101-NLR-NLR-V-24-RAMANATHAN-v.-EBRAHIM-LEBBE.pdf
C 821 )
Present: Bertram C.J. and Ennis J.
BAMANATHAN v. EBRAHIM LEBBE.
46—D. C. Colombo, 1,175,
Principal and agent—Goods delivered to another for sale outside Ceylon—Consignment of goods to ' foreign buyers—Undisclosed principal—Insolvency of agent—Action by assignee against principal for“ short falls ”—Election by foreign buyer to proceed against agentor undisclosed principal—Eight of principal to ask for indemnitybefore paying assignee in insolvency.
Defendant delivered certain quantities of rubber to one Ismailfor Bale in England for commission. Ismail consigned the goods toEnglish buyers without disclosing the fact that he was acting asagent for the defendant, and drew for a very high proportion ofthe price expected to be realized. In several cases the amount-drawn for was not realized. Ismail became insolvent, and theplaintiff was appointed assignee. He sued the defendant for therecovery of the amount not realized (short falls).
Held, ** If the defendant payB the amount now claimed to theplaintiff, it will not reach the English buyers. The English buyerswill only recover a dividend, and they can come upon the defendantfor the balance, and he may thus be compelled to pay that amount.Clearly, snch a result would not be jiist.”
It iB open to the English buyers to elect to proceed either againstIsmail or against the defendant, and so discharge the party notproceeded against …. There is only one conclusive formof election, and that- is the recovery of judgment against one of thepersons liable. Apart from snch a judgment, the question whetheran election has taken place is a question of fact . * . . . Thefact that the English buyers have entered proofs in the insolvencyproceedings does not of itself constitute an election; bat taken inconjunction with other circumstances may lead to such an inference.But in order that such an election may take place, the Englishbuyers must be aware of the alternatives they had of proceedingsagainst Ismail or the defendant.
“ At common law, money due under a contract of indemnitycould not be recovered until the debt in respect of which it wasdue had actually been paid. But equity allowed an order directinga fond to be set apart in advance."
T HE facts are set out in the judgment.
Baton, K.C. (with him Canakeratne and Loos), for the appellant.
Drieberg, K.C. (with him Soertsz, Garvin and Navaratnam), forthe respondent.
1982.
( 322 )
IMS.
Ramanathanv. JSJbrahim
Xiebbe
October 3, 1922. Bertram C.J.—
This is an appeal against a judgment of the District Court ofColombo in an action arising out of the insolvency of a firm ofA. H. Ismail. It appears that the defendant and the firm of A. H.Ismail entered into a contract with regard to certain shipments ofrubber. According to the plaintiff, who is the assignee of A. H.Ismail, that firm contracted with the defendant on the terms thatthe goods should be consigned by the firm for sale in England.The defendant, on the other hand, maintains that the contractwas for an out and out sale of these rubber shipments to A. H.Ismail. There is thus a fundamental question of fact between theparties, and in addition to this there is a claim in reconvention bythe defendant on the footing that his version of the transaction isthe right one. With regard to this question of fact, the learnedJudge in the Court below has found in favour of the plaintiff. Anappeal has been addressed to us on this point, but I think it isperfectly clear that the learned Judge was right. We were askedto say that the version put forward by the plaintiff had not beenmade out, because the contract between Ismail and the defendanttook place in Tamil, and the person by whom it was proved, Mr.Nelson, a person occupying a prominent position in the office ofthe firm, did not know Tamil. That point is no doubt good as faras it goes; but we can infer from the fact of this conversation, andfrom the notion taken upon it, what was the nature of the contract.With one exception, to which I will refer immediately, all theplaintiff’s books have been kept, and all his accounts were made up,on the supposition that the contract was for the sale of goods onconsignment. The documents from time to time rendered to himby his correspondents in England all proceed, upon the sameassumption. The only exception is with regard to the book kept inpursuance of the Rubber Thefts Prevention Ordinance. There, bywhat I think is clearly an inaccuracy, the first few consignmentsof rubber taken by A. H. Ismail were described as having beensold. The error was very soon corrected, and thenceforward theconsignments were described as received for shipment. I thinkwe are entitled to accept the explanation of the witness Nelsonon this point. I have not the smallest doubt that the terms ofthe contract were as contended for by the plaintiff, and I have,little doubt, therefore, that the version set up by the defendantwas fraudulently so set up, and that his claim in reconvention isequally dishonest. This being the finding of fact, we now come tothe question of law.
The position is this: Throughout the transactions A. H. Ismailacted as the principal. He never disclosed his own principal tothe defendant ; and the consignments, therefore, and the arrange-ments- with the English buyers, proceeded, .upon the assumption
( 323 )
that they were dealing with Ismail alone. As a matter of fact,the defendant was an undisclosed principal; and on that fact beingdiscovered the English buyers were entitled to look both to A. H.Ismail and to his undisclosed principal, the defendants
Mr. Drieberg insists that, at this stage in the story, he is entitledat once to be indemnified by the defendant _ in respect of certaintransactions with his English buyers. What were those transactions.As A. H. Ismail shipped the various consignments committed tohim by the defendant, he drew upon his foreign buyers for a certainproportion of the price expected- to be realized. As a matter offact, he drew for a very high proportion, and in' several cases trieompunt drawn for was not realized. There then arose certainclaims referred to in the argument as short falls. A. H. .Ismailbecame responsible to his foreign buyers for these short falls. Owingto the extraordinary laxity with which the business was carriedon, no- account was rendered to the defendant of these short fallsuntil the insolvency of A. .H. Ismail took place; and, as I have said,the assignee claims that the defendant is now liable to make theamount over to him, inasmuch as he is under a liability to theEnglish buyers. There arises, however,, this difficulty. It is opento the English buyers to elect to proceed either against Ismail oragainst the defendant, and so discharge the party not proceededagainst. But it is not clear up to the present that any electionhas been made. If no election has been made, the defendant isin this dangerous position. If he pays the amount now claimedto the plaintiff, it will not reach the English buyers. The Englishbuyers will only recover a dividend and they can come upon thedefendant for the balance, and he may thus be compelled to paythat amount. Clearly, such a result would not be just.
With regard to the question whether the English buyers haveelected, the authorities show this: There is only one conclusiveform of election, and that is the recovery of judgment against oneof the persons liable. The locus classicus for the exposition of thatprinciple is the judgment of Lord Cairns in Kendal v. Hamilton.1Apart from such a judgment, the question whether an election hastaken place is a question of fact. Now, in this case the Englishbuyers have entered proofs in the insolvency proceedings, includingthese short falls, in their general account against A. H. Ismail. It issettled law that this of itself does not constitute an election. SeeCurtis v. Williamson.s On the other hand, the entering of such aproof may be a very strong fact, taken in conjunction with thecircumstances of the case, from which a binding election may beinferred. But in order that such an election can take place, the personelecting must be. aware of the two alternatives before him; and wehave nothing to show that, when the foreign buyers included this
IASS.
BbrthauC. J.
Ramanothanv. EbrahimLebbe
1 (1879) 4 A. C. 514.
a (1874) L.R. 10Q.B. 57.
( *24 )
item in their general account and claimed against A. H. Ismail, theywere aware of A. H. Ismail’s undisclosed principal, and realizedthat, instead of claiming against A. H. Ismail for a dividend only,
rrninomtfftrin they could recover the amount in full from the defendant, A. H.
v. Ebmhim Ismail's undisclosed principal.
Lebbe
As we do not think it satisfactory to give a decision in thesecircumstances, the course we propose to take is this: To remitthe case to the District Court, with a view to giving an opportunityto the English buyers to take some definite action. I think itshould be the duty of the assignee, the plaintiff in thiB case, tonotify to those English buyers the present position. If withinfour months from the date of this judgment the English buyersWithdraw their proofs to the extent of those short falls, this wiltbe an indication that now, knowing the facts, they propose to proceedagainst the defendant. If, on the other hand, they do not so with-draw their proofs, then, in view of the fact that all the circumstancesare before them, and in view of the advanced state of the insolvency,
I think it should be taken that they have elected to look to A. H.Ismail to meet their claim, and the defendant in that case will be _discharged. If one English buyer acts in one way and one Englishbuyer in another, each case, of course, will be dealt with on thesame principle. There then arises the contingency of one or moreof the English buyers electing to look to the insolvent estate ofA. H. Ismail. In that case, no doubt, that estate.will be entitled toindemnity of some sort against the defendant. I need not discussthis principle at length here. I would simply draw attention to twoleading cases on the subject (Lacey v. Hill 1 and In re Richardson a).
I would further like to point out this: That the right of indemnity,which under the circumstances the assignee may have, is an equitableright. At common law, money due under a contract of indemnitycould not be recovered until the debt in respect of which it wasdue had actually been paid. But equity allowed an order directing-a fund to be set apart in advance. It is not necessary for us atthis stage to give any decision of the extent of the indemnity towhich the defendant will be liable if the English buyers elect topursue their proofs against the insolvent' estate. That is a matterwhich can be argued upon a proper issue being framed in the Courtbelow.
The decree should be formally set aside. The plaintiff, however,in any event, will be entitled to judgment for the commission andcharges incurred by A. H. Ismail as commission agent. Withregard to the costs, I think the fairest order will be that there shouldbe no order as to the costs of the appeal. With regard to costsin the Court below up to judgment,. I think that in view of thedefence put forward by the defendant, and in view of his claim
IMS.
BXbtkam0. J.
1 {1874) L. B. Eg. 191.
* {1911) 2 KB 709.
( 825 )
in reconvention and the substantial part that question took in theCourt below, the order of the District Judge giving costs to theplaintiff should remain undisturbed. The costs of all subsequentproceedings should, in my opinion, be in the discretion of the learnedDistrict Judge.
1922*
Bertram."C. J.
RatnatuOfonv. EbrahimLcbbt>
Ennis J.—I agree.
Varied♦