100-NLR-NLR-V-62-HOLLAND-COLOMBO-LTD.-OF-COLOMBO-Appellant-and-V.SUBRAMANIAM-Respondent.pdf
Holland Colombo Ltd. of Colombo u. Subramaniam
BIS
1959 Present: K. D. de Silva, J., and H. N. G. Fernando, J.
HOLLAND COLOMBO LTD. OF COLOMBO, Appellant, and V.
SUB RAM ANT AM, Respondent
S. C. 129—D. C. Colombo, 34211jM
'Principal ond agent—Agent appointed to buy goods—Defective, qitalzty of goods bought—Is agent liable to pay damages ?
Semble : Where an agent is appointed for the purpose of purchasing goods,the contract of agency cannot be treated as one of sale for the purpose of castingupon the agent the liability to pay- damages, q-ua vendor, for the defectivequality of goods purchased by him on behalf of his principal.:
i {1935) 14: C. L. Rec. 91.
616 H. N. G. FERNANDO, J.—Holland Colombo Ltd. of Colombo v. Subramaniam
Appeal from a judgment of the District Court, Colombo.
C. Banganathan, with S. J. Kadirgamar, for the defendant-appellant.
B. Wikramanayake, Q.G., with G. B. Kumar akvlasinghe, for theplaintiff-respondent.
Cur. adv. vuU.
August 3, 1959. EE. N. G. Fernando, J.—
This case turns on the proper construction to be given to an indentdated 5th October 1953 placed by the plaintiff with the defendant Com-pany for five tons of New Crop Siam Dry Chillies of Fair Average Qualityat a price of £220 per ton c.i.f. Colombo. According to the plaint, theplaintiff by this indent “ requested the defendant to import the chilliesfor the plaintiff ”, and the plaintiff subsequently took delivery of fivetons of Siam Chillies, payment for the consignment having been pre-viously made at the rate specified in the indent. The plaint furtherstates that the chillies were not of the “ new crop ”, but of inferior quality,that the plaintiff in consequence suffered damages estimated at aboutRs. 4,1 GO, and that a cause of action has accrued to the plaintiff to suethe defendant for that amount, and for a further Its. 52/50 being surveyfees. Neither in the plaint nor in the issues framed at the trial wasany question raised as to whether the indent constituted a contractof purchase and sale as between the plaintiff and the defendant. Never-theless that question was the principal one dealt with in the argumentsof counsel, and the learned District Judge, having decided that the con-tract was one of sale, gave judgment for the plaintiff on that basis.
In reaching this conclusion the learned District Judge relied heavilyon the decision of this Court in Hayley and Kenny v. Kudhoos1 whichpurported to follow a principle laid down by Blackburn, J., (afterwardsLord Blackburn) in the case of Ireland v. Livingston*. The observationsof Blackburn, J. were generally to the effect that there can be super-added to a contract of agency obligations as between vendor and vendee,and they do support the view that such obligations arise upon a contractof the description dealt with in the case of Hayley and Kenny v. Kudhoos1or a contract of the description with which I am presently dealing. Butthis Court in the last-mentioned case apparently lost sight of two impor-tant features of the Ireland v. Livingston 2 case, firstly that Blackburn,
J.was only rendering an advisory opinion in the House of Lords, andsecondly that he himself, as well as the Law Lords who delivered theiropinions, gave judgment for the plaintiff on the basis that he had fulfilledhis obligation as the agent of the defendant in shipping a consignmentof.goods, and that the defendant had wrongfully refused to take delivery
1 (1922) 24 H. L. It. 2G7.
2 L. It. 1871-72, 5 H. L. 395.
H. N. G. FERNANDO, J.—Holland Colombo Ltd. of Colombo o. Stibramaniam 617
of the consignment. All that Lord Chelmsford (who delivered theprincipal opinion) remarked concerning the question whether the plaintiffwas a vendor was as follows :—
“ I would preface what I have to say by stating my opinion that thequestion is to be regarded as one between principal and agent, thoughthe Plaintiffs might in some respects be looked upon as vendors to theDefendants, so as to give them a right of stoppage in transitu. Butthe transaction began as a contract of agency, and in that light I amdisposed to consider it. ”
The whole matter is admirably dealt with in the .judgment of Jaye-wardene, D.J. (as he then was) in the Ceylon case of Darley, Butler daCo. v. Saheed L, and it is for that reason superfluous to reproduce here theobservations of Blackburn, J. and the comments on those observationswhich were made in subsequent English and Indian cases. It is sufficientto cite the comment of Lord Esher (then Brett M.R.) in Cassaboglou v.Gibb2 :—
“ Mr. Pollard cited, however, in support of his contention, the autho-rity of Lord Blackburn in his work on Sales, and the case of Ireland v.Livingston, and on a question relating to agency he could not havecited a higher authority, but Lord Blackburn has not said that aslong as the contract of principal and agent is executory, the principalcan sue the agent and make him pay as though the contract werethat of vendor and purchaser. He has considered the point withreference to two matters, one with' regard to the theory of passing theproperty in the goods, and the other as to the power of stopping thegoods in transitu, and as to those two matters, he has said with re-ference to the first of them, that if the foreign commission agent haspurchased the goods which he was ordered to purchase and has putthem on board consigned to his principal, by that appropriation theproperty in the goods passed from the commission agent to the princi-pal as if such agent were a vendor. Then, as regards the power tostop in transitu Lord Blackburn has said that if the commission agentabroad is bound to pay for the goods to the foreign seller of whomhe bought them and, if after he has shipped them to Iris principalsuch agent has not been paid, and his principal is insolvent, so that theforeign seller could only have the agent to look to for payment, theCourts have held that such agent may stop the goods in transitu asif he were a vendor, or in the position of a vendor.”
It was I think with this comment in mind that Ennis A.C.J. in DarleyButler's case expressed himself as follows :—
“ The later cases all seem to indicate that the proposition in Irelandv. Livingston has but a limited application, and that a contract of agencyremains throughout a contract of agency, but that for certain purposesit is assimilated to a contract of sale ”. An agent has been held to be in
1 (.1923) 25 N. L. R. 353.
1882 L. R. 9 Q. B. D. 220.
618 H. 1ST. G-. lf’ERKAJNDO, J.—Holland Colombo Ltd. of Colombo o. Subramaniam
the position of a vendor, for his own protection, in order to be entitledto exercise the right of stoppage in transitu and also, for the benefit ofhis principal, in order to pass the property in the goods. This latterwas the substantial position in which the agent was placed by the decisionin Hayley and Kenny v. Kudhoos 1 which held that the agent was boundto produce to his principal a contract of insurance covering the goods.But no decision has been cited to us where a contract which commencesas one of agency is treated as one of sale for the purpose of casting uponthe agent the liability to pay damages, qua vendor, for the defectivequality of goods purchased by him on behalf of his principal. It is there-fore, at the least, doubtful whether it would be correct to construe whatpurports to be a transaction of agency as being one of sale in a case whereno question arises of the need either for a stoppage in transitu or for thepassing of property in the goods.
In any event, there are other grounds upon which this action mustfail. The contract provides very clearly that the goods were to beshipped on the account and at the risk of the plaintiff, that he wouldbear the costs of landing, warehousing and import dues, that insurancewas to be effected for the benefit of and at the cost of the plaintiff, thatthe defendant was not to be responsible for lato d* livery, non-deliveryor short delivery, and that in certain events the defendant would havethe right to dispose of the goods at the plaintiff’s risk. There is no pro-vision which imposes on the defendant any liability for the wrongfulexecution of the order, or for any defect in the quality of the goodsdelivered. On the contrary, clause 20 of the Indent contains thefollowing provision :—
“ 20. I/We do not hold you responsible for any claim regarding theexecution hereof but it is agreed that if any claim is presented toyou in writing within the time specified in clause 13 you will act onmy/our behalf to endeavour to obtain a satisfactory settlement forme/us from the manufacturers or suppliers. ”
This duty to negotiate with manufacturers or suppliers abroad in theevent of 'wrongful execution is the only obligation imposed by the contractin anticipation of an event of the description wrhich has in fact arisen.The learned District Judge thought, in view of clause 5, that the provisionin clause 20 was to apply only if the goods were supplied by a namedmanufacturer or supplier. But if that be the case, it w^ould follow thateven the obligation specified in clause 20 would not arise, and the plain-tiff would be in an even worse position than he would be if ho can haverecourse to clause 20. In the absence of any clear provision renderingthe defendant liable for defects in quality, it is unreasonable to hold thatsuch a liability arises by implication. The plaintiff sues on the contractand can only rely on rights which flow from it. The only right givenby the contract is a right to “ an allowance for proved inferiority in thevalue of the goods, such allowance to be settled by arbitrators ”, butthere was no claim in the plaint for any such allowance. It was argued
» (1922) 24 N. L. R. 267.
Tham bxrajah v. Sdaheswari
619
that if the defendant was relying on the arbitration clause, he shouldhave expressly pleaded the failure to go to arbitration. This argumentmust fail for two reasons—-firstly (as stated already) the defendant isliable, if at all, only under the 'arbitration clause ; secondly the issue“ whether the plaintiff is entitled to recover the damages, in terms of thecontract between the parties contained in the indent, adequately raises thequestion whether anything is recoverable which has not been “ allowed ”by arbitrators.
For these reasons, I would allow this appeal and dismiss the plaintiff’saction with costs in both Courts.
de Silva, J.—I agree.
Appeal allowed.