Uttamchand and Co. Ltd v Hawkes and Co. Ltd (Civil Appeal No. 45 of 1954) [1955] EACA 287 (1 January 1955)

## COURT OF APPEAL FOR EASTERN AFRICA

Before SIR NEWNHAM WORLEY (Vice-President), SIR KENNETH O'CONNOR. Chief Justice (Kenya) and SIR ENOCH JENKINS, Justice of Appeal

UTTAMCHAND & CO. LTD., Appellant (Original Defendant)

## F. J. HAWKES & CO. LTD., by its attorney Robert Sandford Cambell, Respondent. (Original Plaintiff)

## Civil Appeal No. 45 of 1954

(Appeal from the decision of H. M. Supreme Court of Kenya, Windham, J.)

Agency—Confirming House—Duties of agent—Sale of goods—Late delivery of goods—Supply of greater quantity than contracted for.

The appellant company, by an indent, commissioned the respondent company, which company carried on business as a Confirming House, to buy for it from certain suppliers in England, a quantity and description of textile goods. There were to be two contracts, one between the parties hereto, and the other between the respondent company and the suppliers.

By the indent signed by the appellant company delivery was to be in Manchester in April and the respondent company was not to be liable for delays in shipment or incorrect out-turn.

The respondent company placed the order with the suppliers for 48 pieces of material totalling 1,920 yards, but at the time concerned there was a shortage of shipping space with a delay of some seven to twelve months, so that although the goods had been delivered at Manchester on or before 2nd May, it was not possible to obtain shipping space for them. The respondent company registered the goods for shipment under a phasing scheme then in operation and made other efforts to have the goods shipped as soon as possible.

In August the respondent company notified the appellant company that receiving space was expected for a sailing in September and asked for confirmation that the appellant company was ready to accept this opportunity. The reply cancelled the indent.

When the goods arrived there were 49 pieces of a total of 1,973 yards.

The appellant company contended that the respondent company as agent for them stood in their shoes and therefore had to carry out its duties as agent with due regard to any rights which might have accrued to them as principals, that a right to reject the goods had arisen because of the late delivery and on account of the delivery of the excess quantity and that, accordingly, if the respondent company did not reject the goods and repudiate the contract it had with the suppliers it should have communicated with its principal and, in accepting the goods without doing so, it was acting outside the scope of its authority and could not, therefore, claim to reimbursed or indemnified.

Held (25-3-55).—The real issue between the parties was whether the respondents, as agents, had acted with reasonable skill and diligence having regard to the market and other<br>relevant considerations as they existed at the beginning of May. They had done so; they had not gone outside the scope of their authority or exceeded their discretion in accepting the consignment.

Appeal dismissed.

Cases referred to: Bhailal & Co. Ltd. v. Lakhamshi & Co. Ltd. E. A. C. A. Civ. App..<br>25 of 1950; Beal v. S. Devon Rail Co. (1864) 3 H & C 337; Benjamin v. Barnett (1903)<br>19 T. L. R. 564; Broom v. Hall (1859) 7 C. B. (N. S.) 503; 412; Nune Sivayya and another v. Maddu Ranganayakulu 62 I. A. 89.

Nazareth for appellant.

Cleasby for respondent.

SIR NEWNHAM WORLEY (Vice-President).—This is an appeal from a judgment: and decree of the Supreme Court of Kenya sitting at Mombasa awarding the plaintiff-respondent the sum of Sh. 24,117 25 cents. The relevant facts are as follows: $-$

The appellant company carries on business in Mombasa apparently as dealers. in piece goods. The respondent company carries on business in London and the United Kingdom as a "confirming house" and has an attorney Mr. R. S. Cambell, who lives at Mombasa. The action brought by the respondent against theappellant out of which this appeal has arisen was in respect of a contract made. between the parties whereby the appellant commissioned the respondent to buy for it in England from Messrs. W. Houghton & Co. Ltd., of Manchester, (hereinafter referred to as "the suppliers") a certain quantity and description of textile: goods upon the terms and conditions set out in an indent signed by the appellant. (exhibit 3). It is advisable to set out this document in full: $-$

> "Indent taken by R. S. Campbell & Co. (1950) Ltd. Directors— $R$ . S. Campbell.

> > M. L. Campbell.

P. O. Box 1155, Nairobi.

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the university of

Order No. $-2245$ .

Mombasa, Date, 13th February, 1952.

Indentor's name.—Uttamchand & Co. Ltd., P. O. Box 79, Mombasa. Supplier.—W. Houghton & Co. Ltd., Manchester.

To be confirmed by.—F. J. Hawkes & Co. Ltd., London.

Delivery.—April, 1952.

P. O. Box 153, Mombasa.

Terms of payment.—As usual.

Reference.—F. J. Hawkes & Co. Ltd.'s letter to R. S. Cambell & Co. (1950) Ltd., dated 4th February, 1952—Offer No. 286.

Forty-eight ends each $54''$ x 40 yards Quality CT586/3788 Tussore-Suiting at Sh. $8/6d$ . per yard, nett Loco Manchester. Plus 2d. per yard. for vat dyes.

Shades.—12 ends in each of the three shade cuttings attached, plus white.

Signature of Indentors:

For and on behalf of

Uttamchand & Co. Ltd.

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We agree that this order is subject to acceptance by the manufacturer and/or shipper concerned in whole or part, and that the confirming house referred to above cannot be held responsible for delays in shipment or incorrect out-turn.

It is agreed that in the event of any claim arising, it will be taken up by the confirming house on our behalf and pending the outcome of same all relative drafts shall be accepted by us on presentation and paid at maturity.

Supplier's invoices to be made out in strict accordance with Kenya Customs requirements."

It is not in dispute that the contract between the parties was that the respondent was to place the order with the suppliers! making itself responsible to the suppliers for the price of the goods when delivered; in other words, there were to be two contracts, one between the respondent and the suppliers as between principal and principal, for the sale and purchase of the goods, and the other between the appellant and the respondent whereby, in consideration of the respondent accepting the obligation under the contract with the suppliers, the appellant undertook to reimburse or indemnify the respondent as agent for any charges incurred in the performance of both contracts and also to pay either an agreed or the customary trade commission for these services. There may or may not have been other express or implied terms of the contract between the parties to this suit to which it may be necessary to refer later, but I think what I have said above as to the terms of the contracts is common ground.

The respondent duly placed the order with the suppliers who accepted it and in due course delivered piece goods in fulfilment, or purported fulfilment, of the order. As will be seen, the indent stipulated April delivery. One of the matters in issue is whether the goods were or were not delivered in time. The appellant put in evidence at the trial a copy of an invoice received from the respondent's agent in Mombasa (exhibit A) which is dated 2nd May, 1952. The order was for 48 pieces of tussore suiting each 40 yards in length, giving a total yardage of 1,920 yards. The invoice shows that 49 pieces were supplied of slightly varying lengths, giving a total of 1,973 yards. The excess of 53 yards at Sh. 8/6d. a yard comes to approximately Sh. 450. There was also a small error in the calculation of the price in the invoice, the whole quantity being charged at Sh. $8/8d$ . a yard, whereas the extra 2d. was only properly chargeable to the lengths of dyed suiting and not the white. Delivery was made "loco Manchester", that is to say, at Manchester. At that time there was a considerable shortage of shipping space for goods destined for Mombasa, the shipping delay being generally between seven and twelve months. The respondent who, in this particular case, had undertaken to ship the goods to the appellant, accordingly registered them for shipment under the phasing scheme then in operation. The respondent did not, however, rest content with that but was on the look out for other opportunities of shipment and, as the correspondence exhibited shows, in June offered the appellant an opportunity of shipment via Amsterdam. The appellant accepted this on 6th June, 1952, only stipulating that the goods must be shipped as soon as possible. Apparently the opportunity did not offer as soon as expected, and on 19th August the respondent's agent in Mombasa wrote to the appellant stating that receiving space was expected for a sailing in September via Amsterdam, and asking the appellant company to confirm that it was still ready to accept this opportunity. In reply, on 23rd August, 1952, the appellant through its solicitors rejected this offer in the following terms: --

"The original time for shipment was April, 1952, and the same was extended, but our clients are not interested in September shipments and therefore please advise your principals to cancel the above indent."

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It was of course incorrect that the original time for shipment was in April, 1952; that was the date stipulated for delivery at Manchester and the indent expressly excepted the respondent from any liability for delay in shipment. It is material to note here, for reasons which will later appear, that, according to the evidence, the local price of these goods was fairly steady up till June, 1952. The price then began to fall, and when the goods eventually arrived in Mombasa had gone down by about Sh. 2 a yard. Further correspondence ensued, but the<br>respondent refused to stop the shipment and the goods eventually arrived in Mombasa by direct shipment from the United Kingdom in February or March, 1953. The respondent drew upon the appellant a sight draft for Sh. 19,209 representing the price of the goods supplied together with interest charges, freight. insurance and commission, but the appellant refused to pay the draft on presentation or any part of it. It is conceded now by the respondent that there was an error in the calculation of the amount claimed due from the appellant and that the correct amount is that shown in the Supreme Court decree. The appellant has also refused to take delivery of the goods which are still lying in bond at Mombasa.

In the Supreme Court action the plaintiff-respondent claimed to have duly performed its part of the contract with the defendant-appellant. The statement of defence filed included some allegations which have been abandoned, and for the purpose of this appeal the defence may be taken to be as follows, $`namely:$ —

- (a) that the respondent as agent for the appellant, the ultimate buyer, stood in the shoes of the latter and therefore had to carry out its duties as agent with due regard to any rights which might have accrued to its principal, had the latter been dealing directly with the suppliers, under the English Sales of Goods Act and/or the Kenya Sale of Goods Ordinance: - (b) a right to reject the goods had arisen, firstly on account of late delivery, time being of the essence of the contract between the respondent and the suppliers, and secondly on account of delivery of the excess quantity: section 30 $(2)$ of the Act: - (c) that in these circumstances, if the respondent did not reject the goods $\frac{1}{2}$ and repudiate its contract with the suppliers outright, it should first have communicated with its principal; and, in accepting the goods without first so communicating, it was acting outside the scope of its authority and at its own risk and could not therefore claim to be reimbursed or indemnified.

It was also contended for the appellant that the difference in quantity was not covered by the express clause exempting the respondent from liability for "incorrect out-turn".

Mr. Cleasby's contentions for the respondent were, put shortly, that the appellant had failed to show that delivery was in fact not made in April, 1952; nor had the appellant shown that the respondent had in any respect failed to discharge its duties with the skill and diligence which might reasonably be expected from a competent and experienced confirming house, in other words, that the respondent had been in any way negligent in the performance of its duty as agent.

One subsidiary point made by Mr. Nazareth was in relation to Sh. 550 claimed for freight, insurance and other charges. He referred to the letter dated 23rd August, 1952 (exhibit 7. B), from the appellant's advocates to the respondent's attorney, by which the appellant purported to cancel the whole indent. Mr. Nazareth contended that after receipt of this letter the respondent should not have shipped the goods from England at all, but should have resold them there at best and claimed in damages if damnified.

I propose to consider, first, the question of the excess yardage supplied. The learned trial Judge found that the goods delivered by the suppliers "differed slightly, in respect of quantity and lengths of pieces, though not in respect of quality, from those set out in the indent and ordered by the (respondent)". He further found as a fact that "this discrepancy was an 'incorrect out-turn' and as such the defendant, in signing the indent, expressly undertook not to hold the plaintiff responsible for it". Mr. Nazareth has attacked both of these findings.

As to the former, he has put forward the proposition, based on section 30 $(2)$ of the Sale of Goods Act and Cuncliffe v. Harrison (1851), 6 Exch. 903, that the delivery of a larger quantity of goods than was ordered operates as a proposal for a new contract and that the discretion of a confirming agent does not extend to accepting a new contract, which in effect he accepts on behalf of his principal, though nominally in his own name. He conceded that if the excess quantity supplied were negligible or so small as to make no substantial difference to the buyer, his argument would not apply. Accepting for my present purposes<br>Mr. Nazereth's proposition as correct, the question then becomes one of<br>fact and degree. I cannot find that the argument was put to the trial Judge in precisely the same form, but he has at any rate concluded that the excess quantity was "slight". Mr. Nazareth however argues the inclusion of a whole extra piece (49 lengths instead of 48) cannot be disregarded; but for that the excess would have been only about 13 yards, whereas it was in fact about 53 yards, equivalent to about 3 per cent.

He further relied upon the decision of this Court in Civil Appeal No. 23 of 1950, Bhailal & Co. Ltd. v. Lakhamshi & Co. Ltd. (unreported), in which it was held that delivery of textile furnishing material in quantity about 6 per cent in excess of that ordered was unreasonable and justified the buyer in rejecting the whole consignment. In that case 2,000 yards was ordered and 2,119 supplied. Where the line is to be drawn between what excess is significant and what insignificant I frankly do not know. In the instant case I should not be disposed to differ from the trial Judge's view that the excess was "slight". But in any case the question to be answered here is not the simple question, as in *Bhailal's* case, was the buyer justified in rejecting the lot? It is the more complex question, did the respondent act with reasonable skill and diligence in accepting delivery? I think it is quite impossible on the evidence to answer this in the negative. The question must be considered on the footing of the state of the market and other relevant circumstances existing at the beginning of May, 1952. Mr. Nazereth has suggested that a position of difficulty had arisen, which imposed on the respondent, as agent, a duty to communicate with his principal. He cited *Proudfoot v. Montefiori* (1867), 36 L. J. (N. S.) 225, but that case was decided on a very different set of facts. In my view there is nothing in the facts of the instant case to warrant a finding that the respondent went outside the scope of his authority, or exceeded his discretion or failed to show reasonable skill and diligence in accepting the consignment.

But, further, there is the learned trial Judge's finding that the respondent was protected by the terms of the contract which exempted him from liability for "incorrect out-turn". Mr. Nazareth has contended that "incorrect out-turn" has no reference to delivery of a wrong quantity. The expression must, he said, be something attributable to a manufacturing process—something "turned out", I suppose by a machine—and might therefore cover varieties in the yardage of each length or piece of material; but it could not, he said, cover the inclusion of a whole piece in excess of the number of pieces ordered which must be attributable to a mistake made in the course of the packing.

It may be so: I do not know. The expression seems to me to be used in the indent as a trade term or term of art and dictionary meanings are of little use in this case. I think the onus of showing that the excess quantity did not come within the expression "incorrect out-turn" lay on the appellant and, in the absence of any evidence on the point, I am not prepared to accept Mr. Nazareth's categorical statements that it does not cover a mistake in packing.

I do not think we should be justified on the evidence in assuming, as I think Mr. Nazareth does, that the expression covers only faults attributable to machines and excluding faults due to manual labour, for the simple reason that we do not know how many of the processes in the production of these goods ready for delivery are done by machinery and how many are done by hand.

The next point and, so far as I am concerned, the more difficult point, is the question of late delivery. I say it is difficult because there is so little evidence either as to the actual date of delivery or as to the respondent's duty on this aspect. In the plaint, the respondent company pleaded (paragraph 5) that it purchased the goods upon its own credit and that the said goods were "delivered to the plaintiff at Manchester during the month of April, 1952". In its written statement of defence, the appellant company pleaded (paragraph 5 $(e)$ ) "that it was the duty of the plaintiff company to reject the said goods which were not delivered in time and not as ordered". On this issue the learned trial Judge said:-

"I find that it has not been proved that the delivery of the goods in Manchester was later than the end of April, 1952, which was the time stipulated for in the indent (exhibit 3). Late delivery being an allegation raised in the defence, it was for the defendant to prove it; for the date of delivery was not a fact peculiarly within the knowledge of the plaintiffs."

In argument before us Mr. Nazareth has conceded that the onus lay on the appellant to prove late delivery, but he relied on section 106 of the Indian Evidence Act and argued that the defence had produced sufficient prima facie evidence of late delivery to shift on to the respondent the burden of proving that delivery was made in good time. The prima facie evidence was a copy of an involce (exhibit A) put in by the appellant through the respondent's witness, Mr. North. This invoice, which relates to the goods supplied to the respondent's order, bears date 2nd May, 1952, and it is said that if this was not the true date of delivery then the onus shifted to the respondent to prove the true date, that being a fact which was within his peculiar knowledge or as to which he had opportunities of knowledge not possessed by the appellant. ( $R. v. Kakelo$ (1923) 2 K. B. 793.) Mr. Cleasby on the contrary contended that it was for the appellant who had pleaded late delivery as an excuse for repudiating his contract to prove it, that the invoice merely showed that delivery was made not later than 2nd May. and probably previous to that date, and that the appellant had not made use of the means available to ascertain the true date, namely, notice to admit facts or cross-examination of Mr. North, the respondent's principal witness. Mr. Cleasby further contended that it had not been shown to be any part of respondent's duty to take delivery of the goods. I confess I cannot follow this: since the respondent received the invoice for the goods, paid for them and arranged shipment, it seems to me that in law he must have taken delivery.

But I find it unnecessary to decide those points. I am prepared to assume in appellant's favour that there was late delivery and acceptance by the respondent. Even so the question still seems to me to be the same as before: can it be said that the respondent failed to show reasonable skill and diligence?

As before, the question must be considered against the background of conditions existing on 2nd May, 1952. As Mr. Cleasby has truly said, the technical delay of two days was of no practical or commercial significance: there is no ground for assuming that any shipping opportunity was missed thereby and there can be no doubt on the evidence that had the respondent communicated with the appellant by telegraph, as is suggested was his duty, the appellant would have instructed him to accept and ship the goods as quickly as possible. Indeed, months later, in September, the appellant was still asking for "the latest and definite date of shipment", see exhibit No. 7. D, dated 1st September, 1952. I answer the question on this aspect of the case also in the respondent's favour.

Mr. Nazareth's subsidiary point is also, in my opinion, answered by what I have already said. The appellant had no reasonable excuse for repudiating its contract with the respondent company which was acting within its rights in forwarding the goods to Mombasa.

I would dismiss this appeal with costs.

SIR KENNETH O'CONNOR, C. J.-I agree with the judgment of the learned Vice-President.

Mr. Nazareth argued that the appellants, the indentors, were entitled to refuse payment on their contract with the respondent, the confirming house, because the respondent had committed a breach of that contract in not refusing to take delivery from the suppliers of the goods ordered, or, at least, in not communicating with the indentors before taking delivery. The grounds on which it was alleged that the confirming house should have refused to accept delivery were:-

- (1) that the quantity delivered was not as ordered in that $48$ ends each of 40 yards were ordered, totalling 1,920 yards, but 49 ends of varying length totalling 1,973 yards were delivered; and - (2) that delivery, which had been stipulated for April was made on 2nd May.

As to the first of these grounds, the confirming house in its contract with the indentors had expressly declined to be responsible for "incorrect out-turn". In the absence of any evidence as to the meaning attached by the trade to that expression, I must give it a meaning according to the ordinary and natural meaning of the words used. "Out-turn", according to the Oxford dictionary, means "the quantity turned out or yielded, produce, output." To my mind, "out-turn", as used in the indent in this case, meant the quantity turned out by the suppliers. That was the out-turn which interested the indentors. I see no foundation for Mr. Nazareth's attempt to confine out-turn to what was turned out by the manufacturing process, as distinct from what was packed and left the factory. The discrepancy, though not substantial, might have been a ground for repudiating delivery under a contract made between buyers and sellers (Bhailal & Co. Ltd. v. Lakhamshi & Co. Ltd., Civil Appeal No. 25/50), but the confirming house could not, under the express terms of their contract, be held responsible for it. It should have been the subject of a claim by the indentors for adjustment of the purchase price, which the confirming house was bound to take up on their behalf.

As to point $(2)$ above, the date of delivery was not proved. There was some evidence that delivery was made on or before 2nd May, 1952. If the confirming house had been sellers suing buyers for the price of goods sold on a contract calling for April delivery, the onus would have been on them to show delivery in accordance with the contract. But the confirming house were not sellers. Their obligation was to order the goods in accordance with the indent, and,

pursuant to the ordinary principles of agency for reward, to use the care, skill and diligence reasonably necessary for the performance of their undertaking. (Halsbury, 3rd edition, Vol. I, p. 185; Beal v. S. Devon Rail Co. (1864) 3 H. & C. 337, 341.) In other words, it was the duty of the confirming house to place the contract, to exercise reasonable skill and diligence to obtain delivery of the goods in accordance with the contract, to pay for the goods and have them shipped. I have no doubt, upon the evidence, that they carried out this duty. If the agents, the confirming house, had acted contrary to the direct request of their principals in accepting delivery two days late, they might have forfeited their right to indemnity. (Ellis v. Pond (1898) 1 Q. B. D. 426.) In certain circumstances, also, a duty might have been imposed on the agents to communicate with their principals. But I do not think that any such duty arose in the circumstances of this case. The correspondence shows that up to 6th June, 1952, the appellants, the indentors, were anxious to get the goods and were insisting on them being shipped as soon as possible. The confirming house could not reasonably suppose that a delay of two days in delivery at Manchester (even if it occurred) would be material, when a delay in shipment to Mombasa of several months was inevitable. They knew that their principals wanted the goods and, in my view, they acted in what it was reasonable to suppose was their principals' best interests and in accordance with the implied authority of an agent (Pettman v. Keble (1850) 19 L. J. (N. S.) 325), in not refusing delivery because of a delay of two days, even if such a delay occurred. There can be no doubt, on the correspondence, that if the confirming house had asked for instructions from the indentors on 2nd May, they would have received instructions to accept delivery. It was only after the price began to fall in June that the indentors began to look around for an excuse for escaping from their obligations.

In my view, the confirming house performed its obligations under its contract with the appellants.

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I would dismiss the appeal.

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πì.

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SIR ENOCH JENKINS, J. A.—I agree and have nothing to add.

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