Mohamed Azwar Hassim v
SCSampath Bank Limited (Dr. Shirani Bandaranayake, J.)407
custody and possession of the respondent and was not handedover to the appellants.
Considering all the aforementioned circumstances it isabundantly clear, as stated earlier, that in addition to the authoritygranted to the respondent under and in terms of the clause 11 ofthe Pledge Agreement (P4) and Sections 85 (1), (2) and (3) of theMortgage Act, the appellants also had not objected to the sale ofthe pledged goods.
Accordingly it is evident that the learned Judge of the High Courthad erred when he considered the applicability of Section 85(2) ofthe Mortgage Act and the effect of clause 11 of the PledgeAgreement and therefore I answer the question on which thisappeal was considered in the negative.
There is one other matter that I have to consider, before I partwith this judgment.
Learned President's Counsel for the appellants also contendedthat the customs surcharge paid by the respondent cannot beclaimed from the appellants.
The contention of the learned President's Counsel for theappellants was that the respondent claimed a sum ofRs. 445,366/65 on the basis of an additional payment by way ofcustoms surcharge, This payment had been made by the respondenton a revaluation of the said goods by the Sri Lanka Customs.
Learned Counsel for the respondent however took up theposition that the appellants had not protested about the payment ofcustoms duty by the respondent Bank. Learned Counsel for therespondent had referred to the document marked P10 in support ofhis contention.
The letter marked P10 is a document sent by the 1st appellantto the respondent. It was addressed to Mr. W.A.D. Keerthithilakeand the relevant paragraphs reads as follows:
» • • •
2 Regarding your additional payment of Rs. 320.228/-you are aware that you made the Payment withoutconsulting us. In fact we were informed about the
408Sri Lanka Law Reports[2008] 1 Sri L.R
payment only after it was made.11
» • • •
It is therefore evident that the appellants had not been aware ofthe said payment by the respondent. Moreover the proceedings of15.09.1999 further strengthens the contention of the learnedPresident's Counsel for the appellants that they had not agreed topay the additional amount.
"Q :Did you inform your client before you were going to pay
the additional customs duty?
A :No.
Q :If you informed the defendants he would have objected
to the payment of additional customs duty?
A :Yes.
Q :You only informed the defendants after your payment
of additional customs duty.
A :Yes.
Q :Youadmit that payment was outside the agreement
regarding the pledged facility you gave the defendants.
A :Yes.
It is therefore abundantly clear that the additional payment madeby respondent was not only outside the purview of the PledgeAgreement, but also had been paid without any prior authority fromthe appellants. Moreover, as conceded by the respondent it had nottaken any steps to mitigate the damages as the officer, whorepresented the respondent had categorically stated that if theyhad sold the pledged goods in 1994, the outstanding dues wouldhave been considerably less. The question that has to be examinedtherefore is that whether the respondent is responsible for nottaking steps to minimize the loss.
Admittedly, the respondent had claimed an additional sum ofmoney. It is also clear on an evaluation of the evidence of therepresentative of the respondent that the damages could havebeen minimized if the respondent in terms of the accepted bankingpractice had taken action to sell the goods, which were in itscustody in terms of the provisions of the Mortgage Act, the Pledge
Mohamed Azwar Hassim v
SCSampath Bank Limited (Dr. Shirani Bandaranayake. J.)409
Agreement and moreover as the appellants had no objection insuch action.
Learned President's Counsel for the appellants relied on severalauthorities in Support of his contention that it is the duty of a partyclaiming damages to take all steps to minimize loss consequent toa breach of contract.
Cheshire and Fifoot (Law of Contract, 13th Edition, pg. 632)clearly refer to the consequences when acting unreasonably ingiven circumstances and had stated that,
"Alike in contract and in tort a plaintiff may claimcompensation only for the loss caused by the defendant'swrongful act; any loss created by his own unreasonableconduct he must bear himself. In a case in 1955,Hodson LJ. had to consider the question,
"Whether the damages flow from the breach inaccordance with the ordinary law of damages forbreach of contract. Were they the natural and probableconsequences of the breach? If not, they are tooremote …. The question is one of causation. If themaster, by acting as he did, either caused the damageby acting unreasonably in the circumstances in whichhe was placed, or failed to mitigate the damage, the[defendants] would be relieved, accordingly from theliability, which would otherwise have fallen upon them.'[Compania Naveira Maropan S.A. v Bowaters LloydPulp and Paper Mills Ltd.d) at 98-99]"
Prof. C.G. Weeramantry (The Law of Contracts, Vol. II, pg. 906)has also taken the view that regarding mitigation of damages that'it is the duty of a party claiming damages to take all steps tominimise the loss consequent to a breach of contract'. ProfessorWeeramantry had referred to the decision of Lord Haldane inBritish Westinghouse Electric Co. v Underground ElectricRailways<2), where it was stated that,
"There are certain broad principles which are quite wellsettled. The first is that, as far as possible, he who hasproved a breach of a bargain …. is to be placed, as far as
410Sri Lanka Law Reports[2008} 1 Sri L.R
money can do it, in as good a situation as if the contracthas been performed …. but this first principle is qualifiedby a second, which impose on a plaintiff the duty of takingall reasonable steps to mitigate the loss consequent onthe breach, and debars him from claiming any part of thedamage which is due to his neglect to take such steps."
This position had been considered by our Courts in severalcases. For instances in Noorbhai and Co. v. Karuppan Chetty&>,Jayewardene, A.J. had held that,
"But the law casts on the seller in such a case the duty ofminimizing the damages resulting from a breach ofcontract to purchase."
Again in the cases of Wimalasekera v Parakrama Samudra Co-operative Agricultural Production and Sales Society LtdMK andTown Council, Chavakachcheri v Devabalan^), the Supreme Courthad held that it is the duty of a party, who is entitled to claimdamages to take all reasonable steps to minimise the damages.
The appellants' position was that if the respondent had takensteps to sell the pledged goods at the time the question arose andespecially at the time the High Court had sanctioned the sale, thedamages could have been minimised.
The appellants had made a claim in reconvention stating that asum of Rs. 222,351/-, which amount was advanced to therespondent had been lost due to the respondent's failure to sell thepledged goods.
Learned Judge of the High Court had held that the appellantshad not adduced evidence in support of their claim in reconventionand dismissed the application for the claim in reconvention.
The proceedings of 15.09.1999 referred to the respondent'sevidence stating that a sum of Rs. 222,351/- had been paid to therespondent by the appellants as the 10% margin of the letter ofcredit and other statutory charges. After the High Court had statedthat no evidence had been adduced by the appellants in support ofthe contention, it is not disputed that one of the admissions of thismatter is that the appellants had paid the respondent a sum ofRs.222.351/-. The proceedings of 16.01.1997 clearly indicated that
Sri Lanka Insurance Corporation Ltd. v
the appellants had adduced sufficient evidence in support of theirclaim in reconvention.
For the reasons aforesaid this appeal including the claim inreconvention is allowed and the judgment of the High Court dated22.07.2000 is set aside.
I make no order as to costs.
RAJA FERNANDO, J. – I agree.
AMARATUNGA, J. – I agree.
Appeal and the claim in reconvention allowed.
The judgment of the High Court set aside.