McRae v Commonwealth Disposals Commission

McRae v Commonwealth Disposals Commission - [1951] HCA 79 - HCA 1950 case summary — Zoe

[7]

In October 1946 one Jarrett, an officer of the civil administration in New Guinea, told Bowser, who was then regional manager in New Guinea for the defendant Commission, that he wanted to make an offer for an oil tanker, which he said was within a radius of 200 miles of Samarai. He would not give Bowser a more precise position. Jarrett made an offer of £50. This offer was chiefly for the oil, but was for the tanker as well. Bowser told Jarrett the offer appeared too low, and that he could not consider it until Jarrett could tell him where the tanker was. Bowser suggested that Jarrett should see Sheehan, who was then the district superintendent of the defendant Commission at Port Moresby. Jarrett then saw Sheehan and told him he knew of an oil tanker and wanted to buy it; that it was outside Samarai, and that only he, Jarrett, knew where it was, and that it contained oil. Sheehan asked Jarrett what price he was offering. Jarrett asked Sheehan what he thought would be a fair price. Sheehan said he did not know. Then Jarrett asked whether £50 would be a fair price. Sheehan again said he did not know. Jarrett said he was not particularly interested in the boat; that he was more interested in the oil. Sheehan suggested to Jarrett that he should make an offer. Jarrett agreed and dictated one. In this written offer Jarrett described the goods as "Contents of wrecked vessel situated at Jormound Islands - Fuel oil". Sheehan told Jarrett he would not approve of the sale, as he did not know whether the offer was reasonable, and would have to try to trace the oil tanker in the office lists. The next day Jarrett told Sheehan it was an American vessel as far as he knew. Sheehan replied that if it was it would not be on the Commission's lists. Sheehan, however, had authority to sell it even if it were an American vessel. He did not find it on the lists. He then sent a signal to the district officer at Samarai (Exhibit 6), stating that an application had been received for the purchase of "fuel oil said to be on reef at Jormound Islands" and asking whether the district officer knew anything about it. On 7th November 1946 one McMullen, who was the defendant Commission's liaison officer in New Guinea, told Sheehan he knew of a wrecked tanker on Jomard Island. Sheehan replied that he had received an offer of £50 for its contents. McMullen inquired whether Sheehan meant "that American tanker". He promised Sheehan he would see what he could find out about it. Later he told Sheehan he did not get any information. In the same month, November 1946, one Davis, the general manager of the defendant Commission, was in New Guinea and wrote a memorandum to Bowser reading: "I discussed with Mr. McMullen this morning the question of the tanker lying on a reef about a hundred miles north of Samarai. Mr. McMullen was good enough to indicate that he would send out a party and I suggest that Mr. Strange go with this party to establish whether she is worthwhile for sale as a salvage job. If there is equipment of value on her, she could be offered for sale at the termination of the Rabaul Sale whilst the buyers from the South who will be interested in such vessels as the Naroota are still in the area."

[31]

However, I do not think that this oil barge was an oil tanker as that term was understood in shipping circles in Melbourne and by the parties. In the American book by Day , published in 1923, there is a glossary of terms used in the petroleum industry, and the term "oil tanker" is defined to include an oil barge. This book was said by Johnstone, an expert witness for the plaintiffs, to be authoritative, although Johnstone did not agree with that definition. But whatever may have been the meaning of "oil tanker" in America in 1923 I am satisfied that in 1947 in Australia an oil tanker was understood to be a vessel not merely specially constructed for the carriage of oil in bulk but also self-propelled and ocean-going. Currie thought an oil tanker would be self-propelled. When Bowser on 17th October inquired whether the oil tanker had been confused with the barge he indicated his understanding that they were different types of vessel. Therefore the defendants cannot rely on the barge being an oil tanker. Nor can they set up that the barge was sold but was misdescribed as an oil tanker and that they are expressly exempted from liability for misdescription under the conditions of contract. If the defendants, knowing what the vessel they advertised was like, yet wrongly described it as a barge, it might be a case of misdescription, because an oil tanker and an oil barge are vessels and also have in common the feature of special construction for the carriage of oil in bulk, although a barge is not self-propelled or ocean-going. But neither Bowser nor Currie, nor any other servant of the defendants having any power or duty in connection with this transaction, thought that an oil barge was an oil tanker. What both the plaintiffs and the defendants had in mind throughout was an oil tanker as distinct from an oil barge. But there was no oil tanker to sell, and so there was no contract (Couturier v. Hastie [1] ). It was conceded by counsel for the plaintiffs that, if Jarrett had told the plaintiffs and the defendants that there was an oil tanker on the reef at Jomard Islands and thereupon the plaintiffs and the defendant Commission agreed on a sale, there would be no contract. But counsel also submitted that this was not the position because on 15th April 1947 the plaintiffs asked for the location of the vessel, and it was pin-pointed by giving latitude and longitude. Counsel submitted that the plaintiffs could assume from this that there was something valuable at the location, and that, as the plaintiffs acted upon this information to their prejudice, the defendants were estopped from denying the existence of an oil tanker there. But, to furnish ground for an estoppel the statement must have been made as an inducement. It was not made to induce a contract, as the tender had then been accepted. The inducement, if any, could only have been to pay the balance of purchase money, which was still unpaid on 15th April, and to proceed to take delivery of the vessel at the location given. But I find that the only purpose the plaintiffs had in asking for the exact location, and that the defendant Commission had in giving it, was to save the time of the plaintiffs in looking for the vessel on the reef. The plaintiff, F. E. McRae, told Bowser as much on 15th April 1947. He admitted he had a conversation with Bowser on those lines.

[38]

In the Melbourne newspapers, Age and Argus , of 29th March 1947, appeared an advertisment inserted by the Commission. The advertisement read: - "Tenders are invited for the purchase of an OIL TANKER lying on JOURMAUND REEF, which is approximately 100 miles NORTH OF SAMARAI. THE VESSEL IS SAID TO CONTAIN OIL. OFFERS TO PURCHASE THE VESSEL AND ITS CONTENTS should be submitted to the COMMONWEALTH DISPOSALS COMMISSION, Nicholas Building, 37 Swanston Street, Melbourne, indorsed "OFFER FOR VESSEL ON JOURMAUND REEF", and should be lodged not later than 2 p.m., March 31, 1947." In response to this advertisement, the plaintiffs, who are brothers trading in partnership, submitted a tender dated 31st March 1947. The tender was on a printed form. It was headed "Offer for vessel on Jourmaund Reef". The form was divided into columns. In a column headed "Description of Goods" the words "1 oil tanker lying on Jourmaund Reef as advertised Age, Argus, 29/3/47" were inserted. In the next column, which was headed "Location of Goods" the words "On Jourmaund Reef, off Samarai" were inserted. The price quoted was £285, and a cheque for £28 10s. 0d. being the required deposit of ten per cent, was forwarded with the tender. Indorsed on the printed form of tender were a number of conditions. On 11th April 1947 the Commission wrote to the plaintiffs a letter saying: - "With reference to your tender of 31st March 1947, I desire to advise that your offer of £285 net has been accepted. A sales advice note to cover this transaction will be forwarded in the course of the next few days." This letter was followed by another letter of 15th April 1947, which says: - "I wish to inform you that your offer to purchase dated 31.3.47 is accepted for the quantities, the items, and at the price set out hereunder and/or in the attachment hereto bearing the same sales advice number as this acceptance". Below appear the words "One (1) Oil Tanker including Contents wrecked on Jourmaund Reef approximately 100 miles north of Samarai. Price £285." Then come some provisions as to payment and delivery, followed by the signature on behalf of the Commission. After the signature come the words "Your offer to purchase, the general conditions contained in Form O, and this acceptance, shall constitute the contract. Kindly acknowledge receipt of this communication by return post". Finally, certain further "terms" are set out. The plaintiffs apparently did not, by return post or otherwise, acknowledge in writing the receipt of this remarkable "communication". Form O is a printed form which contains a number of "conditions of sale", most of which are entirely inappropriate to the particular case.

[39]

The contention of the Commission that no contract ever came into existence between itself and the plaintiffs was based on extrinsic facts which will have to be considered in a moment. It was not denied that, apart from those facts, a contract would have been made, and, on the assumption that a contract was made, a good deal of argument took place as to what were the terms of that contract. It will be convenient to deal with this matter at this stage. No less than five documents are involved - the advertisement, the tender, the letter of 11th April, the letter of 15th April, and "Form O". Mr. Gillard, for the plaintiffs, contended that the terms of the contract made were to be found in the first three documents only. He said that the letter of 11th April was an unequivocal acceptance of the offer contained in the tender, that the reference to "sales advice note" was not to be understood as contemplating the addition of further terms so as to make the letter in effect a counter-offer, and that the letter of 15th April was merely an ineffective attempt to add further terms to a contract which was concluded on the receipt of the plaintiffs' letter of 11th April. He referred to a well-known line of cases of which Bellamy v. Debenham [1] and Lennon v. Scarlett & Co. [2] are good examples. Mr. Tait, for the Commission, contended that the plaintiffs must be taken to have accepted the terms set out and referred to in the second letter, and that the terms of the contract were to be found in all five of the documents. He admitted that in the terms so found there was overlapping and inconsistency, and that some of those terms were entirely inappropriate to the subject matter of the contract, but he said that these facts merely meant that difficult problems of construction might arise. We are disposed to accept the view put by Mr. Gillard, but the question does not seem to us to matter, and for this reason. The only condition on which Mr. Tait affirmatively relied was a condition which is contained in clause 8 of the terms indorsed on the tender form. That clause provides that the goods "are sold as and where they lie with all faults" and that no warranty is given as to "condition description quality or otherwise". This clause cannot, in our opinion, help the Commission in this case. What the Commission sold was an "oil tanker". It was, therefore, a condition of the contract that what was supplied should conform to the description of an oil tanker, and it is settled that such a clause as clause 8 has no application to such a condition: see, e.g., Wallis, Son & Wells v. Pratt & Haynes [3] and Robert A. Munro & Co. Ltd. v. Meyer [4] ; and cf. Shepherd v. Kain [5] .

[44]

The plaintiffs, as has been said, based their claim for damages on three alternative grounds. They claimed, in the first place, for damages for breach of a contract to sell a tanker lying at a particular place. Alternatively they claimed damages for a fraudulent representation that there was a tanker lying at the place specified. In the further alternative, they claimed damages for a negligent failure to disclose that there was no tanker at the place specified after that fact became known to the Commission. The second and third of these alleged causes of action depend wholly or partly on certain further facts which have not so far been mentioned. On 19th April 1947 a telegram was sent from the District Officer at Misima to the Port Moresby office of the Commission, which read: "Your S4382 stop Large approx. 100 ft. barge type tanker carrying oil machinery etc. apparently drifted on reef, Jomard Entrance high water during 1944 stop When inspected by Lieut. Middleton 1945 large hole stern admitted sea Machinery ruined stop Understand oil still in hold but quantity unknown Vessel exposed low tide only partly submerged high tide Can inspect when district vessel available". This unquestionably refers to the wrecked barge. How and why this telegram came to be sent is one of the minor mysteries of this case: no Port Moresby message numbered S4382 was produced. It seems reasonable to infer that the plaintiffs' request for a precise "fix" for their tanker prompted the making of inquiries which ought to have been made much earlier, and that the missing "S4382" was a belated attempt to find out whether the Commission had really had anything to sell to the plaintiffs. On 14th April the Port Moresby office of the Commission had telegraphed the District Officer at Samarai, saying: - "S4392 Would appreciate urgent reply details oil tanker Jourmaund Reef stop Understand vessel now moved under water and contents nil stop Can this be confirmed?" It seems quite possible that one of the quoted numbers is a mistake for the other, and that the telegram of 17th April is really in response to that of 14th April, which had been passed on from Samarai to Misima. Anyhow, the telegram of 17th April was set out in a letter of 19th April from the Port Moresby office to the Melbourne office of the Commission. The letter was minuted by Bowser, one of the officers of the Commission who were mainly responsible for the "selling" of the "tanker", as follows: - "Received 21/4/47. McRae (successful tenderer) already advised and confirmed by letter location of vessel". In the meantime Port Moresby had replied to Misima, saying: - "Appreciate report stop Vessel sold Melbourne syndicate Inspection not required".

[52]

In considering Couturier v. Hastie [2] it is necessary to remember that it was, in substance, a case in which a vendor was suing for the price of goods which he was unable to deliver. If there had been nothing more in the case, it would probably never have been reported: indeed the action would probably never have been brought. But the vendor founded his claim on the provision for "payment upon handing over shipping documents". He was not called upon to prove a tender of the documents, because the defendant had "repudiated" the contract, but he was able and willing to hand them over, and his argument was, in effect, that by handing them over he would be doing all that the contract required of him. The question thus raised would seem to depend entirely on the construction of the contract, and it appears really to have been so treated throughout. In the Court of Exchequer, Pollock C.B., in the course of argument, said [3] : - "The question is purely one of construction. I certainly think that the plain and literal meaning of the language here used imports that the thing sold, namely the cargo, was in existence and capable of being transferred." This was, in effect, what Martin B. had told the jury, and what it means is that the plaintiff had contracted that there was a cargo in existence and capable of delivery. Parke B., in giving the judgment of the majority of the Court [1] , said: - "It is very true that, when there is a sale of a specific chattel, there is an implied undertaking that it exists; and, if there were nothing in this case but a bargain and sale of a certain cargo on the 15th May, there would be an engagement by the vendor, or a condition, that the cargo was in existence at that time." He went on to say, however, that there was very much more in the contract, and that there was enough to make it plain "that the true meaning of the contract was that the purchaser bought the cargo if it existed at the date of the contract, but that, if it had been damaged or lost, he bought the benefit of insurance but no more" [2] .

[54]

The judgment of the Exchequer Chamber was delivered by Coleridge J. The view that the contract was void is probably derived from certain expressions which were used in the course of this judgment. But it does seem clear that again the question of construction was regarded as the fundamental question in the case. In stating the question for decision Coleridge J. [3] refers first to the direction of Martin B. to the jury, and says that the Lord Chief Baron had agreed with the opinion of Martin B. whereas the other learned Barons had differed from him. The judgment below, he says [4] , "turned entirely on the meaning of the contract", and he proceeds to set out its terms in full. "The question", he says, "turns entirely upon the terms of the contract". The argument for the defendant is then put as including the proposition "that a vendor of goods undertakes that they exist", and [5] the argument for the plaintiff as being "that this was not a mere contract for the sale of an ascertained cargo, but that the purchaser bought the adventure, and took upon himself all risks from the shipment of the cargo". The final conclusion reached is expressed at the end of the judgment [6] by saying that "the basis of the contract in this case was the sale and purchase of goods, and all the other terms in the bought note were dependent upon that, and we cannot give to it the effect of a contract for goods lost or not lost". In the light of these passages it seems impossible to regard the expressions [1] "If the contract for the sale of the cargo was valid" and "the contract failed as to the principal subject-matter of it" as meaning that the contract was treated as being void. All that the passages in which those expressions occur seem in their context to mean is that the principal subject matter of the contract was a cargo of goods, that the purchaser did not buy shipping documents representing nonexistent goods, that the consideration to the purchaser had failed, and that he could not therefore be liable to pay the contract price.

[58]

In Bell v. Lever Bros. Ltd. [3] Lord Atkin, though he does not mention Couturier v. Hastie [4] itself, discusses Gompertz v. Bartlett [5] and Gurney v. Womersley [6] and other cases which have sometimes been regarded as turning on mistake avoiding a contract ab initio, and His Lordship concludes the discussion with a very important observation. He says [7] : - "In these cases I am inclined to think that the true analysis is that there is a contract, but that the one party is not able to supply the very thing, whether goods or services, that the other party contracted to take; and therefore the contract is unenforceable by the one if executory, while, if executed, the other can recover back money paid on the ground of failure of the consideration". This observation accords with the reasons actually given for the decisions in Gompertz v. Bartlett [1] and Gurney v. Womersley [2] . In the former case, in which the action was for money had and received, Lord Campbell C.J. [3] said: - "The action is maintainable on the ground that the article does not answer the description of that which was sold." And Coleridge J. [4] said: - "The vendee is entitled to have an article answering the description of that which he bought". So in Gurney v. Womersley [2] , where also the action was for money had an received, Wightman J. [5] said that the defendants had "professed to sell a genuine bill" and that the bill given "failed in what was the substance of the description". So again in Strickland v. Turner [6] the case is put by Pollock C.B., who delivered the judgment of the Court, entirely on the ground of failure of consideration. "The money which was paid", he said, "was paid wholly without consideration, and may be recovered back" [7] . This language clearly imports the existence of a contract. If there were no contract, there could be no failure of consideration. The case of Scott v. Coulson [8] stands on a different footing and belongs to a class of case in which relief is given on equitable grounds.

[60]

The observation of Lord Atkin in Bell v. Lever Bros. Ltd. [9] seems entirely appropriate to Couturier v. Hastie [10] . In that case there was a failure of consideration, and the purchaser was not bound to pay the price: if he had paid it before the truth was discovered, he could have recovered it back as money had and received. The construction of the contract was the vital thing in the case because, and only because, on the construction of the contract depended the question whether the consideration had really failed, the vendor maintaining that, since he was able to hand over the shipping documents, it had not failed. The truth is that the question whether the contract was void, or the vendor excused from performance by reason of the non-existence of the supposed subject matter, did not arise in Couturier v. Hastie [1] . It would have arisen if the purchaser had suffered loss through non-delivery of the corn and had sued the vendor for damages. If it had so arisen, we think that the real question would have been whether the contract was subject to an implied condition precedent that the goods were in existence. Prima facie, one would think, there would be no such implied condition precedent, the position being simply that the vendor promised that the goods were in existence. That is the real meaning of the direction of Martin B. to the jury, and so the argument for the defendant, as has already been pointed out, included the proposition that "a vendor of goods undertakes that they exist and that they are capable of being transferred, although he may not stipulate for their condition" [2] . So in Barr v. Gibson [3] , where the contract was for the sale of a ship, Parke B. [4] said: - "And therefore the sale in this case of a ship implies a contract that the subject of transfer did exist in the character of a ship". It should be noted in this connection that in Solle v. Butcher [5] Denning L.J. said that the doctrine of French law, as enunciated by Pothier, is no part of English law. His Lordship was without doubt thinking of the passage quoted from Pothier in a note to the report of the argument in the House of Lords in Couturier v. Hastie [6] . Although we would not be prepared to assent to everything that is said by Denning L.J. in the course of this judgment, we respectfully agree with this observation. When once the common law had made up its mind that a promise supported by consideration ought to be performed, it was inevitable that the theorisings of the civilians about "mistake" should mean little or nothing to it. On the other hand, the question whether a promisor was excused from performance by existing or supervening impossibility without fault on his part was a practical every-day question of which the common law has been vividly conscious, as witness Taylor v. Caldwell [7] , with its innumerable (if sometimes dubious) successors. But here too the common law has generally been true to its theory of simple contract, and it has always regarded the fundamental question as being: "What did the promisor really promise?" Did he promise to perform his part at all events, or only subject to the mutually contemplated original or continued existence of a particular subject-matter? So questions of intention or "presumed intention" arise, and these must be determined in the light of the words used by the parties and reasonable inferences from all the surrounding circumstances. That the problem is fundamentally one of construction is shown clearly by Clifford v. Watts [1] .

[62]

If the view so far indicated be correct, as we believe it to be, it seems clear that the case of Couturier v. Hastie [2] does not compel one to say that the contract in the present case was void. But, even if the view that Couturier v. Hastie [2] was a case of a void contract be correct, we would still think that it could not govern the present case. Denning L.J. indeed says in Solle v. Butcher [3] : - "Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew he was under a mistake. A fortiori if the other party did not know of the mistake, but shared it". But, even if this be not wholly and strictly correct, yet at least it must be true to say that a party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any reasonable ground, and, on the other hand, deliberately induced by him in the mind of the other party. It does not seem possible on the evidence to say that Bowser or Sheehan was guilty of fraud in the sense that either knew at the date of the contract that the Commission had no tanker to sell. And even at the later stage, after the receipt of the message from Misima, it is difficult to impute to them actual knowledge that there was no tanker at Jomard Entrance. The message should have conveyed to them the fact that the only vessel lying in the vicinity was almost certainly worthless, and ordinary commonsense and decency would have suggested that the contents of the message ought to be communicated to the plaintiffs. But the message referred to a "barge type tanker", and it is quite possible that this description would fail to bring home to their minds that there was no tanker. A finding of actual knowledge that they had nothing to sell does not seem justified by the evidence, though it is difficult to credit them at the time of the publication of the advertisements with any honest affirmative belief that a tanker existed. The confusion as to locality in the description advertised is almost enough to exclude the inference of any such affirmative belief. But, even if they be credited with a real belief in the existence of a tanker, they were guilty of the grossest negligence. It is impossible to say that they had any reasonable ground for such a belief. Having no reasonable grounds for such a belief, they asserted by their advertisment to the world at large, and by their later specification of locality to the plaintiffs, that they had a tanker to sell. They must have known that any tenderer would rely implicitly on their assertion of the existence of a tanker, and they must have known that the plaintiffs would rely implicitly on their later assertion of the existence of a tanker in the latitude and longitude given. They took no steps to verify what they were asserting, and any "mistake" that existed was induced by their own culpable conduct. In these circumstances it seems out of the question that they should be able to assert that no contract was concluded. It is not unfair or inaccurate to say that the only "mistake" the plaintiffs made was that they believed what the Commission told them.

[64]

The position so far, then, may be summed up as follows. It was not decided in Couturier v. Hastie [1] that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent. Whatever might then have been held on the facts of Couturier v. Hastie [1] , it is impossible in this case to imply any such term. The terms of the contract and the surrounding circumstances clearly exclude any such implication. The buyers relied upon, and acted upon, the assertion of the seller that there was a tanker in existence. It is not a case in which the parties can be seen to have proceeded on the basis of a common assumption of fact so as to justify the conclusion that the correctness of the assumption was intended by both parties to be a condition precedent to the creation of contractual obligations. The officers of the Commission made an assumption, but the plaintiffs did not make an assumption in the same sense. They knew nothing except what the Commission had told them. If they had been asked, they would certainly not have said: "Of course, if there is no tanker, there is no contract". They would have said: "We shall have to go and take possession of the tanker. We simply accept the Commission's assurance that there is a tanker and the Commission's promise to give us that tanker." The only proper construction of the contract is that it included a promise by the Commission that there was a tanker in the position specified. The Commission contracted that there was a tanker there. "The sale in this case of a ship implies a contract that the subject of the transfer did exist in the character of a ship." (Barr v. Gibson [1] ). If, on the other hand, the case of Couturier v. Hastie [2] and this case ought to be treated as cases raising a question of "mistake", then the Commission cannot in this case rely on any mistake as avoiding the contract, because any mistake was induced by the serious fault of their own servants, who asserted the existence of a tanker recklessly and without any reasonable ground. There was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there has been a breach of contract, and the plaintiffs are entitled to damages for that breach.

[70]

It was strongly argued for the plaintiffs that mere difficulty in estimating damages did not relieve a tribunal from the responsibility of assessing them as best it could. This is undoubtedly true. In the well-known case of Chaplin v. Hicks [1] Vaughan Williams L.J. said: - "The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract". That passage, and others from the same case, are quoted by Street C.J. in Howe v. Teefy [2] , but the learned Chief Justice [3] himself states the position more fully. He says: - "The question in every case is: has there been any assessable loss resulting from the breach of contract complained of? There may be cases where it would be impossible to say that any assessable loss had resulted from a breach of contract, but, short of that, if a plaintiff has been deprived of something which has a monetary value, a jury is not relieved from the duty of assessing the loss merely because the calculation is a difficult one or because the circumstances do not admit of the damages being assessed with certainty". The present case seems to be more like Sapwell v. Bass [1] than Chaplin v. Hicks [2] . And see Fink v. Fink [3] , per Dixon and McTiernan JJ. It does not seem possible to say that "any assessable loss has resulted from" non-delivery as such. In Chaplin v. Hicks [2] , if the contract had been performed, the plaintiff would have had a real chance of winning the prize, and it seems proper enough to say that that chance was worth something. It is only in another and quite different sense that it could be said here that, if the contract had been performed, the plaintiffs would have had a chance of making a profit. The broken promise itself in Chaplin v. Hicks [2] was, in effect, "to give the plaintiff a chance": here the element of chance lay in the nature of the thing contracted for itself. Here we seem to have something which cannot be assessed. If there were nothing more in this case than a promise to deliver a stranded tanker and a failure to deliver a stranded tanker, the plaintiffs would, of course, be entitled to recover the price paid by them, but beyond that, in our opinion, only nominal damages.

[72]

There is, however, more in this case than that, and the truth is that to regard this case as a simple case of breach of contract by non-delivery of goods would be to take an unreal and misleading view of it. The practical substance of the case lies in these three factors - (1) the Commission promised that there was a tanker at or near to the specified place; (2) in reliance on that promise the plaintiffs expended considerable sums, of money; (3) there was in fact no tanker at or anywhere near to the specified place. In the waste of their considerable expenditure seems to lie the real and understandable grievance of the plaintiffs, and the ultimate question in the case (apart from any question of quantum) is whether the plaintiffs can recover the amount of this wasted expenditure or any part of it as damages for breach of the Commission's contract that there was a tanker in existence. In the opinion of Webb J. it would have been reasonable, and within the proper contemplation of the Commission, that the plaintiffs should take steps, but should do no more than take steps, to see whether there was a tanker in the locality given, and, if so, whether any and what things should be done to turn her to account. And his Honour estimated the reasonable cost of taking such steps at the sum of £500. This view, however, seems to assume that the plaintiffs would be, or ought to be, in doubt as to whether they really had succeeded in buying a tanker. But they were clearly entitled to assume that there was a tanker in the locality given. The Commission had not, of course, contracted that she or her cargo was capable of being salved, but it does not follow that the plaintiffs' conduct in making preparations for salvage operations was unreasonable, or that the Commission ought not to have contemplated that the course in fact adopted would be adopted in reliance on their promise. It would be wrong, we think, to say that the course which the plaintiffs took was unreasonable, and it seems to us to be the very course which the Commission would naturally expect them to take. There was evidence that salvage operations at the locality given would not have presented formidable difficulties in fair weather. The plaintiffs were, of course, taking a risk, but it might very naturally seem to them, as business men, that the probability of successful salvage was such as to make the substantial expense of a preliminary inspection unwarranted. It was a matter of business, of weighing one consideration with another, a matter of which business men are likely to be the best judges. So far as the purpose of the expenditure is concerned, the case seems to fall within what is known as the second rule in Hadley v. Baxendale [1] . A fairly close analogy may be found in a case in which there is a contract for the sale of sheep, and the buyer sends a drover to take delivery. There are no sheep at the point of delivery. Sheep have not risen in price, and the buyer has suffered no loss through non-delivery as such. But he will be entitled to recover the expense which he has incurred in sending the drover to take delivery: cf. Pollock v. Mackenzie [2] , and see also Foaminol Laboratories Ltd. v. British Ortid Plastics Ltd. [3] .

[75]

The argument is far from being negligible. But it is really, we think, fallacious. If we regard the case as a simple and normal case of breach by non-delivery, the plaintiffs have no starting-point. The burden of proof is on them, and they cannot establish that they have suffered any damage unless they can show that a tanker delivered in performance of the contract would have had some value, and this they cannot show. But when the contract alleged is a contract that there was a tanker in a particular place, and the breach assigned is that there was no tanker there, and the damages claimed are measured by expenditure incurred on the faith of the promise that there was a tanker in that place, the plaintiffs are in a very different position. They have now a starting-point. They can say: (1) this expense was incurred; (2) it was incurred because you promised us that there was a tanker; (3) the fact that there was no tanker made it certain that this expense would be wasted. The plaintiffs have in this way a starting-point. They make a prima-facie case. The fact that the expense was wasted flowed prima facie from the fact that there was no tanker; and the first fact is damage, and the second fact is breach of contract. The burden is now thrown on the Commission of establishing that, if there had been a tanker, the expense incurred would equally have been wasted. This, of course, the Commission cannot establish. The fact is that the impossibility of assessing damages on the basis of a comparison between what was promised and what was delivered arises not because what was promised was valueless but because it is impossible to value a non-existent thing. It is the breach of contract itself which makes it impossible even to undertake an assessment on that basis. It is not impossible, however, to undertake an assessment on another basis, and, in so far as the Commission's breach of contract itself reduces the possibility of an accurate assessment, it is not for the Commission to complain.

[80]

The third claim is of a different character and does not relate to actual expenditure at all. It is made under the head of "loss of revenue", and represents the profit which the Gippsland might have been expected to make if she had not been devoted to the futile tanker enterprise. As framed, this claim was based on the profit anticipated as likely to accrue from the use of the vessel under a contract with a company called King Island Scheelite No Liability. In April 1947 no contract with that company had been concluded, but negotiations were proceeding for the use of the vessel in trading between King Island and Melbourne. Mr. Laird, the witness who gave evidence for the plaintiffs on these matters, said that in consultation with Captain Guthrie he had estimated that, if the last offer of the King Island company had been accepted, a profit of £75 per week would have been realized, and he said or implied that that offer would have been accepted if better terms could not have been obtained. On this basis the claim ultimately put forward under this head was for £1,050, a sum which represents £75 per week for fourteen weeks. Put baldly as a claim for this estimated loss of profit as such, the claim might be thought to be in its nature too remote, and in its amount conjectural to a degree. But the plaintiffs would be entitled to include in their damages the daily value of their vessel for a period which would not be excessively estimated as ten weeks, and the estimate based on Mr. Laird's calculations may be used as a basis - though it can only provide a rough and approximate basis - for arriving at this daily value. It would appear from cross-examination that the estimate was made after taking into account the obvious physical contingencies, but it has, we think, to be substantially discounted for the contingency of the ship being idle for part of the period. There is no evidence as to her earnings in the past. To allow £50 per week does not seem unreasonable, and at that rate the plaintiffs should be allowed £500 under this head.

At a glance

Court

Decision date

Before

Source

Judgment (90 paragraphs)

Parties