Henry Dean and Sons (Sydney) Limited v P O'Day Pty Ltd [1927] HCA 20

Henry Dean and Sons (Sydney) Limited v P O'Day Pty Ltd [1927] HCA 20 - HCA 1927 case summary — Zoe

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denied, that the goods shipped were not in accordance with the contract. The meaning of the averment of readiness and willingness is that the non-completion of the contract was not the fault of the plaintiff and that he was disposed and able to complete it if it had not been renounced by the defendant (Cort v. Ambergate &e. Railway Co. (1) ). The demand for delivery contained in the letter of the appellant dated 26th November is prima facie evidence - that the appellant was ready and willing to perform the contract (Squier v. Hunt (2)). The question is whether that evidence is rebutted by the refusal of the appellant to take up the documents. The inference which I draw from the whole of the evidence is that the appellant in refusing to accept the draft acted on the belief or suspicion that the goods shipped were not goods of the description contained in the contract. This belief may have been induced by the form of the invoice sent by the respondent, but, however that may be, the appellant took the risk and the belief proved to be well founded. The position, then, is that the only documents presented to the appellant did not in fact relate to goods of the description required by the contract and no such goods had in fact been shipped by the respondent. In these circumstances is the refusal of the appellant to take up the documents evidence that the appellant was not ready and willing to perform the contract ? I think not. It was argued for the respondent that the appellant was under an obligation to take up the documents tendered in this case because they were proper or usual shipping documents, being documents of the nature required, namely, invoice, bill of lading and policy of insurance, and containing a description of the goods to which they related not inconsistent with the description contained in the contract. In my opinion something more is necessary to constitute them proper shipping documents - -they must in fact relate to goods of the description contained in the contract which have been shipped. The purchaser under a c.if. contract providing for payment against documents undertakes to pay the contract price of the goods on presentation to him of documents relating to goods of the description contained in the contract which have in fact been shipped. If no such goods had in fact been shipped. (1) (1851) 17 Q.B. 127, at p. M44, (2) (1816) 3 Price 68. :

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the purchaser, in my opinion, is under no obligation to take up documents presented to him, even if such documents purport to represent goods of that description. If the goods shipped, not being goods of the contract description, were truly described in the invoice and other documents, it would be apparent that the goods to which the documents related were not the goods which the purchaser had agreed to buy, and in that case it would be ridiculous to treat a refusal to pay the contract price on presentation of those documents as a breach of contract by the purchaser, or as evidence that he was not ready and willing to perform the contract. If this be so, I am at a loss to understand why the position of the purchaser in this respect should be changed for the worse by the fact that the documents contain an incorrect description of the goods to which they relate. This view is, I think, supported by the decisions in the two cases Tamvaco v. Lucas (1). Inthe first case the description contained in the invoice was in accordance with the contract but the description in the bill of lading showed a quantity in excess of that agreed to be purchased, and it was held that the purchaser was entitled to refuse to accept the documents. In the second case the documents represented the cargo to be in accordance with the contract, but the purchaser pleaded that the cargo was in fact below the minimum quantity contracted for and that therefore he was not bound to accept the documents, and this was held on demurrer to be a good plea. In delivering judgment Wightman J. said (2): - 'In the case which came before us upon a precisely similar contract (3), the shipping documents themselves showed, upon the face of them, an excess above the prescribed maximum ; and we held that the purchasers were not bound, upon the tender of those documents, to accept them, or liable to pay for the cargo. In the present case the shipping documents, upon the face of them, show a quantity within the prescribed limits; but the amount actually shipped is below them: and the question here, therefore, is whether, if the shipping documents untruly represent the cargo as being within the limits, and the cargo, as the plea alleges, is really not within them, the purchasers are bound to accept the cargo. If,

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as I suggested in the course of the argument, the plea had expressly alleged that the shipping documents, by mistake, stated a cargo within the limits, and that the actual cargo was below them, that would surely be a substantial defence, and the plaintifis could not contend that the documents were conclusive for the purpose of acceptance of and payment for the cargo. The plea here does not expressly allege such misstatement in the documents : but I think that, as it stands, it substantially raises the same defence, and shows that the purchasers were not bound to accept." In Benjamin on Sale, 6th ed., at p. 846, it is said: " When delivery is to be made by a bill of lading, the rule is that the seller makes a good delivery if he forward to the buyer, as soon as he reasonably can after the shipment, a bill of lading, whereunder the buyer can obtain delivery, duly indorsed and effectual to pass the property in the goods, made out in terms consistent with the contract of sale, and purporting to represent goods in accordance with the contract, and which are in fact in accordance therewith." This passage is quoted, apparently with approval, by McCardie J. in Diamond Alkali Export Corporation v. Fl. Bourgeois (1). The decision in the second case of Tamvaco v. Lucas (2) seems to show that a purchaser under a c.if. contract commits no breach of his obligations by refusing to take up documents _ which do not in fact relate to goods of the description contained in the contract. The reason for this must be that he is under no obligation to take up such documents ; and if this be so I am unable to understand how his refusal to take them up can be regarded as evidence that he was not ready and willing to perform the contract. A purchaser who refuses to pay on presentation of documents purporting to relate to goods of the contract description no doubt takes the risk that the description contained in the documents may prove to be correct, but in the present case the risk taken was justified by the result. The respondent in this case committed @ fundamental breach of its contract by failing to ship the goods which it had contracted to sell. Adapting the language of Lord Atkinson in Johnson v. Taylor Bros. & Co. (3), the respondent by doing 8° made the creation, and of course the tender, of the shipping

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give us the evidence we asked for, namely, the overseas invoices . describing the pack," é&c. At the trial before Gordon J., the appellant's case was that hal 'i seller's failure to ship goods in accordance with the contract was decisive as to the buyer's right to recover damages. The learned Judge said: " Assuming, but without deciding the point, that the request by the purchasers (the plaintiffs) for further proof was not such as they were entitled to make under the contract, I am of the opinion that by so doing . . . they have not precluded themselves from maintaining the present action." It is fair to the learned Judge to say that he adds, " the question is not free from difficulty." The breaches of contract by the sellers, as found by the learned Judge are: (1) Disconformity of goods shipped; (2) tender of documents not covering any goods coming within the contract. The second breach was regarded as a necessary consequence of the first, the learned Judge saying : "the vendors had already shipped and forwarded goods not as specified in the contract." But his Honor also found, with respect to the buyer's attitude, what to my mind is ultimately decisive against the buyer. He found: " The purchasers refuse to accept these documents and pay for the goods under the contract on the ground that they decline to accept the documents or pay for the goods without an inspection of the goods themselves, which is undoubtedly @ wrong position by the purchasers. to take up under such a contract as the present: one." Gordon J. could not have held the position of the purchaser "a wrong one" if he had thought the invoice itself an insufficient document. The dilemma is, either its insufficiency was not raised or the learned trial Judge has decided against it. The first alternative is, T think, correct, the action being conducted on the basis that the only objection of the buyer was the disconformity of the goods, and that. it was entitled to some proof of conforming beyond the usual documents before payment. I extract the following from the judgment of Gordon J., and italicize certain words. After referring to demand for payment, the judgment proceeds :-~* The plaintiffs. refused to do so and asked for proof to be furnished to them that the goods shipped on board the Suva were goods in accordance:

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description of the goods must be relative to the particular contra it is connected with. As between the buyer and seller the ship documents must give the proper protection to the seller in respec of the dangers of carriage and the perils insured against, and of course they must not be inconsistent with the buyer's rights. documents must be such as are customary as between the shipowner or insurer on the one hand, and the owner of the goods on the ot But by the nature of the contract of sale the buyer must trust t the seller's promise that the proper goods will be shipped and to whatever is customarily included in the documents to show the have been shipped. If he mistrusts the seller, then he may the risk of refusing to pay on presentation of documents in proper - form. The refusal may turn out to be actionable or to be non- actionable by the fault of the seller. But even if non-actionable for that reason, it may be a refusal that affords unanswerable evidence of inability or unwillingness to pay, whatever the seller - has done. Suppose, for instance, the present appellant on presenta- tion of the documents had said expressly: " We are neither in position to pay, nor are we willing to pay, and therefore we refuse _ acceptance of the documents." Then, suppose they discovered a - week afterwards that the seller's goods were not up to the contract No doubt the seller must fail, as it has failed, in a claim for dan But could the buyer succeed in a cross-action? And if not, wh can it succeed now ? Gordon J., as I have shown, has found as a fact why the buyer refused: not because it found any fault in th documents, not because the goods shipped were not in accordance w the contract, but because, as the goods might not be in accorda with the contract, the buyer required inspection of the goods them selves. This attitude was maintained for many days, and althou the vendor made more than one attempt to overcome the refusal it was adhered to; and finally the vendor declared the transaction at an end. At that time there was no knowledge that the goo were not in accordance with the contract, and therefore there mus have been some other reason for the buyer's persistent attitude. The reason was that stated, namely, insistence on inspection of goods that might or might not be up to contract. That was legally

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reliance has been placed, it is absolutely consistent with these statements of the law. The primary Judge, Hamilton J. (now Lord Sumner), laid down the five duties of the vendor on c.i.f. terms who claims payment on tender of the documents; and he puts in the forefront, as an essential condition, his duty "to ship at the port of shipment goods of the description contained in the contract" (2). "Such terms," he adds, " constitute an agreement that the delivery of the goods, provided they are in conformity with the contract, shall be delivery on board ship at the port of shipment." The case turned on the fact that no time was specified in the contract when the cash price was to be paid. Sec. 28 of the (English) Sale of Goods Act says that payment is to be against delivery ; and it was held in the House of Lords, which accepted the views of Hamilton J., and in the Court of Appeal of Kennedy L.J., that the delivery of the bill of lading when the goods are at sea can be treated as delivery of the goods themselves. In that case there was no question as to the goods at sea answering the description in the contract; but the phrase used by Lord Loreburn, " when the goods are at sea," does not apply when other goods than the goods are being sent to the destination. The case of Arnhold Karberg & Co. v. Blythe, Green, Jourdain & Co. (3), before the Court of Appeal, was a war case. War had broken out between Germany and England. The bill of sale had been made void by the War; and it was held that it was not a sufficient compliance with the usual c.i.f. rule to tender such a bill of sale; for the documents tendered must be valid and effective documents - that is to say, valid and effective to pass to the purchaser the goods contracted for. In the present case, the documents, if taken up by the purchaser, would not have been valid and effective to pass to the purchaser the goods for which he had contracted. If the proper goods have been shipped, and if they have been lost at sea, the purchaser has to look to his policy of insurance to secure to him payment for the value; "if the vendor fulfils his contract by shipping the appropriate goods in the appropriate manner under a proper contract of carriage, and if he also obtains

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That the shipping of the proper goods is a condition precedent to the right of the vendor under a c.i-f. contract to claim the price is quite clear. But what is the position when the purchaser for som reason has become suspicious that goods of the description for whi he contracted are not on their way, but other goods, and docu which on their face are consistent with the contract, are present to him? If he decline to pay when the documents are tender he takes the risk of breaking his contract if the goods turn out be right; but he cannot be treated as not ready and willing to perform his contract if the goods turn out to be wrong. The here have turned out to be wrong. This is clearly laid down in Sanders v. Maclean (2). In that case, there were three bills of lading from Russia, and two only were presented to the purchaser in London. Cotton L.J. said (3): " If the purchaser chooses to refuse to accept the cargo, because he does not know whether in fact the tender does comply with the terms of the contract, and whether the other part of the bill of lading has been parted with or not, . . . and if it should turn out on investigation that in fact what was tendered to him y an effectual bill of lading effectual to pass the property in the then he broke his contract by not paying the money and by refusing to accept the cargo when such effectual bill of lading was tend to him." In that case, the third bill of lading was in the hands of the shipper, unendorsed and ineffective ; and it was held that tender of the only effective originals of the set was a sufficient te and put the purchaser in the wrong. As Bowen L.J. said (4) "The person who rejects effective and adequate documents of ti on the ground that another document may possibly be outsta does so at his own risk. If his surmise turns out to be well foun his rejection of the tender would be justified. But if it is a surmise and has no foundation in fact, he has chosen, by excess of caution, to place himself in the wrong."

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sent to him, and he was asked to honour the draft through the Commercial Bank, and to take up the bill of lading and the insurance policy, did suspect that something was wrong. The invoice was certainly consistent with the description in the contract; but it spoke of " 150 bales Liverpool sacks," and did not say " 150 bales first selection Liverpool wheat-sacks," as the contract said. In acknowledging the letter of the vendor with the invoice, before the boat reached Sydney, the purchaser wrote: " We would like you to send us the original invoice" (the goods came from England) " showing that they are first selection bags packed by Messrs. Martin and Levy Bros. & Knowles according to our purchase." The vessel reached Sydney on 16th November, and payment of the draft was refused ; and the vendor telegraphed that unless the documents were "accepted and paid for before three same will be sold against you." This threat led the purchaser to telegraph immediately (16th Novem- ber) : - * We have not refused payment your draft. Your documents do not identify goods as being according contract. Draft will be accepted soon as goods proved equal description purchased. Boat due to-day. Expect examine to-morrow. We wrote you for oversea invoices which you have not provided." The vendor telegraphed at once to the purchaser that its action was a breach of contract, and that the vendor was "selling documents unless our conditions of to-day complied with." On the 17th the goods on the vessel were inspected, and were found not to be "first selection" bags, but rejections from the " first selection," including, as it appears, malt bags, flour bags, pea bags, potato bags. The trial was before a Judge, without a jury, who found for the plaintiff; it is our duty to weigh the evidence ; and, so far as I can see, the purchaser never wavered from the position which it took up in its telegram of 16th November. It wanted to carry out the contract. The vendor had, under the contract, all the month of November in which to deliver ; and in a letter of 26th November the purchaser said : - " We still tequire you to complete your contract and deliver to us 150 bales first selection Liverpool wheat-sacks. Unless you deliver us these sacks in accordance with the contract, we shall be compelled to claim upon you for damages for breach of contract . . . as

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provided." The words "draft will be accepted soon as proved equal description purchased" are conclusive, I think, that they were insisting upon a condition not in the contract, and on they were not entitled to on the c.i.f. contract. On the same da (16th November) the defendant telegraphed : - " Draft has presented and payment in accordance contract not made. Documents are complete. Your action breach contract. Selling document unless conditions of your wire of to-day complied with." Noth was done by the plaintiff on that day but subsequently, on the 17th the goods were examined by the plaintiff and it was found that the sacks did not comply with the description in the contrae If there was any doubt from the correspondence alone about imposition of new conditions by the plaintiff and the intention of the plaintiff to require them, it is cleared away by the oral evidence of the managing director of the plaintiff company. Included in that evidence the following questions and answers appear : - "Your attitude from the first was this, wasn't it - that you wanted some evidence or proof that these sacks were in accordance wit the contract before you would take up the documents ? - Yes, quite so. . . . You understand what I am putting to you, don't you? You would not have been satisfied even if our invoice had copied out the contract description of the goods ? - I do not know; we might not have - we might have wanted to see: anyone could write anything on an invoice like that - We would have been satisfied with proof from the oversea shippers because we know the packers well. But nothing short of. the overseas invoice or an inspection of the goods would have satisfied you at that period, would it ? - No, that is generally demanded by everybody in the trade. . . . Before you would accept the goods you wanted proof that you were getting what you were paying for ? - Yes, that is so. You wanted either the overseas invoices or an inspection of the goods before you would take up the documents ? - Yes, and I might say that the overseas invoices were very necessary, too, for the Customs. . . . And a mere statement in our invoice would not satisfy you, would it?

Well, it would not be anything to go on, would it? Exactly, it would not satisfy you because it would not be anything to go on - _ that is, a mere statement in our invoice that the goods were accordil

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that the buyer subsequently called upon the seller to fulfil contract and to ship goods in accordance with the contract that the seller refused to do so. Thus [ gather that the lea Judge did reach the conclusion that the buyer was ready and w to perform its contract according to its terms though the proce whereby he reached that conclusion is not fully stated. The learned Judges of the Full Court were of opinion that tl buyer was not ready and willing to perform its contract according to its terms. Their view, I gather, is that the buyer declined to take up any documents under the contract unless it first h 1 obtained an inspection of the goods. In this Court, however, are in as good a position as the Judges comprising the Full Cou were to reach a conclusion upon the matter and are bound to exercise our own independent judgment upon the evidence as it stands. The question is, in truth, one of fact. The goods the subject of the contract of sale were 150 bales first selection Liverpool wheat sacks. " First selection " is a most material part of that description The invoice tendered with the bill of lading and policy of insurance was as follows: "To 150 bales Liverpool sacks at 9s. cife £1,687 10s." In my opinion, any reasonable business man wot regard that description with well-grounded suspicion, and be uncerta whether the documents tendered to him represented goods in conformity with the contract. The buyer evidently was suspiciou for it wrote to the seller as follows: '* We would like you to s us the original invoice showing that they are first selection b packed by Messrs. Martin or Levey Bros. & Knowles according to our purchase." Apparently the buyer thought, as was the fact, that some, if not all, of the sacks had been imported from abroad: hence the reference to the original invoice. The seller telegraphes a reply that the bags were in accordance with contract. This was untrue. Later it threatened to sell against the buyer, which there upon defined its position in a telegram as follows : - * We have no refused payment your draft. Your documents do not identi ; goods as being according contract draft, will be accepted soon a goods proved equal description purchased. Boat due to-day expect

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