015-NLR-NLR-V-13-WEBSTER-v.-BOSANQUET.pdf
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Present: The Hon. Mr. J. P. Middleton, Acting Chief Justice, Dee. 21,1909and Mr. Justice Pereira.
WEBSTER ®. BOSANQUET.
D. C., Colombo, 26,132.
Liquidated damages—Penalty—Estoppel—Hearsay evidence—Evidence. Ordinance,a. 32.
If a lump sum is made payable by way of compensation. on theoccurrence of one or more or ailofseveralevents, some of which
may occasion Berious and othersbuttrifling(or evenless serious)
damage,the presumptionis thatthepartiesintendedthesum to
be penal, and subject to modification by Court; but although tnepresumption may arise, the factdoes notnecessarilyoblige the
Court totreat such lumpsum asa penalty.The useof the words
" penaltyor liquidated damages ”doesnotdeterminetheintention
of the parties; but when the ■ parties themselves call the sum madepayable a penalty, the onus lies on those' who seek to show it is tobe payable as liquidated damages (and vice versd).
The criterionwhetherasum—whether itis.called penalty or
liquidated damages—istruly liquidateddamages is to be found'
in ascertainingwhetherthesum stipulatedforcan or cannot be
regarded as a genuine pre-estimateof thecreditor'sprobable or
possible interestin thedueperformance oftheprincipal obligation.
Wherea contract contains several stipulations, and; damage for
the breach of one or more is incapable of precise estimation* thatis to say, is not readily ascertainable, the amount agreed to in thecontract is to be deemed to be liquidated damage. –
A representation in order to work an estoppel must be of such anature as would naturallylead amanof prudence toactupon it,
and in order to justify a prudent man in acting. upon it, it must beplain, not doubtful ormatter of questionableinference. Certainty
is essential to all estoppels.
A
PPEAL from a judgment of the District Judge of Colombo.
By the agreement sued upon in this case the defendant agreed-,
inter alia, that the plaintiff should have the exclusive right of adver-tising and selling the teas of three .estates, including Palamcotta;that the defendant should not sell to anybody else the tea of the saidestates without offering it, in the first instance, to the plaintiff forpurchase; that the defendant should not in any event sell the tea ofthe scud estates to any of the constituents, clients, or purchasers ofteas whose names appear in the books of the Ceylon Co-operativeTea Gardens Company or the Maravila Tea Company, and thedefendant should * not divulge to any company, person, or personsthe name or names of any such constituents, clients, or purchasers.
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Dec 21 1909 The plaintiff alleged in the plaint (1) that the defendant had omitted
■ to offer to him for purchase certain invoices of Palamcotta tea, and
that the defendant had sold the tea to others, and sued thedefendant to recover £500 as liquidated damages.
The District Judge entered judgment for plaintiff as prayed for.
The defendant appealed.
Bawa (with him F. J. de Saram), for the appellant (defendant).—The amount stipulated is penalty, and not liquidated damages…The use of the words “ liquidated damages ” by the parties is notconclusive on the point (Pye v. British Automobile CommercialSyndicate,1 Wilson v. Love2). There is no substantial differencebetween the English Law and the Boman-Dutch Law on this ques-tion (Pless Poll v. De Soysa 3); the Boman-Dutch Law permits evengreater latitude to the Court; even if the parties clearly "intendedthat the amount stipulated should be liquidated damages, Courtswill sometimes interfere if there is great disparity between the actualdamage and the liquidated sum (2 Nathan’s Common Law of SouthAfrica, 669). The evidence in this case shows an enormous dispro-portion between the actual damage and the amount agreed upon.
De Sampayo, K.O., for respondent.—The defendant understoodthe damages which would result to plaintiff by his losing touchwith his markets in consequence of defendant breaking his contract.It would be almost impossible to estimate the actual damagewhich plaintiff may suffer. The parties clearly intended the sumstipulated to be liquidated damages. Counsel -cited Wallis v.Smith* Kemble v. Farren,a Price v. Green* Atkins v. Kinnier.7
Bawa, in reply cited Commissioner of Public Works v. Hills.*
Cur. adv. vult.
December 21, 1909. Middleton A.C.J.—- '
In this case the plaintiff had obtained judgment against thedefendant for £500 as liquidated damages for breach of a contract,by which he agreed to offer the plaintiff the "option of purchasingcertain, portions of .the tea crop of Palamcotta' estate, in 1906*
e., invoices 1, 2, 3, 4, 7 and 8 of the months of February, March,April, May, June, and July, amounting in the aggregate to 53,315 lb.of tea.
*(1906) 1 K. B. 425.
(1896)1 Q. B. 626.
(1909) 12 N. h. R. 45.9 (1882) 21 Ch. D. 243.
8 (1829) 6 Bing. 141.
(1847) 16 M. & W. 346.7 (1850) 4 Ex. 776.
(1906) A, C. 368. y
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The defendant appealed, and the grounds relied on were (1) that Dec. 21,1909the plaintiff was estopped ■ by his conduct from making any claim mjddlbtonfor breach of contract; (2) that the sum agreed upon in the eontraot A.C.J.as liquidated damages was in fact a penalty, and that the damages Webster v.must be estimated by the Court. As regards the question of Boeanquetestoppel, it was only raised for the first time oh the day of trial andnot in the answer, and the Judge refused to allow it to be raised uponthe pleadings as they stood. The defendant’s counsel applied to .amend the answer, but was told that if he was allowed to do so anadjournment must be given to the plaintiff.'
An issue had been proposed by the defendant’s counsel andobjected to by the plaintiff’s counsel, whether the failure to give theplaintiff the option of purchasing the tea invoices Nos. 1, 2, 3, and4 was due to a mutual mistake on the part of the plaintiff anddefendant. As the plaintiff was leaving Ceylon in a few days, hisadvocate withdrew his objection to this issue, and the parties wentto trial on it, possibly, on the defendant’s side, under a misappre-hension that it raised the question of estoppel he was desirous ofhaving tried.
At first I inclined to the opinion that the parties had intendedthat the issue agreed to should raise the question of estoppel, and Iam not quite sure now if the appellant did not suppose it did. Itis clear, however, that such an issue does not .raise the defence ofestoppel against the plaintiff, and I am of opinion that it was toolate upon the hearing of the appeal to raise a question which wouldinvolve a further elucidation of and finding of fact, and to which itseems to me that the dictum of Lord Herschell in the Tasmania 1applied. We therefore did not call upon the respondent upon theconclusion of the appellant’s argument on this point.
The mistake here was not in making the contract, but in failingto observe its conditions on a representation made by the plaintiffthat it was at an end. The defendant, who made the mistake, hadthe means of knowledge in virtue of his possession of a copy of thecontract to which he might have easily referred, and I thinktherefore, that unless he can prove an estoppel under section 115against the defendant, he will be liable for the mistake in a matterof fact which it was his duty to know, and of which he had themeans of knowledge (Leak on Contracts, 207).
Then there remains only the question whether the £500 mentionedin the contract was intended by the parties as a penalty or liquidateddamages. The principal tests under the English Law appear to bethat all the circumstances should be taken into consideration toascertain the intention of the parties, and that if a lump sum ismade payable by way of compensation on the "occurrence, of one,more,.or all of several events, some of which may occasion serious andothers but trifiing damage, the presumption is the parties intended
1 (1890) IS A. C. 223
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Dec. 21,1909 the sum to be penal and Subject to modification, per Lord WatsonMtodleton ha E°r<f Elphinstone v. The Monkland Iron and Coal Co.,1 Wilson v.
A.C.J:Love,* Pye v. British Automobile Commercial Syndicate Co., Ltd.,3 but,
Webefcr v. although the presumption may arise, the fact does not necessarilyBoeanquet oblige the Court to treat such lump sum as a penalty. Lord lusherin Wilson v. Love, commenting on Wallis v. Smith,* remarked thatSir George Jessel went through the dicta on this question, findingfault with them, but he, Lord Esher, did not think, he over-ruledthem, and went on to say that the House of Lords in Lord Elphinstonev. The Monkland Iron and Coal Co. have adopted them.
In Dimech v. Corlet* and Diestal v. Stevenson & Co.* and Wilson v.Love, u6» supra, it was held that the use of the words “ penalty orliquidated damages ” does not determine the intention of the parties,but in Wilson v. Love Lord Esher said that when the parties them-selves call the sum made payable a penalty, the onus lies on thosewho seek to show it is to be payable as liquidated damages, and Ipresume the converse would be equally true.
In the Commissioner of Public Works (Cape of Good Hope) v. Hills'jit was held that the criterion whether a sum—whether it is calledpenalty or liquidated damages—is truly liquidated damages is to befound in ascertaining whether the sum stipulated for can or cannotbe regarded^ as a genuine pre-estimate of the creditor’s probable orpossible interest in the due performance of the principal obligation.I have gone through the terms of the contract, and it seems to me,as put by counsel for the appellant, that a strict enforcement of . thepenal clause on the footing it was liquidated damages for a series oftrifling breaches, in neglecting to give the option of purchase forsmall breaks, or in selling even a pound of tea on occasions to someprohibited persons, might involve the defaulting party, in the firstcase, in many thousands of pounds worth as damages, and in tbs.second in the sum of £500 at least. -I therefore hold that the partieshad not pre-estimated their damages by the words they used, butintended that the sum of £500 should be. a prohibitive penalty tocover the real damages incurred upon estimation.
The parties to this case are English, and may have intended theircontract to be governed by the English Law I have been referringto above, but whether this is so or not is a matter of no importance.As I had occasion to say in Pless Pol v. De Soysa,* there appears to bebut little difference between, the English and Boman-Dutch Law onthe question, and this view appears to be assented to by counsel onboth sides.
We now come to the -question of damages. In assessing thedamages in this case, it mu6t be remembered that the contract
1 (1886) 11 A. C. 332, 342.* (1858) Moore P. C. 199.
(1896) 1 Q. B. 626.* (1906) 2 K. B. 345.
(1906) 1 K. B. 425.7 (1906) A. C. 368.
(1882) L. R. 21,. Ch. D. 243.* (1909) 12 N. L. R. 52.
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between the parties ended on July 30, 1906; that only six invoices Dec. 21,1909
of tea, amounting, as stated in the plaint, to 53,815 lb. of tea, were Mmnr.mw
alleged to have been not presented for the plaintiff's option of A.C.J.
purchase; that his right only amounted to an option of purchase, Weteter v.
which in two instances at least, in the case of invoices Nos. 5 and 6, Bosanquet
not included in the plaint, was declined with very narrow margins
between defendant’s prices and plaintiff’s offers; that if these teas
were of such extreme importance to the plaintiff’s trade, it would
have been well worth his while to concede the few cents that divided
his offer and the defendant’s prices, or even to have bought the teas in
the open market when they were put for sale and sold—the plaintiff
admits in one instance at a lesser rate—by Forbes and Walker,
p. 8/15. The plaintiff alleges he lost touch with the New Zealand
and Canadian markets in consequence of his failure to supply them
with these estate teas, and yet he states that he made no attempt to
retrieve his position by purchasing the teas in the open market, as
he might have done at a possibly lower price. If these teas were of
such value to him, that their absence in his consignments affected
his position so crucially in his foreign markets, he could surely have
afforded to purchase them at the rates asked by the defendant’s
agents, and should most certainly have bought them in the open
market if they were to be had. At the same time also it must be
remembered that the plaintiff never apparently exercised his rights
to refer to another broker in the case of invoices 5 and 6, nor evinced
any such great anxiety about these breaks as would lead an impartial
person to believe that their purchase as. Palamcotta teas was vita!
to his interests in New Zealand and Canada. It must be remembered.
also that after July 30, 1906, the plaintiff would not have been
entitled to the option contracted for, nor does he, from his evidence,
appear to have done anything to prove how great was the value of
the right of purchase of these teas to him or to provide for their
substitution by others. -The inference I draw from the plaintiff’s
evidence, amounting to mere unsupported assertion, is that the .
absence of these teas did not in the least affect his. position in the
New Zealand and Canadian markets, and that the reputation of the
teas he was able to supply his .foreign customers with was not
perceptibly influenced by the fact that he had not the option given
him by purchasing these six small' breaks of tea. A further thing
to be remembered is also that there appear to have been no
complaints made subsequently to July 30, 1906, of the defendant’s
action in omitting to give- him the option contracted for, nor from
the plaintiff’s foreign constituents, nor was plaintiff’s action begun
until February 12, 1908.
It is difficult to assess the damages here because of the option theplaintiff had of purchase. That option might always have beennullified by a high Colombo valuation, and the Palamcotta teaswould not then have entered the plaintiff’s foreign consignments, as it
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Dee. 21,1909does not appearto have been his custom to purchase thematany
MtoDLETONprice. I think,however, the proper measure of damagesisthe
A.G.J.difference between the Colombo valuation of these teasatthe
Webster v.respective datesthey would have been presented to him andthe
Bosanquet value at which the plaintiff invoiced them to his foreign customers.
If the teas left the plaintiff for foreign consignment as a. blend, itwould not be unfair, perhaps, to allow to the plaintiff the invoicedprices per pound of his blend to his ( foreign customers at the sajnedates I have mentioned. The difference between the two priceswill be the damage which, I think, the plaintiff has incurred.
The appeal must be allowed, and the judgment of the DistrictCourt varied , by entering judgment for the plaintiff either for a sumto be ascertained or to 'be agreed on. If the parties cannot agreeupon the damages, which appear easy of ascertainment, the casemust go back to the District Court for an inquiry and assessment onthe basis I have laid down. As regards costs; considering the longperiod of time during which the parties have worked amicablytogether, and the fact that plaintiff sent P 1 to the defendantand certainly misled him, I am not favourably impressed with hisadoption of the position of a greatly aggrieved party as shown byhis bringing this action for the. full amount of the penalty. I wouldtnerefore give him only half his costs in the Court below, and in theclass upon which an action might be brought for . the sum assessedas damages. The defendant will have his costs of the appeal, andthe costs of the inquiry fpr assessment of damages, if renderednecessary, will be in the discretion of the District Court.
Pereira A.J.—
In this case* the plaintiff claimed to be entitled to recover from. the defendant £500 as liquidated damages, stipulated for. in theindenture filed, of record for breach of one of its tenris, that is tosay, for failure on the ‘part of the defendant to offer to the plaintiffthe option of buying certain portions of the tea crop of the teaestate known as Palamcotta in 1906. The defendant pleaded, interalia, that#in the genuine belief, induced by a misunderstanding,that the term of ten years of the agreement had expired on December81, 1905, he had sold by“public auction certain invoices of Palamcottatea which, in terms of the. agreement, should have been offered tothe plaintiff. At the trial the following, among other issues,appears to have been suggested by the defendant: “Was thefailure to give the plaintiff the option of purchasing the tea invoices1, 2, 3, and 4 due to a mutual mistake on the part of the plaintiff anddefendant? ” And an idea then appears to have gained ground inthe Court that the defendant was attempting to plead a new defence,namely, that he had been .misled by the plaintiff into the belief thatthe contract had terminated at the end of December, 1905, and
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that the plaintiff was hence by his own act estopped from holding Dee. 21,19.09the defendant liable for not offering to him the. option of purchasingtea since that year. In this belief the plaintiff’s counsel vehemently A.J.opposed the framing of the issue, but with reluctance consented to wdititarv.it eventually, because he was anxious to proceed with the trial Boaanquetwithout further delay, inasmuoh as the plaintiff was about to ler'.othe Island shortly. It does not appear to have struck anybodythat the issue was as harmless as the defence of mistake pleaded inparagraph 5 of the answer. It did not raise the question of estoppelat all, and it is clear that the fact of mutual mistake could notadvance the defence any further than that of mistake on the part ofthe defendant only. Mutual mistake was insufficient to constituteestoppel. It was necessary that the plaintiff should, by declara-tion, act, or omission, have intentionally caused or permitted thedefendant to believe a thing to be true, and to act upon such belief.
Counsel for the appellant submitted that it was this state of thingsthat was intended to- be established under the issue referred to.
Counsel for the respondent would not concede that. The issuespeaks for itself, and, in the absence of special concession on thepart of the defendant’s counsel, I do not think it will be fair, just,or equitable to put upon an issue a construction which the. wordsused do not in any recognized sense admit of. The District Judgehas been at pains to express a desire “ to make it quite clear thatthe breach of the Contract was due to some mistake or. misunder-standing somewhere, and nothing else. ” This, practically, is ananswer to the issue in the affirmative. What then? The nettresult, as regards the main question of liability, is no improvementon the admission, already made by the defendant in the 5th paragraphof the answer, of a breach of the contract.
The question of estoppel was argued at great length by theappellant’s counsel, but in view of the issues framed it could bebut of merely academical interest. I shall, however; deal with itbriefly. The contention was based upon a letter (P 1) addressed bythe plaintiff to the defendant, in which the plaintiff says that heencloses a cheque for £37.10s., being the last payment due to thedefendant “ as per our agreement. ” He, however, adds: “ I begto point out that no Palamcotta teas have been offered for sometime, the last invoice being No. 16. ” Now, invoice No. 16 had beendelivered on December 29, 1905. It is, therefore, manifest that theplaintiff did not intend to convey, by the reference to the chequefor £37.10s. as the “ last payment, ” that the contract had terminated.
He, on the other hand, pointed to a fact, namely, the absence ofoffers “ for some time, ” which should have induced the belief thatin bis view the contract was in subsistence still; and, indeed, thedefendant might well be expected to have known that the contracthad not yet terminated. But Mr. Bawa very "properly argued thatintention on the part of the plaintiff was- to be presumed from the
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Dec. 21,1909 natural or probable consequence of his act, and it did not matterthat the defendant might on inquiry have discovered the real stateA.J, of things. The law on the point is clearly enunciated by LordIFetafer v Herschell in the case of Bloomenthal v. Ford.1 eIt was there laidBosanquet down that where an “ unequivocal ” statement is made by one partyto another of a particular fact, the party who made that statementcould not get rid of the estoppel which arose from another man’sacting upon it by saying that if the person to whom he made thestatement had reflected and thought all about it, he would haveseen that it could not be true. In the- present case, however,considering the letter P 1 as a whole, it is clear that the statementthat the cheque was the last payment due to the defendant “ as perour agreement ” cannot, particularly in view of what follows, besaid to be an unequivocal statement to the effect that the contracthad terminated.
A representation' in order to work ah estoppel must be of such anature ks would naturally lead a man of prudence to act upon it;and in order to. justify a prudent man in acting upon it, it mustbe plain, not doubtful or master of questionable inference. It hasbeen held that certainty is essential to all estoppels (see Smith v.Chadwick2).
There is, moreover, va lack of evidence that the defendant was, inpoint of fact, misled by the representation made by the plaintiff.Letter P 1 was written not to the defendant direct, but to his agents.It may fairly be presumed that it was communicated to the defendant.4lis witness, Mr. Unwin, says:In the ordinary course we would
have sent a copy of P 1 to the defendant. ” The defendant, however,has not been called as a witness, and the chief evidence of his havingbeen misled is to be found in the letters X 1, X 2, and X 3. Theseletters written by the defendant to his agents were tendered inevidence-. The District Judge says that he rejects them, for thevery elementary reason that evidence must be given on oathand subject to cross-examination. But I take it that the letterswere tendered under the provision of our. law, which constitutesan exception to the rule, excluding hearsay, and dispenses undercertain special conditions with direct oral evidence hnd the safe-gukrds provided by cross-examination and the sanction of an oath.One of these conditions is that the attendance of the witness cannotbe procured without an amount of delay or expense which, in thecircumstahces of the case, appears to the Court unreasonable. TheDistrict Judge expressly held that it would be unreasonable toexpect the defendant “ to come down to Ceylon to give evidence inthis case. M< That at once paved the way for the admission of theletters tendered (whatever weight their contents might merit asevidentiary material), provided certain other conditions laid downin section 32 of the Evidence Ordinance were also fulfilled; and I
1 (1877) A. C. 168,.1 (1882) 20 Ch. D. 27.
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confess I cannot follow the District Judge when he gives as a further Z>«c. 21,1909reason for rejecting the letters that the defendant might have takenput a commission to have himself examined as a witness in England. A.J.That, no doubt, would have been a prudent course to take in the Webster v.circumstances of this case, but the omission of the defendant to take Boeanquetthat course could not affect his right to have the letters read inevidence, if they were otherwise admissible. To meet one othercondition prescribed by the Evidence Ordinance, the statements inthe letters should have been made in the ordinary course of business.
As regards that, I agree with the District Judge that the conditionhas not been fulfilled. The addressees were the agents of thedefendant for certain commercial purposes only, and it could hardlybe said that the information that the defendant gave in those lettersto those agents was in the nature of statements in the ordinaryroutine of business necessary for or germane to the carrying out ofthose purposes.
I now come to the question as to the amount that the plaintiff isentitled to by way of loss sustained.’ The District Judge has treatedthe sum of £500 named in the agreement as liquidated damages, andhas awarded to the plaintiff the whole of that sum. Now, if we areconcerned with merely the assessment of damages for the breach ofthis contract, it is clear that, in view of the District Judge’s findingof the entire absence of mala fides on the part of the defendant, thedamages should be placed at the lowest possible figure. The obligee-would be entitled to only the damage sustained as a direct result ofthe breach complained -of, $nd not to such as were merely incidentalto it (see Poth. I, 2, 5). But in the present case the amountrecoverable as damage is, as observed above, fixed in the agreementat £500, and the question is whether the whole of that sum is .exigible as liquidated damages, regardless of the amount of damageactually sustained. It is contended by the defendant in his petitionof appeal that the contract is governed by the Boman-Dutch Law.
It is not altogether an agreement for the sale of goods, and it maywell be that it is so governed. The contention was mentioned bycounsel in the course -of the argument, and it was said that on theabove question there was no difference between the Boman-Dutchand the English* Law, and reference was made to Nathan's CommonLaw of South Africa, vol. 11., 638. The South African casescited by Nathan would appear to have been decided on principlessimilar to those of the English Law; but the reports cited from arenot available here, and it is not possible to say that they contain anenunciation of the Boman-Dutch Law untinged by local legislationor local usage. In this connection I may say that the inclinationof my opinion is in the direction of there being a difference betweenthe English Law and the Boman-Dutch on the point in question.
Under the English Law a sum stipulated to be paid as damage forthe breach of the covenants in an indenture is to be deemed to be a8-
Dec. 21,1909
Pereira
A.J.
Webster v.Boaanquet
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penalty or liquidated damages (regardless even of the nomenclaturein the indenture itself) in accordance with certain rules, to be noticedhereafter, laid down and explained from time to time by judicialauthority; and in the event of its being held to be a penalty, theactual amount of the loss sustained is to be assessed and awardedto the injured party. In the Roman-Dutch Law such a sum hasonly one designation—poena—which, as observed by Mr. JusticeWithers in the case of Fernando v. 'Fernando,1 has not the same forceas the word “ penalty ” in the English Law. As a general rule,this peena is exigible to its fullest extent, in every case, but, asexplained by Bonser C.J. in the case just cited, where it happens tobe out of all proportion to the damages sustained, is manifestlyexcessive or exorbitant, the Court has the power to make a reduction.This reduction is, I conceive, not to be based upon a minute calcu-lation of the loss actually sustained, but may be effected in a moreor less arbitrary manner. The reduced sum still retains the characterof a penalty, or, more properly, of poena, but it is awardable,nevertheless, to the obligee in lieu of loss actually sustained. TheCourt, however, I take it, is not absolutely precluded from having acorrect assessment made of the« damages actually sustained. That,apparently, is a matter which is more or less in its discretion. Inthe present case I am inclined to the opinion, for reasons to be givenlater, that the sum stipulated for in the contract to be paid asdamages is manifestly excessive. No more need be said on thequestion of the loan applicable, because counsel who argued theappeal appeared to be content to let the decision of the case begoverned by the principles of the English Law, and English authoritieswere therefore largely cited. It is thus necessary to decide, in thefirst place, whether the sum of £500 stipulated for in the contractis to be deemed to be a penalty or liquidated damages under theEnglish Law.
The cases upon, the question as to whether a sum stipulated in acontract as payable as damage in the event of a breach of its termsis to be regarded as a penalty or liquidated damages appear to bevery numerous. Where the sum stipulated has been depositedsomewhere, or placed in the hands of a stakeholder to abide theperformance of the contract, the idea of its being liquidated damageshas been given effect to (see Lea v. Whitaker*). Then, again, as heldin the case of Law v. Local Board of Redditch,3 where parties to acontract have agreed that in case of one. of the parties doing oromitting to do some one thing he shall pay a specific sum to the otheras damages, the sum is to be regarded as liquidated damages,' andnot a penalty; but it will be seen that Lord Esher, M.R., mentions inhis judgment certain exceptions to this rule, one of them being thatwhere the sum agreed to be paid is, with regard to the matter in i *
i (1899) 4 N. L. R. 285.1 (1872) L. B. 8, C. P. 70.
» (1892) 1 Q. B. 121.
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respect of which it is agreed to be paid, so large as to make the idea Dec. 21^1909that it was intended to be payable by way of, liquidated damages so Pereiraabsurd that the Court would be compelled to arrive at theconclusion that it was to be, paid not as liquidated damages, but as Webster v.a penalty.Bosanguet
On the other hand, there are many cases in which it has beenheld that where a sum is mentioned in an agreement as payable asliquidated damages on the performance or non-performance of anumber of matters, some of which would involve very inconsiderabledamages, it should be treated as a penalty. Kemble v, Farren 1 andAstley v. Weldon ! are among the older of these'. A very elaborateexposition of the oases on this subject will be found in the judgmentof Jessel, M.R., in the case of Wallis v. Smith.3 I need not burdenthis judgment with authorities in support of the proposition thatwhere a contract contains a variety of stipulations of differentdegrees of importance, and one sum is stated to be payable on breachof performance of any of them, then, although it is called by thename of liquidated damages, it is in reality a penalty, and theactual damage sustained is alone recoverable. The cases will befound collated in the Encyclopaedic of Laws, vol. IV., 103. I maymention that in Lord Elphmstone v. Monkland Iron and Goal Co.*
Lord Watson said: “ When a single lump sum is payable by way ofcompensation on the occurrence of one, or more, or all of severalevents, some of which may occasion serious and others but triflingdamage, the presumption is that the1 parties intended the sum to bepenal and subject to modification. ” On this, Lord Esher, M.R.,observes in Wilson v. Love3: “ I think the effect is substantially thesame if, instead of the words * some of which may occasion seriousand others but trifling damage,’ he had said ‘ some of which mayoccasion serious and others less serious damage.’
There, then, is another class of cases in which it is stated thatwhere a contract contains several stipulations, and damage for thebreach of one or more is incapable of precise estimation, that is tosay, is not ascertainable or is not readily ascertainable, the amountagreed to in the contract as damage is to be deemed to be liquidateddamage. This is the only class referred to by the District Judge, andto the case that he has cited I may add that of Reynolds v. Bridge.*
Turning now to the agreement sued upon in this case, I see thatthere are in it certain covenants or groups of covenants in respectof which £500 is mentioned as damage recoverable in the event ofbreach. The breach complained of by the plaintiff in his plaint istwo-fold: (1) The omission to offer to the plaintiff for purchasecertain invoices, of Palamcotta tea; and (2) the.sale of such tea toothers. At the trial, as appears from the first issue agreed to, the
1 (1829) 6 Bing. 141.« 11 A. C. 332, 342.
* (1801) 2 B.dsP. 346.« (1896) 1 Q. B. D. 630.
» (1882) 21 Ch. D. 243.• (1856) 6 Ellis A Bl. 628.
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Dec. 91,1909 plaintiff apparently confined himself to the first of these breaches.
_ Now, in lie group of covenants in the deed of agreement, in whichA.J. is comprised the covenant securing to the plaintiff the right ofWdbaier v pre-emption, there are many other covenants, which, omittingpoaanquet immaterial portions, may be summarized thu6. That the defendantshould in certain circumstances instruct a certain attorney, agent,or proctor to register or cause to be registered certain descriptions,devices, and trade marks, although, I may mention, the failure ofsuch attorney, agent, or proctor to obtain such registration is notto render the defendant liable in damages; that' the plaintiff shouldhave the exclusive right of advertising and selling the teas of threeestates, including Palamcotta; that the defendant should not sellto anybody else the tea of the said estates without offering it, in thefirst instance, to the plaintiff for purchase; that the defendantshould not in any event sell the tea of the said estates to any of theconstituents, clients, or purchasers of teas whose names appear inthe books of the Ceylon Co-operative Tea Gardens Company or theMaravila Tea Company, and that the defendant should not divulgeto any company, person, or persons the name or names of any suchconstituents, clients, or purchasers.
I cannot help thinking that here we have stipulation of varyingdegrees of importance, and I do not see the difficulty of ascertaining(if it were necessary to apply that test) the damage that the plaintiffmay reasonably be deemed to have sustained by reason of theparticular breach complained of. It occurred during the expiringdays of the contract. The plaintiff apparently felt no pinch untilMay 9, 1906, when, with no complaint of any serious inconvenience,he inquired of the defendant when he might expect another invoiceof tea. Two invoices were thereafter offered to him, the second onJune 14, when the plaintiff knew that in about another six weeksfrom that date he would be entitled to no offers at all. But herefused them because the first, was priced at 36 cents and 32 cents,and the second at 35 cents and 31 cents. There is also a complaintby the plaintiff in his evidence that only two grades were offered, butI see no reference to that grievance in his letters of May 16 andJune 15, 1906. In these circumstances, I am not prepared toassume the loss of touch by the plaintiff with foreign markets asa result ’ of the particular breach of contract on the part of thedefendant, of which the plaintiff complains in this action. Nomysteries of the trade have been disclosed by the operation of whichsuch a mighty result can spring from what, at any rate, appears tobe such a trivial cause.
I would set aside the judgment, and remit the case to the DistrictCourt for the assessment of damages on the lines indicated by theChief Justice, if an amount could not be agreed to by the parties.As regards costs, I agree to the order proposed.
Appeal allowed; case remitted.