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Petitioner: ARNING & COMPANY LTD. VS Respondent: HAROON A. SOORTY BROTHERS
P L D 1964 (W
P L D 1964 (W. P.) Karachi 133
Before A. S. Faruqui, J
ARNING & COMPANY LTD.‑Plaintiffs
Versus
HAROON A. SOORTY BROTHERS‑Defendants
Suit No. 1142 of 1955, decided on 29th November 1963.
(a) Sale of Goods Act (III of 1930), S. 54(2)‑Unpaid seller re‑selling goods without notice of re‑sale to buyer and about six months after breach of contract‑Held : not entitled to claim damages on basis of difference between contract price and price fetched at re‑sale.
(b) Sale of Goods Act (III of 1930), S. 56‑Buyer wrongfully neglecting or refusing, to accept and pay for, goods‑Quantum of damages be measured by rule contained in S 73, Contract Act, 1872‑Contract Act (IX of 1872), S. 73.
(c) Contract Act (IX of 1872), S. 73‑Contract for sale of goods‑Breach‑Quantum of damages‑Buyer failing to accept and pay for goods‑Seller entitled to damages upon difference of contract price and market price prevailing on date of breach‑Same rule applicable vice versa i.e., in case of breach by seller‑Rule not applicable only in case of absence of any market for goods‑Plaintiff failing to prove market price on date of breach‑Claim based on right of re‑sale not available‑Statements, in correspondence between parties, varying figure of estimated loss from time to time‑Cannot form sound basis for determining market price.
A. K. A. S. Jamal v. Moolla Dawood 43 I A 6 and Erroll Machay v. Maharaja Dhiraj Kameshwar Singh A I R 1932 P C 196 ref.
(d) Contract‑Sale of goods‑Breach by buyer‑Power to re‑sell may either be statutory or conferred on seller by contract--- Power to re‑sell conferred by statute‑Can be exercised only on passing of property in goods to buyer‑Contract Act (IX of 1872), S. 73‑Sale of Goods Act (III of 1930), Ss. 54 & 56.
Messrs Ralli Brothers Ltd. v. Messrs Bhagwan Das Parmeshri
A I R 1945 Lah. 35 ; A I R 1925 Bom. 28 and A 1 R 1932 L4h. 169 considered.
Fazlur Rehman for Plaintiffs.
Shah Jamil Alam and Sharaf Faridi for Defendants.
Dates of hearing : 15th November 1961, 23rd and 24th October 1963.
JUDGMENT
These two suits for recovery of damages are by two allied English companies. In the first suit, that in suit No. 1142/55, the plaintiffs are Messrs Arning & Co. Ltd., incorporated in England having their registered office and principal place of business at Lancaster House, White worth Street, Manchester, England. In the second suit, that is Suit No. 1192/55, the plaintiffs are Messrs Barton & Catlow Ltd., incorporated in England having their registered office and principal place of business at the same place as the former company. This company is a subsidiary concern of Messrs Arning & Co. Ltd. The defendants in both the suits are Messrs Haroon A. Soorty Brothers, a firm carrying on business on 41, Moolji Jetha Cloth Market, Laxmidas Street, Karachi. The questions involved in both the suits and the evidence therein being common they were consolidated at the request of the Advocates of the parties. This judgment will dispose of both these suits.
2. There were in all eight contracts, four in each suit whereby the defendants agreed to buy from the plaintiff's various quantities of textiles. In the case of Arning & Co., the four contracts were made in the month of February 1951 at Karachi between the defendants and a representative of the plaintiff's. These contracts were made by indents placed by the defendants on the plaintiffs and the sale notes by the latter accepting the said indents. The brief particulars of these four contracts are as follows :‑
Contracts between Arning & Co. and Haroon A. Soorty Bros.
Indent No.
Date
Goods
Rate
Shipment
Quality No.
139
21-2-51
48,00) yards Split Printed Hair cords.
27 per yd.
Sep./Oct. 1951
4718
140
21-2-51
72,00 yards Split printed Cotton Cambrics.
25 per yd. CIF Karachi less 5%.
Dec.1951/Mar1952
2932
141
21-2-51
48,000 yards Split Dyed Poplinettes
25 per yd. CIF Karachi less 5%
Nov.1951/Apr.1952
70524
142
21-2-51
30,000 yards Split Dyed Poplinettes
28 per yd. CIF net Chittagong.
June/July 1951.
70508
The total cost price of the goods of these four contracts amounted to 21,722 sterling.
3. In the other suit (Suit No. 1192/55) of Barton & Catlow Ltd. there were again four similar contracts, the particulars of Which are as follows :‑
Contract between Barton & Catlow Ltd. and Haroon A. Soorty Bros.
Indent No.
Date
Goods
Rate
Shipment
Quality No.
136
21-2-51
32,000) yards Printed Cotton Cambric.
32 per yd. CIF Karachi less 5%
Oct./Nov., 1951
Same as in Indent 109
152
28-5-51
32,600 yards Split printed Cotton Plaints.
27 d per yd. CIF Karachi less 5%.
March,1952
As A & Co. s 2932
153
28-5-51
24,000 yards Printed Cotton Haircords.
28d per yd. CIF Karachi less 5%
Jan/Feb.1952
As previously supplied to us.
154
28-5-51
20,000 yards Split Dyed Poplinettes
36d per yd. CIF Karachi less 5%.
March/April, 1952
x.
The total cost price of the goods of these four contracts amounted to 13,221 sterling.
4. The payment in respect of each of these 8 contracts was specifically provided to be by confirmed and irrevocable letters of credit to be opened by the buyers (defendants) in favour of the sellers (plaintiffs). The price in each case was C. I. F:, Karachi or Chittagong.
5. The plaintiff's appropriated the goods to each of these eight contracts and called upon the defendants to open letters of credit which the latter failed to do. Certain amount of corres pondence followed in which the defendants expressed their difficulties due to the slump in the market and eventually by their letter dated 27th February 1955 they cancelled all the pending orders with the plaintiffs which included the eight contracts in these two suits. It is the case of the plaintiffs that the defendants by their letter of 27th February 1955 undertook to compensate the plaintiffs for any loss which the plaintiff's might incur because of the said cancellation.
6. The plaintiff's further claim that in the circumstances they resold the goods which had been appropriated to the eight contracts in the exercise of their rights as unpaid sellers and they old the goods at the best prices obtainable. By this resale the plaintiffs realised in the four contracts of Arning & Co. a total lum of 12,892 and in the case of Batton & Catlow a total Sum of 6,963. The total loss after certain adjustments as pleaded in paragraph 10 of these plaints on the basis of Tresale amounted to 7,434 in the case of Arning & Co: and to 5,543 in the case of Barton & Catlow. The par ticulars of the loss on resale in respect of the two suits are as follows :‑
"Proceeds of resale of goods by Arning & Co. Ltd.
Indent No.
Contract Price:
Proceeds of resale.
Loss on resale.
Amount due after proportionate appropriation vide para. 10 of the plaint.
139
6,300
4,111
2,189
1,842 18 6
140
7,126
3,975
3,150
2651 19 11
141
4,797
3,240
1,557
1,310 16 9
142
3,500
1,566
1,934
1,620 4 10
Proceeds of resale of goods by Barton & Catlow Limited.
Indent No.
Contract Price:
Proceeds of resale.
Loss on resale.
Amount due after proportionate appropriation vide para. 10 of the plaint.
136
4,053
2,074
1,979
1,753 7 5
152
3,658
1,920
1,738
1,541 0 6
153
2,660
1,270
1,390
1,231 3 9
154
2,850
1,699
1,151
1,017 8 4
13,221 6,963 6,258 5,543 0 0= Equivalent in Pakistani Currency : Rs. 74,035 3 0
The plaintiffs claimed these sums in these two suits upon the basis of resale of the appropriated goods in their exercise of the right as unpaid sellers. Later on, they amended the plaint on 7‑8‑62 by the following addition in para. 7 of the two plaints
"In the alternative as a result of the cancellation of the contract by the defendants, the plaintiffs are entitled to recover the difference between the contracted price of the goods agreed to be sold and the price actually realised by them upon the sale of the goods in the global market, under section 56 of the Sale of Goods Act."
7. In the first plaint the claim in Pakistani rupee was made on the basis of the rate of exchange before its devaluation. Later on, the plaint was amended and the claim was made upon the basis of the rate of exchange after devaluation. At this rate in Suit No. 1142/55 the plaintiffs have claimed Rs. 99,292‑6‑2 as being the equivalent to 7,434 and in Suit No. 1192/55, Rs. 74,035‑3‑0 as being the equivalent to 5,543 sterling.
8. As in the plaint the pleas in the written statements of both the suits were also identical. It is not necessary to refer to the whole of the written statement because of the limited stand taken before me at the hearing on behalf of the defendants. In the material part the defendants have denied that it was only on 27th February 1952 that they had cancelled the orders. It was alleged that this was done by a letter written in June or July 1951. With regard to the resale it was averred that the plaintiffs never informed the defendants that they were going to sell the goods and they did not give any notice of resale. It is added that in any case they should have sold the goods at the time when the contract was cancelled or when it was to be performed. It was further stated that the plaintiffs did not make any attempt to get the best available prices in local and other markets including Pakistan, nor were the goods resold after due notice to the defendants. The liability, therefore, for the loss on resale was denied. It was added that if the plaintiffs suffered any loss, it was due to their own laches and negligence. With regard to para. 10 of the plaint it was admitted that certain negotiations were carried on between the parties and certain amount of the defendants lying with the plaintiffs were appro priated towards payment of the compensation which was already settled between them. It was asserted that the amount of com pensation had been agreed upon between the parties but this could not be fulfilled because of the insistence of the plaintiffs that the payment should be made to them in sterling.
9. A number of issues arising from the denials and aver ments in the written statements of the two suits had been framed. However, at the stage of the argument before me Mr. Jamil Alam, the learned counsel for the defendants, stated at the Bar that the only question, which he was going to press, was that the plaintiffs bad failed to prove damages as required by law. He also said that he denied that the goods had been sold by the plaintiffs and for the prices as alleged by them. In view of this statement only the following issues survived : ‑
(1) Did the plaintiffs resell the goods covered under the orders of the defendants, if so, for what sum? (2) Did the plaintiffs suffer any loss, if so, how much? (3) Are not the defendants liable to make good the loss suffered by the plaintiffs because of not having given any notice before selling the goods? (4) Are the plaintiffs entitled to damages under section 56 of the Sale of Goods Act as claimed in the alternative? (5) Are the plaintiffs entitled to the new rate of exchange on account of the devaluation of the Pakistan rupee? (6) To what reliefs, if any, are the plaintiffs entitled?
These issues were agreed to be treated as common for both the suits. I shall now proceed to deal with these issues.
10. Issues Nos. 1 and 2.‑These two issues can be taken together. The question of the resale of these goods by the plaintiffs and the prices fetched at the resale is not of much significance in the suit because of the conclusion that I have reached that the plaintiffs are not entitled to claim damages upon the basis of the difference between the contract price and price of resale. However, I shall deal with this matter very briefly. Exhs. 16 and 43 are the two statements relating to the resale of the goods of the 8 contracts in suit. Exh. 16 is in respect of the resale of the goods of the contracts between Arning & Co. Ltd. and the defendant and Exh. 43 in respect of the contracts of Barton & Catlow Ltd. These statements were proved by Mr. Eric Nuttal, the Production Manager of both the companies who was examined on commission. Both these statements contain complete detail of sale of the goods of each of the eight contracts with invoices and other supporting documents. In addition the plaintiffs have examined on commission some of the buyers of these goods. These are P. W. 2 the Secretary to Mr. Maurice Shamsh, Manchester ; P. W. 3 Norman Martin Sacca of Dintex Fabrics, Manchester; P. W. 4 William Torkington of William Forgatty Ltd., Manchester; P. W. 5 Cecil Robert Stephenson for Cooper & Co. Manchester; P. W. 6 J. D. Doll, Manufacturers, Johannesburg, South Africa; P. W. 7 Kassamali Fazal of Faz d Dharamshi & Company Ltd., Mombasa; P. W. 8 Taherali Gulamabbas of M/s. Tayaballi Abdulhusein & Co. Ltd. Mombasa, P. W. 9 Issa Hirji of M/s. Issa Hirji, Mombasa; P. W. 10 Kanji Karsan of Messrs Kanji Karsan & Co. (Kenya) Ltd., Mombasa; and P. W. 11 Lalji Mangalji of M/s. Lalji Mangalji & Co. (Kenya) Ltd. Mombasa. These witnesses have given the quantities and the price for which they have bought the goods from the plaintiffs. Exhs. 16 and 43 contain the names of all the buyers at resale along with the relative invoice number. Upon all this evidence I hold that the resale of the goods of the eight contracts in question was made upon the prices stated in Exhs. 16 and 43. I accordingly find that on the resale the plaintiffs Messrs Arning & Company suffered a loss of 8,083 which, after adjustment of certain credits of the defendants in the books of the plaintiffs amounting to 1396, brought the figure to 7,434, the equivalent of which in Pakistani currency has been claimed in this suit. In the other suit of Barton & Catlow, the plaintiffs suffered a loss of 6,258 upon resale and after adjusting the sum of 715, which was standing to the credit of the defendants in the books of the plaintiffs, brought the figure down to 5,543, the equivalent of which in Pakistani currency has been claimed in the suit. I answer issues 1 and 2 accordingly.
11. Issues Nos. 3 and 4.‑These issues are connected and may be taken up together. The contention of Mr. Jamil Alam, the learned counsel for the defendants, was that in order to bind his client with the losses at resale, assuming that the plaintiffs had such a right, it was incumbent upon them to give notice of resale to the defendants, which they admittedly did not, and further that they should have resold the goods within a reasonable time which also they did not. It was, therefore, pointed out that the plaintiffs were not entitled to claim damages upon the basis of the difference between the contract prices and the prices fetched at the resale in view of the clear provisions of section 54 of the Sale of Goods Act. It was then urged that having regard to the provisions of section 73 of the Contract Act, which applies to cases when damages are claimed under section 56 of the Sale of Goods Act, the plaintiffs could only have been entitled to damages upon the basis of difference between the contract price and the market price prevailing on the date of breach, and in so far as the plaintiffs have made no attempt to prove the market price at the material time their claim for damages must fail in its entirety.
12. It may be noted that in the plaint the case set out in para. 7 was that "the plaintiffs in the exercise of their rights as unpaid sellers under the said four contracts, resold the goods which had been appropriated to the said four contracts at the best prices obtainable". This statement appears in para. 7 of both the plaints. It would, therefore; appear that the plaintiffs had clearly based their claim for damages upon their right of resale. The plaintiffs, however, amended the two plaints on 7‑8‑62 by adding art alternative claim for damages under section 56 of the Sale of Goods Act. However, they led no evidence thereafter on the question of market price on the date of breach. All their evidence had been concluded in the year 1960.
13. At the final bearing the position taken by Mr. Fazlur Rahman, the learned counsel for the plaintiffs, was that sub section (2) of section 54 of the Sale of Goods Act was not
applicable to the present case. This subsection reads as under
"54 (2).‑Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to resell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, resell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the resale. If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the resale."
The learned counsel admitted that no notice of resale was given by the plaintiffs to the defendants, but he urged that no notice was necessary because in the present case the property in the goods had not passed to the buyers inasmuch as these were C. I. F. contracts and the property in the goods would have passed only after the shipment of the goods by delivery of documents of title. For the same reason, it was urged that the question whether the plaintiffs resold the goods within a reason able time also did not arise. It may be noted that the resale in this case according to Exhs. 16 and 43 took place between August 1952 and June 1953. It was thus conceded that the plaintiffs were not entitled to damages within the meaning of section 54 (2) of the Sale of Goods Act. That is obviously so, because if the plaintiffs wore exercising their right of resale a unpaid sellers who had exercised their right of lien they would have to give notice of resale to the buyers and also have to effected the resale within a reasonable time. According to the plaintiffs the breach of contract in this case took place on or about the 27th of February 1952 and the resale having taken place between August 1952 and June 1953 could not be said by any stretch, to have been effected within a reasonable time.
14. We then come to the alternative claim under section 56 of the Sale of Goods Act. This section merely provides that where the buyer wrongfully neglects or refuses to accept and, pay for the goods the seller may sue him for damages for non‑acceptance, but the rule governing the question of measure o damages is contained in section 73 of the Contract Act, the material portion of which reads as follows :‑
"When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach."
The rule is now well‑settled that where a seller of goods commits a breach, the buyer is entitled to damages upon the basis of the difference between the contract price and the market price of the goods in question on the date of breach. This is so because the buyer has to be put in the same position in which he would have been if the contract had been fulfilled and upon a breach by the seller he can go to the market and buy the goods on the prevailing market rate. This, of course, assumes that the G goods are such which are available, conversely when the buyer commits a breach and fails to accept and pay for the goods, the seller would be entitled to damages and based upon the difference of the contract price and the prevailing market price on the date of the breach, because he can take his goods to the market and sell it at the ruling price. This rule, however, may not be applicable if there is no market for the goods. As far back as 1915 the Judicial Committee of the Privy Council took this view in the case of A. K. A. S. Jamal v. Moolla Dawood (43 I A 6). It was held that under a contract for the sale of shares in a company the measure of damages upon a breach by the buyer is the difference between the contract price and the market price on the date of the breach, with an obligation on the part of the seller to mitigate the damages by getting the best price he can upon that date. Lord Wrenbury, who delivered the judgment of the Court in this case, observed :‑
"It is undoubted law that a plaintiff who sues for damages owes the duty of taking all reasonable steps to mitigate the loss consequent upon the breach and cannot claim as damages any sum which is due to his own neglect. But the loss to be ascertained is the loss at the date of the breach:"
The underlined portion appeared in italics in the judgment of his Lordship. The same view was taken by their Lordships of the Privy Council in the case of Foley Brothers and others v. James A. Mcllwee and others (A I R 1917 PC255). Again the case of Erroll Machay v. Maharaja Dhiraj Kameshwar Singh (A I R 1932 P C 196), Lord Wright, who delivered the judgment of the Board, observed as follows :‑
"If there was an available market for the goods at the date of breach, the damages must be based on the difference between that market price and the contract price : a contract of resale becomes immaterial, because if there was a market, the law presumes that the buyer can minimize his damages by procur ing substituted goods in the market, so that he is thus in the same position, apart from the difference in price, as if the seller had not made default. Hence the difference of price, if the market price exceeds the contract price, is the sole damage in general recoverable."
This was a case where the seller had committed the breach but the principle is equally applicable where the breach is by the buyer.
15. It was, therefore, contended by Mr. Jamil Alam, that inasmuch as the plaintiffs failed to prove the market price of the relevant time, their claim based, as it is, upon a right of resale, which right was not available to them, must fail. It was pointed out that it was not the plaintiffs' claim that there was no market for these goods at all and that there is sufficient evidence on record to show that the goods could be sold though the market was low.
16. Mr. Fazlur Rahman did not question the correctness of the interpretation of the rule as to the measure of damages as has been stated above, but he contended, firstly that the defendants had authorised the plaintiffs to sell the goods and had agreed to compensate them to the extent of the loss accruing upon such resale, and secondly, that there was evidence in the admitted correspondence, which establishes the market price of the goods at the material time and which price compares favourably with the price at which the goods were sold by his clients. For that reason it was pointed out that the plaintiffs' claim should succeed even upon the rule of market price on the date of breach. I shall now proceed to deal with these contentions.
17. 1 shall first deal with the contention of Mr. Fazlur Rehman that the defendants had authorised the plaintiffs to resell these goods and are upon that ground liable to pay damages as arose to the plaintiffs upon the resale as established in this case. There can be no doubt that the power to resell may either be statutory or it may be conferred on the sellers by the contract of sale. It has been seen that in the former case that power can g be exercised only if the property in the goods has passed to the buyers but in the latter case it can be exercised even if the property in the goods has not passed to the buyers. In the present case, no power of resale was conferred upon the sellers by the contracts.1 The question then to consider is whether this power was subse quently granted to the sellers. Mr. Fazlur Rehman referred me to several letters which passed between the parties in support of the contention that a power of resale was conferred upon the sellers. I may note that the correspondence establishes the fact that there was a great slump in the textile market at the material time. There are number of letters from the defendants themselves on this point and this fact was not disputed by Mr. Jamil Alam, the learned counsel for the defendants. Now, to revert to the correspondence relied upon by Mr. Fazlur Rehman, the first of these is the letter of 31st July 1951 from the defendants to Messrs Arning & Co. Ltd. It may be here stated that all the correspondence on the side of the plaintiffs was done by Messrs Arning & Co. Ltd. or by Mr. Nuttal who repre sented both the concerns. In this letter of 31st July 1951, Exh. 1 14, the defendants have written that the market here "has slumped still further…
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