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May 16, mi
Present: Lascelles C.J. and Middleton J.
JAYAS1NGHE v. SILVA.
27—C. /?. Colombo, 20,654.
Penalty—Liquidated damages—Fidelity bond—Deposit of a sum of
money—Agreement to forfeit that sum for dishonesty.
The plaintiff, who was a tavern-keeper under the defendant,,entered into a fidelity bond and agreed inter alia to forfeit the sumof Rs. 100, which he had deposited with the defendant, if he acteddishonestly in the sale of arrack. The plaintiff was detectedselling a bottle of arrack containing “ two fingers ” less than theproper quantity (causing a loss of about three cents to the buyer).The defendant dismissed the plaintiff and forfeited his deposit ofRs. 100.
Held, the forfeiture was legal.
A Court will not enter into the question of quantum of damageswhere a penalty is fixed, unless it is shown that the poena is ingensor immanis or immensis.
rjpHE facts arc set out in the judgment of Lascelles C.J.
A. Sl V. Jayawardene, for the defendant, appellant.—Theplaintiff deposited the Rs. 100 with the defendant and agreedto forfeit that amount should he act dishonestly. Under these
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circumstances the Court would not inquire whether the deposit is Moyle, 1911in the nature of a penalty or liquidated damages. Wallis v. Smith? jayoHngheHinton v. Sparkes.* [Lascelles C.J.—Has it not been held that the «•StivaRoman-Dutch law governs this question ?] Yes, it has been so heldby Bonser C.J. in Fernando v. Fernando.* See also Webster v.
BosanquetA The amount agreed upon cannot be said to be ingens.
Seneviratne, for respondent, argued that the amount agreed uponwas ingens, as the plaintiff had sold arrack of the value of three centsonly below die proper quantity.
Cur. adv. vult.
May 16,1911. Lasceixes C.J.—
The defendant is the renter, under the Government, of theColombo arrack farm, and the plaintiff was a tavern-keeper in chargeof the Hendala tavern, in the defendant’s employment On hisappointment the plaintiff entered into the bond D 3, conditioned inthe sum of Rs. 500, by which he bound himself, amongst other things,to account duly and faithfully for all goods and property whichmight be entrusted to him for or on account of the obligee, and notto embezzle or misappropriate any goods or property belonging tothe obligee, and to be strictly honest in the sale of arrack. Thebond o1:o contained a provision by which the plaintiff depositedwith the obligee the sum of Rs. 100, which sum he hypothecatedto secure the performance of his obligations under the bond. Acircular notice (D 1) was also sent to the plaintiff and other tavern-keepers warning them that if they were found selling arrack byshort measurement they would be dismissed at once and theirwages and security money forfeited.
On August 29, J. Fernando, an inspector employed on thearrack farm, paid a surprise visit to the plaintiff’s tavern anddetected the plaintiff selling a bottle of arrack containing “ twofingers” less than the proper quantity. The^defendant inquiredinto the matter and ultimately dismissed the plaintiff, forfeitinghis deposit of Rs. 100, and also Rs. 25, the amount of wages thenowing to him. The plaintiff now sues to recover these sums, andthe Commissioner of Requests, though he finds that the plaintiffwas rightly dismissed, has given judgment for him on groundswhich, I confess, I do not quite appreciate.
The provisions of the Roman-Dutch law with regard to theenforcement of penalties are clearly explained in Fernando v. Fer-nandoA After citing the passages from Voet bearing on thesubject, Bonser C.J. stated :—
“ In other words, where the amount of the penalty is out of allproportion to the damages likely to be caused by the breach of thecontract, in such a case the equitable course is, not to give judgment
1 L. B. 21 Ch. D. 243.'» (1899) 4 N. L. R. 285.
* L. R. C. P. 161.* (1909) 13 N. L. R. 43.
( in )May io, 19U for the whole amount of the penalty, but to reduce the amount toT.ianmca something more like the real loss incurred by the parties.
C-J-“ That, however, is no authority for the proposition that whenever
Jayaeinghe & penalty is fixed it is the duty of the Court to enter into the questionp. Silva 0f quantum of the damages. It must be shown that the poena is,as Voet describes it, ingens, or, as other writers call it, immanis orimmensis
The respondent’s counsel has urged that the penalty imposed inthis case is in fact ingens, and has emphasized the contrast betweenthe penalty which has been imposed and the three cents which is theestimated value of the spirit by which the amount sold was deficient.This view is in my judgment fallacious. When an inspector, on asurprise visit, discovers a tavern-keeper, who had previously beendetected in the same offence, selling by short measurement, it is areasonable inference that the tavern-keeper has been systematicallycarrying on this practice. It is impossible to estimate the damageto which the renter is exposed, owing to mal-practices of this natureon the part of. his servants. A trader whose servants are allowed. to sell by short measurement is likely to lose his customers. Thereis also the further consideration that it is of paramount importanceto an arrack renter that his business should be carried on honestly ;for an arrack renter is the holder of a special privilege fromGovernment, which may not be renewed or continued if mal-practicesare allowed in his business. It is clear to me that the damage which arenter sustains by short sales may be very considerable. But thereis another consideration in the present case which, in my opinion,is a complete answer to the suggestion that the penalty is grosslyexcessive.
The plaintiff voluntarily set aside and deposited a certain sum onthe condition that it should be forfeited for the breach of certainstipulations, some of which may be very trifling. No authority hasbeen cited from the Roman-Dutch law, and there is none in Englishlaw (Wallis v. Smith1), in support of the proposition that in such acase the Courts are at liberty to refuse to give effect to the bargainbetween the parties on the ground that it is unreasonable.
In my opinion the judgment of the Commissioner should be setaside, and the action dismissed with costs both here and in theCourt below.
This is an action to recover Rs. 125 i.e., Rs. 100 deposited by theplaintiff with, the defendant on entering the defendant’s service,which the .defendant pleads were forfeited in conformity with anagreement between the parties, marked D 3 in the case, and Rs. 25for balance of wages earned by the plaintiff for the month of August,
1 21 Oh. D. 2S8.
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1910, which the defendant pleads have been forfeited to him in Mayi€ti9iiterms of a circular issued by the defendant to his employees in the Middletonarrack farm of Colombo, acquiesced in and assented to by the J*plaintiff. The issues agreed on were as follows :—Jayaringhe
Was the security deposited subject to the conditions
specified in the answer ?
If so, is the defendant entitled to have it forfeited, as well
as the wages due at the time of the dismissal ?
The Commissioner of Requests has found on the evidence that theplaintiff, on the day alleged by the defendant, sold, for the value ofa bottle of arrack a quantity less by three cents worth than a fullbottle : that the deficiency was due to dishonesty on the part of theplaintiff; that the defendant ran the risk of losing his credit- byshort sales ; that the circular in question and its contents werebrought to the notice of the plaintiff; and that plaintiff was rightlydismissed without notice, and there is no doubt that plaintiff signedthe security bond marked D 3 and was well aware of its terms. TheCommissioner gave judgment for the plaintiff, and the defendantappealed. No objection is taken to the findings of the Commissionerbut it is contended that he was wrong in holding that the forfeitureunder the bond could not be enforced, and in giving judgment forthe plaintiff upon this.
Now, the document D 3 has taken the form of a fidelity bond bywhich the obligor, the plaintiff, binds himself to pay the sura ofRs. 500 to the obligees, one of whom is the defendant. It recitesthe business of the obligees and the agreement to employ the plaintiffand his agreement to act in that employ, and it goes on to state thatthe plaintiff deposited with the obligees the sum of Rs. 100 averringthat it was hypothecated for securing the payment of all sums ofmoney payable under or in respect of the bond and the performanceof the covenants and obligations therein on his part.
One of the obligations was to be strictly honest in the sale ofarrack, and the plaintiff covenanted, amongst other things, that ifhe acted dishonestly in the sale of arrack or otherwise, or committedany breach of the covenants therein contained, he should forfeitthe sum of Rs. 100 so deposited, in addition to the liability on hispart to make good all damages to the defendant’s firm.. The plaintiffnot only agreed to forfeit his deposit, but to pay damages in addition.
The defendant in his answer has elected to rely on the forfeit ofthe deposit as sufficient damages, and makes no claim in reconventionfor any further damages. The question then is, is the deposit to betreated as forfeited under the circumstances ? The cases of Wallis v.
Smith1 and Hinton v. Sparkes – have been cited for the appellant,particularly in respect to the deposit here of the sum sought to beforfeited in the hands of the obligees.
1 L. R. 21 Ch. D. 243.3 Rf O, P. 16h
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May 16, mi
Now, the penalty here in the bond is the sum of Rs. 500, and notthe sum of Rs. 100 deposited so that the sum to which attentionmust be given in respect to its construction upon the reported cases,as either a penalty or liquidated damages, is the larger and not thesmaller sum. In my opinion the intention of the parties as ex-pressed in the bond was clearly that the sum deposited should beforfeited to the obligees, if the plaintiff acted dishonestly in thesale of arrack or committed a clear breach of any of the conditionsof the bond. It has been decided on sufficient evidence by theCommissioner of Requests that the plaintiff was dishonest in thesale of arrack, and there can be no question that such dishonestymight have materially affected the credit of the defendant farbeyond the amount deposited. I think, therefore, that accordingto the terms of the agreement which the plaintiff entered into withthe defendant the sum of Rs. 100 must be deemed to be forfeitedto the defendant by him.
As regards the wages, it was, I understood, the amount payablefor a part of the month up to the date when the plaintiff was, as theCommissioner of Requests found, rightly dismissed by the defendant.
In my opinion, irrespective of the circular, he would not beentitled to claim for these wages as not having served for the periodwhen they become due, but the circular, with the contents of whichthe Commissioner has found the plaintiff was acquainted andassented to, clearly renders them forfeitable. In my opinion theappeal must be allowed, and the action dismissed with costs inboth Courts.
JAYASINGHE v. SILVA