Bhagwanji and Co. v Mohamedbhai and Co. Ltd (Civil Suit No. 963 of 1952) [1953] EACA 3 (1 January 1953)

# ORIGINAL CIVIL

#### Before DE LESTANG, J.

#### **BHAGWANJI & CO., Plaintiffs**

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### MOHAMEDBHAI & CO. LTD, Defendants

## Civil Suit No. 963 of 1952

# Sale of Goods Ordinance (Cap. 290), section 41-Unpaid seller in possession as bailee—Whether lien subsists—Section 48 (2) (3)—Unpaid seller's right of resale—Resale—Whether at fair market price.

In March, 1951, the plaintiffs contracted to sell, and were ready to deliver, iron-ware to defendants. The defendants were unable to pay the price. The plaintiffs agreed to store the goods on payment of interest and storage charges, towards which defendants paid four instalments. In June, 1952, the plaintiffs gave the defendants notice that, failing payment of the price, they would sell the goods and hold the defendants liable for any loss. The defendants failed to pay. The plaintiffs sold the goods at great loss and sued for damages for breach of contract. It was conceded that the plaintiffs had become bailees. The defendants contended that, as bailees, the plaintiffs had no right of resale and that the sale was not at a fair market price.

Held (16-1-53).—(1) By section 41 of the Sale of Goods Ordinance, the unpaid seller of goods has a lien on them while they are in his possession and this lien subsists notwithstanding he is in possession as a bailee of the goods.

(2) The combined effect of sub-sections (2) and (3) of section 48. Sale of Goods Ordinance, is that an unpaid seller, who exercises a right of lien, may resell the goods, after giving notice to the buyer of his intention to do so, if the buyer does not, within a reasonable time, pay or tender the price.

(3) The market price for the goods had dropped considerably between 1951 and 1952 and the market was flooded. In the circumstances, the price was a fair and reasonable one at the time.

Judgment for the plaintiffs.

A. P. Shah for plaintiffs.

Gledhill for defendants.

JUDGMENT.—This is a claim for damages for breach of contract in the following circumstances: —

On or about 17th March, 1951, the defendant agreed to purchase from the plaintiffs, who agreed to sell, two consignments of British corrugated steel sheets from the firm stipulated in the contract. The goods were to be railed to the defendants from Mombasa and payment was to be made by sight drafts. In April the plaintiffs railed the goods to the defendants in Nairobi and drew on them two sight drafts for the purchase price. The defendants, being unable to meet the drafts, requested the plaintiffs to retain the goods until they were in a. position to pay for them—that meanwhile they would pay to the plaintiffs 6 per cent interest on the purchase price and Sh. 100 per month as storage charges. The plaintiffs agreed and took possession of the goods and retained them. It is conceded that by this arrangement the plaintiffs became bailees of the goods for the defendants. Between April and June, 1951, the defendants paid over to the

plaintiffs Sh. 4,520 in four instalments. This was partly towards the purchase price of the goods and partly towards interest and storage charges. I accept the evidence on behalf of the plaintiffs, which is supported by letters, that during the second half of 1951 and the first half of 1952 they requested the defendants on many occasions to pay the purchase price and take possession of the goods, but the defendants failed to do so, the reason no doubt being that the market for corrugated iron sheets was falling.

Finally, on 4th June, 1952, the plaintiffs informed the defendants by letter that unless the goods were collected and the account settled within seven days. they would resell the goods and hold the defendants liable for any deficiency in the price obtained. The defendants failed to take delivery of the goods and, on 15th July, 1952, the plaintiffs resold the goods to Messrs. M. R. Ghai & Sons at a great loss. They accordingly claim the difference between the purchase price and the resale price as damages from the defendants. They also claim interest and storage charges in accordance with the second agreement. The whole comes to Sh. $20.037/14$ as set out in detail in exhibit 3.

Two questions arise for consideration in this case. The first is whether the plaintiffs were entitled to resell. If so, then the second question arises, whether the resale was at a fair market price.

On the first question Mr. Gledhill for the defendants contends that by becoming bailees of the goods for the defendants the plaintiffs deprived themselves of their right of resale. In my view, this argument is not sound. By section $\cdot$ 41 of the Sale of Goods Ordinance the unpaid seller of goods has a lien on them while they are in his possession and this lien subsists notwithstanding that he is in possession of the goods as a bailee from the buyer. That being so, the plaintiffs in the present case had a lien on the goods in their possession. Section 48 of the Ordinance deals with the unpaid seller's right of resale. The relevant portions of this section for our present purpose are sub-sections (2) and (3) which read as follows: $-$

"(2) Where an unpaid seller who has exercised his right of lien or retention or stoppage *in transitu* resells the goods, the buyer acquires a good title thereto as against the original buyer.

(3) Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to resell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may resell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract."

In my view the combined effect of these provisions is that an unpaid seller who exercises a right of lien may resell the goods after giving notice to the buyer of his intention to do so, if the buyer does not within a reasonable time pay or tender the price.

In the present case, the goods were in the possession of the plaintiffs who had not been paid for them. They had clearly a lien on the goods for the price. They had kept the goods for the defendants for over a year and, despite repeated requests, the defendants failed to pay the price and remove the goods. Whereupon the plaintiffs gave the defendants seven days' notice to do so. Nevertheless, they did not actually resell until six weeks later. I consider that on these facts the plaintiffs came within the provisions of section 48 of the Ordinance and properly exercised their right of resale.

On the second question: it is quite clear from the evidence that the price for corrugated iron sheets had dropped considerably between 1951 and 1952, that in July, 1952, the market was so flooded that certain firms were selling below cost in order to get rid of their stocks. The corrugated iron sheets in question were in three gauges, one only of which was readily saleable. In these circumstances, can any blame attach to the plaintiffs for selling the whole lot a little below the price which the readily saleable sheets could have been sold for? I think not and I accept the evidence that the price was a fair and reasonable one at the time.

It was also contended by the defendants that the plaintiffs failed to mitigate damages by refusing to supply the goods to the P. W. D. on defendant's behalf. Let me say at once that I am not satisfied that the P. W. D. ever agreed to purchase any corrugated iron sheets from the defendants nor that the defendants instructed the plaintiffs to deliver any corrugated iron sheets to the P. W. D. on their behalf. It is, furthermore, quite clear from what I have said before that the defendants, not having paid the purchase price of the goods, were never in a position to obtain possession of the goods or to give possession of them to anybody else.

There will therefore be judgment for the plaintiffs as prayed.