Madras High Court
Mayen And Anr. vs Alston And Ors. on 3 February, 1893
Equivalent citations: (1893)ILR 16MAD238
JUDGMENT Muttusami Ayyar, J.
1. Messrs. Alston Low and Co. plaintiffs, respondents, are merchants who carry on business as Commission Agents at Tellicherry and elsewhere. Appellants, first and third defendants, are Mapilla merchants who, together with second defendant since deceased, received advances from them from time to time on the security of produce to be collected and consigned through them for sale in Europe and Egypt, such as coffee, pepper, timber and other goods. During the year 1888, respondents dealt with appellants separately, each on his own account. In 1889 and 1890, the former carried on business with the latter in partnership, subject to the terms mentioned in agreement A, dated the 27th January 1889. The first appellant was the only party who first made the agreement, but on the 18th March next, the second appellant and the deceased second defendant who were first appellant's partners also became parties to that document and adopted it as altered by the addendum. The business commenced in January 1889 and continued till June 1890. During this interval, respondents furnished to appellants copies of account-sales which they received from the consignees at the several plaoes of consignment, and on the 28th March 1889, the former sent to the latter a statement of account, which showed at that time a balance of Rs. 5,69,909 in respondents' favour. On the 16th December 1889 appellants executed document C, mortgaging thereby certain properties as security for Rs. 2,50,000. The business ultimately resulted in a loss, the prices realized in Europe being less than those paid by appellants in India, and on the 6th May 1890, respondents furnished an account which showed then a balance of Rs. 2,87,470. Appellants were since called upon to pay it and on their failing to comply with the demand, respondents brought this suit on the 5th September 1890 to recover that amount with interest thereon at 8 per cent, per annum. They also prayed for a decree directing the sale of the properties mortgaged by document C in default of payment of Rs. 2,50,000 and interest thereon.
2. The issues fixed in this case sufficiently indicate the several grounds upon which appellants resisted the claim. The preliminary objection, that Nayan Vittil Assan ought to have been made a co-defendant as one of appellants' partners, was given up at the final hearing in the Court below. On the merits, the Subordinate Judge determined all the issues in respondents' favour and decreed their claim. Hence this appeal.
3. The questions raised by the tenth and twelfth issues are not argued on appeal. Nor is there any reliable evidence to show that document C was obtained by misrepresentation as alleged in appellants' written statement. For the sake of clearness, I proceed to consider the questions raised by the other issues under three general heads:--viz. (1) whether the account rendered by respondents is correct and complete so far as it relates to consignments sold and sale-proceeds realized, (2) whether the charges entered therein are correct, and whether respon dents made any and what profit in the agency business for which they are liable to account to appellants, (3) whether respondents acted in contravention of their duty as agents in regard to the sales of consignments and, if they did, whether any and what loss was thereby occasioned to appellants and whether such loss might be set off in this suit against respondents' claim.
4. Before proceeding to deal with the questions mentioned above, I may state that beyond denying the correctness of respondents' account and thereby raising the general issue, appellants neither surcharged nor falsified specific items. Again, they did not plead any set-off in their written statement nor did they refer to any cross claim or demand as such and furnish a statement of particulars as required by Section 111 of the Code of Civil Procedure. Further, they admitted the debit side of the account furnished to them, but impugned the credit side in toto. On the other hand, respondents, who admitted their liability to render an account, contended that they were not bound to prove in the first instance the credit side.
5. The first question considered by the Subordinate Judge is as to onus of proof and his decision regarding it appears to be correct although some of the reasons assigned by him in its support convey the impression that the party bound to account is bound only to prove the debit side. There can be no doubt that where there is an obligation to render an account, it includes a duty to show prima facie that the account rendered is correct and complete and that that duty extends to both sides of the account. Sales of consignments entrusted to commission agents and particulars of those sales are matters which lie specially within their knowledge, and every contract of agency imposes on the agent the duty of rendering a true and complete account regarding the subject-matter of the agency. This, the Subordinate Judge admits at the close of paragraph 7 of his judgment. He is clearly well founded in saying that so far as appellants impute to respondents misconduct or dereliction of duty, it is for the former to establish their case. The presumption is against such misconduct or violation of duty until it is proved by the party who makes the imputation. The Subordinate Judge is also right in holding that when the agent produces prima facie proof of his account, it is for the principal to surcharge or to show that more moneys came into the agent's hands than are acknowledged by him.
6. Although the Subordinate Judge compares the credit side of the account to a list of payments made by a debtor on account of an admitted debt, he does so for the purpose of indicating the necessity that exists for surcharging or falsifying and not for the purpose of absolving respondents from their obligation to produce prima facie proof.
7. The substantial question, therefore, is whether there is prima facie proof of the account rendered to appellants. Exhibit K series consist of account-sales received by Mr. Tatham, respondents' local agent, from the consignees at the several ports of consignment in Europe in the ordinary course of business, and he has given general evidence as to his having so received them and furnished copies of the same to appellants from time to time. He also appeared as a witness in the case and gave the appellants an opportunity of cross-examining him as to the general accuracy of the account, as to any discrepancy between it and the vouchers and as to any specific consignments in respect of which the quantities sold were considered by them not to correspond to the quantities consigned, or the prices stated in the account were believed to be less than what were actually realized. There is also the fact that the second defendant admitted the correctness of the account furnished by respondents on the 28th March 1889, and the explanation now offered by appellants, viz., that the second defendant did so because respondents refused otherwise to make further advances is not satisfactory. There is the further fact that in December 1889, appellants executed document C as security for Rs. 2,50,000. On the other hand, appellants refer us to no specific evidence regarding the alleged mis-statements of prices and quantities, hut only contend that the account-sales are not of themselves legal evidence, and that respondents were bound to have examined on commission their agents at the several foreign markets in Europe aud Egypt and proved strictly each item on the credit side. I do not think this contention is tenable. It was held by the High Court at Calcutta in Shearman v. Fleming 5 B.L.R., 619 and by the High Court at Bombay in Hodgson v. Rupchand Hazarimal 6 Bom., H.C.R. O.C.J., 39 that "when goods are consigned to be disposed of in a foreign market, it must be considered that the consignor impliedly agrees that the account-sales furnished by the correspondents abroad shall be taken as prima facie evidence of what the goods realized." In the last mentioned case the learned Chief Justice said: " It would cause great expense and inconvenience if the debtor, by merely objecting to the account, could compel the procuring evidence from abroad; and seeing that in practice merchants are satisfied with the truth of the account-sales and ask for no further evidence, I think there is good ground for holding that there is such an implied agreement." There is also a dictum of Justice blackburn in Smith v. Blakey L.R., 2 Q.B., 326, that account-sales are primd facie evidence, subject to the right on the other side to surcharge or falsify. Seeing that the procuring of the evidence of correspondents at the several foreign markets would occasion considerable delay and expense and tend to paralyze trade, I am of opinion that account-sales were properly admitted as prima facie proof. As for the objection that those furnished by Busch and Co. are not signed, it is sufficient to observe that signature is not indispensable, provided they were really received from them in the usual course of business. It is noteworthy that though copies of account-sales were furnished to appellants from time to time, they do not appear to have taken exception to them as they were received or within reasonable time after they were received. The only letters which the first defendant remembers to have written on the subject are Exhibits E, I and II. Exhibits I and II. which are dated April 1889, show only that appellants used te examine accounts and to obtain such information as they deemed necessary to render their examinations efficient. Exhibit E which was written in November 1889 refers only to the rate of local exchange and to the charge made for curing coffee and there is nothing in these letters impugning the correctness either of the quantities of goods sold or prices realised. As observed by the High Court at Bombay in the case already cited, the law as to account-sales is that where an account between merchants in different countries is transmitted from one to the other, and no objection is made after several opportunities of writing have occurred, the account is deemed in a Court of Equity to be a stated account only to be re-opened when some cogent reason is shown. The first defendant states in his evidence that "whilst business was being conducted under document A, we used to go to the plaintiff's' office almost every day" and yet no objection appears to have been taken to account-sales until a disagreement arose between the parties. Upon the whole evidence I see no reason to hold that the Subordinate Judge has not come to a correct finding on the fourth and fifth issues.
8. The next question which we have to consider relates to charges and profits forming the subject of the eighth, ninth and tenth issues. The only items finally disputed in the Court below are those of local exchange, sterling exchange, commission and brokerage, and on appeal, the objection to brokerage is not pressed upon us.
9. As to the local exchange, the objection is that the rate at which respondents paid the local Bank was from 8 to 10 annas per every Rs. 100, but that the rate afc which they charged appellants throughout was 12 annas. That there is this difference betweeen the rates paid to the local Bank and those charged against appellants is admitted by Mr. Tatham, but his explanation is that the local Bank charged them the lower rate by reason of a special arrangemeut made with their firm, without reference to the contract of agency and that he is not bound to give appellants the benefit of the concession personal to his firm and antecedent to the contract of agency. The learned Advocate-General contends on their behalf that the case is similar to insurance, and that the benefit of special insurance terms need not be given up to constituents in the absence of an express provision to the contrary. On the other hand, the learned pleader for appellants argues that an agent has no rignt to charge his principal more than what he actually pays, any special advantage enjoyed by him being in part the iuducement to his selection by the principal. Document A is silent on the subject, but it is in evidence that when appellants did business with respondents in 1888, though not in partnership, they were charged 12 annas per cent for local exchange. In the account furnished to appellants in March 1889 and admitted by them to be correct, the rate entered was 12 annas and the first time they objected to it was in November 1889. The favorable rate charged by the local Bank is in its nature an advantage growing out of respondents' position as merchants who habitually cash their bills at the local Bank and not dependent on the contract of any particular agency. There was no express agreement to give the appellants the benefit of this favorable rate and not to charge them a higher rate in common with their other constituents. Adverting to insurance, witness Zellweger states that he would not give his constituents the benefit of any special terms conceded for his firm. Having regard to the course of business between appellants and respondents in 1888 and 1889 and to the evidence of witness Zellweger relative to special insurance terms, I am not prepared to allow this objection.
10. As regards the sterling exchange, two objections are taken on appellants' behalf, viz., (1) that the telegrams produced by Mr. Tatham are in cipher and (2) that the Subordinate Judge was in error in admitting a copy of the Madras Mail as evidence. As regards the first, it was appellants' fault if they did not choose to ask Mr. Tatham to explain the telegrams and to verify his statement that the charge made was in accordance with the quotations contained therein. As for the second objection, I think it must prevail, copy of the Madras Mail being no legal evidence. Apart from it, however, there is the evidence of Mr. Tatham that the charge is proper and that the telegrams produced are vouchers in its support. I do not consider that appellants ought now to be permitted to object to the charge on the ground that Mr. Tatham did not verify his statement by volunteering translations of the telegrams in cipher. It is not alleged even now that the charge is not borne out by the telegrams, but we are asked either to strike out the item or re-open the case on the ground that it had not been voluntarily verified. This I think we must decline to do.
11. As regards the commission, document A provides that appellants should pay respondents in addition to the usual charges a commission of 1 per cent, for themselves and of 2 1/2 per cent, for their agents at the ports of consignment. It is admitted by Mr. Tatham that by a special arrangement made with some of those sub-agents, they paid him back out of 2 1/2 per cent, commission fixed for them a return commission of 1 per cent, or so. It is also admitted that he never communicated this fact to the appellants. Nor does it appear that they were aware of it when document A was executed. The objection urged on appellants' behalf is that the return commission or rebate as it is called is in the circumstances of this case a profit made by the agent in the agency business without the knowledge of the principal and that it must be given up to the principal. On the other hand, it is argued on behalf of respondents that the return commission is a payment made by consignees for employing them as such and enabling them to earn a commission. I am of opinion that the objection taken by appellants must prevail and that the question is governed by the principle laid down in Morison v. Thompson L.R., 9 Q.B., 480, viz., that profits directly or indirectly made in the course of or in connection with one's employment as agent without the sanction of the principal belong absolutely to the principal. The Subordinate Judge is in error in holding that the law in India is otherwise. The return commission was the result of a dealing in the business of the agency on the agent's own account without the knowledge of the principal; and to the benefit accruing therefrom, the latter must be taken to be entitled within the meaning of Section 215 of the Contract Act. The unreported case of Van Ingen v. Maclean (Referred Case No. 74 of 1877) is not in point, for there, the agency ceased when the horse was bought in and the subsequent sale of the horse took place after the agency had terminated. The reason of the rule is not fraud or dishonest concealment but is, as stated by Lord Ellenbrough in Thompson v. Havelock 1 Camp., 527, the conflict which would otherwise arise between the agent's interest and duty. Again, if Mr. Tatham had communicated to appellants when document A was executed that he expected to get a return commission, they might not have agreed to pay 3 1/2 per cent, commission on the whole, viz., 1 per cent, to respondents and 2 1/2 per cent, to their sub-agents or consignees at the ports of consignment. I do not think that the rule can be ignored on the ground that notwithstanding this payment the sub-agents at the ports of consignment discharged their duty well and that appellants were in no way prejudiced. Document A, clause 4, of the addenda provides, no doubt, that in case appellants broke their covenant and consigned produce to Europe otherwise than through respondents, the former should pay the latter all such commission and profits as they would have made if the consignments had been made through them, but upon its true construction, the term profit cannot be taken to include profits made in breach of their duty. The Subordinate Judge appears to infer from this clause that appellants were aware when they entered into agreement A that respondents were to receive this return commission, but there is no warrant for such inference. On the other hand, the evidence of the first defendant and Mr. Brown shows that when appellants pressed for the reduction of rate of interest, Mr. Tatham said that all that his firm got was 1 per cent, commission. Mr. Tatham himself does not state that appellants were aware of it. His evidence on this point is as follows: " I wanted to charge a certain rate of interest, probably 10 per cent. The first defendant probably asked me to lower it. I think in all probability he asked me to lower it to 8 per cent. It was finally agreed that we should charge 2 per cent, below the Bank rate fixed for natives. I do not certainly recollect saying that I could not give a lower rate because 1 per cent, commission was all we got. I can swear positively that I never said so. I never told the defendants that any portion of the 2 1/2 per cent, commission fixed for the agents at the port of consignment ever came to me. So far as I am concerned, defendants were not put upon notice of any repayment to me. I do not suggest that at the time of the execution of Exhibit A, defendants knew that any part of 2 1/2 per cent, commission came back to me. I did know at the time that I would get certain rates of return commission if I consigned to certain firms at certain ports. So far as any action on my part is concerned, the defendants were not aware when they acknowledged my account to be correct that any part of the 2 1/2 per cent commission came to me."
12. It is true that he adds: " But I knew from other sources that they were already so aware. I say so because all these things are known in the bazaar among the traders and are no secrets. No trader told me that the defendants were aware of this usage. I think all the other firms here, European and Native, do know the exact terms under which one firm deals with its correspondents abroad. I do not know the exact terms on which Volkart Brothers deal with Busch and Co. But I am perfectly certain that the latter do allow them a return commission if goods are consigned for sale."
13. Mr. Zellweger, the Agent of Volkart Brothers, does not speak of any return commission though he states that Busch and Co. did business for them in 1888 as consignees for 3/4 per cent, commission. I am unable to hold that when it is incumbent on a party to prove notice or knowledge of a specific fact, a vague suspicion of the kind mentioned by Mr. Tatham can be accepted as proof of knowledge aliunde. The conclusion to which I come is that the respondents are liable to appellants for whatever return commission they have received, and in this respect the decision of the Subordinate Judge must be set aside.
14. Objections to the other charges mentioned in the ninth issue are not pressed on appeal. The third question we have to consider is as to the alleged breach of duty on the part of respondents in connection with the sale of appellants' goods. It was first urged that respondents did not exercise proper skill and care and sell the goods to appellants' advantage. There is not a particle of evidence to support this complaint. It was next contended respondents did not comply with trade usages as other firms and that most of appellants' goods were improperly sold on what are called landed and delivered terms instead of cost and freight terms. There is nothing in document A on this point and the evidence in the case does not either establish a trade usage in appellants' favour, or show clearly that sales on cost and freight terms are more advantageous than on landed and delivered terms. In one place the first defendant states in his evidence that " cost and freight terms are more profitable" and in another, he says that " sales on delivered terms will fetch a higher price than those on cost and freight terms." Mr. Tatham deposes that he could not have secured cost and freight terms even if he had attempted to do so and that he never sold on such terms as a rule. Mr. Zellweger, who is in charge of the firm of Volkart Brothers at Tellicherry, does not give evidence regarding any trade usage although he states that his firm sells always on cost and freight terms and does notsconsign. Mr. Brown, appel lants' second witness, a trader at Tellicherry, said at first that cost and freight terms were more advantageous than landed terms, but since recalled that statement adding that it was not correct and that landed terms would fetch 7 francs more. The difference between these two modes of sale appears to consist in that when the sale is on cost and freight terms, the seller is not liable for the landing charges at the port of discharge, and it is by no means clear that when the charges are to be paid by the buyer the price will not be proportionately less. I cannot hold upon the foregoing evidence that there is proof of any trade usage as urged for appellants or that cost and freight terms are so beneficial as to exclude the discretion of the agent in the matter.
15. The next ground of complaint is that respondents did not communicate to appellants the state of foreign markets from time to time and the result of the several sales as they were effected, sixth issue. Document A provides that respondents shall give the first appellant all such information as they may obtain regarding the state and movements of the various markets. On this point, Mr. Tatham states in his evidence as follows: " We get almost daily quotations from Europe during the season and we also wire to our agents at the various places for opinion as to the future state of the market. All this information I gave the defendants. In fact I often showed them the telegrams. Every day one of the defendants or their clerks came to me. Sometimes they came to my office two or three times a day. We kept defendants generally informed." On the other hand, the first defendant states that he never used to go to the plaintiffs' office every day, but used to go there at times and that on some of such occasions Mr. Tatham used to speak to him about the state of the European markets. He added also that: " whenever we used to ask Mr. Tatham he always gave us information as to the state of the market." This is all the evidence on this point and in my opinion the Subordinate Judge rightly decided the seventh issue against the appellants. As between Mr. Tatham and the first defendant, I agree in the opinion of the Court below that the evidence of the former is weightier than that of the first defendant. Document A contains no provision about the result of each sale being communicated. The account-sales contain the information, and if information was in any case needed at once it is clear on appellants' own showing that there was no difficulty in their securing it by applying to Mr. Tatham.
16. The next and the most important ground of complaint is that the sales were unauthorized and contrary to express instructions and it forms the subject of the second and third issues. It is in evidence that from April to June 1889 the coffee market in Europe was steady and the prices were high, but that towards the end of June it began to fall rapidly, and rose again from September next. Exhibits XXV and XXVI, dated the 7th and 19th June, show further that appellants were then under the impression that the market was rising day by day and likely to rise further and asked Mr. Tatham to hold their consignments and not to sell them without consulting appellants. In the reply which Mr. Tatham sent on the 29th June 1889 he stated that the market was. falling instead of rising day by day as appellants alleged and added: " We must reserve to ourselves the right of dealing with your consignments as we think best." Several consignments were sold in July and August before the market rose in September and the appellants' case is that if Mr. Tatham had complied with their instructions and waited till September, their consignments would have fetched higher prices than were realized when the market was low and depressed.
17. The contention on respondents' behalf is that as observed in Exhibit XXIX the sales were under their direction, that there was an express oral agreement made to that effect when document A was executed and that it was on that understanding the business was carried on with appellants in 1889 and 1890. The Subordinate Judge held that the oral agreement set up by Mr. Tatham was really made, and on referring to the evidence in this case, I see no sufficient reason to come to a different conclusion. It was the case of both parties that there was some oral agreement, the only question being whether according to that agreement, the sales were to be under Mr. Tatham's or appellants' direction. On this point, the only positive evidence on record is that of Mr. Tatham and of the first appellant and although they contradict each other, there are several circumstances which turn the scale in respondents' favour. As already observed, Mr. Tatham's testimony is weightier than that of the first appellant who, as remarked by the Subordinate Judge, has made several mis-statements in his evidence. Again, appellants did not refer to the agreement set up by them either in their letters XXV and xxvi, or in the reply which they sent to Mr. Tatham's letter of the 29th June or 1st July 1889, or in the letter which they again addressed on the subject on the 8th July 1889 (Exhibits XXVIII and xxix). The tenor of those letters is compatible with respondents' rather than with appellants' case. This view receives an accession of strength from the fact that document C was executed in December 1889, and that the evidence discloses no objections taken at that time to the sales in July and August. It is no doubt true that in 1888 Mr. Tatham obtained second defendant's permission previous to the sales of his consignments, but, as pointed out by Mr. Tatham, he expressly undertook to do so and wrote a letter to that effect in that year. The business which has given rise to this litigation is not part of that business, but a new business carried on by appellants and second defendant in partnership, and the large advances made by respondents to appellants in connection with it probablize Mr. Tatham's version of the matter. The only circumstance in appellants' favour is that document A is silent on the subject, but I do not consider it sufficient to counteract the other evidence and to warrant my disturbing on appeal the finding of the original Court.
18. It is next urged by appellants' pleader that agreement A is a formal document and that no evidence of a contemporaneous oral agreement is admissible for the purpose of varying its contents under proviso 2 of Section 92 of the Indian Evidence Act, which directs that the Court shall in such cases have regard to the degree of formality of the document. In the case before us, agreement A was no doubt drawn up by the High Court pleader Mr. Rozario and on a subsequent occasion a foot-note was appended to it whereby its terms were revised. That there was an intention to reduce to writing the terms subject to which the business was to be carried on and to give to that writing the character of a formal document is clear from the nature and contents of the document itself. According to Mr. Tatham he attached importance to securing a right to deal with appellants' consignments in consequence of the mode in which the second defendant interfered with the sales of consignments in 1888. Again, the illustration to the second paragraph of Section 92 is also in favour of appellants' contention. Further, this illustration is in conformity to the course of decisions in England, according to which this rule of exclusion applies not only to records, deeds, wills and other documents required by law to be in writing, but also to every document which contains the terms of a contract between two parties, and is designed to be the evidence of their final intentions see Taylor on Evidence, Vol. II, 8th Edition, page 963). I would uphold the objection if there was nothing more than a contemporaneous oral agreement, but I observe that the agreement in question is a mercantile contract and the course of business between the parties throughout the years 1889 and 1890 was in accordance with the oral agreement. The evidence does not show that appellants' permission was obtained in 1889 previous to the sale of each consignment as was done in 1888 in regard to the sale of second defendant's consignments. When the appellants asked respondents in June 1889 not to sell their consignments on the ground that they hoped that the market would rise, they did not complain of any departure from the usual course of business. Nor did they do so since prior to the suit. Again, document A is silent on several matters connected with the business, such as the rates of local exchange, sterling exchange and the nature of sales on cost and freight terms or on landed and delivered terms. It could not have been the intention of the parties to exclude the course of business between them from being treated as part of document A so far as it relates to matters on which it is silent. On the ground, therefore, that the course of business between the parties was in accordance with the oral agreement I disallow this objection.
19. Another contention is that sales of consignments contrary to express orders amount to a breach of duty on the part of respondents to use their discretion to the best advantage of appellants. Exhibit XXVII shows that Mr. Tatham had information when he wrote it that the market was falling and not rising as appellants stated in Exhibits XXV and XXVI and there is no evidence that Mr. Tatham's statement is not correct or that he could have then foreseen that the market would rise again in September. The evidence is consistent with an honest belief on his part that appellants were speculating for large profits on erroneous information, and that it is not their interest to hold all their consignments for an indefinite length of time. It is conceded by appellants' pleader that if the oral agreement set up by Mr. Tatham is true and admissible in evidence, their objection to the sales must fail. It is, therefore, not necessary to discuss for the purposes of this appeal either the question whether the loss, if any, arising from the sales in July and August 1889 ought to be set off against respondents' claim in this suit, or whether the Subordinate Judge is correct in holding that no loss was sustained.
20. The result is that the decree appealed against must be modified so as to give credit to appellants for the return commission received by respondents and confirmed in other respects. The costs of this appeal must be assessed proportionately on the extent to which the appeal is allowed and disallowed.
Wilkinson, J.
21. The plaintiffs are a firm of English merchants trading at Tellicherry and London, their business at the former place being managed by their agent, Mr. R. Tatham. In January 1889 they entered into an agreement with the defendants, a firm of Mapilla merchants residing at Tellicherry, to make advances upon produce shipped to Europe by the defendants' firm. They now seek to recover from the defendants and by sale of the properties mortgaged the sum of Rs. 2,83,377 and interest due thereon as per schedule B.
22. The defendants admit the dealings between themselves and the plaintiffs' firm and the correctness of the debit side of the accounts filed by the plaintiffs, but take exception to certain entries on the credit side of the account.
23. The Subordinate Judge in an able and exhaustive judgment has gone fully into the arguments on both sides and the evidence, and his finding on each and every issue is in favour of the plaintiffs.
24. The defendants appeal against the whole decree. The first question argued before us is as to the burden of proof, the defendants contending that it is not enough for the plaintiffs to put in the account-sales received by them from the European firms which disposed of the defendants' shipments, but that they must prove by evidence aliunde that the amounts realised in the various markets, the amount charged by the different firms for brokerage, commission, etc., were the actual sums entered in the accounts.
25. The question is really one not of the onus of proof but of the sufficiency of proof. The plaintiffs were the agents of the defendants for the sale of certain produce shipped to Europe. Such produce was disposed of by plaintiffs' sub-agents at various markets. The sub-agents submitted their accounts to the plaintiffs showing sums realised by sale of produce and the local charges. There are 133 of these account-sales put in and marked K. It is argued on behalf of the defendants that these account-sales are not admissible as primd facie evidence, but can only be used as evidence corroborative of the statements made by persons who incurred the charges and that in the absence of such evidence these accounts are inadmissible. No authority is quoted in support of the defendants' argument.
26. On behalf of the respondents it is contended that the account-sales are admissible in evidence, that they are primd facie evidence of the transactions referred to therein, and that it lies upon the defendants who question the correctness of the accounts to prove their case.
27. The Subordinate Judge was of opinion that the account-sales were admissible in evidence under Section 32 of the Evidence Act as written statements of relevant facts made by persons whose attendance could not be procured without an unreasonable amount of delay and expense, such statements having been made in the ordinary course of business and consisting of documents used in commerce written or signed by the persons making them.
28. In paragraph 526 of his work on Equity Jurisprudence, Story thus states the rule as to what constitutes a stated account: " Between merchants at home, an account which has been presented, and no objection made thereto after the lapse of several posts, is treated under ordinary circumstances, as being, by acquiescence, a stated account. Between merchants in different countries, a rule founded in similar considerations prevails. If an account has been transmitted from one to the other, and no objection is made after several opportunities of writing have occurred, it is treated as an acquiescence in the correctness of the account transmitted; and, therefore, it is deemed a stated account. An account rendered shall be deemed an account stated from the presumed approbation or acquiescence of the parties, unless objection is made thereto within a reasonable time. Upon like grounds, a fortiori, a settled account will be deemed conclusive between the parties unless fraud, mistake, omission or inaccuracy is shown. The Court will not generally open the account, but will only grant liberty to surcharge and falsify." The question now in issue was considered by the Court of Queen's Bench in Smith v. Blakey L.R., 2 Q.B., 326, and was thus disposed of by blackburn, J.: " As to the argument that there ought to have been a non-suit, viz., that plaintiffs had made out no case, as they could not recover unless they made out affirmatively what were the proceeds of the sales by strict legal evidence, and that the account-sales were no evidence, the answer is this--where there is a consignment of goods which are to be sent to a different country for sale, it may well be that there is an implied agreement by the consignor that account-sales sent from abroad shall be good prima facie evidence of the proceeds until the contrary be shown, leaving it open to the consignor to surcharge and falsify." The law as to account-sales contained in the above extracts was followed by couch, C.J., in Hodgson v. Rupchand Hazarimal 6 Bom., H.C.R. O.C.J., 39, who added: " It would cause great expense and inconvenience if the debtor by merely objecting to the account could compel the procuring evidence from abroad; and seeing that in practice merchants are satisfied with the truth of the account-sales and ask for no further evidence there is good ground for considering that there is an implied agreement."
29. Now, what are the facts of this case? The first defendant as well as the second and third defendants had dealings with the plaintiffs' firm in the year 1888. The first defendant admits that he accepted all the account-sales rendered of such dealings and took no objection to them. The account-sales in the present case were in due course presented to the defendants ,and no objection was taken to them until the written statement in this case was filed and even then no specific objection was raised. The defendants have not been able to point out any one entry as incorrect or erroneous. It is, however, now urged that the account-sales submitted by Messrs. Busch and Co. are not signed, but no such objection was raised in the lower Court. Mr. Tatham was examined about them and stated that he had been accustomed to see the firm sign in the way the accounts filed are signed for 8 years. He further stated that he had been in constant correspondence with the firms who submitted the account-sales marked K, and had received letters and papers signed by them, and that the signatures appended to the several papers in Exhibit K are the signatures of the several firms. He also deposes that in the case of consignments to Europe the results of sales are according to the usual mercantile custom communicated in the form of such documents.
30. No cause has been shown why these stated accounts should be opened. The defendants impliedly agreed that the account-sales furnished by the correspondents abroad should be taken as prima facie evidence of what the goods realized. The onus was clearly on them to surcharge and falsify the account and this they have entirely failed to do.
31. The next question argued was the right of set-off. The Subordinate Judge was of opinion that the claim for set-off could not be gone into in the suit. He did however go into the question of damages and found that the plaintiff's were not liable in damages to the defendants.
32. In my opinion there is no question of set-off strictly so called in this suit. Set-off has been well defined as a mode of defence by which the defendant acknowledges the justice of the plaintiffs' demand, but sets up a demand of his own against the plaintiff's to counterbalance it, in whole or in part (Barbour on Set-off). There is a difference between what is styled by American jurists reduction on the one hand and set-off on the other. In the latter the ground taken is that defendant may owe plaintiff what he seeks, but that a part or the whole of this amount is in reason and justice discharged by the debt which plaintiff owes to defendant.
33. It is admitted that Section 111 of the Code of Civil Procedure has no application, but it is argued that Section 111 is not exhaustive of the law of set-off, and that as both claims arise out of the same transaction the defendant is entitled to set-off his claim against that of the plaintiff. There are three answers to this (1) The defendants have no claim against the plaintiffs. They do not say " you owe us so much and that sum we claim to set-off against our debt," but, " if the accounts were correct, if you had not sold contrary to our express instructions, the amount at our credit would have been larger." That is matter of evidence, not of claim. (2) If defendants are entitled to a set-off they are bound to give plaintiffs the fullest particulars thereof and this they have not done. (3) The amount of set-off must be reasonably certain. The defendants' claim is absolutely vague.
34. The first specific objection taken to the plaintiffs' accounts relates to the rate charged for local exchange. The defendants' plea is that as plaintiffs were their agents they were not entitled to charge defendants more than they themselves were charged by the local Bank, viz, 8 or 10 annas per cent. Admittedly there was no agreement as to the rates of local exchange. What Mr. Tatham says on the point is as follows: If I want to pay the defendants I give them a cheque on the Bank of Madras. If I sell cheques to the Madras Bank here (i.e., Tellicherry) drawn on Madras Exchange Banks, they charge me 6 annas per cent.; on cheques on Exchange Banks in Bombay the charge is 8 annas. This is by special arrangement between us and the Madras Bank at Tellicherry. In either case I always charge 12 annas to all natives and to defendants. That is our custom." The plaintiffs having a well-established reputation and an account with the Bank can get better terms from the Bank than a native merchant. They offered to cash the bills for defendants at the same rates as they charged others, and during 1888 and up to November 1889 defendants acquiesced in the charge. It was no part of the agreement between plaintiffs and defendants that the former were to give the latter the benefit of their arrangement with the local Bank. Such benefit was personal to the firm. The Bank were willing to give plaintiffs a higher price for the Bills of Exchange than they would give to an outsider. An analagous case is that of insurance and defendants' own witness Mr. Zellweger asserts that his firm would not give to their constituents the benefit of the uniform rate of insurance for which they have contracted. In April 1889 defendants admitted the correctness of the accounts submitted up to March and they cannot now claim to repudiate or re-open those accounts in which 12 annas per cent is charged for local exchange.
35. It is not very clear on what ground objection is taken to the rates of sterling exchange. In support of the charges made on this account we have the evidence of Mr. Tatham and the telegrams put in by him. He says: " For our daily quotations of foreign exchange we had telegrams from our brokers in Bombay and we also wired at times to Madras. 1 fixed my foreign exchange with the defendants on the basis of such quotations." This was elicited in cross-examination, defendants' counsel did not ask Mr. Tatham to produce the telegrams he referred to, but on re-examination he was questioned about them and produced them [FF]. No objection was then taken to them, but appellants'pleader now points out that they are in cipher and therefore unintelligible. The objection is too late. If Mr. Tatham had been asked to translate them when he put them in, he would doubtless have been able to do so, but he was not asked a single question about them. Moreover he deposes that he gave every information to the defendants during the continuance of the business showing them the telegrams received from Europe and from plaintiffs' agents at various places. The first defendant admits that he must have had conversation about the rates of the European markets, but conveniently forgets whether Mr. Tatham spoke to him and his partners about the rates of European exchange. There is no evidence on the defendants' side. The objection to the rates of foreign exchange was taken for the first time in the written statement. The file of the Madras Mail and the account (P) prepared therefrom were not put in to prove that proper rates had been charged, but merely to show that the defendants had been charged very favourable rates. The defendants having failed to prove that the rates charged for foreign exchange were incorrect, their objection was rightly overruled.
36. With reference to the sales in Europe there are only two questions to be considered: (1) Was there, as contended by plaintiff's, a special oral agreement that such sales should be absolutely at plaintiff's' discretion? (2) Is evidence of such oral agreement admissible? With reference to the second question it is provided by Section 92 of the Evidence Act that the existence of any separate oral agreement as to any matter on which a document is silent, and wich is not inconsistent with its terms, may be proved. Admittedly Exhibit A is silent as to the mode of sale, and the agreement that the discretion of the plaintiffs should be unfettered is in no way inconsistent with any of the terms of the agreement. Evidence therefore is admissible. The only evidence is that of Mr. Tatham and his evidence is as follows: " In 1889 when second defendant became a partner with the first defendant 1 varied the old system of trading with second defendant whereby I took his instructions before selling his goods. I did so because second defendant gave me immense trouble the previous year and I saw the danger I ran. The second defendant was a tricky man. I did not consider it necessary to reduce the new condition into writing or to add it to Exhibit A, as the arrangement was already made with first defendant. I pointed out (to defendants) that I would not work in the same way as with second defendant in the previous year, as he had given me very considerable trouble in regard to the sale of his produce consigned through us, and I insisted that if consignments were made through us, which they had the option of doing or not, the sales must rest in our hands. This was agreed upon.
37. When defendants Nos. 2 and 3 signed the agreement A the arrangement was that we should have sole discretion in the matter of sales. All the three defendants must have certainly understood so." The appellants' pleader can assign no valid reason why Mr. Tatham's evidence should be discredited. The evidence of the first defendant on the point is uncertain and contradictory. " He cannot positively swear " that Mr. Tatham told him consignments would not be sold without their (defendants') instructions. Here his pleader puts his case thus--there was no agreement one way or the other, but the defendants were under the impression they would be consulted. The second defendant has not come forward for examination and I concur with the Subordinate Judge that first defendant's evidence is unreliable. The probabilities are all in favour of plaintiffs' case. It is hardly probable that a man of business, like Mr. Tatham, would, after the experience he had had in 1888, have left himself entirely at the mercy of the defendants. He was bound to make advances against produce to the extent of 7 lakhs of rupees, if satisfied that the value of the produce showed a margin of 70 per cent., but the defendants were not bound to consign any produce at all to Europe. The law gives plaintiffs a lien on the goods for the advances made, and it is difficult to believe that Mr. Tatham would have consented to give defendants the power of controlling and virtually cancelling that lien by agreeing not to sell without their orders. In March, April and May some 30 or 40 sales had taken place without the defendants being consulted. No objection was or is taken to these sales. The first defendant admits that he and his partners used to go to the plaintiffs' office every day, that he had complete confidence in Mr. Tatham, and that Mr. Tatham used to send them accounts regularly ' one shortly after the other." Not one of these sales was repudiated although they were all made without consulting the defendants, but on the 7th June the defendants having heard a rumour that the European coffee market was likely to rise wrote to the plaintiffs begging them not to sell their consignments before consulting them. This letter was followed by one written from Bombay by second defendant on the 19th June to the same effect. The plaintiff's' reply was brief but decisive--"the market is falling not rising, we reserve to ourselves the right of dealing with your consignments as we think best." Nothing could be clearer than this, yet the defendants did not repudiate the agreement, or refuse to have any further dealings with the plaintiffs' firm. If there had been no such agreement as is spoken to by Mr. Tatham, plaintiffs would undoubtedly have been bound to conduct the business according to the directions given by the defendants, but the fact that plaintiff's claimed the right of dealing with the produce as they thought best offers strong corroboration of the agreement.
38. It being found that the plaintiffs were at liberty to sell according to their own discretion the defendants' contention that they suffered loss in consequence of the sale of their consignments in a falling market is not maintainable. The letter of Messrs. Busch and Co. (Exhibit V, dated 16th October 1889) shows that the sales were conducted by that firm according to their " best judgment." It was the plaintiffs' own interest to sell the consignments in the highest market, and there appears no reason to doubt that the business of the agency was conducted with reasonable diligence and skill.
39. As to whether the plaintiffs are liable to account to the defendants for having sold the greater part of the produce consigned on landed instead of on cost and freight terms, I observe that there is no certain evidence to show that the cost and freight terms would have been more advantageous or favourable to the defendants than the delivered or landed terms. Admittedly there was no agreement as to the terms of sale and Mr. Tatham deposes that he could not have got " cost and freight terras if he had tried." Defendants' second witness, Mr. Brown, at first stated that sale by cost and freight terms was more advantageous to the consignors, but subsequently admitted that that statement was incorrect. Defendants' third witness, Mr. Zellweger, was not asked which was most advantageous to the consignor, cost and freight or landed terms, but stated that he preferred the former. It appears, however, that he has no experience of landed terms, for he deposes that his firm always sell cost and freight and never consign. It does not appear that the defendants ever suggested that they wished their consignments sold on cost and freight terms, and they have failed to show that cost and freight terms were so manifestly in favour of the consignor as to throw upon the agent the onus of getting cost and freight terms in every case. It was agreed that the sales of produce consigned should be left absolutely in the control and at the discretion of the plaintiffs and the defendants cannot now complain because the consignments were sold on landed terms.
40. The only other matter which has to be dealt with is that of the commission allowed to the plaintiffs by the firms to whom defendants' produce was consigned. In Exhibit A it was stipulated that defendants should on all consignments pay to Messrs. Alston Low and Co., in addition to the usual charges, a commission of 1 per cent, for themselves and 2 1/2 per cent, for their agents at the port of consignment. Mr. Tatham deposes that Bean and Co., of Marseilles, Perdomo and Co. of Havre and Carr Brothers of Genoa allowed them a commission of 1 1/2 per cent., while the London firm, Busch and Co. of Havre, and Macke and Bohamar of Hamburg allowed 1 per cent. It is contended on behalf of the defendants that Mr. Tatham fraudulently concealed from the defendants the fact that he was to get a commission from the sub-agents, and that as in connection with transactions which plaintiffs had with the European firms they were acting as plaintiffs' agents they are liable to account to defendants for whatever profit they made by way of commission. The Subordinate Judge found, and I think rightly, that there was no dishonest concealment or wilful misrepresentation on the part of Mr. Tatham. I do not believe that Mr. Tatham ever represented that no part of the 2 1/2 per cent, would ever come back to the firm in the shape of commission. He states that he did not know at the time whether or not he would get any, and if so, what commission from the firms to whom produce was consigned, In fact, Mr. Tatham did not know at the time when the agreement was entered into to what European ports consignments would be made. It was not, therefore, in his power to inform defendants then that his firm would obtain a commission from the European firms as a consideration for placing business in the hands of such firms. The same rate had been charged and paid without demur in 1888, and I see no reason to doubt that the consent of the defendants to pay 2 1/2 per cent, for the agents at the port of consignments was given freely and not in consequence of any misrepresentation or fraud on the part of Mr. Tatham. But there remains the further question whether the plaintiff's are entitled to retain such commission. The Subordinate Judge was of opinion that they were. He found (but he does not say on what evidence) that the plaintiffs received defendants' sanction to receive this commission. No evidence in support of this finding has been brought to our notice. It may be that the Subordinate Judge implied consent from the former transactions. He admitted that the general principle was that in all cases where a person is, either actually or constructively, an agent, all profits and advantages made by him in his business, beyond his ordinary compensation, are made for the benefit of the principal. But he thought that the law in India, as contained in Sections 215 and 216 of the Contract Act, did not contain any corresponding rule and that as the plaintiffs had not dealt on their own account in the business of the agency, the plaintiffs were not bound to pay to the defendants sums received on their plaintiffs' own account. The case quoted by the Subordinate Judge, Van Ingen v. Maclean (Referred Case No. 74 of 1877), is not in point, because it was held that that case was governed by Section 215, not Section 216 of the Contract Act and defendants' pleader contends that Section 216 is applicable to the present case. That section deals with the case of an agent who, without the knowledge of his principal, deals in the business of the agency on his own account instead of on account of his principal, and the question is whether the acceptance of a commission from the sub-agents at the ports of consignment amounts to a dealing in the business of the agency. On behalf of the plaintiffs the learned Advocate-General contends that the arrangement made by the plaintiffs was entirely distinct from the agency, that as merchants plaintiffs were in a position to make consignments and that they are entitled to retain any commission which the European firms may have been willing to pay to plaintiffs to influence consignments in their favour. I am unable to concede this. Mr. Tatham states that when he sent the consignment he wrote to the firm to whom the goods were consigned demanding the grant of a percentage which was granted, and that " out of the sales on account of the plaint dealings with the defendants " the plaintiffs " got some Rs. 15,000 return commission more or less." In other words, the plaintiffs obtained a profit by consigning the goods of the defendants to firms of their own selection. I think that this must be held to be a dealing in the business of the agency, and as such dealing was not on behalf of the principal and was never disclosed to the prinicpal, the latter is entitled to claim whatever benefit the agent has gained by the transaction. The general principle of all such cases is thus stated by Story: " In all cases when a person is an agent for others all profits and advantages made by him in the business beyond his odinary compensation are to be for the benefit of his employers." The plaintiffs' firm was employed by defendants to dispose of their consignments. In so doing the plaintiffs made certain profits in the shape of a commission paid by the firms to whom the consignments were made. Such profits must be held to have been made for the benefit of the defendants.
41. In Turnbull v. Garden 38 L.J., Ch., 331 Lord Justice James (then Vice-Chancellor) observed: "A person who is dealing with another man's money ought to give the truest account of what he has done, and ought not to receive anything in the nature of a present or allowance without the full knowledge of the principal that he is so receiving."
42. The commission paid to the plaintiffs in this case may be regarded as a present or allowance made to the plaintiffs' firm at Tellicherry for putting business in the hands of the European firms, who of course make their own profit out of such business and are therefore ready and willing to pay a commission to the Tellicherry firm for, as the Advocate-General puts it, influencing consignments.
43. It is, however, argued that the payment of this commission is a usage of the trade and that in consequence of the arrangement made plaintiffs' interest was not brought in conflict with his duty. [267] There is no evidence beyond Mr. Tatham's assertion as to its being a trade usage. Mr. Zellweger gives evidence as to the commission charged by Busch and Co., for doing business for his firm, not of any commission allowed to his firm. The arrangement was one made between Mr. Tatham and the different firms and even if such commission had, as Mr. Tatham asserts, been paid by various consignees for many years, it does not appear that the defendants were aware of it. Mr. Tatham admits that he never mentioned it to them. It is not always easy to say whether the interest of the agent was adverse to his duty, but in Morison v. Thompson L.R., 9 Q.B., 480, Lord cockbubn stated in these terms the result of the authorities: " An agent is bound to account to his principal for all profits made by him in the course of his employment, and is compelled to account in equity. At the same tima there is a duty, which we consider a legal duty, incumbent upon him, whenever any profits so made have reached his hands, to pay over the amount as money absolutely belonging to his employer, unless there is an, account remaining to be taken between him and his employer."
44. I hold, therefore, that the plaintiffs are bound to account to defendants for whatever sums they have received from the consignees as commission on the sales made on behalf of the defendants.
45. In this respect I would modify the decree of the Subordinate Judge which in other respects is confirmed. Respondents are entitled to their costs of the appeal, but must pay appellants' costs on the amount hereafter found due as commission.
46. The Court then made the following ORDER
47. We shall therefore call upon the Subordinate Judge to submit a finding as to the actual amount of return commission received by respondents from their sub-agents in the matter of appellants' consignments within three weeks from the date of receipt of this order, and seven days after the posting of the finding in this Court will be allowed for filing objections.'
48. Fresh evidence may be adduced by either party.
49. In compliance with the above order the Subordinate Judge submitted his finding as to the amount of the return commission. When the appeal came on for final disposal, this finding was accepted by their Lordships and judgment was delivered accordingly.
50. Wilson and King, Attorneys for Respondents.