Govindji & Co

- vs -

Soon

Judgment

Abdul Hamid FJ

(delivering the judgment of the Court)

1. The appellants Govindji & Co entered into three contracts Nos 1156 (25 May 1973), 1157 (25 June 1973) and 1158 (28 July 1973) with the respondents Soon Hin Huat for sale of copra for a fixed price per picul to be delivered on or before 31 August 1973 before 31 October 1973 and before 31 December 1973 respectively. A total of 348 piculs were delivered under the first contract between September 1973 and April 1974 leaving a balance of 155.40 piculs undelivered. No copra was delivered in respect of second and third contracts. In the process there was an overpayment of a sum totalling $10,597.60 to the respondents.

2. In an action against the respondents, the appellants claimed a sum of $10,597.60 for money had and received and damages arising for loss of difference below the market and contract prices assessed on the dates of the breaches of the contracts amounting to $59,081.40 and 6% interest in the sum of $10,597.60 as from 8 May 1974.

3. The learned judge Arulanandom J entered judgment for the appellants for money had and received and dismissed the rest of the claim. Hence the appeal.

4. The central issue in this appeal revolves around the question of legality of the contracts in the light of para 4(1)(a) of the Coconut Marketing Scheme 1973 dated 27 April 1973 prescribed under s 5 of the Federal Agricultural Marketing Authority Act 1965 which came into force on 1 May 1973 which provides that "no person shall, for the purpose of trading or processing, purchase from a coconut farmer any copra .... unless he is licensed to do so by the Board established under s 6 of the Act".

5. Before we deal with this question, it is pertinent to mention in passing that the learned judge made specific findings of fact to the effect that it was the appellants who failed to take delivery of the goods when he considered whether it was the respondents who breached the contract by non-delivery of the goods or the appellants for not taking the delivery.

6. On the question of legality of the contract the learned judge expressed the view that:

   The plaintiffs by their own evidence admitted that they had no licence to purchase copra and hence any sales agreement entered into by them contrary to the law would make the consideration unlawful and thereby void.

7. Of the appellants’ contention that by reason of s 5(4) of the Act which provides that “Any discretion conferred on any person to issue or to refuse to issue a licence to deal in any agricultural produce, under any marketing scheme prescribed under this section shall be so exercised as to allow the issue of a licence to any person who immediately before the coming into force of the scheme was lawfully dealing in the marketing of such produce,” and the fact that the appellants had been dealing in copra for several years before the scheme came into force should exclude them from the provisions of the scheme, the learned judge formed the view that it cannot legalise a contract which the appellants entered in breach of the provisions of laws.

8. On appeal before us, it is the appellants’ contention, the same point raised in the court below, that the contracts were forward contracts and therefore no licence was required except at the time of the completion of the contract when taking delivery of the goods under the contract. A Singapore case of Anglo-American Corp Ltd v Singapore Produce Co [1962] MLJ 399 was cited in support of the contention.

9. Mr. TR Hepworth counsel for the respondents in his submission quite rightly pointed out that in that case the defendant buyers admitted the contract and that they bought the rubber but they refused to take delivery as they contended that the contract was illegal because they were not licensed under the Rubber Dealers Ordinance to purchase rubber. And it was in that context that Buttrose J held that it was only when the purchaser sought to take delivery of specific rubber by way of completion of the contract to purchase that he was bound to have a licence to take delivery.

10. The distinction lies in the fact that in the present case the appellants (buyers) were suing on contracts in respect of which they were bound to have a licence to take delivery but which they did not have. In effect the appellants never had any licence to purchase copra indeed were not even aware of any legal requirement of a licence to purchase copra until the case came up for hearing in 1976. The question therefore of applying for or obtaining a licence did not arise.

11. A further important distinction that can be drawn in the present case from the Anglo-American Corporation case is that the contract there was a forward FOB contract executory in its terms which did not involve delivery at the time it was made whereas this is not so here. All the three contracts were effective on the dates they were entered into and at the option of the appellants they were entitled to require delivery of the copra at any time on or before the specified date. The terms of the contracts were such that it was a purchase followed by delivery. It means in effect the appellants were not precluded from requiring the respondents to effect immediate delivery. Such being the case, the question is whether the appellants were at all relevant times legally able to accept delivery. The answer is obvious in that they were unable to do so. An acceptance of any delivery of copra by the appellants pursuant to the contracts entered into would have been a direct violation of the legal prohibition contained in para 4(1) of the Scheme. And furthermore any delivery of the copra would expose the appellants to prosecution for failure to comply with the relevant provisions of the Act and they would be liable to a fine or imprisonment.

12. Our attention has also been drawn to a case Re Anglo-Russian Merchant Traders and John Batt & Co (London) [1917] 2 KB 679 which Mr. Hepworth submitted provides the answer to the question under consideration. It is pertinent to the present case to the extent that if the respondents should effect delivery pursuant to the contracts, there would have been in law a sale of copra, i.e., a purchase by the appellants in breach of the relevant provisions and would constitute an illegal performance of the contract.

13. On consideration it is our finding that by reason of the fact that the legal prohibition was in existence prior to the contracts being entered into such contracts were clearly in contravention of the law such that the consideration was unlawful and therefore void.

14. For these reasons, this appeal must fail and it is accordingly dismissed with costs.

Judgment below

Arulanandom J

15. This was a claim by the plaintiffs for damages, the sum of $10,592.60 as money had and received, interest and costs against the defendants who it was alleged had failed to perform certain contracts of sale of non-black fully dry copra in hemispheric form and without pieces.

16. According to the plaintiffs by the first contract in writing No 1156 dated 25 May 1973 the defendants sold and agreed to deliver 504 piculs of the said copra at the price of $44 a picul at Weld Quay on or before 31 August but only delivered a total of 348 piculs between September 1973 and April 1974 leaving a balance of 155.40 piculs undelivered.

17. Again by Contract No 1157 dated 25 June 1973 the defendants sold and agreed to deliver 420 piculs of the said copra at $47.75 per picul at the same place before 31 October 1973 but no copra was delivered.

18. Again by Contract No 1158 dated 28 July 1973 the defendants sold and agreed to deliver 420 piculs of the copra at $56 per picul at the same place before 31 December 1973 but no copra was delivered.

19. In the process the plaintiffs had overpaid the defendants by the sum of $2,597.60 on Contract No 1156, and made advance payments of $3,000 on Contract No 1157 and $5,000 on Contract No 1158, thus leaving the amount of $10,597.60 in the hands of the defendants as money had and received. The damages the plaintiffs were claiming was the difference between the market price and the contract price of the said copra at the relevant dates which according to the plaintiffs’ claim amounted to $59,081.

20. There is no dispute between the parties as regards payment and non-delivery of the said copra on the three contracts. But the plaintiffs claim that defendants’ letter of 8 May 1974 (page 20 of the Agreed Bundle) where they refused to deliver any more copra because of the plaintiffs’ failure to take delivery of orders and non-payment for certain deliveries constitute a breach of the contracts.

21. The defendants averred that in addition to the contracts it was orally agreed that as far as delivery was concerned time would not be of the essence. Furthermore they contend that as all the contracts contain a condition that “In the event of the buyers failing to take delivery, sellers have the option of cancelling the contract or of selling out against this contract, all losses incurred to be for account of the buyers” it was evident that the sellers would have the option of treating the buyers’ failure to take delivery as a repudiation of the contract. Furthermore the defendants contended that the failure to make payment for the last two deliveries of copra was a breach of contract.

22. The whole question of liability hinges on whether it was the defendants who breached the contract by non-delivery of the goods or whether it was the plaintiffs who committed the breach by not taking delivery of the goods.

23. While the plaintiffs claimed it was the defendants who failed to deliver the defendants contended that the failure was the plaintiffs’ who did not take delivery. From the defendants’ evidence the plaintiffs had placed the orders with the defendants for the purpose of exporting the copra overseas and that this was a condition of the sale agreement as otherwise the defendants’ own business, that of a copra dealer, locally would be affected. That being so the plaintiffs had to ensure that shipping space was available and letters of credit had been opened. Plaintiffs’ counsel objected to the admission of this part of the evidence on the ground that since the contract was in writing, it was inadmissible under s 91 of the Evidence Act. But this court was of the opinion that it was clearly admissible under proviso (b) of s 92 of the Act which reads as follows:—

    the existence of any separate oral agreement, as to any matter on which a document is silent and which is not inconsistent with its terms, may be proved, and in considering whether or not this proviso applies, the court shall have regard to the degree of formality of the document;

24. The documents relied on by the plaintiffs contained the barest of particulars. And the dates on which they took deliveries only give credence to the defendants’ contention that there was a collateral oral agreement regarding deliveries. Plaintiff himself admitted that he had no godown in Weld Quay where goods could be delivered or stored, and delivery was made in an open space near the Customs Office which dealt with goods for export. This supports the defendant’s evidence that it was only when the plaintiffs had secured shipping space for the copra that they would require the defendants to deliver the amounts they had arranged to be exported at Weld Quay where the Customs could clear the goods for export and the goods loaded onto the ships. Furthermore from the defendants’ stock book it was evident that on the dates plaintiffs complained that the defendant failed to deliver he did have stock of the said grade of copra in his store. Another curious fact is that while the earlier contracts had not been performed, the plaintiffs were still entering into further contracts.

25. Again to prove damages the onus of which was on the plaintiffs, there was no documentary evidence, no copies of letters of credit, contract notes, invoices or receipts to show that they had suffered loss through being unable to fulfil contracts because of the failure of the defendants to deliver the copra.

26. The only conclusion that one can arrive at is that the price of copra having risen far above the prices stated in the contract the plaintiffs were trying to take advantage of their own failure to take delivery by alleging the defendants had committed breaches of contract.

27. The question of legality of the contract was raised as at the time the contracts were signed the plaintiffs had no licence to sell copra. Paragraph 4(1)(a) of the Coconut Marketing Scheme, 1973 dated 27 April 1973 (prescribed under s 5 of the Federal Agricultural Marketing Authority Act 1965) which came into force on 1 May 1973 provided that no person shall for the purpose of trading or processing, purchase from a coconut farmer any copra .... unless he is licensed to do so by the Board (The Agricultural Produce Marketing Board established under s 6 of the Act). The plaintiffs by their own evidence admitted they had no licence to purchase copra and hence any sales agreement entered into by them contrary to the law would make the consideration unlawful and thereby void.

28. The plaintiffs contend that since s 5(4) of the Act provides that “any discretion conferred on any person to issue or refuse a licence to deal in any marketing scheme prescribed under this section shall be so exercised as to allow issue of licence to any person who immediately before coming into force of the scheme was lawfully dealing in the marketing of such product” the fact that the plaintiffs had been dealing in copra for several years before the scheme came into force excludes them from the provisions of the scheme, especially as they were not aware of it until this case came up for hearing in 1976 and the defence of illegality was raised.

29. I cannot agree. While the fact the plaintiffs were bona fide dealers in copra before the coming into force of the scheme may be taken into account if plaintiffs were prosecuted under the Act for dealing in copra without a licence, it cannot legalize a contract which plaintiffs entered in breach of the provisions of the laws.

30. The defendants further contended that they were entitled to forfeit the monies of the plaintiffs held by them as the plaintiffs were in breach of the agreements. There is no provision in the agreement for forfeiture of monies held by the defendants nor is there any counterclaim by them for losses suffered through the plaintiffs not taking delivery of the goods they ordered.

31. For the reasons stated above judgment will be entered for the plaintiffs in respect of prayer 2 for money had and received and the rest of the claim dismissed.

32. As to costs the defendants will pay to the plaintiffs one quarter of the plaintiffs’ taxed costs and the plaintiffs pay to the defendants three quarters of the defendants’ taxed costs.

Cases

Anglo-American Corp Ltd v Singapore Produce Co [1962] MLJ 399; In Re Anglo-Russian Merchant Traders and John Batt & Co (London) [1917] 2 KB 679

Legislations

Coconut Marketing Scheme 1973, 27 April 1973: para 4

Federal Agricultural Marketing Authority Act 1965: s.5

Evidence Act: s.91, s.92 (proviso (b))

Representations

S Thillaimuthu for the plaintiffs.

TR Hepworth for the defendants.