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Present: Lascelles C.J. and De Sampayo A.J.
RAE SANDS v. KADIBHOY.69—D. G. Colombo, 31,050*
Sola of rubber shares—Contract silent as to time for delivery of documents—Time for payment stipulated for—Sale of ^ Goods Ordinance—■“ Goods
In the case of a sale of shares, where the time for payment isstipulated for. but the contract is silent as to the time for delivery,the seller is bound to deliver forthwith or within a reasonable timebefore payment, unless – his obligation is otherwise regulated by abinding usage or custom.
fJ>HE facts are fully set out in the judgment.
Bawa, K.C.t for the defendant appellant.—No time was stipulatedfor the delivery of the scrip. In the state of the market at the timeit was not possible to stipulate for delivery of the scrip at thetime of payment. In the case of a contract to deliver, where notime is specified for delivery, a reasonable time will always beallowed for delivery (2 Nathan ■ 535,) In considering what isreasonable time, regard must be had to the circumstances ofthe case. It would be impossible to lay down any hard and fastrule as to what constitutes unreasonable delay in the delivery ofshares sold.
Even if the evidence does not prove a custom, it helps the Courtto find out what is ** reasonable time ” in this case. Counsel citedBenjamin- on Sales 683 (5th ed.), Umov Corporation v. Car ring ton,1Benjamin v. Barnettr De Waal v. Adlar,3 Field v. Lelean4.
Elliott (with him Hayley), for the respondent.—The case isgoverned by the Sale of Goods Ordinance of 1896. In the EnglishAct the definition of the term “ goods ” specially excludes shares.In our Ordinance “ goods ” include all movables, except moneys.The ruling in Croos v. De Soysa3 does not apply to this case. Undersection 27 of the Sale of Goods Ordinance the custom pleaded bythe appellant has not been proved. Moreover, the alleged customis unreasonable. It is unreasonable to expect a man to pay moneyand wait for months to get the scrip.
'■ (1902-3) 8 C. C. 99.» (1887) 12 A. G. 141.
* (2903) 8 C. €. 244.* (1861) 30 L. J. Excli. 168.
» (1903) 7 N. L. R. 32.
10J. K. A 9M13 (8/50)
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1M8. Bawdi K.C., in reply.—The ease is governed by the Roman-Jtae 8and» Dutch law, and not by the Sale of Goods Ordinance. Section 27v.Kaiibhoy applies to corporeal movables, and not to shares.'
Cur. adv. wit.
May 14, 1912. Lasceli.es C.J.—
The facts which have given rise to this appeal are shortly, asfollows. On March 31, 1910, the plaintiff received from Mr. L. C:Davies, a broker, a bought note advising him that he had boughton his account 165 shares in the Rubber Plantations InvestmentTrust Company from the defendant at 65*. per share. The boughtnote provided that payment should be mad,e in ten days from date, ‘but was silent as to the time for delivery of documents. On April 2the plaintiff re-sold the shares to Somerville & Co. On April 10,1910, the plaintiff wrote the letter P 2 to Mr. Davies asking him toforward transfer and scrip for the shares, on which he, the plaintiff,would give a cheque in payment. On the following day the defend-ant wrote to Mr. Davies demanding payment for the shares. Onthe same day Mr. Davies communicated to the defendant theplaintiff’s letter P 2 asking for the scrip. Mr. Davies then, on April12, received from the defendant the letter P 5 asking him to senda cheque to Messrs. Keel & Waldock, who, the defendant stated,would hand over the transfer and scrip. The defendant added thatif the amount was not paid that day the defendant would considerthe contract cancelled.
This letter was shown to the plaintiff, who, on the same day,wrote to Messrs. Keel & Waldock offering to send a cheque inexchange for the scrip. Messrs. Keel. & Waldock on the 13th repliedthat they had hot yet received the shares from another firm ofbrokers. On April 16 Mr. Davies wrote to the defendant that theplaintiff would hand him a cheque-as soon as Messrs. Keel & Waldockwere in a position to give the documents to the buyer.
About the end of May the plaintiff bought shares to fulfil hiscontract with Somerville & Co., and on June 11 the plaintiff, byletter P 13, formally demanded from the defendant the amount forwhich he now sues, which represents the difference between theprice at which the plaintiff purchased the shares from the defendantand the price which he had' to pay for them in order to completehis contract with Somerville & Co. It appears from the evidenceof' Mr. Keel that the shares in question had been bought byMessrs. Keel & Waldock from other brokers, .who did not deliverthe . documents until August or September, so that, when theplaintiff purchased the shares, he could not have been given adelivery order, with which he says he • would have been content.It further appears that the defendant sold the shares in questionat 74s. on May 14, 1910, and so profited considerably by thetransaction.
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There has been some discussion whether this transaction isgoverned by the Sale of Goods Ordinance, No. 11 of 1896, andwhether the English or the Boman-Dutch law is applicable to thetransaction. The contention that the Sale of Goods Ordinance isapplicable is founded on the difference between the definition of theword “ goods ” in the Ceylon Ordinance and the English Act. Butin Croos v. D$ Soysa1 it was held that the word “ movables ” in thedefinition of goods ” related only to corporeal movables. Thisdecision, which is binding on us, and is certainly convenient,disposes of any doubt there may have been as to the non*applicability of the Ordinance to the sale of stocks and shares.
The legal principle relating to the time within which scrip shouldbe delivered on a sale of shares appears to be clear, and it does notseem to be material whether the English or the Boman-Dutch lawis applied. In Field v. Lelean2 the bought and sold notes, as inthis case, provided for the time of payment for the shares, but wassilent as to the time for delivery. There it was held that thepurchaser, apart from any special custom, would have been entitledto require the seller to deliver them forthwith or within a reason-able time before payment.” In Union Corporation v. Charring Lon,3Bigham J. held that, as a general rule, where there is a sale of shares,“ speedy, prompt, and proper delivery is essential,” and this wasapproved in Benjamin v. .Barnett.*
In De Waal v. Adlar* which was a Natal case, presumably decidedunder the Boman-Dutch law, it was held that seller was boundto deliver the certificates within what would be a reasonable periodin an ordinary contract for the sale of shares, and that the reason-ableness of the time cannot depend upon circumstances which wereunknown to the buyer.
.It is not disputed that, as a general rule, the scrip should be deli-vered promptly on payment of the price by the purchaser, but the1 answer in paragraph 6 sets up a practice or usage alleged to obtainin Colombo, under which scrip is deliverable within a reasonabletime after payment, and that owing to a boom in rubber shares thescrip relating to the shares purchased could not have been deliveredwithin the time the plaintiff required delivery.
I entirely concur in the finding of the learned District Judge thatno special usage or custom has been proved. Apart from the questionwhether Mr. Keel was in this case the proper person to prove theexistence of the allegedcustoiji,it is clearthathisevidencefalls
far short of proving anotorious, certain,andreasonableusage
or custom under which, on a sale of rubber shares, the delivery ofscrip could have been indefinitely postponed after payment. Mr.Keel’s evidence was to the effect that prior to 1910 the share market
■> 11903) 7 N. L. R. 33.. 3 (1903-3) 8C, C.99.
– (1861) 30 L. j. Exch. 168.'* (,1902-3) 8C. C.244.
* (1887) 13 A. C. 141.
Roe Sandsv . Kadibhoy
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1812. in Colombo was comparatively small; that the business was trans-Im.scbi.lsbby firms who were produce brokers rather than professional
C.J. share brokers; that before the Colombo Brokers’ Association framedfl«e Sands rules, which came into force on October 1, 1910, brokers and clientsr. Kadibhoy were in a somewhat vague state as to their rights in respect of sharetransactions; and that, when the rubber boom came, there wasextraordinary confusion and great delay in the delivery of stock.This evidence clearly does not establish the existence of any specialusage or custom in the Colombo share market. It points rather totemporary disorganization of the share market.
At the argument, the appellant somewhat modified the positionwhich he had taken up in his answer. He did not rely so much onthe alleged usage of the Colombo share market. The scrip, it wasargued, was deliverable within a reasonable time, and havingregard to the state of the Colombo share market, which was wellknown to the plaintiff, it was unreasonable to insist on deliveryagainst payment. In other words, it was contended that althoughthe plaintiff was bound to pay for the shares within ten days, thestate of the share market in Colombo was such that the partiesmust be taken to have contemplated the delivery of scrip beingindefinitely postponed. Prima facie, it is highly improbable thatthe plaintiff would have entered into any such contract; that hewould have bound himself to pay the purchase money withoutreceiving in return either scrip or any negotiable document. Butfrom the letter P 5, it is clear that the defendant, who had hadlittle experience of such matters, on April 12. 1910, believed that hisbrokers were then in a position to hand over the scrip. In sellingthese shares to the plaintiff he had unwillingly placed himself in theposition of selling what he was not in a position to deliver, and hemust bear the consequences. The contention of the appellant isequivalent to saying that during a period of excessive speculationin shares sellers are released from the obligation which is ordinarilyincumbent on them of delivering scrip or negotiable documentsagainst payment. The contention is. in my opinion, as unsoundas it is dangerous.
I think the decision of the learned District -Judge is right, and 1would dismiss the appeal with costs.
De Sampayo A.J.—
I also think that the judgment appealed against is right. In thecase of a sale of movables, unless otherwise agreed, delivery andpayment are concurrent conditions. The case of Field v. Lelcan1is an authority for the .proposition that where, as in this case, thetime for payment is stipulated for, but the contract is silent as to thetime for delivery, the seller is bound to deliver forthwith or withina reasonable time before payment, unless his obligation is otherwise
i (1861) 30 L. J. Exch. 168.
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regulated by a binding usage or custom. Accordiugly the defendant 1912.in his answer pleaded a custom in these terms: “According toSascpayo
the practice and usage obtaining in Colombo among merchants andA.J.
brokers scrip for shares sold is deliverable to the purchaser within Sae Sandsa reasonable time after payment for such shares, unless it is expressly v. Kadibhoy*agreed that payment and delivery of scrip should be concurrentconditions.” And the defendant proceeded further to plead thatat the dates material to this action ” there was a boom in rubbershares, in consequence of which such shares were freely sold andpassed from hand to hand so rapidly that such documents as arereferred to as necessary documents in the plaint could not and wereuot executed within such time as that within which plaintiff requiredtransfers and scrip to be delivered as aforesaid, and the plaintiff madethe said demand well knowing the circumstances herein set forth,and well knowing that the plaintiff could not comply therewith.”
The District Judge at the trial stated issues as to the existence ofthe custom and as to its reasonableness and legality. To prove thecustom pleaded defendant called Mr. W. E. Keel, a member of thefirm of Messrs. Keel '& Waldock, who carry on business as brokersin Colombo. Something was said at the trial and mentioned in theDistrict Judge's judgment to the effect that Mr. Keel was not thebest witness to be called on this subject, because it was Messrs. -Keel& Waldock who had purchased the shares for the defendant, pudbecause there was said to be some feeling about Mr. L. C. Davies(who had put through the present contract) not being at that time amember of the Brokers' Association. In my opinion Mr. Keel wasa quite competent witness, and his* evidence is reliable, but thequestion is what his evidence proves. I quote the relevant passagesin his evidence. After speaking of the difficulty of obtaining scripduring what is called the ” boom " in rubber shares, and how peopleused to buy and sell shares without scrip, he says, “ We on behalfof the seUer would not have undertaken to deliver the scrip by acertain date. We would deliver the scrip in such a case when itwas received from the seller, provided that the buyer had paid forthem. That was the general practice at that time. In such a casethe contract note would provide for payment within a specifiedtime, but would contain no reference to delivery of scrip. On sucha contract as this one (in question) scrip would have to be delivered,within a reasonable time soon after the seller received it. Duringthe boom we would have delivered scrip or transfer and deliveryorder or certified transfer as soon as obtained by us, provided thebuyer had paid for the shares. Anything between six months anda year would have been a reasonable time during the boom, fordelivery of scrip to a purchaser of shares. Mr. Sands (plaintiff)should have paid for the shares to the broker, L. 0. Davies, withinthe ten days and waited till he got the scrap f°r the shares; thatwas the custom of the trade at- the time. ”
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Bob Sandsv. Kadibhoy
This evidence falls far short of proof of a binding custom. Theso-called custom is too vague and. indefinite and wholly unreasonable.
It establishes no more than an extraordinary condition of businessarising out of a particular emergency. As Mr. Keel himself says,
“ There 'was extraordinary confusion during the boom last year, andthings came to such a pass that the Brokers' Association framedcertain rules, which came into force on October 1, 1910, so thatbrokers and clients should know definitely what their rights are andorder might be produced from disorder,” and he adds, ” A largenumber of purchasers kicked at the custom; there was an outcry,and it was found that the rules under which we were working wereimpossible. ” This is emphatic testimony to the unreasonablenessof the custom and to its not being acquiesced in. It is interestingto note' that the new rule framed by the Brokers’ Association ismodelled on that of the London .Stock Exchange, and provides forsettling days., namely, the second and fourth Friday in every monthfor both rupee and,, sterling shares, and enacts that on each settlingday all shares sold prior to the Tuesday next preceding such settlingday shall be paid for by the buyer and the necessary documentsshall be delivered by the seller. The period thus fixed retrospec-tively shows the unreasonableness of a practice which would compel:a purchaser who has paid for shares to wait for a year for delivery■of scrip, or,' even for a longer time if the seller should not himselfhave got them before, and which would-practically leave the matter•of delivery of scrip to the option and convenience of the seller.
It is true that, as a matter of fact, a series of transactions mighttake plac.e during the boom without the scrip being available at anystage; but because at a time of wild speculation people were contentto do business in that fashion, it does not follow that each seller inthe series was not running the risk of being called upon to deliverthe necessary documents promptly, and of being liable in law for& breach of contract in case of failure to do so,
Mr. B'awa, for the defendant-appellant, did not rely so much uponthe custom pleaded as upon the argument, that in entering into thecontract- both parties contemplated the actual condition of businessin the share market, and that, having regard thereto, it was anImplied term in the contract that the defendant-appellant shouldonly deliver the scrip within a reasonable time after payment, whichunder the circumstances meant the indefinite period alreadyreferred to. This position cannot be sustained. In the first place,I do not think that you can thus annex to a contract a term whichdoes not amount to a binding trade custom. In the next plac.e, itdoes not appear, as a matter of fact, that either party had in viewthe peculiar circumstances of the time. The plaintiff positivelydenies it, and the defendant does not allude to it either in his corre-spondence or in his> evidence. On the contrary? the defendant'sattitude was that on the plaintiff paying him for the shares he
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would deliver the scrip. His letter of April 12, I§10 (P 5), in reply 1912.
to a demand for the scrip, seems to me to put the matter beyond De
doubt, for there he says, “ I shall thank you to send me a chequeAJ.
to Messrs. Keel & Waldock, who will hand you the transfer and
scrip for the same, which appears to me not only to acknowledge ■>. Kadibhoy
his obligation to deliver the scrip concurrently with the payment,
but to intimate that he was in a position to do so.
I agree that this appeal should be dismissed with costs.
RAE SANDS v. KADIBHOY