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The Judicial Committee of the Privy Council Decisions
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Judgment of the Lords of the Judicial Committee of the Privy Council on the Appeal of Sally Wertheim v. The Chicoutimi Pulp Company, from the Court of King's Bench for the Province of Quebec ( Appeal Side); delivered the 18th March 1910.
Present at the Hearing:
[Delivered by Lord Atkinson.]
This is an Appeal from a Judgment of the Court of King's Bench for the Province of Quebec (Appeal Side), dated the 3rd October, 1908, affirming in part and reversing in part a Judgment of the Superior Court of that Province, dated the 12th November, 1907.
By the former Judgment the Respondent Company was condemned in a sum of $2,434 and costs.
The Defendant Company carryon the manufacture of wood pulp at the town of Chicoutimi. which is situate on the river Saguenay. a tributary of the Saint Lawrence in the Province of Quebec. The Plaintiff is the sole partner in a German firm of merchants carrying on business at Hamburg in Germany. He has an agent at Manchester named Reichenbach, where he trades in the pulp he imports from Canada and elsewhere, and an agent at New York named Goldman.
He claims in this action to recover damages from the Respondents under three separate heads for three separate breaches of a contract entered into between them on the 13th March, 1900, to deliver at Chicoutimi f.o.b. 3,000 tons of moist wood pulp between the 1st September and the 1st of November in that year, at a price which was equivalent to 25s. per ton. The contract was in the terms following;-
Québec, 13 Mars, 1900.
La Compagnie de Pulpe de Chicoutimi consent à livrer à A. Wertheim & Cie., de Hambourg, trois mille (3,000t) tonnes de Sa pâte de bois habituelle, humides, de 2,240 lbs a $11.00 la tonne de 2,000 lbs. sèche, livrée à Chicoutimi sur vapeur au vaisseau QU char: du premier Septembre au premier Novembre courant si possible 8i faire se peut en partie plutôt.
Ceci en règlement complet total et absolu de toute réclamation quelconque qu'ils ont ou pourraient avoir sur les transactions faites jusqu'à ce jour en vertu du contrat du 9 Décembre, 1898.
Termes de paiement comme ci·devant.
LA CIE. DE PULPE DE CHICOUTIMI,
J. E. A. Dubuc, Dir.·Gt
The first breach relied upon consists in the Respondents having delayed the delivery of this quantity of pulp till the month of June 1901 ; the second in the alleged inferior quality of the pulp actually delivered; and the third in its alleged deficiency in weight. In the view which their Lordships take of the Appellant's claim under the second and third heads, it is unnecessary to deal with the amount demanded in respect of each. The first was the main claim. In respect of it the Appellant claimed to recover 27s. 6d. per ton on the three thousand tons mentioned in the contract, that being the difference between the market price of such pulp at Manchester, the ultimate destination of the pulp, at the time it should have been delivered, namely, 70s. per ton, and its market price there at the time it was in fact delivered, namely, 42s. 6d. per ton; the differences between the market values of the pulp at these respective times being, according to Sir Robert Finlay's contention on behalf of the Appellant, the well-established and indisputable measure of damages for delay in breach of contract in delivery of goods. The Appellant in reality never sustained this loss nor anything like it, because he sold the goods under contracts, some anterior in date to the contract sued upon, the others anterior in date to the actual delivery, at the price of 65s. per ton, which is only 5s. per ton less than the top market price for which the pulp could presumably have been sold in Manchester had it arrived there in November, 1900, the contract time. Yet so rigid, it is insisted, is this formula or rule, that the re-sales must be ignored as collateral and irrelevant matters and damages be awarded for a loss which in reality has never been sustained. That, however. is not the only peculiarity of the Appellant's claim. He admits
that 13s. per ton would cover all the costs and expenses of the transport of the pulp from Chicoutimi to Manchester. It would thus cost him when delivered there 38s. per ton in all. If the pulp had been delivered in November and the Appellant had sold it then at the highest market price namely 70s. per ton, he would have made a profit on it of 32s. per ton; but if the Appellant was to succeed in this action, he would have received from the sub-vendees the price at which the goods were actually sold, namely, 65s. per ton, plus 27s. 6d. per ton, from the Respondents in the shape of damages, making together 92s. 6d. per ton, leaving a profit of 54s. 6d. per ton, or 22s. 6d. per ton more than if the contract had never been broken at all.
One cannot but feel that the reasoning which leads to results so unjust and anomalous must be fallacious.
On the assumption that by this delay m delivering of the pulp the Respondents were guilty of a breach of their contract-a point to be dealt with presently-and that the Appellant was therefore entitled to recover some damages in respect of it, the main question for decision is on what principle and by what rule those damages are to be measured under the circumstances of this case. That question has given rise, apparently, to much conflict of judicial opinion. By the Judgment and Decree appealed from, the damages seem to have been fixed at 5s. per ton, that being the difference between the full market value of the pulp at Manchester when it should have reached that town and the rate at which it was sold when it in fact reached it. The rate per ton so fixed is, in their Lordships' opinion, the highest rate at which it could properly be fixed, since it covers the loss actually sustained. And it is the general intention of the law that, in giving damages for breach of contract, the party complaining should so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed. Trevone v. Midland Railway Company (Ireland), 6 L.R.I. at p. 63; approved of by Pallas. C.B., in Hamilton Magill, 12 L.R.I. at p. 202. That is a ruling principle. It is a just principle. The rule which prescribes as a measure of damages the difference in market prices at the respective times above-mentioned is merely designed to apply this principle and, as stated in one of the American cases cited, it generally secures a complete indemnity to the purchaser. But it is intended to secure only an indemnity. The market value is taken because it is presumed to be the true value of the goods to the purchaser. In the case of non-delivery, where the purchaser does not get the goods he purchased, it is assumed that these would be worth to him, if he had them, what they would fetch in the open market·; and that, if he wanted to get others in their stead, he could obtain them in that market at that price. In such a case, the price at which the purchaser might in anticipation of delivery have resold the goods is properly treated, where no question of loss of profit arises, as an entirely irrelevant matter (Rodocanachi v. Milburn, 18 Q.B.D. 67). The purchaser not having got his goods should receive by way of damages enough to enable him to buy similar goods in the open market. Similarly, when the delivery of goods purchased is delayed, the goods are presumed to have been a t the time they should have been delivered worth to the purchaser what he could then sell them for, or buy others like them for, in the open market, and when they are in fact delivered they are similarly presumed to be, for the same reason, worth to the purchaser what he could then sell for in that market, but if in fact the purchaser, when he obtains possession of the goods, sells them at a price greatly in advance of the then market value, that presumption is rebutted and the real value of the goods to him is proved by the very fact of this sale to be more than market value, and the loss he sustains must be measured by that price, unless he is, against all justice, to be permitted to make a profit by the breach of contract, be compensated for a loss he never suffered, and be put, as far as money can do it, not in the same position in which he would have been if the contract had been performed, but in a much better position.
The authorities cited, Wilson v. The Lancashire and Yorkshire Railway Company, 9 C.B.N.S. 632, and Schulze and Company v. The Great Eastern Railway, L.R 19 Q.B. 30, bear out this conclusion. In both these cases the goods, by reason of the delay in delivery, had become valueless or of less value to the purchaser. And it is clear from the Judgments that the measure of damages in such a case is the difference between the contract price and the value of the goods to the purchaser when obtained. The same remark applies to the other cases cited.
In order to deal with the several points raised in argument, and to determine whether the Respondents committed any breach of contract in fact, or what is properly the number of tons on which the rate of 5s. per ton should be calculated, and whether the Appellant's claims under the second and third heads are valid or not, it is necessary to examine the correspondence and oral evidence at some length.
The Appellant and Respondents had been dealing in this pulp for several years. During that time several consignments of it had, according to the evidence of Reichenbach, the local agent, been delivered to the Appellant at Manchester. The Appellant was not a manufacturer. He bad no works at Manchester. The Respondents must have known the goods were required for re-sale. On the 9th December, 1898, they had entered into a contract for the sale and delivery to the Appellant of the entire output of Respondents' pulp mill at Chicoutimi for the year 1899, on the terms following as to payment :-
TERMS.-Buyers to open a credit in a Rank against which sellers are to draw for full amount against bills of lading, In consideration of buyers paying lull cash against documents, sellers agree to authorize their London bankers to give buyers a written guarantee of $5,000 (five thousand dollars) in the event of any valid claims or deficiency in their invoices.
These are the terms to which the phrase :-"Termes de paiement comme ci-devant" contained in the contract sued on refer, and mean practically payment in advance, This contract of December, 1898, was carried out in the main; but differences arose between the parties in respect to it. These by the terms of the contract sued upon were settled. What was the nature of those differences, or of the claims alleged to arise out of them, does not appear, nor does it appear what effect, if any, they had on the contract price of the pulp to be supplied.
Much controversy was raised at the trial as to the nature of the contingencies against which the Respondents sought to protect themselves by the introduction into the contract of the words "si possible," The Appellant contended that the contract meant that the Respondents should be absolutely bound to supply the specified quantity of pulp within the stipulated period unless prevented by some fortuitous circumstances or by force majeure.
The Respondents, on the other hand, con, tended that by the introduction of these words it was merely intended to provide that they, the Respondents, should only be bound to deliver the 3,000 tons within the months of September and October if their obligations under earlier contracts which, to the knowledge of the Appellant's agent, they had theretofore entered into permitted them to do so. In the result, for reasons to be hereafter mentioned, it became unnecessary for the Courts to decide which of the two constructions was the true one, but it is clear from the correspondence that the Respondents up to the last insisted that the latter of the two was the correct construction. They protested that after implementing those earlier contracts no sufficient surplus of their output remained Over to enable them to deliver to the Appellant the 3,000 tons contracted for, or any portion of them, during these months, and asserted that because of this circumstance they had not, by their failure to deliver the pulp within the specified time, been guilty of any breach of their contract. They never repudiated the contract. Till the goods were actually delivered in the month of June, 1901, they never treated it as at an end. On the contrary, on the 11th of that month they delivered to the Appellant an account claiming payment of interest on the purchase money at the rate of 6 per cent from the 20th December, 1900, to the 6th June, 1901, and also claiming payment of a sum of 500 dollars for five months' storage of 3,050 tons of pulp, and of a sum of 108 dollars "Insurance on Stock Pulp held over winter." The claim for each and everyone of these items must have been based upon the assumption that the contract of the 13th March, 1900, was up to the month of June in the following year a valid, binding and subsisting contract.
The River Saguenay, like the St. Lawrence, is frozen over in winter, and Chicoutimi becomes for some months an ice-bound port. In the year 1900 all navigation ceased on the 25th November.
As early as the 9th July. 1900, Goldman, the Appellant's agent, wrote to the Respondents a letter containing the following passage :-
" We should also like to know whether you can deliver us end of this month part of the 3,000 tons which were to be delivered end of this year, which you stated you thought you could deliver in part before close of navigation' on the St. Lawrence. If you can deliver us a quantity we probably could get one of Furness Line steamers to stop at Chicoutimi end of this month in order to load this pulp.
" Kindly advise us in regard to this by wire on receipt of letter and oblige."
In reply to which he received on the 12th July a telegram in these words "Impossible to ship pulp presently."
He wrote again on the 12th of the same month, acknowledging this telegram and stating that he awaited their letter, in which he hoped they would advise him when they would make shipment - and again upon the 14th, two days later, he wrote to them a letter containing the following passage :-
"In regard to the 3,000 tons we note that at present time you cannot state when you could deliver some of the 3,000 tons that are due us. It would greatly accommodate us if you could deliver this quantity or part of it from now on until close of navigation at the St. Lawrence and we have received cable from Hamburg asking whether you could not oblige them and do this."
It does not appear whether any reply to this communication was received.
Goldman, on the 7th August, wrote again to the Respondents, reminding them that, according to their contract, the delivery of the pulp was to commence on the 1st September and if possible earlier, stating that it would be a great favour and help to his principals if they would commence delivery at once, begging of them as a favour to himself to advise him promptly whether they would commence the delivery at once, and further stating that he was aware, from shipment he had noted they were making, that they had pulp to spare beyond what was required for their contract with Becker and Co., and that in all justice to the Hamburg House they ought to make delivery on their contract before shipping pulp to other parties. He further reminded them that it was then getting to the close of the navigation on the St. Lawrence, that freights were very firm and were advancing, and that space must be engaged at once in order to secure room on steamers sailing from the St. Lawrence up to the close of the navigation.
Though a prompt reply to this letter was asked for, none was apparently received or, if received, was not given in evidence.
After two months' delay, the Appellant wrote from Hamburg a letter in the following terms :-
Hamburg, 7th October, 1900.
La Compagnie de Pulpe de Chicoutimi.
According to arrangement made with you under date of 13th March, you have undertaken to ship 3,000 ts. woodpulp for us from 1st Sept. till 1st November a.c., and only on this condition, viz., that you execute such undertaking we have declared ourselves willing to waive our different claims against you.
The remark in the cited arrangement 'if possible' has been fixed verbally in presence of 2 members of your Board and afterwards confirmed by correspondence from your Managers as only referable to cases of force majeure. No such force majeure having been notified to us, the shipment is overdue partly already since several weeks.
To our greatest surprise our representative Mr. Goldman informs us that you will not ship before November, but that besides you had sold some parcels during the summer to others.
We herewith beg to give you notice that we require from you to put at our disposal 1,500 to 2,000 tons of your pulp latest last week of October and the balance of 1,000/1,500 tons latest 15th November next. Failing to do so we are compelled to hold you responsible for the consequences arising from such non-fulfilment. At the same time we beg to give you notice that in the event of non-fulfilment of our demand, we consider the arrangement made with you broken by you and consequently ourselves free to act with regard to our old claims as if such arrangement had not been arrived at. Besides we reserve ourselves the right in case of your delivering the parcels as requested above to charge you for such part delivered after the time stipulated in the arrangement the extra freight caused by such delay.
We remain, dear Sir,
A. WERTHEIM & Co.
This letter seems to have been sent through Goldman. It must have taken some time to reach his office in New York. He apparently forwarded it to the Respondents under cover of a letter from himself dated the 22nd October. On the 26th October the following letter in reply was received by Goldman :-
S. Goldman, Esq., Agent,
99, Nassau St., New York.
Your favour of 22nd inst. received, so ,vas letter enclosed from Hamburg. Advise Hamburg that we did not sell a single ton after our agreement of 13th March, 1900, and as agreed as soon as possible we will deliver them 3,000 wet tons. You remember it has been understood our previous sales had to be delivered before, and at that time we hoped we would be ready between 1st Sept. and 1st Nov. It has been impossible; we have not yet finished Mr. Becker's contract, and same must be over before we deliver you these 3,000 tons.
J. E. A. DUBUC, Manager.
In reply to a few of your letters I kept you posted and you were always aware we could not deliver in Sept. and Oct.
Thus, whether the Appellant craved as a favour, or demanded as a right the delivery of the 3,000 tons of pulp within the contract time or before the River St. Lawrence was closed by ice, the reply was in effect the same: "We cannot deliver; we are not bound to deliver to you; all our output is absorbed in implementing contracts anterior to yours."
The sequel shows that the excuse thus put forward was false, and the accusations as to sale to others contained in Goldman's letter of the 7th August only too well founded; but the excuse was made, and, in the face of it, it would have been absurd for the Appellant to have tendered a ship to take a cargo which it was known beforehand could not, or would not be provided, or to have made a formal demand that the goods should be delivered within a particular period, as that demand had in effect been already many times made to no purpose. The river closed on the 25th November. The offers contained in the Appellant's letters of the 7th October and 27th November, though made in relief of the Respondents, were declined, and, having been declined, the parties were left in precisely the same position as if the offers had never been made. They affect neither the rights nor the liabilities of the parties.
The Appellant, however, wrote to the Respondents the following letter :-
Hamburg, 15 January, 1901.
Chicoutimi Pulp Company,
After you have failed to deliver the 2,000 tons wood pulp in the time stipulated in our arrangement of 13th March, 1900, whereby shipment of these 3,000 tons will only have place after opening of navigation, so that thereby the essential purpose of said arrangement has become illusionary, we herewith give you notice that we have instructed our lawyers, Messrs. Caron, Pentland & Stuart, Quebec, to bring suit against you for the amount of our damages.
A. WERTHEIM & Co.
So things ended for the time.
The Respondents continued during the winter to manufacture and store their pulp.
On the 22nd May, 1901, the Respondents were recalled to the performance of their obligations by the receipt of the following telegram from the Appellant :-
"Hamburg cables have chartered steamer Importer to load 3,000 tons at Chicoutimi for Manchester. Steamer expected ready to load about May 28th. Must load 600 tons daily, weather permitting. Have cabled credit Bank Nationale, Quebec. Make arrangements deliver pulp promptly as required."
To which they replied :-
"Will do all possible to ,give her quick despatch, Might do in five days. How early will she be Chicoutimi ? "
The steamer "The Manchester Importer" soon after arrived. She was loaded and despatched in June. The 3,000 tons of pulp were carried to Manchester, there received and despatched to the several sub-vendees; but there was no accord and satisfaction as has been suggested, since the Respondents insisted they had been guilty of no breach of their contract, and if the statements contained in the letter of their manager dated the 20th October had been true, they would have been right. There was no new contract, as has been also suggested. The performance of the old contract, which had been as it were in abeyance, was revived and carried out, and ,that was all.
The statements contained in Dubuc's letter of the 26th October, 1900, were entirely inaccurate. He had a surplus amply sufficient to enable him to carry out the contract with the Appellant. In his evidence in chief and on cross-examination he admits it. The figures he gives on cross-examination are unintelligible unless on the assumption that he was dealing with tons of dry pulp.
He admitted that the Respondents manufactured from the 1st January to the 1st November, 1900, 9,975 tons of dry pulp, and that of this his Company delivered to Becker Co. 6,537 tons, and to two other customers 881 tons, making together 7,418, leaving a surplus of 2,.557 tons of dry pulp, equivalent to over 5,000 of wet or moist pulp. Out of this, had they been so inclined, they could have delivered to the Appellant 1,500 tons of dry pulp, equivalent to 3,000 tons of wet or moist pulp.
The Trial Judge, Mr. Justice McCorkill, adopted these figures and found as a fact that the Respondents had on hand sufficient after satisfying their earlier contracts to deliver to the Appellant all the latter was entitled to demand. It appears to their Lordships to be quite an error to suppose, as apparently has been supposed, that this learned Judge merely found that the Respondents could have delivered 1,500 or 2,000 tons before the 1st November. His finding to the contrary is quite plain and unambiguous. Their Lordships are therefore of opinion that the damages should have been calculated on 3,000 tons of pulp, not upon 2,000 as appears to have been done, and that the sum awarded is therefore too little by £250.
It was pointed out by Mr. Atkin, on behalf of the Respondents, that the delivery contracted for was a delivery at Chicoutimi, not at Manchester; that there is no market at Chicoutimi, and that therefore the rule insisted upon on behalf of the Appellant could not be applied, but, having regard to the long course of dealing between the parties and the inter-communication between Chicoutimi and Manchester consequent upon it, their Lordships think, on the authority of the three cases cited from the Reports of the State of New York, namely, Grand Junction Co. v. Phillip, 23 Wallace 471, Cohen v. Platt, 24 Sickel's Rep. 348, and Wemple and others v. Stewart and others, 22 Barbour's Rep. 154, as well from Bolag v. Hutchison (1905) A.C. 515, the market price at Chicoutimi may for the purposes of this measure of damages be fairly taken to be the market price at Manchester, despite the distance which separates them, of course, less the cost of carriage, which in this case is admitted to be 138. per ton. If this be taken to be so, the same sum of 13s. per ton must of course be deducted from the price (65s. per ton) obtained on re-sale, so that the difference between the two equally diminished sums is necessarily the same, namely 5s. per ton. This is, in their Lordships' opinion, the amount of the damages which the Appellant is entitled to recover under this head.
As to Claims 2 and 3, the Trial Judge and each of the Courts before which the case has come have considered the evidence given in support of them loose and unsatisfactory. Their Lordships are inclined to concur in that view, and are not by any means so convinced that the decision arrived at was erroneous as to induce them to overrule it on a pure question of fact.
No Cross-Appeal has been lodged in this case, though it is stated that the Respondents have appealed against the Judgment, and that this Appeal is now pending in the Canadian Court. Their Lordships do not think, however, they are precluded from amending the Judgment appealed against by increasing the amount awarded by £250, i.e., 5s. per ton on 1,000 tons, together with the sum of £1,044 19s. 8d. for freight from Manchester to the different places of delivery, and interest from the 28th February, 1902, to the 28th February, 1911, agreed at £807 15s. 0d.
As, therefore, both parties have failed in part and succeeded in part, each should bear their own costs.
Their Lordships will therefore humbly advise His Majesty that this Appeal should be dismissed, but that the Judgment appealed against should be amended by being increased by the sum of £2,102 14s. 8d., or its equivalent in dollars, and that each party should bear his own costs of the Appeal.