Overman Reid and Company and Another v Karim (C.C. 42/1931 (Mombasa).) [1934] EACA 26 (1 January 1934)

## ORIGINAL CIVIL.

### Before WEBB, J.

# OVERMAN REID AND COMPANY AND RALPH OVERMAN $(Plaintiffs)$

#### $v.$

# HASHAM KARIM (Defendant).

### C. C. $42/1931$ (Mombasa).

# C. I. F. contract—Subsidiary contract—Right of Buyer to Presentation of Shipping Documents before Payment-Local Usage of Trade-Course of Dealing-Waiver-Estoppel.

Held $(15-1-34)$ .—1. That an agreement between the plaintiffs (through whom the contract, which was for the sale of goods C. I. F. and E. "nett cash against documents", was made) and the defendant, by<br>which the plaintiffs undertook to pay the sight drafts drawn by the seller and the defendant undertook to give to the plaintiffs Promissory Notes at ninety days for the same amount together with interest and expenses, constituted a subsidiary contract upon which the plaintiffs could sue. (Jordeson and Kahn v. London Hardwood $\bar{C}o.$ , 110 L. T. 666.)

2. That the buyer under a C. I. F. contract is entitled, as a condition precedent to payment, to have actual presentation of<br>the shipping documents made to him.

3. That an alleged local usage, by which the place of delivery of shipping documents in Mombasa is the Bank which receives the documents or the place of business of the vendor, and by which the documents are deemed to be sufficiently tendered to the buyer when he is given notice of their arrival and called upon to pay the sum due, was not proved to be "so universally acquiesced in that everybody knows it or might know it". (Plaire v. Allcock, 4 F. & F. 1075.)

4. That the fact that in respect to previous consignments under the same contract the defendant had treated such a notice as sufficient presentation of the shipping documents did not. amount to a waiver of his right to actual presentation. (Malmberg v. Evans, 30 Comm. Ca. 107.)

5. That the fact that, before the defendant expressed his readiness to give the Promissory Note upon presentation of the shipping documents, the plaintiffs had parted with the latter in order to have the goods cleared at the port of landing, did not, in the circumstances of this case, estop the defendant from still asserting his right to presentation. (Tyrer v. Hessler, 84 L. T. R. $653.)$

Christie for Plaintiffs.

Atkinson for Defendant.

The following statement of facts is taken from the judg $ment :=$

"The defendant is sued for damages for failure to take delivery of a consignment of ten tons of Australian flour shipped to Dar es Salaam. The contract sued upon is contained in an order and letter both dated the 1st September, 1930. The material portion of the Order, which was for fifty tons best quality white Australian wheat flour to be supplied in monthly shipments at £10 per ton, Cost Insurance and Exchange, is as follows:—

Order No. 80-OVERMAN & COMPANY, Agents.

Order placed by Mr. Hasham Karim, Mombasa.

For Mr. P. W. Heyman, Melbourne.

Subject to fluctuations of the market and acceptance by principals.

Terms: Nett cash against documents.

This order was sent to the defendant for his signature accompanied by the following letter:—

'Mr. Hasham Karim, Mombasa.

Dear Sir.—In consideration of your signing the attached Order No. 80 for fifty tons Australian flour, we agree that on arrival of the documents here we will pay the sight drafts ourselves and will draw on you for the same figure at 90 days sight, you paying Bill Stamps, interest and any other expenses incurred by us in doing so . . . Yours faithfully, Overman & Co.'

Upon receipt of this letter the Order was signed by the defendant and returned to Messrs. Overman & Company.

In due course the flour was shipped. The invoice relating to the consignment with which this case deals is headed: 'Messrs. Overman & Co., Mombasa; Bought of P. W. Heyman.' According to the Bill of Lading the consignors are The Bank of New South Wales: the insurance policy is in favour of P. W. Heyman as well in his own name as in that of those to whomsoever the same may appertain.

These shipping documents arrived in Mombasa on the 12th January, 1931, at the Standard Bank of South Africa to whom the Bill of Lading had been indorsed for collection of the cost and charges. The Bank informed Messrs. Overman Reid and Company, which had been incorporated on. the 25th September, 1930, and had taken over the business of Overman & Co., and called upon them to take up a sight draft for the amount due. Thereupon Messrs. Overman Reid and Company made out an Invoice (No. 847) and a Promissory Note at ninety days in their own favour and sent them

to the defendant to sign and return the Promissory Note. but nothing further was done until the arrival of the goods at the end of January. Then, when the defendant was called upon to sign the Promissory Note he first insisted upon taking a sample of the flour, which was tested and apparently reported upon satisfactorily. Even then the defendant required a further and more exhaustive test to be made. On the 10th February the plaintiffs' lawyers wrote to the defendant intimating that if the Promissory Note was not granted by him by noon on the following day the flour would be sold and he would be held liable for any resulting loss. On the 11th the defendant's lawyers wrote that their client was willing to sign the Promissory Note upon receiving the shipping documents. Further correspondence took place, to which I shall refer hereafter, but in fact the shipping documents were never actually presented to the defendant, and he never signed the Promissory Note.

Meantime the consignment of flour had proceeded to Dar es Salaam, and on the 11th February Messrs. Overman Reid and Company paid the sight draft to the Standard Bank and obtained the shipping documents, which they handed to the African Mercantile Company to have the flour cleared and sold there. This was done and there is no dispute as to the amount of damages in the event of the defendant being found liable in law.

At the same time that this consignment arrived in Mombasa there also arrived another consignment bought by the defendant under another contract for delivery at Momhasa. The defendant refused to take delivery of this in identical circumstances and the correspondence deals with both consignments.

An action was brought with regard to the Mombasa consignment (C. C. No. 41/1931) which was decided in favour of the defendant by a majority of the Court of Appeal for Eastern Africa. (C. A. No. 21/1931.) In that case the only point raised was that 'there was no tender of the shipping documents and therefore no liability on the appellant to sign the Promissory Note.' In the present case, however, the parties and pleadings are not the same."

Christie.-The plaintiffs are entitled to sue either as agents for a foreign principal, or in virtue of a subsidiary contract contained in the letter of the 1st September, 1930, or because, having paid the vendor, they have a special interest in the subject matter of the contract: Indian Contract Act, section 230-Keland v. Livingstone (5 H. L. C. 395).

As regards tender of the shipping documents, the local usage has been proved and in the case of previous consignments tender in this manner was accepted. Here, by refusing to pay until

he had examined the goods the defendant broke the contract and the plaintiffs were relieved from the necessity of tendering-Biddell Bros. v. Horst (1911 1 K. B. 214); Braithwaite v. Foreign Hardwood Co. (1905 2 K. B. 543); Indian Contract Act, sections 38, 39, 51; Bank of China, etc., v. American Trading Co. (1894 A. C. at p. 273); Jones v. Barkley (99 E. R. 434); Planck v. Colburn (131 E. R. 305); Hochster v. De La Tour 118 E. R. 922). By refusing payment the defendant induced us to part with the shipping documents, he is therefore estopped from claiming presentation: Tyrer v. Hessler and Company (supra); Alexander v. Gardiner (131 E. R. 1276).

It is enough if the seller is ready and willing to hand over the documents: Braithwaite v. Foreign Hardwood Co.; Johnson v. Taylor Bros. (1920 A. C. 144); Stein Forbes and Co. v. County Tailoring Co. (115 L. T. R. 215).

Atkinson.—At the date of the contract Overman Reid and Co. were not in existence: an actionable claim can only be transferred by a document in writing: Indian Transfer of Property Act, section 130. Overman and Co. contracted as agents only and are not entitled to sue: Flatau Dick and Co. v. Keeping (36 Comm. Ca. 243).

There has been no proper compliance with the terms of a C. I. F. contract: the seller must be ready to hand over the shipping documents against payment: Biddell Bros. v. Horst; Bills of Exchange Ordinance, section 45 (4), 52 (4); Indian Contract Act, section 38; Scrutton on Charterparties Art. 59; Diamond Alkali Corporation v. Bourgeois (1921 3 K. B. 443); Wilson Holgate v. Belgian Grain Co. (1920 2 K. B. 7); Malmberg v. Evans (30 Comm. Ca. 107).

The practice of the Banks is immaterial.

There has been no waiver: (Malmberg v. Evans). Possibly the plaintiffs might have cancelled the contract, but they did not do so: Hansson v. Hamel and Horley (1922, 2 A. C. 36).

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Christie in reply.

JUDGMENT.—(The Judge stated the facts and continued.)

Here the first point taken for the defendant is that, assuming there was a contract made between Overman and Company and the defendant, Overman Reid and Company are not entitled to sue upon such contract because, under section 130 (1) of the Indian Transfer of Property Act the transfer of an actionable claim must be effected by an instrument in writing signed by the transferor, and there is no evidence of the existence of such an instrument here, nor even of such a letter from Overman and Company to the defendant as would bring the case within Brandt v. Dunlop (1905 A. C. 454).

It is not necessary for me to express an opinion on this point seeing that Ralph Overman is one of the plaintiffs.

Then it is said that, if any contract was entered into between Overman and Company and the defendant, such contract was made by Overman and Company as agents for Heyman, who alone is entitled to sue on it.

As to what was in the minds of the parties I have no knowledge but reading Order No. 80 it appears to me to be reasonably clear that this document contains no contract between Overman and Company and the defendant. The name Overman and Company occurs only in the printed heading, accompanied by the word "Agents", and, so far as this document goes, it might have been nothing more than an order from the defendant to Heyman written upon a piece of Overman and Company's business paper. From the printed word "Subject to fluctuations of the market and acceptance by principals", it may be inferred that it was an order or offer to be transmitted by Overman and Company to Heyman for his acceptance or rejection, but that, I think, is the most that can be said.

Even if I were to hold that Overman and Company were parties to this contract, they were clearly so only as agents for Heyman, and therefore, for the reasons that I have given in Adamji v. Thomsen (C. C. 97/1932), I would hold that, if the matter ended there. Ralph Overman would not be entitled to sue.

Nor am I convinced by Mr. Christie's argument that the fact that Overman and Company were bound in the first instance to pay the seller cash for the consignment gave Ralph Overman such a special interest in it as to entitle him to maintain the present action. The decision in Flatau Dick and Company $v$ . Keeping (36 Comm. Ca. 243) where the facts were very similar, is against him, and the rule, or exception, by which factors and auctioneers can sue upon contracts made by them seems to be confined to agents of these particular categories.

Then it is said that there was a subsidiary contract by the defendant to pay Overman and Company and not their principal. In Jordeson and Kahn v. London Hardwood Company (110 L. T. 666), (where Jordeson and Company were the brokers and Kalın the vendor) Pickford J. said (at p. 670): "If there be anything which raises an implication of a contract personally with the agent outside the original contract of sale... then of course the agent would be entitled to sue upon that contract." In my opinion the letter of the 1st September, the terms of which, it is conceded, were agreed to by the defendant, did create such a subsidiary contract between Overman and Company and the defendant.

But the rights of Overman and Company under this subsidiary contract could only arise upon presentation of the shipping documents to the defendant, and, in paragraph 5 of the defence, the defendant denies that any shipping documents under the said alleged contract were tendered or offered to him.

Now so far as regards the question whether actual physical presentation of shipping documents is a condition precedent to the right of the seller, or his agent, to demand payment, I am bound by the decision of the majority of the Court of Appeal in the previous case between the parties. There are, however, expressions in the judgment of PICKERING C. J. which might suggest that it was to some extent based upon his belief that the plaintiffs in that case were in fact unable to procure and present the shipping documents to the defendant because they were not in a position to take up the sight draft from the Banks until they had discounted the defendant's Promissory Note, and that possibly there would have been a sufficient tender if in fact the plaintiff had been able and willing to present the documents. I wish to state that in my opinion a purchaser under a C. I. F. contract, if he stands upon his strict rights, is entitled to insist upon actual physical presentation of the shipping documents to him as a condition of his being called upon to pay the price. It seems to me that this follows from the nature of a C. I. F. contract, which is "a contract for the sale of goods to be performed by the delivery of documents", (Arnhold Karberg and Company v. Blythe-1916, 1 K. B. at p. 510), by which "as the bill of lading, with its accompanying documents, comes forward by mail, the purchaser obtains the privilege and absolute power of profitably dealing with the goods . . . before the arrival of the goods themselves" (per KENNEDY L. J. Biddell v. Horst-1911, 1 K. B. at p. 958). Therefore a purchaser, when he is called upon to pay, has the right to see that he is getting such documents as will entitle him, or a sub-purchaser from him, to the goods which he has contracted to buy, or will give him a valid claim on the Insurance Company if they are lost on the voyage. That this is so is, I think, clear from a number of cases. of which Johnson v. Taylor (1920 A. C. 144), Hansson v. Hamel and Horley, (1922, 2 A. C. 36) and Malmberg v. Evans (30 Comm. Ca. $107$ ) are examples.

But a new point has been raised in paragraphs 4 and 5 of the amended plaint in the present case, namely, that by the usage of trade in Mombasa the place of delivery of shipping documents is the Bank which receives the documents or the place of business of the vendor (if he has one), and the documents are deemed to be sufficiently tendered to the buyer when he is given notice of their arrival and is called upon to pay the sum due under the contract and take delivery.

In my opinion the answer to this argument is that the evidence does not appear to me to establish the existence of any such usage "so universally acquiesced in that everybody in the particular trade" (or, in this case, place) "knows it, or might know it if he took the pains to inquire". (Plaice v. Alicock-4 F. & F. at p. 1075.) Mr. Reid says that the usual practice of the Banks has been, where the shipping documents are to be paid for by a sight draft, to send to the consignee a notice informing him that the documents and draft have arrived and that, upon his attending and paying the draft, the documents will be handed over. And this appears to have been the practice of Barclays Bank prior to 1931. But in the case of the National Bank of India, though this is what was done in many cases, if the draft was drawn on the consignee at a particular address, or if he refused acceptance without giving any reason, there was made a second demand with actual presentation of the shipping documents.

Further, even if this procedure constituted a valid presentation of the draft and shipping documents as between the Bank and the plaintiffs—as to which I express no opinion—on the plain. tiffs' own case it would seem that the proper place for presentation as between them and the defendant should have been the defendant's place of business.

Then it is said that the defendant impliedly waived his right to actual presentation of the shipping documents by the course of business by which in respect of other consignments he signed the Promissory Note without question upon receipt of the plaintiffs' invoice, and by the fact that on the present occasion the only reason that he gave for his refusal to sign was that he wished first to examine the quality of the flour.

This argument is disposed of by Scrutton L. J. in Malmberg v. Evans (30 Comm. Ca. at p. 114): "Now when one comes to look at the facts of this case, what has happened is that in a number of previous cases the buyer has received this document without objection $\ldots$ and that then the buyer $\ldots$ raised a perfectly untenable contention that he was entitled to examine the goods before he paid against the shipping documents. That point having been raised the seller says: "Very well, you are raising this point, we will rely on the contract strictly: these goods have come forward, if you do not take them they will be sold against you." Whereupon each of the parties gets on his strict rights, and in this particular case the goods are rejected because there was a document which does not comply with the original terms . . . ", and he goes on: "I am not able to infer ... though the document had been tendered and accepted in cases where no question whatever rose about it, an agreement to accept it in a case where each party was standing on his strict rights".

So, in the present case, I cannot infer from the course of business between the parties an agreement by the defendant that he would always, throughout the whole currency of the contract, dispense with his right to have the shipping documents actually presented to him before he signed the Promissory Note.

But Mr. Christie says that there is more here than mere The defendant, he says, by his refusal to sign the waiver. Promissory Note induced the plaintiffs to alter their position by parting with the shipping documents to the African Mercantile Company in order to have the goods cleared at Dar es Salaam, and therefore he was not entitled afterwards to demand those documents when he did, through his advocates, express his willingness to sign.

Now it is clear that when the defendant demanded inspection of the flour he was asking for something to which he was not entitled (Biddell v. Horst-1911, 1 K. B. 214, 1912, 2 A. C. 18), and the plaintiffs were then entitled to repudiate forthwith, and, in such event would be excused from tendering the shipping documents (Jones v. Barkley 99 E. R. 434; Braithwaite v. Foreign Hardwood Company, 1905, 2 K. B. 543). But where, in such circumstances, a party does not repudiate he may be taken to have elected to treat the contract as still subsisting and to have kept it open for the benefit of both parties.

And that, I think, is the effect of the acts of the plaintiffs The plaintiffs and the correspondence in the present case. procured a test of samples of the flour: then on the 10th February Messrs. Ross and Christie write to the defendant: "We have now to intimate to you that unless these Notes are granted by you before noon to-morrow the flour will be sold by public auction and you will be held liable for any damages that may result." To this the defendant's advocates replied on the 11th February: "Our client is willing to comply with the terms of the contract, which were to accept a bill of exchange against the shipping documents. . . If you will be good enough to send over the bills of exchange and shipping documents to us we will have the bills of exchange accepted by our client."

Now if the plaintiffs had replied to this: "We gave you until noon to-day to sign the Promissory Note and, as you did not do so, we have repudiated the contract and have parted with the shipping documents", I think that there might be much in Mr. Christie's contention. But Messrs. Ross and Christie replied on the 12th: "As desired, we enclose the Promissory Notes; upon delivery of these duly signed to our clients the buyer can obtain delivery of the consignment of flour", and, more definitely still, on the following day in response to a further demand for the shipping documents: "If your client will now sign the Promissory Notes we shall send him the shipping documents." Then, on

the 16th they write: "Unless we receive back the Promissory. Note in respect of the Dar es Salaam consignment duly signed within the course of twenty-four hours, we shall advise our clients to have this consignment sold by public auction ..."

Assuming that, in the events that had happened, the defendant might have been treated after noon on the 11th as being in default and as having forfeited his right to presentation of the shipping documents before signing the Promissory Note, I am clearly of opinion that these letters are consistent with no other conclusion than that the plaintiffs were still treating the contract as in existence, and that, wherever the shipping documents actually were, they were still within their procurement.

The situation here seems to be quite different from that in Tyrer v. Hessler (84 L. T. R. 653), where the failure of the shipowners to notify the charterer in due time that they had exercised their right to cancel the charter on account of his failure to pay the hire when due, had reasonably led him to believe that it was still in existence, and to incur expense on the faith of that belief. Here I cannot hold that the defendant had caused the plaintiffs so to alter their position as to estop him from still asserting his right to presentation of the shipping documents.

This, I think, disposes of all the points that have been raised. As to the merits of the defendant's case I say nothing, but in the result there must be judgment for him with costs, including the costs of the application for security for costs.

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