034-NLR-NLR-V-39-HULL,-BLYTH-&-CO.-v.-VALIAPPA-CHETTIAR.pdf
Hull, Blyth & Co. v. Valiappa Chettiar.
97
Present: Poyser S.P-J. and Fernando AJ.
HULL, BLYTH & CO. v. VALIAPPA CHETTIAR.
180—D. C. Colombo 2,839.
Contract for sale of rubber—Purchase without a licence under the RubberThefts Prevention Ordinance—Contract not illegal—Ordinance notapplicable to forward contracts—Rubber Thefts Prevention Ordinance,No. 21 of 1908, s. 3.
The provisions of section 3 of the Kubber Thefts Prevention Ordinancewhich require a purchaser of rubber to take out a licence do not rendera forward contract for the sale of rubber entered into with an unlicensedpurchaser illegal.
The provisions of the Ordinance do not apply to forward contractsand a licence under the Ordinance is not necessary until delivery 'ofrubber is taken by way of completion of the contract.
T
HIS was an action to recover damages for breach of a contractentered into between the plaintiff Company and the defendant under
which the plaintiffs agreed to sell to the defendant 150 tons of rubber,delivery to be in equal quantities of 25 tons monthly from August, 1934,to December, 1935.
The defendant accepted and paid for all deliveries in respect of themonths of August, September, and October, 1934, but refused to acceptor pay for any rubber tendered thereafter.
The grounds on which the defendant denied liability were—
that the contract was an agreement to gamble in differences andtherefore unenforceable ;
that the contract was illegal as the defendant had not at thedate of the contract a licence to deal in rubber in accordancewith the terms of section 3 of the Rubber Thefts PreventionOrdinance ;
that the plaintiffs did not duly tender to the defendant therubber in accordance with the terms of the contract.
The learned District Judge, having found in favour of the plaintiffon the issues (1) and (3), held that as the defendant was not a licenseddealer under the Rubber Thefts Prevention Ordinance, the contract wasprohibited and unenforceable.
Hayley, K.C. (with him N. E. Weerasooria and D. W. Fernando), forplaintiff, appellant.—The provisions of the Rubber Thefts Ordinancedo not apply to forward contracts but only to purchases for immediatedelivery. To ascertain the meaning of the word purchase in section 3,it is necessary to examine very carefully the whole of the Ordinance.The preamble of this Ordinance commences—“ Whereas it is expedientto make special provision to prevent thefts of rubber. ” The preambleof a statute may be legitimately consulted "to find out its meaning andkeep its effect within its real scope. (Maxwell on the Interpretation ofStatutes, 7th ed)., p. 37.) It follows therefore from the. preamble thatthe scope of this Ordinance is to prevent the thefts of rubber and not .tocontrol all dealings in rubber. A careful reading of the various sections
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POY5ER S.P.J.—Hull, Blyth & Co. v. Valiappa Chettiar.
brings one to the same conclusion. The word purchase in section 3applies only to a purchase with immediate delivery. If the wordpurchase applied to ' a forward contract then it would be impossibleto comply with the requirements of certain of the sections, e.g., section8 a (b). In re Mahmoud and Ispahani1 is in fact an authority in favourof the appellant. The Supreme Court of the Straits Settlements inthe case of Syn Thong & Co. v. Tong Joo (Hoo) & Co. * interpreted theword purchase in a similar enactment as not referring to a forwardcontract.
Even if the word does apply to forward contracts the appellant is stillentitled to succeed. The Ordinance only prohibits a purchase without alicence and not a sale. The seller in this case is an innocent party. Anunlawful act by the purchaser does not make the act of the seller ipso factounlawful. It is not open to the purchaser to take advantage of his ownwrong. “ When a contract may be performed either in a lawful way or inan unlawful way and if a party in the performance of his part of thecontract, without the knowledge of the other party, elects to performit in an unlawful way, he cannot be heard to allege his own wrong."—Bankes L.J. in In re Mahmoud and Ispahani (supra). (Bloxsome v'.Williams*). There was an implied obligation on the part of therespondent to use his best endeavours to obtain a licence and hemade no such endeavour. The appellant is therefore entitled tosucceed. (In re Anglo-Russian Merchant Traders and John Batt & Co.,London ').
H. V. Perera, K.C. (with him E. F. N. Gratiaen and J. A. T. Perera).—The provisions of the Ordinance apply to forward contracts. Thepreamble cannot restrict the provisions of the Ordinance. Even if aforward contract is not prohibited as such, the delivery of rubber to anunlicensed person is an offence. The contract cannot be performedwithout a breach of the provisions of section 3 of the Ordinance.The contract will, therefore, not be enforced by a Court of law. Thoughsection 3 specifically prohibits only a purchase, a sale is also inferentiallyprohibited. The contract of purchase cannot be severed from thecorresponding contract of sale. The case of Bloxsome v. Williams (supra)does not apply to the present case. The necessity for the defendant toobtain a licence was not before the minds of the parties at the time thecontract was entered into. There could, therefore, be no obligation expressor implied on the part of the defendant to obtain or to endeavour toobtain a licence. The principle laid down in the case of In re Anglo-Russian Merchant Traders and John Batt & Co., London (supra) has,therefore, no application.
’ Hayley, K.C., in reply.
Cur. adv. vult.
June 29, 1937. Poyser S.P.J.—
The plaintiff company and the defendant entered into a contract onMay 23, 1934 (P 1) under the terms of which the plaintiff companyagreed to sell to the defendant 150 tons of rubber, delivery to be in equal
' (1921) 2 K. B. 731.* 3 B. <b C. 232.
* Stratit Sett. Lem Rep. (1929), Part I., p. 39.* (1917) 2 K. B. 633.
POYSER S-P.J.—Hull, Blyth & Co. v. Valiappa Chettiar.89
quantities of 25 tons monthly from August, 1934, to January, 1935,payment to be against tender in accordance with the Chamber ofCommerce by-laws and conditions of sale of rubber.
The defendant accepted and paid for all claims in respect of the monthsof August, September, and October, 1934, but refused to accept or payfor any rubber tendered during the months of November and December,1934, and January, 1935.
The plaintiff company claimed Rs. 15,960 for breach of the saidcontract, and it was agreed in the lower Court that they should be givenjudgment for this sum “ in the event of their being found entitled todamages
The principal grounds on which the defendant denied liability were :—
That the contract in question was an agreement to gamble in
differences and therefore unenforceable.
That the defendant had not, at the date of the contract, or at any
date, a licence to deal in rubber, the contract therefore was voidand unenforceable, and no action could be maintained for therecovery of damages for the non-fulfilment thereof.
That the plaintiff company did not duly tender to the defendant
in accordance with the terms of the contract, the rubber,deliverable in November and December, 1934, and January, 1935.
The learned Judge, in a careful and exhaustive judgment, found infavour of the plaintiff company on all the issues framed with the excep-tion of the issues in regard to the defendant not having a licence to dealin rubber, and on these issues he held that as the defendant was not alicensed dealer under the provisions of the Rubber Thefts Ordinance,1908, the contract was therefore prohibited by law and unenforceable.He consequently dismissed the plaintiff’s action.
On behalf of the appellant it was argued, firstly, that the provisionsof the Rubber Thefts Ordinance were not applicable to forward contractsbut only to purchases for immediate delivery, and that the object of theOrdinance was to prevent rubber dealers from receiving stolen property,secondly, that even if the Ordinance did apply to forward contracts,the contract in this case was not an unlawful or prohibited one as theOrdinance did not require sellers to have a licence.
Mr. H. V. Perera, for the respondent, relied on section 3 of theOrdinance and argued that the Ordinance was applicable to all purchasesof rubber whether for immediate or future delivery, and that if thepurchaser was unlicensed, the contract was unlawful and unenforceable.
To decide these questions, it is first necessary to carefully examine theprecise terms of the Rubber Thefts Ordinance.
As Atkin L.J. said in the case of In re Mahmoud and Ispahani1:—•“When the Court has to deal with the question whether a particularcontract or class of contract is prohibited by statute, it may find anexpress prohibition in the statute, or it may have to infer the prohibi-tion from the fact that the statute imposes a penalty upon the personentering into that class of contract. In the latter case, one has to examinevery carefully the precise terms of the statute imposing the penalty
* {1921) 2 K. B. 731.
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POYSER SJJ.—Hull, Blyth & Co. v. Valiappa Chettiar.
upon the individual. One may find that the statute imposes a penaltyUpon an individual, and yet does not prohibit the contract if it is madewith a party who is innocent of the offence which is created by thestatute.”
The preamble of this Ordinance commences thus : —“ Whereas it isexpedient to make special provision to prevent thefts of rubber.”
1 have set this out with a view to appreciating the real scope of theOrdinance. “ The preamble of a statute may be legitimately consultedto find out its meaning and keep its effect within its real scope.” (Maxwellon Interpretation of Statutes, 7th ed., p. 37, and cases cited therein.)
The sections of the Ordinance to which reference is necessary are asfollows. Section 3 upon which the respondent relied, is as follows : —
“ From and after the commencement of this Ordinance, it shall beunlawful for any person to purchase rubber or to take delivery ofrubber for sale or shipment, unless he has been licensed under thisOrdinance to deal in rubber, or has received from the GovernmentAgent a permit authorizing him to do so. Any person who purchasesrubber or takes delivery of rubber for sale or shipment without beingso licensed, or without such permit, shall be guilty of an offence againstthis Ordinance.”
In connection with this section it is to be noted that it is only unlawfulto purchase rubber or to take delivery of rubber for sale or shipment.The sale of rubber by an unlicensed person is not prohibited.
Sections 4 and 5 deal with the issue of licences, section 4 (2) requiringthe premises to be stated at which the business of a dealer in rubber is tobe carried on, and section 4 (4) permits the issue of licences to Superin-tendents and Assistant Superintendents of estates to purchase rubber.
Section t> requires a licensed dealer to have the words “ LicensedDealer in Rubber ” painted in conspicuous letters upon his licensedpremises.
Section 7 makes provision with regard to partners, and it will be seenthat only one licence is required in respect of the same premises.
Section 8 (1) (a) makes it an offence for any person to sell or to deliverrubber or for a licensed dealer to purchase or take delivery of rubberexcept between sunrise and unset.
Section 8 (1) (b) makes it an offence for any licensed dealer to purchaseor take delivery of rubber from any person not personally known to him,under twelve years of age, or from any estate iabourer.
Section 8a (b) requires, inter alia, the seller of rubber to fill up adeclaration specifying the lands from which the rubber was produced.
Section 9 requires a book to be kept by licensed dealers in whichcertain particulars are to be entered. These particulars all deal withthe purchase and delivery of rubber, amount bought, from whom, day ofdelivery, price, and similar matters. A seller, unless a licensed dealer,is hot required to keep books.
Section 10 provides for the inspection of licensed premises and books;Section 13 imposes a duty on licensed dealers to keep scales on thelicensed premises.
' From the above it will be seen -that the object of the Ordinance, as itstates, is to prevent thefts of rubber and to carry out this object not
POYSER SJ?.J.—Hull, Blyth & Co. v. Valiappa Chettiar.
101
only are dealers licensed but the places where they are authorized todeal and receive the rubber they purchase are controlled and open toinspection. The Ordinance also appears to have been, framed in regardto the purchase of rubber with immediate delivery and not in regardto forward contracts.
In regard to the latter class of contract many 6f its provisions areinapplicable and some could not be carried out.
Section 8a (b), e.g., could not be complied with in the case of a forwardcontract by a firm of brokers for they would in all probability be unableto specify the lands of which the rubber to be delivered was the produce.
Section 9 also indicates that the expression “ purchase ”. does notrefer to forward contracts as the various entries in the books are requiredto be made only when the rubber is delivered.
Having considered this Ordinance as a whole I am of opinion that itsprovisions do not apply to forward contracts and that a licence underthis Ordinance is not necessary until delivery of rubber is taken by way ofcompletion of a contract.
The object of this Ordinance is) clearly, to prevent the purchase ofstolen rubber, not to control all dealings in rubber, and to carry outthese objects provisions are made that persons who purchase rubberand such rubber is delivered to them have to comply with certainregulations and to furnish information as to the origin of every lot ofrubber they purchase. All these requirements are obviously to preventthe purchase of and to trace stolen property.
The Ordinance does not and was never intended,. in; my opinion, toprohibit, e.g., a forward contract entered into between, two brokers aftersunset, and if the respondent’s contention is correct, such a contractwould be unlawful.',
The Supreme Court of the Straits Settlements have come to. a similarconclusion. The case of Syn Thong & Co. v. Tong Job (Hoo) & Co.xdepended on the interpretation of section 3 of the Rubber DealersOrdinance (Laws of the Straits Settlements, Vol. V., Cap. 212) which isas follows : —
“ No person shall purchase, treat, or store rubber unless he shall havebeen duly licensed in that behalf by the licensing, officer. ”
The Court held “ that the fact :that plaintiffs were not the holders of alicence to purchase rubber under .section 3 of the.,Rubber DealersOrdinance, did not render the contracts illegal as. the words ‘purchaserubber’ in section 3 do not refer to a forward contract. A licence underthe section does not become necessary until delivery is taken. Where acontract is executory, the circumstance that one party is bound to fulfila certain condition before he can legally perform the contract, and hasnot yet done so, does not render the contract itself illegal
I also agree with Mr. Hayley’s argument that even if the Ordinancedid' apply to forward contracts, the plaintiff company.-are still entitledto succeed.
The Judge has held that the contract was a prohibited one, and apply-ing the principles set out in In re. Mahmoud, and Ispahani (supra) heldthat it was unenforceable. That case depended on the,true construction
1 Straits Sett. Law Hep. (1929) Part Ip. 39v
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POYSER S.P.J.—Hull, Blyfli & Co. v. Valiappa Chettiar.
of an order of statutory effect made under the Defence of the RealmRegulations. This order prohibited any person from buying, selling orotherwise dealing ini'certain articles whether situated within or withoutthe United Kingdom, except under and in accordance with the terms of alicence issued by the Food Controller. The seller had a licence, thepurchaser had. not. The Court held that as the contract was prohibited,they would not enforce it even on behalf of an innocent party.
“ The sole question is whether the statute means to prohibit thecontract. If the contract is prohibited by statute, the Court is boundnot to render assistance in enforcing an illegal contract. ”—Scruttonp. 729.
In this case the contract was not prohibited—the wording of section 3of the Ordinance is very different to the wording of the Order abovereferred to.
It was argued that the following words in this section—“ it shall beunlawful for any person to purchase rubber or to take delivery of rubberfor sale or shipment unless he has been licensed ”—had the effect ofmaking the contract between the parties a prohibited one if the pur-chaser was unlicensed.
I do not agree that if the purchaser commits an unlawful act theseller also ipso facto does. One cannot read into a penal statute,as into a contract, words necessary to give it what has been calledbusiness efficacy.
This case, in my opinion, falls within the class of case referred to byBankes L.J. in his judgment in In. re Mahmoud and Ispahani (supra), viz..“ the class of cases which say that when a contract may be performedeither in a lawful way or in an unlawful way and if a party in the per-formance of his part of the contract, without the knowledge of the otherparty, elects to perform it in an unlawful way. he cannot be heardto allege his own wrong ”.
Of this class of case Bloxome v. Williams' is an example. This casewas not overruled by In re Mahmoud and Ispahani (supra) althoughin the latter case the Court did disapprove of a dictum of McCardie J.(Brightman v. Tate *) to the effect that there is some qualification admis-sible to the established rule of law that the Court will never lend its aidin the enforcement of a contract which is ab initio illegal.
There is not the slightest doubt in this case that the plaintiff was aninnocent party and not a particeps criminis.
The evidence of Mr. Shand on this point, and the Judge accepts hisevidence “ on this and every other point ” is “ I did not know that thedefendant was not qualified to buy rubber because he had no licence.I regarded him as a gentleman of standing who would observe all pro-visions of the law. He never told me nor did I have any informationthat he had no licence to deal in rubber. I did not inquire if he had alicence or not”.
On the other hand the defendant made no effort to obtain a licence,and if this appeal could not be decided on other grounds it might be
« 3 B. «£ G. 232.* {1919) I. K. B. 463.
Pathmanathan v. The Imperial Bank of India.
103
decided against the respondent on the ground that there was an impliedobligation on his part to use his best endeavours to obtain a licence andhe made no such endeavour. (See In re Anglo-Russian. Merchant Tradersand John Batt & Co., London'.)
For these reasons I do not consider it is competent for the defendantto rely on his own breach of the law, assuming there was such a breach,and I think the Judge was wrong in holding that the principles enunciatedin In re Mahmoud and Ispahani (supra) are applicable to this case.
There is only one other point to which I need briefly refer, viz., thatthe plaintiffs did not duly tender to the defendant the rubber deliverablefrom November, 1934, to December, 1935.
In connection with this argument reference was made to the Sale ofGoods Act but as the Judge points out, tender, according to the contract,was to be made in accordance with the Chamber of Commerce by-lawsand this the plaintiff company duly did.
Further the Judge finds, and the evidence amply supports his finding,that the defendant never intended to take delivery of the rubber tenderedduring these months.
I would allow the appeal and direct that decree be entered for theplaintiff company as prayed for with costs both here and below.
Fernando A.J.—I agree.
Appeal allowed.