GENERAL SALES COMPANY LTD v. SRI KRISHNA CORPORATION LTD

001-SLLR-SLLR-2005-V-1-GENERAL-SALES-COMPANY-LTD-v.-SRI-KRISHNA-CORPORATION-LTD.pdf



scGeneral Sales Company Ltd V.
Sri Krishna Corporation Ltd (Bandaranayake, J.)
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GENERAL SALES COMPANY LTDV
SRI KRISHNA CORPORATION LTD
SUPREME COURTBANDARANAYAKE, J.
DE SILVA, J. ANDJAYASINGHE, J
S. C. (CHC) APPEAL NO. 25/99H.C. (CIVIL) NO. 47/96(1)
28th MARCH, 16m JUNE, 9th JULY AND 8m AUGUST, 2003
Landlord and Tenant – Landlord’s action for damages on the ground of defectsof the premises let – Defendant's counter claim.
The plaintiff took on rent a building from the defendant at a monthly rental of Rs.248,000/- for storage of rice expected to arrive in the Port of Colombo. Theplaintiff also paid a deposit of Rs. 1,488,000/- for the warehouse. The plaintiffcaused his agent to inspect the premises and later made suggestions foralternations including for entry of lorries, carrying rice to enter the building, andfor partitions and cubicles. The said alterations were effected in consequenceby agreement between parties.
Rice was brought into the warehouse in 30 ton lorries. Allegedly as a result thefloor cracked and at the defendant’s suggestion lorries weighing 20 tons onlywere used thereafter although this was not a condition of the agreementbetween the parties. Next, the plaintiff requested the defendant to fill up andcover cracks on the floor which does not appear to have been done. In fact, theplaintiff had notified the defendant that in the event of transporting rice into thewarehouse being interrupted plaintiff had to pay demurrage on the ship at U$$5000 a day.
The aforesaid dispute led to the plaintiff filing action for damages in a sum ofRs. 7,000,000/- and the deposit fo Rs. 1,488,000/-. The defendant alleged thatthe plaintiff vacated the premises on 31.03.1994; also that the defendantincurred expenses for making several alterations to the warehouse at theplaintiff's request.
The High Court took the view that since the plaintiff inspected the premisesand satisfied himself that the premises were suitable for the storage of rice, hecannot now claim damages from the defendant.
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Held:
The inspection of the premises by the plaintiff was only a visual inspection,but the evidence established that the premises were required for storage ofrice to be brought in heavy lorries. This was the understanding of parties.
The plaintiff is entitled to have his appeal allowed subject to a direction tothe High Court to assess the damages based on the plaintiff's claim as wellas the defendant’s counter claim of the rent and to enter decree accordingly.
APPEAL from the judgment of the High Court
Romesh de Silva, P. C. with Geethaka Goonawardane for plaintiff – appellant.S. L. Gunasekera with Kushan de Alwis for defendant – respondent.
Cur.adv. vult
November 14,2003
SHIRANI BANDARANAYAKE, J.This is an appeal from the judgment of the High Court dated
By that judgment the plaintiff-appellant’s action (hereinafterreferred to as the plaintiff) against the defendant-respondent (hereinafterreferred to as defendant) was dismissed. The plaintiff preferred an appealagainst that order to this Court.
The facts of this appeal, in brief, are as follows :
The plaintiff instituted action against the defendant, praying inter aliafor the recovery of a sum of Rs. 8,488,000/- together with legal interestthereon from the plaint till date of decree and thereafter on the aggregateamount of the decree till payment in full. In his plaint, the plaintiff hadpleaded the following;
the defendant was the owner of a warehouse;
the defendant was aware that the plaintiff wanted to rent awarehouse for the sole purpose of storage of rice;
. all negotiations between the parties were on the express knowledge
and undertaking that the stores would be used for the purpose ofstoring rice;
SCGeneral Sales Company Ltd V.
Sri Krishna Corporation Ltd (Bandaranayake, J.)
the defendant held out to the plaintiff that the premises were suitablefor the storage of rice;
the plaintiff on or about 01 st November, 1993 took on rent from thedefendant the said warehouse for the purpose of storing rice andpaid a deposit of Rs. 1,488,000/.;
the plaintiff thereafter stored rice in the warehouse;
the said warehouse was not suitable for the storage of rice;
in the premises aforesaid, the plaintiff suffered loss and damage whichthe plaintiff estimated at Rs. 7,000,000/-;
the defendant has failed and neglected to pay the said sum of Rs.7;000,000/- or any part thereof or return the deposit of Rs.1,488,000/- though thereto obliged to and though theretodemanded.
The plaintiff based his claim on documents filed with the plaint andthereafter produced in evidence.
The defendant had admitted that he was the owner of the warehousein question and the plaintiff stored rice in the said premises. He has alsoadmitted that the plaintiff paid a sum of Rs. 1,488,000/- as a deposit atthe commencement of the said tenancy.
The defendant in his answer took up the position that the plaintiffafter inspecting a newly constructed warehouse of the defendant found itsuitable for its purpose and took it on rent at a monthly rental of Rs.248,000/- on the terms and conditions which were set out in the tenancyagreement dated 01st November, 1993 (P6). The defendant furthersubmitted that at the request of the plaintiff, the defendant constructedoffice partitions/cubicles, security tower etc. at a cost of Rs. 205,700/-and installed additional lights at a cost of Rs. 28,000/-. The defendant alsostated that the petitioner had vacated the premises in question on31.03.1994 without notice to the defendant and/or without paying thedefendant a month’s rent in lieuoi notice and that the plaintiff failed andneglected to pay the defendant rent for the months of December 1993 toMarch 1994.
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Two questions were taken as main issues for determination by thelearned District Judge as well as the learned Judge of the High Court,which were as follows :
Whether the defendant was well aware when the premises weretaken on rent that the premises were used for the storage ofrice;
Whether the. defendant was well aware that the plaintiff woulddrive lorries into the premises.
The defendant took up the view that he has never dealt in rice orstored rice and is ignorant of the practices of the trade in the storage ofrice. His position is that he could have been held liable for the loss, if any,caused to the plaintiff by reason of the premises having been unsuitablefor the storage of rice only if the defendant had represented to the plaintiff-that the said premises were suitable for such purpose.
Be that as it may, on an examination of the correspondencebetween the plaintiff and the defendant it appears quite clearly that thedefendant was aware from the outset that the plaintiff needed a warehousefor the purpose of storage of rice. A fax message sent by Bala Emmanuel,who was the Sales Manager of the plaintiff Company at the time materialto this action, to Sri Kantha, the Business Development Manager of thedefendant Company dated 09.10.1993, refers to the purpose of using thesaid warehouse by the plaintiff (P2). The relevant portion of that messagereads as follows:-
“We refer to the discussions we had with you and thesubsequent visit the undersigned made to your warehousecomplex at Wattala. As advised to you on telecom yesterday weare pleased to confirm our interest to enter into an agreementwith your Company for renting of 31,500 sq. ft. of warehousinglocated at your factory complex at No. 102, Sri WickramaMawatha, Wattala.
We wish to take occupancy of the warehouse by the 1stof October in order to store a shipment of rice expected toarrive in the Port of Colombo between 15/17 October 93.
(emphasis added)”.
SCGeneral Sales Company Ltd V.5
Sri Krishna Corporation Ltd (Bandaranayake, J.)
The defendant on 01 st November, 1993, wrote to the plaintiff informinghim of the tenancy agreement and informed the plaintiff that,
"We are now pleased to inform you that we areprepared to lease the above premises
on the under mentioned terms and
conditions”
Clause II of the said agreement stated as follows :
"You shall use the said premises for yourbusiness and trade purposes including thestorage of rice”.
On an examination of the contents of the aforementioned letters it isclear that the plaintiff’s intention was to rent out storage space for storingof rice and the defendant was aware of the plaintiff’s requirement. LearnedJudge of the High Court, has taken the view that since the plaintiff inspectedthe premises and satisfied himself that the premises were suitable for thestorage of rice, he cannot now claim damages from the defendant.
Notwithstanding the above, the following issuse raised at the HighCourt on the contrary relate to the purpose of renting out the premises inquestion by the plaintiff, which clearly shows that such renting out wasfor the purpose of storing rice. All these have been answered by learnedJudge of the High Court in the affirmative.
“Issue 1 (a) during the period material to the action did the defendantknow that the plaintiff wanted to take the said premises onrent for the purpose of storage of rice ?
Answer: Yes
were all the transactions between the defendant and theplaintiff conducted on the basis that the said premises wouldbe used for the storage of rice ?
Answer: Yes.”
Sri Kantha, the Business Development Manager, of the defendantCompany, giving evidence stated that, before the plaintiff came intooccupation of the stores, the defendant was aware that the plaintiff’s
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intention was to store rice (pg. 314 of the brief) and that the said warehousewas rented out to the plaintiff with the clear knowledge that the plaintiffwould be using the premises for storage of rice. Bala Emmanuel, theSales Manager of the plaintiff Company, who had apparently inspectedthe premises stated in evidence that it was only a visual inspection andthat the question whether the warehouse was not suitable for storing ricecould not be decided.on a visual inspection.
The documents placed before the High Court indicate quite clearlythat the defendants were aware that the plaintiff intended to use the saidwarehouse for storage of bagged rice. This is further confirmed by theletter written by Sri Kantha as the Business Development Manager of thedefendant Company to the Director General of Customs, which is as follows
“Ref.: SKC/G/282/934th October, 1993.
The Director General of Customs,
WAREHOUSE COMPLEX ATWATTALA
This is to confirm that the warehouse complex at Wattala 31,000sq. ft. in extent has been leased to M/s. ITC Ltd., of 6-3-1110, Arumuthmall,Begumpt, Hyderabad 500 016, India through M/s. General Sales Co. Ltd.,7, Station Road, Colombo 03 to be used as a bonded warehouse underthe Customs Bonded scheme for storage and sale of bagged rice fora period of 12 months, commencing from 01 st November, 1993, as per theterms and conditions of the agreement (emphasis added).”
In such circumstances it is evident that the defendant was well awarethat their warehouse was taken on rent for the storage of rice. However,this does not mean that the defendant is solely responsible for the damagescaused to the stored rice.
The next question that has to be considered is as to whether thedefendant knew that the plaintiff would drive into the premises. LearnedJudge of the High Court, at the commencement of the conclusion of hisjudgment states that,
“It is my conclusion that at the very commencement of the
SCGeneral Sales Company Ltd V.
Sri Krishna Corporation Ltd (Bandaranayake, J.)
offer on P2 being made, the defendant was aware that trucks willbe taken inside the warehouse.”
Having said that, the High Court had proceeded to examine whetherthe defendant was aware of the weight of the lorries. However the defendant'scase was that they were not aware that vehicles were to be driven into thepremises and what was necessary at the High Court was to examine thecorrectness of the position taken up by the defendant.
In one of their initial correspondence, dated 09.10.1993 (P2) BalaEmmanuel in his letter to Sri Kantha, informed their needs, which clearlyindicated not only that the trucks would be driven into the warehouse, butalso that certain modifications will have to be carried out in order toaccommodate such requirements. These requests were in the followingterms :
“We wish to take occupancy of the warehouse by the 15th ofOctober in order to store a shipment of rice expected to arrive inthe Port of Colombo between 15/17 October 93.
As discussed and agreed you will take steps to effect thefollowing modifications to the warehouse prior to occupancy:
All six doors of the warehouse to be modified to permitaccess by truck for which purpose door heights will have tobe raised accordingly.
Suitable ramps to be constructed for each doorway topermit trucks to be driven into the warehouse for unloading
(emphasis added)”.
In response to this request Sri Kantha informed Bala Emmanuel on14.10.1993 that the “Modifications and additions referred to inEmmanuel’s communique of 09.10.1993 would be attended to”.
In such circumstances it is abundantly clear that the defendant,from the very outset of entering into an agreement, was aware that therewould be vehicles driven into the premises. As referred to earlier thewarehouse was taken on rent for storage of rice and therefore the defendant
should have been aware that the vehicles which were to be driven in wereto carry heavy weights. Accordingly it should have been the responsibilityof the defendant, being aware of the type of vehicles that would be drivinginto their warehouse, to make such arrangements in order to accommodatethe requirements of the plaintiff. In fact the Sales Manager of the plaintiffsCompany had informed the defendant on 12.11.1993 a date prior to thecommencement of cargo being brought into the warehouse, as to thedeterioration of the floor of the warehouse, in the following terms (P11):
‘The most serious problem however is the cracking up of the floorwithin the warehouse. The floor is deteriorating at a very fast rate andwe feel that with operations ongoing this would develop into a veryserious problem as the major portion of the warehouse floor area willbecome unuseable. Please discuss with your engineers animmediate solution to this problem as any disruption to smooth• receipt of cargo into the warehouse will result in our incurringdemurrage on the ship which is payable @ US $ 5000 a day. Wemight be compelled to seek relief from you for any demurrage incurredon A/C of warehouse deficiencies”
The communications between the plaintiff and the defendant since12.11.1993 show that the plaintiff was complaining of the defective floorand requesting the defendant to attend to the matter urgently.
It is apparent on a perusal of the documents before this Court,that the warehouse was not designed to sustain the weight of movingtrucks with a heavy cargo. The letter of the Managing Director of ElemechEngineers (Pvt.) Ltd., of 6th November 1.993 clearly reveals the said position.Elemech Engineers appears to be the construction engineers who hadattended to the said warehouse. The said letter (P12) is in the followingterms :
“Warehouse at 102, Sri Wickrama Mawatha. Wattala – Stage I
We write to confirm of having handed over to you the abovecompleted premises in perfect condition and to the agreedspecifications to you on 01 st October, 1993.
Subsequently as per your request we had to increase the sizeof the doorways and replace the existing shutters with larger
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SCGeneral Sales Company Ltd V.9
Sri Krishna Corporation Ltd (Bandaranayake, J.)
shutters. This work is in hand and will be completed by end of thisweek. We have now been advised that your client’s lorries eachweighing around 30 tons have been plying within the premises asagainst our advice that it was designed only up to a moving loadof forklift’’
As a result of this letter, the defendant informed the plaintiff to curtailthe movement of lorries with a load in excess of 20 tons within the warehouse.Restrictions of load per truck, it is to be noted,’ was not a part of theagreement entered into between the plaintiff and the defendant (P13). Byletter P14 dated 17.11.1993, Bala Emmanuel informed Sri Kantha that theplaintiff had reduced the load of rice per truck to 20 tons or less andrequested the defendant to fill up and cover the crackings on the floor with1/4” thick steel plates.
Considering the aforementioned circumstances, it is apparent thatat the time the plaintiff and defendant entered into an agreement (P2), thedefendant was fully aware that the warehouse would be used for the purposeof storage of rice and for this purpose vehicles carrying bags of rice wouldbe moving through the warehouse. When the warehouse was given on rentfor such purposes, later the defendant cannot be heard to say that he wasnot aware that lorries carrying heavy loads would be driven into thewarehouse damaging his property. After all, when the chief purpose ofrenting out the premises was for storage of rice and when such rice werebrought inside the warehouse in trucks, the defendant should have examinedthe capacity of the building’s floor to see whether it would sustain theweight of such cargo, prior to entering into an agreement.
For the aforesaid reasons both questions which were taken as mainissues are answered in the affirmative. This appeal is accordingly allowedand the judgement of the High Court dated 12.05.1999 is set aside.
j
The plaintiff also claimed that the defendant did not return the balanceamount from the deposit he kept with the defendant amounting to Rs.
488,000/-. The defendant contended that the plaintiff did not pay him therents for the month of December 1993 and January, February and March1994. Moreover, he claims that the plaintiff did not give the defendant one
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month’s notice in writing of the termination of the agreement. Accordinglythe defendant claims that he is entitled to retain 5 months rent. viz. a sumof Rs. 1,240,000/- out of the said deposit in respect of four months rentand as one month’s rent in terms of notice.
No evidence was led in the High Court with regard to the damagesclaimed by the plaintiff as well as the claim made by the defendant on therent for the warehouse. Therefore, the High Court is directed to assess thedamages based on the plaintiff’s claim as well as the defendant’s counterclaim on the rent and enter decree accordingly.
There will be no costs.
DE SILVA, J. -1 agree.
JAYASINCSHE, J. -1 agree.
Appeal allowed with a direction to High Court to assess damages.