Kishingchawd Dingonal Ramchandani t/a Raneyko Enterprises v. Nylex Plastics Ltd
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IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 33 OF 1971 (On Appeal from O.J. Action No. 518/70) ________________________
________________________ Coram: Blair-Kerr, S.P.J., Huggins and Leonard, JJ. ________________________ JUDGMENT ________________________ Huggins, J.: 1. It is convenient to refer to the Appellant as “the Buyer” and the Respondents as “the Sellers”. The Buyer paid to his sub-purchaser a sum of £1,400 as damages for breach of contract and it is half of that sum which he now seeks to recover from the Sellers. He claimed the whole £1,400 but it appears to be conceded that, as the learned judge has held, no more than half can be recovered. The learned judge said that the matter went to arbitration in Berbera and that £1,400 “was awarded”, that being equivalent to $20,106.80. There has been some discussion in this Court whether there ever was an award or whether the payment was made in pursuance of a compromise of the arbitration proceedings. The Notice of Appeal does not challenge the finding of the learned judge and it is, in any event, supported by the memorandum of 9th April 1971, where reference is made to payment of “the compensation”. 2. The first ground of complaint argued on behalf of the Buyer is that the learned judge said the payment to the sub-purchaser was “an ex gratia payment”. If there was an enforceable arbitration award it clearly was not an ex gratia payment but a debt which could be recovered by legal process. The contention of the Sellers appears to be in the first place that the award was not enforceable because there was no enforceable agreement to arbitrate and secondly that, even if there was, the Buyer did not in the arbitration proceedings raise the issue that under the terms of the sub-contract he was in the circumstances under no obligation to pay compensation for non-delivery. I think the Buyer is in some difficulty here by reason of his having sought to argue as a pure point of law what is in reality a question of fact or of mixed law and fact, namely whether there was any evidence to support the finding that the payment under the arbitration award was an ex gratia payment or whether such finding was against the weight of the evidence. Only if it could be said that every arbitration award was of necessity enforceable could the Buyer succeed on the first ground of appeal as it has been drafted, since a payment made pursuant to an unenforceable award is in truth an ex gratia payment. There is no express finding as to the enforceability of the award and in the absence of the record of the evidence (which was not filed because it was thought to be irrelevant to the appeal) we cannot decide whether it was enforceable or not. In these circumstances I think the first ground of appeal must fail. 3. The substance of the second ground of appeal is stated as follows:
I have found this extremely confusing. The implication in the first instance is that the judge should have held that on a true and proper construction of the condition the Buyer was bound to pay damages. The “alternative” allegation implies that the judge should have held that the Buyer was not bound to pay damages. What in fact was it that the learned judge did find? He said:
The learned judge is there visualising a situation where the sub-purchaser brought an action against the Buyer for damages for non-delivery under the sub-contracts and he clearly states that in his view the action would fail. In other words he held that the Buyer was not bound to pay damages. Despite the confusing way in which it has been pleaded in the Notice of Appeal it is that decision which the Buyer now seeks to reverse. 4. The learned judge decided that the negotiations between the Buyer and the sub-purchaser resulted initially in an agreement which was intended to be merely “a statement of the terms which are to cover any contract for the sale and purchase of goods to be made in the future” and subsequently in a series of contracts. The condition now in issue was included in each of those contracts and was in these terms:
(In this context the “Suppliers” were, of course, “the Buyer”). The learned judge did not in his Judgment discuss the construction of this condition and whether he came to the conclusion which he did because he thought the contemplated reasons beyond the Buyer’s control were reasons for non-execution generally or only reasons preventing exportation does not appear. 5. I sympathise with those who have been called upon to advise the parties as to the meaning of this condition but would add that if those whose native language is English often produce documents which are difficult to understand merchants whose knowledge of the language is limited may be excused for producing documents wanting in clarity and precision. It seems to me, and I do not think either side really contests this, that the ordinary grammatical construction of the condition is:
but neither side seems to be content to interpret the condition in that simple form. The arguments addressed to us on both sides assume that there is some ambiguity when the condition is so construed and counsel attempt to resolve that ambiguity in different ways. Counsel for the Buyer says that the condition was inserted for the protection of his client and that consequently it should be interpreted in favour of the sub-purchaser. It is further suggested on behalf of the Buyer that the ordinary grammatical construction would produce a result which the parties cannot conceivably have intended: no overseas purchaser would have agreed to a condition which would deprive him of any remedy should his vendor be prevented from performing his side of the contract because the vendor’s supplier failed to deliver or because of some other reason which did not amount at least to force majeure. Counsel for the Sellers has drawn our attention to various instances of obscurity and want of precision in the other conditions and he goes on to submit that the ordinary grammatical construction of the condition makes nonsense of it. The basis of that contention is that exportation is not, in common parlance, “prohibited” by a “reason” of any kind. 6. I must deal with this last argument at the outset. It is, of course, true that one does not normally talk of something’s being prohibited by a reason, but such lax language is all too commonly used by native Englishman and is surely not to be assumed never to be used by others. It is not necessary to go to the Oxford English Dictionary for an explanation of this usage: the Concise Oxford Dictionary gives “debar” as one meaning of “prohibit” and “debar” can mean “prevent”. If one substitutes “prevented” for “prohibited”, this condition is certainly comprehensible. But is the interpretation which thus results one which cannot possibly have been intended? The sub-contracts, which were on a printed form, were “C.I.F. Berbera nett” and this interpretation would, as Mr. Justice Blair-Kerr points out, be equivalent to “Heads I win: tails you lose” in favour of the Buyer. Unlikely though it may be that a merchant in Northern Somalia would wittingly contract upon such a basis, it seems to be to be going very far to say that he would never do so. It is such a basis which I think is indicated by the language the parties have used and though they could undoubtedly have made their intention clearer (and that applies whatever their intention in fact was) I am not persuaded that this is a proper case for the application of the maxim verba fortius accipiuntur contra proferentem, because that maxim should be applied only when all other rules of interpretation have failed. What in effect the Buyer asked us to say was that the condition should read:
This certainly does greater violence to the language which the parties have used and I see no need to read in all those words in order to make sense of the condition. For myself I would attach no weight to the comma, which, on either reading, is strictly unnecessary. The Buyer’s argument appears to me to take us beyond the limits of legitimate interpretation: it requires us to decide what the parties might reasonably be expected to have agreed rather than what they have in fact agreed, as evidenced by their written instrument. We have to ascertain the intention of the parties from what they have said and only if we can say that they cannot possibly have intended what the words appear to indicate may we interpret them in any other sense. The failure of the Sellers to deliver did prevent the exportation of the goods contracted for and that was the reason for the non-execution of the sub-contract by the Buyer. Accordingly I see no reason to disagree with the learned trial judge that the Buyer could have refused to pay damages to his sub-purchaser and that the payment made was an ex gratia payment. 7. It is the third ground of appeal which has given me most anxiety: the Buyer contends that even if he was not liable in law to pay damages he did nevertheless pay damages, was justified in so doing for the maintenance of good business relations with his sub-purchasers and was entitled to recover those damages from the Sellers provided that they were reasonable in amount. The Sellers knew that the Buyer purchased the goods for resale and that it would be a direct and natural result of a failure by them to deliver that the Buyer would be unable to deliver to his sub-purchasers. If the Buyer had to pay damages for non-delivery to the sub-purchasers that would be a further direct and natural result of non-delivery by the Sellers. There may at first sight appear little reason in logic why the Sellers should be able to take advantage of a very stringent clause in their Buyer’s sub-contract, such as Condition 2 in the present case. The Buyer relies upon the principle of James Finlay & Co. Ltd. v. N.V. Kwik Hoo Tong H.M.([1]). The question is whether that principle extends to such a case as the present. The principle is stated at p.410 in that case:
It was, therefore, held that the buyers need not keep their sub-purchasers to the strict terms of the sub-contract since to do so would be to base their case against the sub-purchasers upon an assumption which they knew to be false. Greer, L.J. went so far as to say that in his view there was nothing immoral or unconscionable in an endeavour to hold to their bargain the sub-purchasers who had bought goods on different terms from those on which the buyers bought them. He said at p.415:
It is true that in the present case the Buyer would not be doing anything so manifestly likely to ruin his credit in the business world. The case is perhaps closer to the one propounded by Sankey L.J., where a buyer refused to plead the Statute of Frauds or the Statute of Limitations against his sub-purchaser. However, counsel for the Buyer submits that Banco de Portugal v. Waterlow & Sons Ltd.([2]) shows that the principle can be applied in a case like the present. The question there was whether the Bank should have mitigated its damage by declining to pay on the “forged” notes. It was held that it need not, because to do that would have destroyed all confidence in the paper currency issued by the Bank. 8. As I see it, the matter boils down to the question whether the action of the Buyer in paying damages which, on the findings, he was not bound to pay was reasonable conduct for the protection of his business reputation. In my judgment it was going beyond what the most conscientious merchant would consider necessary. The fact that the Buyer may have been uncertain whether he could be held liable to his sub-purchaser was not, I think, sufficient reason for paying and looking to the Sellers for reimbursement: it was not impossible to obtain an authoritative interpretation from the Court which would have bound both the Sellers and the sub-purchaser. I do not, of course, express any view on the finding that the payment was an ex gratia payment beyond what I have said earlier: if the arbitration award was enforceable I have no doubt that the damages paid thereunder would have been recoverable against the Sellers. 9. I would dismiss the appeal. |