the contract P 28 under which 50 tons a month were deliver-able during the year 1930 no rubber passed in any of the first threemonths—the period with which we are concerned. There is besides the
GARVIN S.P.J.—Tarrant v. Martkar.
evidence of Mr. Walsgrove: “ There was not a single instance in whichdelivery was made to the defendant himself under these contracts*'.Later this statement was modified thus—“ When I say not to himself Imean that cheques would be received from the broker in payment of hiscontract and the delivery order would be made out in favour of the broker.That is he would have entered into some arrangement with the brokerwho paid us and we delivered to the broker If Mr. Walsgrove washere speaking with reference to forward contracts with the defendant,there is nothing to support his statement that he ever received a chequefor the contract price of rubber deliverable under any such contract orthat actual delivery thereof was made to a broker as agent for thedefendant. There should have been no difficulty in proving a few instancesor even a single instance of the issue of a delivery order or of the receiptof a cheque for the value of the rubber.
Later in his cross-examination Mr. Walsgrove says: “ If rubber is paidfor, the money would pass and the delivery order would issue. In thecase of differences there is a set off, my contract against his contract, andone or the other pays the difference. We have had several contracts ofthat kind with the defendant previously. There were large numbers ofsuch contracts, in which we had set offs like that. I know that peopleenter into contracts for a larger amount of rubber than their estatescould produce. It would have been an exception to the rule if there was anactual delivery of rubber
Heading Mr. Walsgrove’s evidence as a whole, I do not think thestatements in the above extract were intended to be an express admissionhy him that a large number of these forward contracts were purelycontracts for the payment of differences. What I think he intended tosay and has said is that there were large numbers of forward contractswith the defendant which resulted in the payment of differences and thatan actual delivery of rubber would have been an exception to the rule.
But there is no proof that there was even a single exception to the rule.According to the defendant the invariable rule in the case of forwardcontracts was for one or the other to pay the difference—not to deliveror take delivery of rubber. The evidence discloses a regular course ofbusiness in regard to these forward contracts. A letter is written by theseller formally tendering a quantity of rubber in terms of the contract.The purchaser does not take delivery. A contract is then passed by abroker which is in form a sale of an equivalent quantity of rubber by theoriginal purchaser to the original seller at the market price. Then asMr. Walsgrove has said there would be a " set off, my contract against hiscontract, and one or other pays the difference ”.
There are several other passages in the evidence to the same effect.But sufficient has been said to show that the learned District Judge wasjustified in his conclusion that on these forward contracts no rubberpassed and that so far as the defendant was concerned it was his.intentionfrom the outset—an intention which he said he communicated to thebrokers—that there was to be no delivery or acceptance of rubber on thesecontracts but merely the payment of differences.
The purchase of a commodity by a person for the sole purpose ofrealizing a profit by resale in the expectation that the market will rise is
GARVIN S.P.J.—Tarrant t>. Marikar.
a perfectly legitimate commercial transaction and the circumstance thatthe buyer intends to sell whether the market rises or falls is immaterial.In the case before us the intention of the buyer was never to take deliveryfrom the seller but only to pay or receive the difference between themarket price and the contract price. The fact that the purchaser enteredinto what is in form a contract of sale with such an intention does not ofitself convert the contract into a wager. There must be mutuality beforea Court can justifiably hold that this is a wagering contract in the guiseof a contract for the sale of rubber.
There is no evidence here of a direct communication by the defendantof his intentions to the plaintiffs or any one of them. The defendantdoes say that he communicated his intentions that these should beunderstood to be merely contracts for the payment of differences to thebroker. But the broker has not been called as a witness and there istherefore no evidence that he passed this on to the plaintiffs.
Notwithstanding that there is no evidence—and such evidence I shouldimagine would not often be available—that the plaintiffs were specificallyinformed of the defendant's intentions and assented thereto, there is abody of fact established by the evidence from which the District Judgeinfers that the contracts P 1 and P 28 were entered into by both partieswith the common intention that neither party should have any otherinterest therein or obligation apart from the payment or receipt as thecase may be of the difference between the market price and the contractprice.
As we have seen there was a long course of dealings covering a periodof two or three years between the parties before the contracts P 1 and P 28were entered into. These purported to be forward sales or purchases ofrubber to an amount of over 3,000 tons which was the aggregate ofnumerous forward contracts. So far as the defendant was concerned hisposition always was that there was to be no delivery or acceptance of anyrubber.
During the whole of this period not a pound of rubber was in factdelivered. In every instance whether the market was in favour of thedefendant or against him a cross-sale was put through and the differencepaid. Not an ounce of rubber passed on these cross-sales, and there canbe no doubt that, though expressed to be sales of rubber, they were purelyfictitious and were merely a device for ascertaining at or about the timeof each tender the amount of the difference between the contract priceand the market price. These differences were regularly paid until inJanuary, 1930, the defendant found himself unable to pay his losses.
There is no evidence as to the circumstances under which the earliestof these forward contracts were entered into but the history of the dealingson this and the numerous forward contracts over a period of two or threeyears is before us. The defendant never performed a single one of theseforward contracts in the manner in which a contract of sale is ordinarilyperformed by a purchaser, viz., by taking delivery of the commoditypurchased.
A striking feature of the dealings between the parties is that evenwhen the market price was favourable to the defendant as purchaser norubber passed but the plaintiffs paid the difference to the defendant.
GARVIN S.P-J.—Tarrant v. Marikar.
Mr. Walsgrove’s evidence on the point is as follows:—“ Even if it was notto our advantage tc have the set off 1 would still have a set off. When thebalance has been in favour of the defendant we have set off and paid thedifference to him. That happened in 1929 very frequently. He wouldsell to me and I would owe him the difference and pay him ”.
In the case of forward sales to the defendant when the market pricewas higher than the contract price is it to be supposed that the defendantrefused to take delivery and preferred to make a loss? If he did anythingso foolish the plaintiffs would be relieved from the obligation to deliverrubber to him at the contract price which was below the ruling marketprice. And yet we find the matter concluded by the usual cross-sale andthe payment by the plaintiffs to the defendant of the difference—a profitto which as a defaulter he was not entitled. “ Even if it was not to ouradvantage to have the set off I would still have a set off ” said Mr. Wals-grove, but he has not said why he preferred to do that which was notadvantageous to him. Counsel however suggested that as the plaintiffswere shippers they could always dispose of rubber and were thereforeprepared to retain the rubber and pay the difference to the defendant.Had this explanation been offered by Mr. Walsgrove it would doubtlesshave been carefully tested and explored in cross-examination. Whatcounsel’s suggestion indicates is that the plaintiffs had other businessobligations towards the performance of which the rubber referred to intheir forward contracts with the defendant was regularly applied—theywere even prepared to pay him the difference and retain the rubber.
The history of these dealings strongly indicates that a regular systemof business had been established -for the payment of differences whichdisplaced the ordinary obligations of the seller to deliver and of thepurchaser to take delivery—even supposing that at the commencement•of these transactions three years previously these were genuine contractsfor the sale and purchase of rubber.
It was in these circumstances that in April, 1929, the contract P 28was concluded for the sale to the defendant of 600 tons deliveries tocommence eight months later in January of the following year, and thiswas followed in November, 1929, by the contract P 1.
The effect of Mr. Walsgrove’s evidence is that when the contracts P 1and P 28 were concluded there was no arrangement that they were to beperformed by the payment of differences. It may be taken that therewas no direct communication between the parties at the time the con-tracts were concluded. But these were only two—presumably the lasttwo—of a large number of forward contracts made from time to time anddating back to the year 1926. Having regard to the history of theseprevious dealings and the course of business established in regard toforward contracts, is it to be supposed that when the plaintiffs entered intothese contracts they intended them to be ordinary contracts for the saleof rubber to be performed as such by seller and buyer?
It has been urged that the plaintiffs always and all along regarded theseas genuine sales and that this is evidenced by the tenders of rubberregularly made in terms of these contracts. The plaintiffs certainly didin every instance make a formal tender in writing and there is no reasonto doubt that the plaintiffs were in control of the rubber described in
154GARVIN S.P.J.—Tarrant v. Marikar.
these tenders. But were they real tenders in the sense that the plaintiffsexpected the defendants to take delivery and intended that they should?Where, as here, the defendant never took delivery of a single pound ofrubber tendered at any time and we find the plaintiffs on every occasionarranging to retain the rubber even to the extent of paying the defendantthe profit between the contract and the market price for the rubber whichthey tendered, a serious doubt does arise as to whether the plaintiffs everexpected or intended that the defendant should take delivery of thisrubber which they evidently required themselves.
If the tender be not genuine why tender at all? Something has beensaid as to this being a requirement of the rules of the Chamber of Com-merce. But a tender of some kind was necessary for the purpose of fixingthe day on which the market price was to be taken and the differenceascertained, as these contracts gave the plaintiffs a period of time—inthe case of P 1 a month and P 28 a month in respect of each month’sdeliveries—for the performance of the contract. On every occasion thedifference was worked out with reference to the date of tender.
In my view these are the principal facts upon which a decision mustbe taken as to the true nature of these contracts. The learned DistrictJudge has formed the opinion that these contracts were concluded on theunderstanding that there was to be no delivery or taking delivery ofrubber but only that difference between the contract price and the marketprice should be paid by the winner to the loser. Can we say that he waswrong? It seems to me that the history of the dealings between theparties is not only consistent with such an understanding but pointsstrongly to the conclusion at which the District Judge has arrived.
There is no need to refer specifically to certain subsidiary argumentsbased on some of the documents produced all of which were directed toshow that the parties could not have regarded these transactions as realbargains for the sale and purchase of rubber, since for the reasons alreadygiven it seems to me that the learned District Judge arrived at a correctconclusion when he held that they were wagering contracts.
Our law relating to the sale of goods is to be found in Ordinance No. 11of 1896 and in a casus omissus we are directed to apply the English lawin determining any question which may arise in regard to the sale ofgoods. But the question whether a wagering contract, though in form acontract for the sale of goods, or a claim in respect thereof is enforceableby action must be determined with reference to the law of Ceylon.
The legislature of Ceylon has declared lotteries to be a common nuisanceand against the law—vide Ordinance No. 8 of 1844; so also unlawfulgaming has been penalized by Ordinance No. 17 of 1899. In recent timeslegislation has been passed prohibiting the receipt or negotiation of betson horse races except taxable bets, i.e., bets on a horse race run or proposedto be run upon a registered racecourse—Ordinance No. 9 of 1930. Thereis no legislation which prohibits betting or wagering generally. It wouldseem, therefore, that in Ceylbn a wagering contract is not made illegal inthe sense that is punishable by law. It is, therefore; necessary toinquire what the attitude of the common law is towards such contracts.Grotius in his treatise on the Jurisprudence of Holland, book III., ch. III.,
GARVIN S.P.J.—Tarrant v. Marikar.
s. 48, says: —“ Hereupon a doubt arises whether wagers, that ispromises made upon a condition, when there is no evidence of an intentionto give, and no other contract is involved in the transaction, are bindingor not: this matter is held to be disputable as regards the Homan law,but with us it has been decided in the common interest that all such wagersare devoid of effect, unless there are reciprocal obligations and the partieshave some interest in the event, which is the case in contracts of assurance.Otherwise, what has been given or paid may be demanded back ”. In anote Grotius adds:It is for the interest of the State that people should
not waste their property in such useless and absurd wagers.
Van Leeuwen in his Commentaries on the Roman-Dutch Law, book IV.,ch. 11, s. 13 after stating that a promise to do something may becompelled to performance by imprisonment except promises, with respectto things in which “ we either have not or cannot have any right or springfrom immoral and dishonest causes or are contrary to public policy andgeneral law ”, says, “ In like manner, no action lies among us in cases ofgambling and for whatever is stipulated or promised from such a cause;nor in the case of a wager, which depends on a bare accident, and is notmutually beneficial
The same author when dealing in Book XIV. states in sections 4 and 5—“ In like manner, whatever any one has given for an unlawful or otherwisedishonest purpose, that is if the improper purpose is on the side of thereceiver alone, may be demanded back. Even where the transaction hasbeen completed, just as if it had been tacitly stipulated that what the lawsdo not permit the receiver to retain, must be given back. But if theimproper purpose be on both sides the payment made thereunder holdsgood.
" For this reason the winner in gaming, or gambling, cannot lawfullyrecover his promised winnings, and on the other hand, he, who has oncepaid, has no right to receive it back; so much so that he who lendsanother money with which to gamble or wager has no right to claim itback again
Van Leeuwen refers to the Statutes of Leyden of the year 1583, whichenacts that no action lies on gambling, although bonds have been given inconsequence thereof, founded on this same or any other cause, and adds:“ Of the same nature is wagering, which with us is subject to the samelaw, and concerning which there are likewise in different places specialenactments; except where it is of such a kind that it promotes the beiiefitand interest of both parties, as in the case of insurance, bottomry andthe like ”.
Schorer in his Notes on Grotius1 Treatise dissents from the view thatunder the Civil law wagers were invalid and expresses the opinion thatthey were valid except where prohibited, but he states of Grotius* opinion“ that it was so advised at Utrecht on the auhority of Grotius
Groenewegen to whose work I have no access presumably held thesame view as Grotius. Whereas Van Der Keessel (Thes. 514) says thatthough it cannot be proved from the general laws enumerated byGroenewegen that all wagers are prohibited in Holland, it would appear
GARVIN S.P.J.—Tarrant v. Marikar.
that causes are very rarely decided upon such wagers. May it not be fairlypresumed that such causes were “ rarely decided ” because the prevailingopinion was that of Grotius?
Van Leeuwen in his Censura Forensis, 1.4.14, expresses much the sameopinion as Schorer but concludes as follows:—“But I should not dareto affirm this in opposition to Grotius”. We know from the passagescited earlier from his Commentaries on the Roman-Dutch Law that VanLeeuwen’s views crystallized into a form identical with the opinion ofGrotius which was accepted at Utrecht and Leyden.
Lastly there is the opinion of Voet. A perusal of his Commentaries onthe Pandects, Book XI., tit. 5, leaves no doubt as to his opinion that wagerswere prohibited under the Civil law. In XI., 5.7, he says: “ Nor is theobligation for losses in gambling which have not yet been paid but onlypromised and in respect of which the winner has taken security from theloser strengthened by the fact that the wagerer has perhaps givensureties or pledges to his winning fellow gambler as security for the amountof the loss, since the whole of the principal obligation depending on thewager is condemned by Roman law and custom. Nor ought the pledgeof the added parties to be binding nor should a successful right of actionbe granted against the sureties and such others, but leave should ratherbe given for the recovery of the pledge even if the loss has not beenpaid
In section 8 Voet states that the rules as to payments and promises asbetween those who gamble together are applicable to those who enterinto contracts in respect of the victory of the players.
He then refers to the opinion of “ Christineus and others ”—Christineusbeing one of those relied on by Schorer—“ that these agreements werenot disapproved of just as though the purchase of a risk was consideredto be thereupon contracted for and the price of the risk agreed upon,rand says, “ it is not possible for one who examines D 1-5 more closely notto approve rather of the contrary opinion for the reason that the price ofthe risk is there permitted to be agreed upon only provided it does notresemble a gamble; but there is no doubt that an agreement made inrespect of a game of chance and its uncertain and fortuitous resultresembles a gamble and moreover, the consideration (causa) for thisagreement is clearly immoral (inhonesta) and does not permit the agree-ment to be effectual
Later Voet refers to conditional stipulations which are valid both underthe Roman law and the “ laws of to-day ” and remarks, “ Yet reciprocalpromises constituting an agreement in respect of the same chance,whether it is present or absent, are not therefore valid for the reason thatthey begin to take on the nature of a prohibited gamble
I would herd acknowledge my indebtedness to Mr. Advocate Wickrama-nayake who during the argument prepared a translation of the titles ofVoet relating to wagers and made it available to us.
It would seem therefore that Voet holds the same opinion as Grotius.He excepts certain unilateral conditional stipulations but brings all
GARVIN S.P.J.—Tarrant v. Marikar.
reciprocal promises constituting an agreement in respect of the samechance, “ whether it be present or absent ”, within the rule that wagersare invalid.
It may be presumed that some forms of wagering were tolerated andnot prohibited or penalized. And there are indications, notably in Schorer,of a school of thought favourable to wagers so long as they were notimmoral or dishonourable. But there is no clear authority for theproposition that in the provinces of the United Netherlands wagers wereenforceable at law. Evidently Utrecht and Leyden, the two principalseats of learning, accepted the law as stated by Grotius, who is supportedby Van Leeuwen, and Voet than whom “ no greater authority could beproduced ”. As in South Africa so also in Ceylon in case of a conflict ofauthority the opinions of Voet would usually be followed.
The weight of authority seems to be in favour of the opinions of Grotiusthat “ in the common interest ” wagers are devoid of effect, unless theyare of such a kind that promotes the benefit of both partis as in the caseof insurance.
Judicial decision in South Africa favours the opinion of Grotius thatCourts should not enforce wagering contracts, Dodd v. Hadley and EstateWege v. Strauss
I have searched in vain for any instance of an action to enforce a wagerin the Courts of Ceylon. Looking back over the last 30 years I cannotrecall an action to enforce a wager or even the suggestion that such anaction might be maintainable under our law. There is however a recentcase, Swaminathan Chetty v. Gordon Douglas3, upon a kindred point. Theplaintiffs there had lent money to the defendants who were carrying on abusiness as turf commission agents and who agreed to give him a shareof the profits as part consideration for the loan. It was held that theplaintiff was not entitled under our law to recover a loan granted for thepurpose of wagering. The decision was reached on the footing that theRoman-Dutch law applied and is based largely on Van Leeuwen.
There is therefore at least one decision of our Courts by a bench of twoJudges which proceeds upon the view of the law approved by Grotius,Voet, and Van Leeuwen. I see no reason to doubt that our common lawis and always was that wagering contracts were not enforceable at law asbeing contrary to public policy. Does the circumstance that this actionis based upon a bond make any difference? An argument was addressedto us which obviously was based upon the decisions of the English Courtsthat a just promise based upon a good consideration is not a wageringcontract within the contemplation of 8 & 9 Vic. c. 109, s, 18and that an action may therefore be based thereon. What is this newconsideration ? I
I hope I am doing no injustice to counsel when I say that it appearedto me that he had great difficulty in stating of what this new considerationconsisted. It was said that it was the plaintiff’s forbearance to sue;
1 4 Transvaal L. R. S. C. 439.* (1932) S. A. L. R. (App. Div. 76).
#3 (1931) 32 N. L. R. 293.
GARVIN S-P.J.—Tarrant v. Marikar.
that it was this forbearance to sue coupled with the concession of time topay till the end of the year; that this concession must be viewed in thelight of the defendant's confidence that the rubber market would recoverand that he would in that time be able to recoup his losses and thatanother factor was that the plaintiffs would continue to do business duringthat period on the basis of the contract referred to in P 28 which was interms thereof to run till the end of the year 1930.
Whether the evidence justifies the conclusion that this bond was givenunder any such circumstance is a matter which I shall consider later, butassuming that there is evidence of all this does it constitute good con-sideration for a fresh promise? Now the mere giving of time to pay thatwhich is not enforceable is not consideration : “ to give time for a pay-ment that cannot be enforced is nothing at all ”—Farvell L.J. in Hyamsv. Stuart King’. The same observation applies to forbearance to sue fora wager for which no action is maintainable in a court of law; forbearanceto sue and the giving of time are merely different terms for the sameforbearance. Nor am I impressed with the argument that forbearanceto sue in respect of a claim unenforceable at law though it is not of itselfconsideration becomes consideration if it is exercised in circumstanceswhich afford the other party an opportunity to recoup his losses. Everysuch forbearance presumably is intended to give the other party time inwhich to find the money he is not in a position to pay at the moment.Lastly, if the contract P 28 is a wagering contract—the assumption withwhich this examination of the law commenced—the undertaking tocontinue to do business on the basis of that contract for the rest of the yearis in effect an undertaking to continue to wager with the defendant whichin the absence of definite auhority to the contrary cannot be regardedas good consideration for the payment of a wager which became payableand was unpaid.
It was finally urged that at the time the bond was given neither partyregarded the claim as justly due and owing. But if the transactions werereally wagering transactions, the claim, being for money won by theplaintiffs, was not enforceable at law. If forbearance to sue for a claimdeclared by law to be unenforceable is not good consideration for apromise to pay money, I cannot think that it becomes good considerationfor a promise to pay, because the parties thought that the claim wasenforceable.
But this bond was given purely to secure the payment of the claims oneontracts P 1 and P 28 which have been found to be wagering contracts.Mr. Walsgrove says:“ These accounts were not paid although we asked
for payment several times. I saw the defendant personally. He pro-mised to pay but failed to pay. I consulted my lawyers, Messrs. P. D. A.Mack & Sons, and I got this letter dated March 8, from Messrs, de Vos &Gratiaen who were defendant’s lawyers. Then the proctors arrangedmatters between themselves and it was arranged that a bond should begiven ”.
' (J90S) 2 K. B. 696 at p. 726.
GARVIN S.P.J-—Tarrant v. Marikar.
The letter referred to is in the .following terms : —
“ This gentleman (i.e., the defendant) saw us to-day in connection
with the amount due to you. We will write to you more fully on this
Mr. Mack says he was consulted by Mr. Walsgrove of Messrs. Tarrant &Co. The claim was in respect of contracts of sale of rubber. The defend-ant had made default and he was asked to safeguard Tarrants’ position.Tarrants wanted to sue the defendant who was anxious to gain timebecause he had great faith that the price of rubber would go up after sometime. Tarrants agreed to take security and give time. This bond wasaccordingly drawn up for the amount of the bills and interest and wasduly executed.
This is all the evidence adduced by the plaintiffs and all that it amountsto is that as the defendant wanted time to pay the claim the matter wassettled on the basis that the plaintiffs should give him time and that heshould give security by bond and hypothecation of property to pay theclaim. The defendant’s position is that as at that time he had not muchcash and was slightly embarrassed for lack of money he gave this bond forthe amounts he had to pay Tarrant & Co. on these contracts.
This is merely a case of a person who was not in a position to pay aclaim giving security for the payment of that claim. If the claim wasone which' arose out of a wagering transaction, then what the bond wasgiven to secure was the payment of that claim.
I gravely doubt whether assuming that the English law applied anaction could be maintained in the circumstances of this case in any Courtof law or equity to recover what is palpably money won upon a wager.
But it is the Roman-Dutch law which governs the case, and under thatsystem wagering contracts are unlawful in the sense that they are contraryto public policy. Had such contracts been contrary to public policyunder the common law of England it remains a question whether the Courtwould have permitted the recovery by action of what is in substance awager even though presented as a claim upon a contract based upon goodconsideration. Since, however, it is the Roman-Dutch law which appliesthe question for us is whether there is justa causa for the promise to pay.What the defendant has promised to pay by the terms of this bond is nowadmitted to be the amount due on the contracts P 1 and P 28 or in otherwords the amounts won on these wagering contracts.
The circumstances under which this bond was given have been referredto earlier—it is merely a case of a person who was unable to pay beingpressed or persuaded to give security for the payment of his debt—thedebt in this instance being the amount of his losses on wagering contracts.
This is in effect a second promise to pay a wager secured by hypothe-cation of property and as such is unenforceable-^-oide Voet XL, 5, 7. Thepromise relates to a matter in regard to which no lawful contract can b?made—wagers being unlawful as being contrary to public policy—andno justa causa exists for the promise.
The appeal fails on all grounds and is accordingly dismissed with costs-
AKrXr —Tarrant v. Marikar.
:C — -4- ..t… —, .
This was an action on a mortgage bond for the recovery ofRs. 109,112.59 and the appeal is from an order of the District Judgedismissing plaintiff’s action with costs on the ground that the bond wasvoid and unenforceable because it was for a consideration which wasillegal or in other words that the agreement was in the nature of a wageringcontract. It appears that there were two forward contracts for the saleof rubber, F.A.Q. sheet or crepe, by the plaintiffs to the defendant, P 1dated November 20, 1929, by which 100 tons of rubber were sold at thefixed rate of 44 cents per pound delivery to be given in January, 1930,and P 28 dated April 28, 1929, for the sale of 600 tons, F.A.Q. sheet orcrepe, at 62 cents per pound delivery from January to December, 1930, at50 tons per month.
According to the evidence of Mr. Walsgrove who was examined de beneesse for the plaintiffs, defendant made default in accepting delivery of therubber under these two contracts, and the defendant entered into themortgage bond A sued upon to secure the payment of the sums due onthe two contracts till March 11, 1930, and it is on this bond that theplaintiffs sue.
There are three questions which arise in this case, one on a question offact, and the other two on questions of law. The question of fact iswhether the contracts P 1 and P 28 were wagering contracts to theknowledge of both parties (see the summing up of Cave J. reported inUniversal Stock Exchange, Ltd. v. Strachan'). The questions of law are,firstly whether assuming that P 1 and P 28 were wagering contracts tothe knowledge of both parties are such wagering contracts void andunenforceable under our law and secondly, even so, was there fresh•consideration for the mortgage bond now sued upon to make it valid andenforceable. Let me deal with these three questions in the order statedby me. On the question of fact the learned trial Judge held that thecontracts were wagering contracts to the knowledge of both parties andthere is ample evidence to support his finding. As' it was pressed inappeal that the District Judge was wrong in his finding it is necessarythat I should state my reasons for thinking that this finding of fact wascorrect.
It will be noticed that the bond A gives a fictitious reason for itsexecution. The words are : “ I, the above-bounden obligor, am indebtedto the said obligees in the sum of Rs. 101,462.63 for money borrowedand received by me from them, which said sum of money it has beenagreed should be secured by these presents, &c. ”. Admittedly no moneywas borrowed by the defendant and the real cause of action alleged byMr. Walsgrove is that the sums of money were due on P 1 and P 28 inrespect of sales of rubber.
The defendant himself stated in his evidence that before these contractswere entered into he had previous forward contracts with the plaintiffs forabout two to three years from 1926 to 1927 and that he entered into these
1 (1S96) A. c. 166.
AKBAR J.—Tarrant v. MtNrtkar.
forward contracts* with a view to speculation. .He used to buy and sellabout 500-1,000 tons of rubber for a month' and s^l the transactions onforward contracts were mere paper contracts as there was no delivery ofrubber either by defendant or to him and on the due date payment wasmade on the differences, because immediately after the sale by one to theother there was a cross-sale from the latter to the former to obviate anynecessity for the delivery of any rubber sold or bought. He also statedthat his brokers, Philips and Vangeyzel, put through a large number offorward contracts on his behalf between him and the plaintiffs, and for aperiod of about two years (1927-30) they bought and sold about threethousand to four thousand tons of rubber on his. behalf.
Defendant stated that although he owned rubber estates he was not ashipper of rubber and that it was only in the case of spot sales rubber wasdeliverd and money paid. The defendant practically challenged theplaintiffs to produce a single letter or a delivery order signed by him toshow that on forward contracts he had ever accepted delivery of rubberor made delivery.
Mr. Walsgrove’s evidence on these points goes a long way to corroboratethe defendant. Let me quote a few passages :—“ We did not actuallydeliver the rubber to the defendant in respect of these contracts, wemerely made the tender in reference to the contracts. The tenders werenot accepted when they were made. Before the tender and after it therewere other transactions with the defendant which were set off. Theywere deliberately intended to set off the amounts due under the contracts.Defendant did not take delivery of anything under these contracts. Ineach of the cases there was a set off and the amount due was the differenceon the contracts between the parties. That was so in respect of thesubsequent contracts. We have only particulars of the January portionof the old contract. I can speak to the earlier contracts as well. I amnot sure whether the old contract is only for January delivery. If theJanuary delivery is for 100 tons then that is correct. Always on the dayof the tender there were cross-sales. The cross-sales >were not immediatelyafter the tender but within a day or two. The first tender under P 1was on January 3, 1930, P 2. On January 6, 1930, there was a cross-purchase. The writing in pencil in P 21 at the corner is a clerk’s writing‘ set off against H. P. B’s contract, &c. ’ dated January 10, 1930. Icannot say whether the cross-purchase was at our instance or defendant’sinstance. It is the customary thing to set a contract off by anothercontract at the market rate. If the buyer wishes to sell it back and theseller wishes to buy, then the contract for purchase is passed. Thedifference would be between the contract price and the market price onthe day on which payment is due.
“I do not know of any instance where the rubber was taken by thedefendant himself and put into his store. There have been contractsfor purchase by the defendants and sales to us by the defendant in manyinstances. I distinguish between rubber being paid for and rubber bemgset off. If rubber is paid for, the money would pass and the delivery orderwould issue. In the case of differences there is a set off, my contract36/14
AKBAR J.—Tarrant v. Marikar.
against his contract, and one or the other pays the difference. We havehad several contracts of that kind with the defendant previously. Therewere large numbers of such contracts in which we had sets off like that.
I know that people enter into contracts for a larger amount of rubberthan their estates could produce. It would have been an exception tothe rule if there was an actual delivery of rubber. We did not usuallyexpect a contract for resale to be entered into. In cases where he sold tome on forward contracts, the same custom did not prevail, I wouldinvariably take the rubber as I was a shipper.
“ We had to keep to the rules otherwise we could not go on trading.We contemplated that there was (not) a possibility of his not takingdelivery of the rubber by his asking us to enter into a contract of salefrom him. That was not contemplated at the time the contract wasentered into but that would be decided at the time of tender as to whetherthere would or would not be a delivery and whether there would be a setoff. Even if it was not to our advantage to have the set off I would stillhave a set off. When the balance has been in favour of the defendant wehave set off and paid the difference to him. That happened in 1929 veryfrequently. He would sell to me and I would owe him the difference andpay him. If he was selling to me on a forward contract and at the timeof tender it is disadvantageous to me to have set off I would accept therubber. In the case where he buys from/sells to me and the contractwas advantageous to him he would resell to me and take the difference.When it is to our advantage not to take up the contract, pricehaving fallen, it is because I did not want the rubber. Where we buyfrom/sell to him and we could not get the rubber, we resell to him at adisadvantage.
“ In the case of the 600-ton contract it was not our wish to have thesesales : we wished to have our accounts settled, and the only way we hadout of it was by having these cross-sales. There is no other way ofsettling the accounts if the man does not take the rubber. It is becausethe defendant continually promised payment of these accounts that wedid not at once sue him. This system of cross transfers went on formany years but he did not owe us money, not until these contracts. In1928, and so on, perhaps we paid him on some and he paid us on somecontracts. We did not sue him in January because he promised to payus the difference, which is our damages. The question of set off came intoplay after the default. After the default,of each instalment I should say.In the case of each tender the question of set off would occur between thedate of tender and the date of set off. Contracts would probably passbetween us between the purchase and the set off. ”
Mr. Walsgrove’s evidence shows that there were forward contractsprevious to P 1 and P 28 in which no delivery was ever made to thedefendant and that there was a set off by the system of cross-sales andpayments were made to or by the defendant on the differences—thedifference being between the contract price and the market price on theday on which payment was due. This happened even when the marketprice happened to be above the contract price, which happened frequently,according to Mr. Walsgrove, in 1929. This shows the real nature of these
AKBAK J—Tarrant »*. ManiuJ-.
contracts. If the defendant never accepted delivery then there was abreach of the contract on his part and the plaintiffs need not have paidanything to the defendant and could have kept the rubber themselves.And yet the plaintiffs in such cases actually bought back their own.rubber from the defendant on this system of cross-sales even when themarket price rose above the contract price and paid the difference betweenit and the contract price to the defendant. When P .1 and P 28 com-menced the price was falling and when the defendant refused to acceptdelivery of any of the tenders, there was a breach of the contract onnon-acceptance of any one of the tenders and yet when the defendant’sbrokers sold these lots back to the plaintiff they bought these lots at themarket price and sent in their accounts for the differences.
This is not all. These sales of rubber were regulated according to theChamber of Commerce rules, according to Mr. Walsgrove, and under theserules a tender was necessary in all forward contracts (see rule 12), andthe form of the tender is given in the rules (see form 3). All the tenderwere made by the plaintiffs in this form. On P 1, tenders were made byP 2, P 4, P 6, and P 8 on January 3, 1930, and the payment was to beprompt (see P 3, P 5, P 7, and P 9), i.e., under rule 12 and rule 7 (d)three days were given for payment. According to P 3, P 5, P 7, andP 9 payment was due on January 7, 1930, and yet before payment wasdue, on January 6, 1930, by P 21 and P 22 the plaintiffs by cross-salesbought back the 60 tons sold to defendant by plaintiffs at the marketrates prevailing on what day it is not quite clear, but it must be January6, 1930, and the account sent* in is for the difference (see P 20) of January10, 1930.
The tenders on P 1 were 9 in number (P 2, P 4, P 6, P 8, P 10, P 12,P 14, P 16, and P 18) and were for 100 tons plus 47 lb. and the cross-saleswere on P 21, P 22, P 23, and P 24 and amount to 110 tons. It may benoted that on P 21 and P 22 the delivery was to be made immediatelyand on P 23 and P 24 delivery was to be in January, 1930. The courseof business pursued on these contracts corroborates the opinion of thetrial Judge that these words relating to delivery were meaningless becauseno delivery was ever contemplated.
On P 28 the January tender was made by P 29 for 50 tons plus 90 lb.and the cross-sale was made on January 9 by P 37 for 50 tons, the 90 lb.excess being ignored and the date being two days after prompt date. InP 37 there is the fictitious entry that delivery was to be “ Ex Stores Spot ”and “ Payment against tender (set off) ”. Thirty tons of the Februarytender was made by P 31 of February 6, 1930, the prompt date beingFebruary 10. The cross-sale was made by P 39 on February 10 not forthe 30 tons but for the full 50 tons and the balance 20 tons still duefrom the plaintiffs on the February contract was set off against thisexcess on the cross-sale on February 14 by P .33 after a cancellation ofsome earlier set off and the plaintiffs, claimed for the difference by P 34(or P 41). In P 39 the delivery of the 50 tons was to be in Februaryex stores but the words “ set off ” appear in brackets and the paymentwas against tender.
AKBAR J.—Tarrant v. Marikar.
I think I have said enough to show that these cross-sales were undis-guisedly and admittedly fictitious. They were entered into with theconcurrence of the plaintiffs when there had been a definite breach of thecontract by the defendant. When one finds this occurring in everyinstance for a period of three years and even when the market price roseabove the contract price, necessitating the payment of money by plain-tiffs to defendant, the reasonable inference that one can draw from thiscourse of business is that the understanding was to pay on the differ-ences with no delivery of rubber (see section 15 of Ordinance No. 14of 1895).
Mr. Walsgrove spoke of a custom provided for in the rules by whichthe buyer could invoice back to the seller at the market rate when thereis a breach. But there is no such rule when the buyer is the defaulter.Rule 15 is the only rule, and that only applies when the sellerdefaults.
The plaintiffs have taken great pains in this case to show that everytender they made was with regard to specific lots which they had boughtat public auctions and were easily traceable. The first comment that onecan make is that such tenders were necessary under the Chamber ofCommerce rules under which all these sales were conducted (see OrdinanceNo. 10 of 1395) and the fact that plaintiffs were shippers of rubber on a bigscale [they had no less than 2,500,000 lb. of rubber at the SuduwellaStores, which was admitted by counsel for the appellants as being theplaintiffs’ store, in February (see evidence of Mr. W. C. Wishart) ] enabledthem to make fictitious tenders to keep within the Chamber of Com-merce rules.
The plaintiffs knew that the defendant was not a shipper and that hehad a small store. They also knew that the defendant was dealing verylargely in rubber, buying and selling them on forward contracts andapparently on a large scale for a Ceylonese capitalist and that he wasnever taking any delivery of rubber sold to him. By their readilyagreeing to the cross-sales, sometimes even before the prompt date, theplaintiffs must have known that the defendant was speculating ondifferences and they did everything in their power to smooth the way forthe defendant in his speculations. This opinion of mine is confirmed bycertain other facts disclosed in the evidence.
By P 35 of March 4, 1930, the plaintiffs tendered the 50 tons of rubberfor March and the reply P 49 of March 5 is significant. The reply is tothe effect that defendant is sorry he “ is compelled to delay your chequefor. the difference this time. I am making arrangements to get money topay you and I hope to be able to do so in a short time. I shall settleyour claim with the least delay, believe me. I quite appreciate yourpatience in my matter and thank you very much for same”. There isno mention of his inability to accept the delivery; his regret is for hisinability to pay the difference this time. As defendant had failed tomake any payment on the differences on P 1 and P 28 the words “ thistime ” can only mean “ in contrast to our previous dealings ”. What isthe reaction of the plaintiffs to his letter? There is no protest from the
AKBAR J.—Tarrant v. Marikar.
plaintiffs of the breach of the contract to accept delivery but the wholematter is entrusted by plaintiffs to their proctor, Mr. Mack. Mr. Macksaid: “ At that time Tarrant’s position was that the defendant owedthem a considerable amount of money. He had defaulted on the amountagreed on …. I was asked to make an endeavour to safeguardTarrant's position. I corresponded with Mr. de Vos, defendant’sproctor . . .
On March 6 defendant’s proctors wrote P 44 direct to plaintiffs and theproctors met and discussed. On March 10, 1930, followed the inevitablecross-sale of the 50 tons (see P 42) with the fictitious entry, “Deliveryex Store Spot (set off) Part contract 1821. Payment—Differenceand the account P 27 was made up for Rs. 101,462.63 including intereston the differences ; and the mortgage bond A entered into with the incorrectrecital that the sum was due “ for money borrowed and received ” by thedefendant from the plaintiffs. The bond P 2 dated July 15, 1930, forthe subsequent operations on P 1 and P 28 states definitely that thefurther sums were due on P 28 and might become due on P 28. Themethod of calculating these further apprehended damages was still thesystem of differences (unless of course the defendant accepted delivery)for the defendant bound himself to resell to plaintiffs on the 5th day ofeach month at the current market price on that day, and, if he failed toresell, the ruling price of rubber on that day certified by a recognizedbroker was to be conclusive on the question of damages.
Mr. Walsgrove said in his evidence that at the time of the contract P 1and P 28 they entered into contracts in England to purchase rubber tocover themselves against the contracts P 1 and P 28. If the rubbertendered to defendant was meant by the plaintiffs for delivery to defend-ant, the fact that they rebought it by cross-sales from defendant perhapspoints to other transactions where this surplus will come in useful,especially as some of the cross-sales took place even before the promptday of the tenders on a market where prices were varying. The inferenceis that the transactions with defendant were entirely transactions ondifferences and that the rubber was wanted by plaintiffs for other contractson which they had to supply.
All the cross-sales were effected by brokers on bought and sold notesand the defendant stated in his evidence that the brokers knew thatdefendant never expected to accept delivery or to make it and that thesewere the instructions given by him. If so, it is a question whether thebrokers’ knowledge was not that of the plaintiffs on these cross-sales. Itis not necessary to consider this question, because in my opinion thelearned District Judge appears to have been right in coming to theconclusion that these were wagering contracts to the knowledge of bothparties when the position of the parties, their course of business beforethese contracts and during them, the documents, the conduct of partiesand other relevant circumstances are considered and weighed. This, isin accordance with the judgment of the House of Lords in Universal StockExchange, Ltd. v. Strachan
1 (1896) A. C. 166.
AXBAR J.—Tarrant v. Marikar.
The fact that the plaintiffs were in a position to supply the rubber onthe tenders is no answer to the question whether these were wageringcontracts. It is an element which must be considered along with theother circumstances in the case and the District Judge has taken thisfactor into account (see also the Indian cases, Partabchand v. Jeychand and Molldh v. Mollah ’) and I cannot say that he was wrong.
As regards the two questions of law which arise in this case, the firstis the question as to the law applicable to the case. There are no Ordi-nances prohibiting ordinary wagering in Ceylon, and the law that wouldgovern wagering contracts would therefore be the Roman-Dutch law.It was held in the local case of Swaminathan Chetty v. Douglas * that in thecase of a gaming or wagering contract the law applicable in Ceylon wasthe Roman-Dutch law and that under that law moneys paid on suchcontracts were not recoverable.
There can be no doubt that if the real transactions covered by P 1 andP 28 were agreements to pay on differences without delivery of therubber such agreements would be wagering contracts (see Universal StockExchange, Ltd. v. Strachan (supra) and 2 Nathan (1904 ed.)t p. 554).What is the Roman-Dutch law in force in Ceylon with regard to wageringcontracts ? The Roman-Dutch law on the subject is discussed in twoSouth African cases, Dodd v. Handley * and Estate Wege v. Strauss3.Innes C.J., in the former case quoted from Grotius (3.3.48) as follows : —“ It has been decided with us for the general good that such wagers areinvalid, unless there is an obligation on both sides, and unless the con-tracting parties have an interest in the consideration, as in the case withan insurance ”. Schorer disagrees with him (note 312) but he adds asfollows: “ But by the Civil law Grotius says they are null and void ongrounds of public policy, and it has been so advised at Utrecht on theauthority of Grotius”. In a note to 3.3.48 Grotius adds that it is forthe interest of the State that people should not waste their property insuch useless and absurd wagers. In 3.30.13 he states that “ althoughevery one is by natural law master of his own property and actions,municipal law does not allow people to use the same to their own injurywithout any benefit to the general public, as was stated above withreference to the case of wagers Van Leeuwen agrees with Grotius(2 Kotze, 1923 ed., pp. 29 and 117).
Voet discusses the question in XI. 5-7, 8, 9. In section 8 Voet speaksof wagering contracts and says that agreements made in respect of agame of chance and its uncertain and fortuitous result resemble agamble and the causa is inhonesta and does not permit the agreement tobe effectual. He then goes on to say that agreements in respect of anyfuture matter the result of which is doubtful and uncertain, and does notdepend on human industry and skill but on chance, were put on the samefooting as games of chance. For instance, when the turpitude of thecontracting parties is equal, the state of the. person in possession is betterthan his who brings the action whether the profit on the agreement offered
32 N. L. R. 293.
* Transvaal f<. 7t 4 39.
* (1932) Snuth African L. R. A. v. 7f>.~
1 30 Bombay 83.
* 29 Calcutta 4S9.
AKBAR J.—Tarrant v. Marikar.
to the winner has been paid or promised. Reciprocal promises consti-tuting an agreement in respect of the same chance, whether it is presentor absent, are not therefore valid—according to Voet—for the reason thatthey begin to take on the nature of the prohibited gamble.
In section & Voet speaks of stakes in a wager and he ends by sayingthat the causa for such an agreement is inhonesta as it appears to be in thecase of a game of chance, as stated before.
I have given this long extract from Voet to show that in his opinion awager was on the same footing as a game of chance and that therefore thecausa was inhonesta, and that the law did not allow such contracts. Ifwe keep in mind what Grotius said, namely, that such contracts weremade invalid for the public good it becomes clear that such contracts werenot merely unenforceable but forbidden by the Roman-Dutch law,unlike the English betting contracts (see Universal Stock Exchange, Ltd. v.Strachan (supra) ).
In the two South African cases the opinion of Grotius and Van Leeuwenwas followed in preference to that of Schorer and there can be no doubtthat the same preference ought to be shown to them in Ceylon too. Butunlike the law in South Africa, which appears to have been settled by along series of cases (in the words of Innes G.J.: “ The general current oflegal decision in South Africa ”), where it was- held that wagering contractswould not be enforced—the Roman-Dutch law in Ceylon would appear togo further and appears to be that such contracts are forbidden by law orare immoral.
But, even if the common law be as stated in the South African cases,wagering contracts as disclosed on the transactions on P 1 and P 28 areunenforceable in our Courts, Then there remains the question whetherthe mortgage bond, A was valid because there was a new contract. Inthis connection we should keep in mind that the plaintiffs’ instructions totheir proctor, Mr. Mack, was merely to safeguard the position of theplaintiffs. The bond A, a mortgage bond under the Roman-Dutch law,was a collateral security to secure the principal debt. The Englishdecisions seem to me to be clear that mere time given to pay an unenforce-able debt was not a good consideration.
In the words of the President (Hyams v. Stuart King *) “ the mere givingof time to pay that which cannot be enforced does not amount to con-sideration ”, and in those of Farvell L.J. “ to give time for a paymentthat can at no time be enforced is nothing at all ”.
There is no evidence at all in this case of a threat to post up or ruin thedefendant if he did not give the bond, which the Court held in the abovecase to be a sufficient consideration to validate a new agreement.
There are several English decisions on this point, Hyams v. Coombes *;Hodgkins v. Simpson*; Cohen & Co. v. Ulph & Co.*; Burrell v. LevenK;Chapman v. Franklin *. If the Roman-Dutch law is applied the positionis worse. Liabilities due on wagering contracts were not regarded asdebts of honour under the Roman-Dutch law, nor were they regarded asvalid under our common law as they were under the English common law.
1 (1908) 2 K. B. 696.4 25 T. L. B. 710.
28 T. L. R. 413.* 42 T. L. R. 407.
25 T. L. R. 53.• 21 T. L. R. 515.
AKBAB J.—Tarrant v. Marikar.
Kotze In his Treatise on Causa (p. 31, and also see 2 Kotze’s Van Leeuwen,1923 ed., p. 604-616) discusses the whole question and he is of the opinionthat there must be a reasonable or legitimate cause for the agreement,
e., it must not be contra legem aut bonos mores.
As I have already pointed out Grotius, Voet, and Van Leeuwen say thatsuch contracts are null and void as they are not for the public good, andas the causa is inhonesta. Voet as a matter of fact uses the words “ nonlicet ” and even “ turpis(See in this connection Van der KeesseTs Thesis
484 and 2 Kotze, 614).
In my opinion the judgment of the District Judge was correct and theappeal should be dismissed with costs.