Valabhdas v Andrew and Another (Civil Appeal No. 86 of 1955) [1950] EACA 232 (1 January 1950)

## H. M. COURT OF APPEAL FOR EASTERN AFRICA

Before SIR NEWNHAM WORLEY (President), BRIGGS (Acting Vice-President) and BACON, Justice of Appeal

## **JETHALAL VALABHDAS trading as JETHALAL VALABHDAS & CO.,** Appellant (Original Defendant) $\mathbf{v}$ .

### (1) FREDERICK IVAN ANDREW and (2) IVAN GEORGE CARLYLE ANDREW trading as ANDREW & CO., Respondents (Original Plaintiffs)

#### Civil Appeal No. 86 of 1955

(Appeal from the decision of H. B. M. High Court of Zanzibar, Robinson, C. J.)

Agency—Extent of agent's authority—Meaning of expression "buy back".

The respondents acted in London as agents for the appellants who were exporters of cloves. Contracts had been entered into for the supply of cloves to Europe, including 1,000 bales for shipment to London in October/November, 1950. In October, 1950, the price of cloves varied, London being higher than the appellant's contract price and Singapore being higher than London, and the appellants were warned by the respondents of the consequences which would occur if the appellants failed to make their shipment. The appellants inquired of the respondents whether cloves could be bought in London for October/ November shipment without disclosing that their suppliers in Zanzibar had defaulted. It appeared that Zanzibar exporters were then buying in the London market to cover their October/November shipments, presumably to enable them to ship the cloves thereby released direct to Singapore, and consequently the price was rising. The respondents suggested that if the appellants wished to do this they would have to agree which of the outstanding contracts the purchases should be set against and quoted the then current price in London. The appellants then wrote disclosing the true position and asking the respondents to buy 500 bales and to take whatever action they thought best. The respondents then purchased 1,000 bales, informed the appellants of this and stated these had been allocated to the October/November shipments and the letters of credit for these had been closed. They also asked for a remittance to cover the difference in price and advised against a suggestion by the appellants to buy double the quantity they needed to cover their commitments. The appellants then cabled the respondents to sell the 1,000 bales, to which the respondents replied that there was nothing to resell. The appellants then stated that their instructions to buy were intended to take advantage of the rising market and/or covering sale. The appellants then cabled that the respondents had acted without authority, that they were suspending all shipments and would not accept responsibility for default:

Eventually the respondents, after arbitration proceedings on the contracts they had entered into, were adjudged liable and, together with the claim on the contract which had been covered, sustained a loss of some $£4,800$ and ultimately obtained judgment against the appellants for Sh. 93,799/66, the appellants' counterclaim for loss of profits from the respondents' refusal to sell being dismissed.

The defence was (1) that the purchase of the 1,000 bales was not a "buying back" but a simple purchase for the appellants' account (2) that the appellants were excused from fulfilling their contracts by the respondents' cancellation of the letter of credit (3) that the respondents were under a duty to deal with the 1,000 bales in accordance with the appellants' instructions and had not done so and (4) that payments made by the respondents under the arbitrations were not for the account of the appellants.

*Held* $(14-7-56)$ .—(1) The phrase "buy back" is normally used to describe in the widest sense a covering operation and the appellants knew this.

(2) The purchases to meet the open contract were on a different basis from a proposed speculative purchase.

(3) The respondents' action in allocating the 1,000 bales to the contract—for October/November shipment was not a breach of their authority.

(4) The respondents were not guilty of any misconduct such as would discribile them to indemnity or remuneration.

Appeal dismissed.

No cases.

## Vellani and Dodd for appellants. O'Donovan and Talati for respondents.

JUDGMENT (prepared by BRIGGS, Acting Vice-President).—This was an appeal from a judgment and decree of Her Majesty's High Court of Zanzibar. We dismissed the appeal with costs and now give our reasons for that order.

The appellant was, *inter alia*, an exporter of cloves from Zanzibar and the respondents were his London agents for this business and advised him generally on it. In autumn 1950 the appellant had open contracts with Europe for 1,560 bales of cloves, of which 1,303 bales were for October/November shipment, 1,000 to London and 303 to continental ports, and 257 were for November/ December shipment, 200 to London and 57 to continental ports. The clove markets both in London and the Far East were at that time nervous and uncertain, and Singapore was offering substantially higher prices than London, but even London prices were materially higher than those at which the appellant had sold.

In this state of affairs the appellant encountered some difficulty in making a September/October shipment in time and by letter of 24th October the respondents warned him that buyers would not accept late bills of lading, and that in case of late shipment the appellant would be obliged—

"( $a$ ) to make buyers an allowance to cover November shipment;

(b) to cover their sales by purchasing on the London market;

$(c)$ default.

(a) is, of course, at buyers' option, i.e. the buyer may not agree to accept an allowance but insist upon the fulfilment of the contract. If the buyer insists upon the latter, then the shipper has either to buy shipping documents covering goods of the contract description shipped within the contract period or 'default'. Whether such shipping documents are bought in Zanzibar, London or elsewhere is a matter depending upon the market, i.e. it may be cheaper for us to buy for you on the London market than for you to buy in Zanzibar. If it is impossible to purchase to cover your sale in Zanzibar, London or elsewhere then you . cannot avoid default.'

This warning was expanded at some length. On 24th October, the appellant wrote-

"The clove market here is very strong $@$ 1s. 6d. per lb. to which 6d. to be added for C. & F. expenses. This means 2s. per lb. C. & F.

We note that there is no effect in London. However, if you will let us know the up-to-date clove market report, we may take interest to buy cloves in London and reship them to Singapore. Please let us know at what price you can buy October/November shipments.

The market at this end is so unsettled that we cannot make any offer at the moment.

We hope the market will come to normal on the 1st of November when October deliveries should have been completed,"

On 27th October the respondents reported inquiries in London which pointed to attempts by Zanzibar to cover October/November contracts and said:-

"If the orders are from Zanzibar, then it would appear that certain of the Zanzibar shippers are trying to cover their sales of October/November shipment on this market. There are two causes for this, viz. the reported lower prices in the London market as compared with those in Zanzibar or an expected shortage of cloves in Zanzibar for October/November shipment. If this latter reason is the cause, then you will have to take particular care to see that you secure delivery from your suppliers as early as possible of the cloves you require to complete your contracts for October/November shipment".

On 30th October the respondents cabled—

. "Your letter twentyfourth suggest buying London against existing contracts shipping Singapore from Zanzibar stop With firm order can probably buy October November within oneshilling elevenpence C. I. F. London including brokerage and our commission."

and on 31st October they again cabled-

$\pmb{\gamma} \in \mathcal{I}$

"Re our telegram of 30th with firm order in hand could probably get 500 bales 1s. $10\frac{1}{4}d$ ."

On the same day they wrote letter No. $63/50$ ,

"We fear you would not be competitive if you bought cloves, ex warehouse London or C. I. F. London and had them reshipped to Singapore. The costs of placing F. O. B. plus freight and insurance to Singapore on spot London cloves or the cost of transhipping cloves afloat to London plus freight and insurance to Singapore would, in each case, make your price C. I. F. Singapore too high for that market in comparison with direct offerings from Zanzibar by your competitors.

Your competitors, in order to secure the higher prices obtainable from Singapore, have bought back some of their October/November shipment sales to the United Kingdom. On Friday evening, Messrs. Leslie & Anderson Ltd., bought 50 or 100 bales for October/November shipment at 1s. $9\frac{1}{4}d$ . per lb. C. I. F. London—this purchase, we presume, has been made to declare against one of their October/November shipment contracts (sales) to the United Kingdom and thereby releasing 50 or 100 bales (according to the quantity purchased on Friday last) of their own cloves in Zanzibar for shipment to Singapore. To the above mentioned 1s. $9\frac{1}{4}d$ , must be added $\frac{1}{2}$ per cent brokerage plus Leslie & Anderson Ltd.'s London office commission of $2\frac{1}{2}$ per cent making the cost to Leslie & Anderson Ltd., Zanzibar, about 1s. 10d. per lb. C. I. F. London.

The London dealers are fully aware of the purchases made by Messrs. Leslie<sup>4</sup> & Anderson Ltd., London, and it is now evident that the inquiries,

telephoned to us and mentioned in our letter No. 62/50, emanated from Leslie & Anderson Ltd., London, and other representatives of Zanzibar shippers. As a result, the London market has advanced and to-day there are no sellers of October/November shipment at below 1s. 10d. per lb. C. I. F.this with brokerage and our commission amounts to about 1s. $10\frac{1}{2}d$ . per lb. C. I. F. London.

We hope our cablegram of the 30th inst. made the position quite clear to you. We mentioned you instruct us to buy October/November shipment within 1s. 11d. per lb. C. I. F. London as it will not, we think, be possible to buy much at 1s. $10\frac{3}{4}d$ , per lb. C. I. F. net to you. You will appreciate that such buying on your behalf would have to be done by us very quietly otherwise the market would advance very rapidly, as indeed, it has done on the report of the purchase by Messrs. Leslie & Anderson Ltd., London, and possibly by others.

If you elect to instruct us to 'buy back' for you on the London market, it must be agreed between us, as soon as possible, which of your sales contracts we are 'buying back'. In this connexion it must be remembered that you have to ship your October/November sales contracts in order of the contract dates. It is not possible to lay down any hard and fast rule but we suggest that in 'buying back' the cloves bought in London for your account should be declared against the sales contracts which would normally be shipped last in order of rotation—this to safeguard you against late shipor 'default'.

When you have a credit balance with us, the difference in value between your 'sale' and 'bought' contracts can be debited to your account but when we have no funds of yours in London, then you must remit the difference in value or we must draw on you at three days' sight for the difference".

On 1st November the appellant cabled—

"Re your telegram 31st. Buy 500 bales if 1s. $8\frac{1}{2}d$ ."

and on the same day the respondents cabled in reply-

" $Re$ your telegram of 1st cannot buy at your limit".

On 4th November the appellant cabled-

"Re your telegram of 31st. Re your telegram of 1st. Buy at your price or lower if possible 500 bales wait letter now in post for further";

and on the same day he wrote, acknowledging the letters of 24th, 27th and 31st October which we have mentioned, and said: -

"Zanzibar cloves.—As explained to you in our previous letters and referring to your valuable advices, we have never speculated. All our October/November sales to you were covered by us locally from the clove merchants under October sellers option contract.

During the month of September, 1950, the similar contracts were made, and they were fulfilled to the last penny, in spite of the high market prices ruled during the month.

When the end of October, 1950, approached nearer, the sellers hummed ([sic.] Qu. 'seemed'?) to hesitate to deliver cloves or pay the difference between the selling price and the market price that will be closed on 31st October, 1950. Generally the sales were made from Sh. 94 to Sh. 110 and the prices closed on 31st October 1950 Sh. 151. Thus the difference amounted to Sh. 41 to Sh. 57 per 100 lb. All the sellers approached the big shippers and the buyers and requested them to assist to keep them affoat. The shippers and buyers sympathetically heard the seller's petition and convened a general meeting of the clove merchants, wherein they unanimously appointed a<br>committee to decide one clearance price, at which the October sales should be cleared. The committee then fixed an intermediate figure of Sh. 135 for clearance purposes and requested all the sellers to respect this price.

Accordingly we, in spite of the committee's decision, lodged a claim with the sellers, who said the difference is too much and are not willing to pay any compensation whatsoever, and challenged us to go to the Court.

We are now filing a suit against the sellers for non-delivery to us on 31st October, 1950, and God knows when and what the result comes !!!

Now our position is most critical. We can neither get cloves from the sellers nor compensation whereas our sales through you stand outstanding. The local prices do not go below Sh, 150 per 100 lb, which if we ship cost us-

Sh. $1/50$ cents per lb. local delivery.

$-$ /30 cents f.o.b. and packing expenses.

$-\frac{10}{2}$ cents freight to London.

-/15 cents your $2\frac{1}{2}$ per cent commission exchange on 90 days' draft and loss of weight in transit.

Sh. $2/05\frac{1}{2}$ cents

which is roughly 2s, 1d. per lb. c. & f. London, whereas as you know, our following sales: $-$

1,000 bales to London.

150 bales to Hamburg.

128 bales to Gothenburg.

25 bales to Trieste.

against October/November and 200 bales November/December, London.

32 bales November/December, Antwerp.

25 bales November/December, Trieste.

average nearest 1s. $8d$ . per lb. against which the price we will have to pay 2s. 1d. as worked out above, which means a loss to us of $5d$ . per lb. while we may suffer less if we may buy in London.

The object of writing this letter to you is to seek your co-operation and valuable advice on the following proposals: —

1. Buy through you quietly quantities as above at steady prices.

2. To buy double the quantity of the above sales. The market will certainly go up as and when you will commence purchasing. When you think, the prices have reached the top price, commence steadily to sell our surplus stock, which would compensate our loss.

3. To pay a premium to the buyers for cancellation of all the contracts.

To give you the position of Zanzibar market we will closely keep you advised of the local market giving you indication of the local price per 100 lb. twice a week, to which you have to add: $-$

Sh. $-\frac{30}{30}$ cents f.o.b. charges.

$-\frac{10}{4}$ cents freight to London.

-/15 cents your $2\frac{1}{2}$ per cent commission, exchange and loss of weight in transit.

$-155$ cents or say 7d. per lb.

The reason of doing above is that we are afraid the market is ruling here very strong and there are shipments of appreciable quantities to U. S. A., Singapore, Bombay, Calcutta, and U. K., and we are confident that the<br>prices will not decline until December. The untimely rains hamper the drying of cloves and the producers who have gained a lot are satisfied with what they have got and they wish to stock the balance of their cloves in. anticipation of getting Sh. 2 per lb. which means 2s. 7d. to 2s. 8d. per lb. c. & f.

We now seek your valuable and most experienced advice to this subject and if you agree with us to Scheme No. 2 we wish you to go ahead with the purchase of cloves, advising us daily of the purchases and the price bought at. In the event of anything unusual cropping up, we will urgently telegraph you to suspend buying.

We will keep you well advised of the manifests of the shipments to U. K., which may give you some guidance of the lots to come and you might forecast the effect they may bring on your buying on our behalf.

We feel confident, we will get out of the danger by your co-operation on the contrary we may make a penny or two if the prices jump to our expectations.

We have opened our cards and now are anxious to hear from you the approval of our scheme which will make our connexions more thicker than ever.

#### Yours faithfully,

# per pro.: JETHALAL VALABHDAS & CO.

$(Sgd.)$ ................................

After writing above and going through your last letter No. 63 we come to a decision to buy initially 500 bales at your offer of 1s. $10\frac{1}{4}d$ . or lower and are telegraphing you to-day as under: -

'Ref. to your telegram of 31st and 1st buy at your price or lower if possible 500 bales await letter now in post for further'.

On receipt of this letter, please take whatever action you think in our best interest and cable us immediately.

> per pro.: JETHALAL VALABHDAS & CO. $(Sgd.)$ ....................................

It has been necessary to set out this correspondence at some length, because the suit turned on the true effect of it both immediately before and immediately after this last letter arrived in London on 9th November. Before it had arrived. the respondents acted on the cable of 4th November and cabled to the appellant on the 4th: $-$

"Ref. your telegram of 4th acting on your instructions Monday morning. expect to buy 1s. 10d. 1s. $10\frac{1}{4}d$ . Do not report your intentions in your market";

and again on the $6th:$ —

"Bought for your account 500 bales 1s. $10\frac{1}{4}d$ . cannot get anymore at less than 1s. $10\frac{3}{4}d$ . Others operating".

They also wrote on 6th November, confirming and giving details of the purchase and said: $-$

"We regret we were unable to obtain any of the above-mentioned 500 bales at 1s. 10d. per lb. C. I. F. as intimated in our cable of the 4th inst. When we entered the market as definite buyers, we found that our competitors also were operating on behalf of their friends in Zanzibar. We picked up 350 bales fairly quickly but we had difficulty in getting the remaining 150 bales at the same price of 1s. $10\frac{1}{4}d$ . per lb. C. I. F.

On the buying from Zanzibar, the market has become much firmer here and we do not think it would be possible by buy any more at less than 1s. $10\frac{3}{4}d$ . per lb. C. I. F.

We suggest that the above-mentioned 500 bales be declared against your contracts dated 30-8-50 (four contracts totalling 500 bales for October/ November shipment). In accordance with this suggestion, we enclose herewith our Debit Note, dated 6th November, 1950, for £631 15s. 2d., and, if you are in agreement, we shall be obliged by your kindly arranging to remit this sum to us at once by telegraphic transfer.

We understand that those who have already bought back are Messrs. Leslie & Anderson Ltd., Messrs. Frame & Co. Ltd. and Messrs. G. R. Cole & Co., and that others are now endeavouring to act similarly.

We shall be interested to know the name of the shippers represented in this market by Messrs. G. R. Cole & Co.

We understand Messrs. G. R. Cole & Co. have bought back most, if not all, of their October/November sales.

It is impossible to gauge what remains to be shipped from Zanzibar to London but there is no doubt that the purchasing by the Zanzibar merchants has considerably helped this market."

On 7th November the appellant wrote: —

"We confirm your two cablegrams dated 4th and 6th inst. and noted the contents with thanks.

We note that the others are operating on the same line as we are and that further cannot be purchased at less than 1s. $10\frac{3}{4}d$ . We have fully written on 4th November, which letter should be in your hands by now and we anxiously await your news by cable."

The letter of 4th November clearly came as a shock to the respondents. They replied at length on the 9th and the following are extracts from their letter:

"We appreciate your confidence in us in seeking our advice in your present difficulties. Our previous letters have been written on the assumption that you are buying back your sales of October/November shipment in order to take advantage of the higher prices now obtainable from India and Singapore. We are, therefore, very sorry indeed to learn that your difficulties are the result of your suppliers dishonouring their contracts with you. Needless to state, we will do our best to assist you.

We were advised by Messrs. Frame & Co. Ltd. that the up-country suppliers of their shippers, Messrs. A. F. Hirjee, had defaulted on their sales of September/October shipment but it was generally understood in London that the position in regard to sales of October/November shipment would be much easier.

In regard to your sales of October/November and November/December shipments, we have carefully considered the alternatives open to you.

The cheapest method, as the London market is much lower than the Zanzibar, is for you to authorize us, as you have, to buy quietly in London a quantity equivalent to that which you have sold for October/November and November/December shipments. When this action is taken the holders here do not know that the orders are from Zanzibar and not genuine U. K. or continental consumers.

The alternative method is to approach the respective buyer of each contract and ask the allowance he would require to cancel. We do not advise this when several contracts are involved as the respective buyers realize at once that Zanzibar is 'buying back' and, in order to protect their and their consumers' interests, ask an allowance which will cover the price they will have to pay to replace.

Whilst we are quite prepared to act upon your instructions, we cannot advise your buying a larger quantity in the London market than is necessary to cover your sales contracts. The firmness and advancing prices in the London market are due solely, at the moment, to 'buying back' by the several Zanzibar shippers. So soon as this 'buying back' is completed, the market will, we think, again be very quiet. Even if, as you expect, the price in Zanzibar is maintained at something over $2s$ , $0d$ , per lb. C. I. F. the price of cloves on the spot London (ex warehouse London, usual landed terms) may remain something under that C. I. F. price and we may have, as happened in the past, a purely nominal market for some months. On the other hand if the London holders unwittingly sell back too large a quantity, then this market will advance for both spot and forward positions. It is, however, impossible to gauge to what extent the sales of the September/November shipments have been bought back by the Zanzibar shippers and without this knowledge coupled with a foresight of what the consuming demand is likely to be in the coming months, such an operation as you propose becomes in our opinion, too much of a gamble. Taking the argument in this paragraph as a whole, we think you must agree that would be tempting Providence to buy more than is actually required to meet your obligations under your sales contracts.

Our suggestion is that you buy back a further 500 bales in order to complete covering your sales, totalling 1,000 bales, of October/November shipment and we are, at the moment, doing our very best to secure these for you. This morning, one of our competitors was trying to buy at 1s. $10\frac{1}{4}d$ . per lb. C. I. F., but without success. We understand there are now no sellers below 1s. $10\frac{1}{4}d$ . C. I. F. and that we shall be very fortunate if we secure 500 bales at this latter price for you. On this information, we instructed our broker, on your behalf, to purchase up to 500 bales at 1s, $10\frac{1}{3}d$ , per lb, C. I. F. or lower if possible. You will appreciate that if our above-mentioned competitor receives authorization from Zanzibar to increase his limit, the market will go beyond 1s. $10\frac{1}{4}d$ , per lb. C. I. F.—as you have kindly left the matter in our hands, we considered it advisable to be first in the market at the higher price. We trust you approve our action.

As regards the 150 bales for Hamburg, 128 bales for Gothenburg and and 25 bales for Trieste, all October/November shipment, we think you must ship these parcels at all costs to your goodselves. These contracts are with actual consumers who will insist upon having the cloves. If the cloves are not shipped we fear they will insist upon a very heavy allowance or damages for default of contract. This, in order that they can replace by buying from others. You will appreciate that in regard to these sales, we have not an open market, i.e. there are unlikely to be any merchants holding unsold contracts covering your sales contracts to these continental ports. You are, therefore, completely in the hands of the buyers concerned. It is not that the buyers are unjust but that being consumers, they must have the cloves to keep their factories and factory hands employed apart from their obligations to their consumers of their manufactured article. We truly think you will find it cheaper to purchase in your market at current prices to complete these contracts. However, if you wish it, we will write the buyers concerned to ascertain if they are prepared to accept an allowance to cancel their contracts but, for the reasons stated above, we will be surprised if they will entertain considering cancellation. We do not advise writing consumers in this way as it does a lot of harm to your and our reputations.

In reference to the 200 bales for London, November/December shipment, we are taking no immediate action as we wish to get the October/ November position cleared first for you".

On the same day, the 9th, the respondents cabled: $-$

"Re your letter of 4th instant. Bought for your account 250 bales shipment October/November London 1s. $10\frac{1}{4}d$ . Hope to buy balance at same price full stop. Antwerp, Hamburg, Gothenburg, Trieste strongly advise shipment letter posted to-day;"

and on the 10th they cabled again: $-$

"Re our telegram of 9th shipment October/November to London bought balance at 1s. $10\frac{3}{4}d$ . Market closed $\frac{1}{2}d$ . dearer shipment November/December to London. Trying to buy back what is your limit stop Continental ports will you be able to ship."

Also on the 10th they wrote giving details of their purchases and saying: -

"The total amount due to us on the 1,000 bales, October/November shipment to London is £1,505 16s. 1d. and we shall be obliged if you will kindly arrange to remit this sum to us by telegraphic transfer at once.

We now await to know what you wish us to do in regard to the remaining contracts for 150 bales to Hamburg, 128 bales to Gothenburg and 25 bales to Trieste. As already advised, we truly hope you will be able to ship these 303 bales."

At this juncture the appellant sent, on the 13th November, a cable which to the respondent must have had something of the effect of a bombshell:-

"Resell at best all purchases 1,000 bales remit by telegraphic transfer. Net surplus market looks like easier owing to supplies increasing hope to ship total commitments end of month."

The respondents replied on the same day: $-$

" $Re$ your telegram of 13th cannot resell correct procedure remit by telegraphic transfer immediately $£1,500$ telegraph firm offer Zanzibar cloves guaranteed shipment telegraph confirmation subject to reply here 10 a.m. to-morrow."

On the 14th the appellant cabled: $-$

"Re your telegram 13th cannot understand first and also final part stop Purchase made intended for taking advantage of a rising market and/or covering sale according to circumstances stop Resell at best as per our telegram with firm offer in hand for 24 hours we hope to succeed 2s. 1d. 200 bales shipment November/December."

The respondents replied on the same day: $-$

"Re your telegram 14th. Purchases necessarily allocated your sale contracts for shipment October/November to London therefore nothing to resell stop Awaiting remittance stop You must now make firm offer shipment November/December which must be treated separately financially and otherwise."

They also wrote at considerable length setting out the whole position as regards the covered London contracts and the open continental contracts for October/November and the contracts both with London and the continent for November/December. They seemed willing to treat the appellant's action as a mere abberration and were willing to continue to do business with him if he would correct it. Meanwhile on the 14th the appellant cabled:—

" $Re$ your telegram 14th your reply very unsatisfactory stop Since we did not approve London purchase allocation against October/November sales contract you cannot use your discretion and defer our instructions for resale stop Revoking letter of credit causes unpleasantness stop Suspending all shipments will not accept responsibility in consequence of default re your telegram of 15th indication unworkable."

To which the respondents replied on the $16th:$ —

" $Re$ your telegram of 15th, we have acted in accordance with your letter of 4th instant stop Position as stated our telegram of 14th is in accordance with trade practice accepted by your competitors who have already, we understand, remitted by telegraphic transfer sterling difference due to London representative stop Letter of credit will be opened as fresh sales made stop It is in your own interest October/November purchases allocated your sales contracts thereby relieving your risks of non-fulfilment leaving you free to make fresh sales of any deliveries you may receive from your supplier stop Must hold you responsible for shipment uncovered contracts."

In a letter of the same date they explained the position at length again and said: —

"If you do not consider that the action we have taken in regard to the 1,000 bales, purchased for your account in accordance with your definite instructions ([sic.] Qu. 'was correct' omitted?), we can only suggest the matter be settled by a friendly arbitration. If you agree to this, we shall be appointing N. Shaw, Esq., of Messrs. Paines & Reid, 41 Eastcheap, London, E. C. 3, to consider the matter. We shall be pleased, if you desire it, to give you the names and addresses of such gentlemen who could act for you and be relied upon to give a fair and just consideration of your point of view, otherwise you could, of course, arrange for the London Chamber of Commerce to appoint a gentleman in the Zanzibar Clove Trade to act for you.

they thought best in his interest. This did not mean that they should write him another letter, but that they should act, and at once. The respondents' decision to buy sufficient to cover the remaining open contracts, but not to make any further and speculative purchase, was not only within their express authority but was clearly the best decision which, in accordance with good mercantile practice, they could have made in the appellant's interest. In any event there has been no complaint that they did not buy enough.

It was objected for the appellant that the 1,000 bales should have been kept in hand so that they could either be allocated to the open contracts or resold, as the appellant might direct. This is quite unrealistic. The appellant had been warned in the letter of 31st October that if he desired to buy for any purpose he must send the appropriate remittance with his order or be prepared to pay immediately thereafter. The suggestion that the respondents would allow the appellant to speculate at their expense and with their capital is really not to be taken seriously. It was generous of them even to allow the appellant to saddle them with the financial responsibility for his loss on covering transactions. but these clearly stood on a different footing. Only differences were involved, though they were substantial. We have no doubt whatever that the appellant's manager fully realized this when he sent the cables of 13th and 14th November, whether or not he had then received the respondents' letters of 6th, 9th and 10th November. We think it probable that he had received at least the first of these and that the request for a remittance prompted his disingenuous attitude thereafter. On the main issue the appellant clearly failed. Whether from lack of confidence in his case on that issue or for other reasons, his counsel raised a number of subsidiary issues with which we must deal as shortly as possible.

The first of these relates to the passage in the respondents' letter of 6th November, where they suggested allocating the first 500 bales to four particular contracts out of the ten open October/November London contracts. No reply to this suggestion was ever sent and it was sought to base on this an argument that the parties were never *ad idem* and that there was no contract. The letter of 31st October also refers to this point. Whatever merit this argument might have had after the first purchase, it disappeared when the second 500 bales were bought, since all the ten open contracts in question were then covered and specific allocation was no longer necessary. As on 6th November it was necessary, in order that a precise account of differences could be prepared, but when all the contracts were covered this could be done by taking totals and without specific allocation. There was no substance in the point.

Many of the subsidiary issues discussed seem to us to spring from the fact that the respondents' evidence was taken on commission in London. In such circumstances it is difficult, if not impossible, to prevent attempts to range far beyond the scope of the issues as defined by the pleadings. The examination-inchief of Mr. F. I. Andrews, the senior partner in the respondent firm, ran to 416 questions and the cross-examination to a further 708. A great deal of this appears to us to have been little more than a fishing expedition. On the pleadings the respondents claimed indemnity and remuneration as agents. The defence was that the transactions were beyond the agent's authority. Now it is sought to say (1) that the agents have by misconduct disentitled themselves $(a)$ to remuneration and (b) to indemnity, and (2) that the agents improperly acted as principals, and to support. these allegations by evidence taken on the commission. The short answer, of course, is that the evidence was taken subject to all just exceptions and, if not relevant to the issues pleaded, should have been excluded.

The misconduct alleged is that the respondents did not establish privity of contract between the appellant and European buyers, but dealt with the appellant and with the buyers as if they were in each case principals. It is agreed

that they never concluded a contract with the appellant without selling the goods concerned to a buyer in Europe, but it is said that they contracted at different and enhanced prices with buyers and that they made C. I. F. contracts with them instead of C. & F. contracts on the same terms as the appellant sold. This is said to be wrong; but it was never put in issue and neither the High Court nor this is in a position to say whether it was wrong or not. In any event there are the strongest indications that it was all done in accordance with a well-understood. and agreed course of business between the parties. Correspondence in 1946, soon after they first had dealings, shows clearly that the appellant understood that the respondents claimed the right to make small adjustments in contracts and to deal as if they were principals. Meticulously detailed accounts show that the overall profit of the respondents on all the selling contracts in issue in this suit was no more than 2.42 per cent, omitting the cost of opening letters of credit and of cables. Their theoretical "commission" was $2\frac{1}{2}$ per cent. They made a shade more on the buying contracts, but no terms for these were ever expressly agreed. "Commission", as we have said in another case, is in Zanzibar commonly<br>used as meaning only "discount". It is not impossible, though we think it highly improbable, that, if a strict examination were made for that specific purpose. some acts of the respondents might be found to be in breach of their duties to the appellant. They seem to have acted in some respects as middlemen rather than strictly as agents. But in the general aspect they regarded their duty to advise and assist the appellant in the most serious light, and they acted in his interests in most scrupulous and conscientious manner. In this sense they were agents and most faithful ones. The last word rests with the appellant's manager, who said in evidence:

"I did say 'We left it to you to add any commission you deemed fit to obtain business'. That refers to Rotterdam buyer.

I deny it implied that Andrew and Co. would make a different contract with Rotterdam. I agree it would include brokerage and insurance. I agree it would be sale on C. I. F. terms less brokerage and payment according to Broker's contract. My contract with Andrew was C. & F. terms and payment against letter of credit on Zanzibar on shipment.

Andrew's contract with a third party corresponds with our contract with him, but is not identical. Has to provide different things-brokerage, insurance and different terms of payment."

and again-

"I know Andrew said brokerage and commission would be payable. Apart from allocating their purchases against our contracts, the costs debited by them for the purchases are correct. I agree the charges are reasonable."

$I_n$ face of this we decline to hold that the respondents were guilty of any misconduct such as would disentitle them to indemnity or remuneration, or that in so far as they acted as principals they were contravening the agreed terms of their employment.

On this last point the appellant's counsel cited a large number of authorities. We think none of them in any way assists him. The duties of an agent depend in each case on the contract of agency and, if breach of duty is relied on, it mustbe pleaded and proved. On the facts properly proved in this case there was no breach of duty.

We turn now to the cancellation of the letters of credit, on which the appellant relied as ground for repudiating not only his remaining October/ November contracts but also his November/December ones. The respondents did not work on irrevocable credits and did not furnish a single general credit,

but opened a separate revocable credit in respect of each contract made with the appellant. When they closed the ten open October/November London contracts they withdrew the credits in respect of those specific contracts, but no other credits then opened. Since the ten contracts had been closed those credits could obviously never be used. If cloves were to be shipped to London on October/November contracts, the contracts would be new ones and new credits would have to be opened for them. Assuming, as we have held, that there was authority to close the ten contracts, it was obviously correct to withdraw credit facilities relating solely and specifically to those ten contracts. It follows that the appellant had no right to repudiate, as he did, the contracts remaining open. He failed to ship in performance of those contracts and was thereby in breach of them.

This disposes, not only of the defence, but also, of the main part of the counterclaim. As the respondents' refusal to sell was justified, no claim for damages can arise from the consequences of that refusal.

The sequel is perfectly simple. The respondents declared default, ascertained their liability for differences in the manner required by their contracts, and paid the necessary differences and expenses, as they were obliged to do. Those payments are the measure of the indemnity to which they are entitled as against the appellant in respect of the defaulted contracts. They are entitled also to the amounts claimed in respect of differences on the closed contracts. We agreed with the judgment of the learned Chief Justice. The appeal accordingly failed.