Find a Lawyer

High Court Appeal No.81 of 1982 decided on 16th March,1987.

---Ss. 126, 127 & 128--Contract of guarantee--Liability of agent- Co-extensive with principal debtor--Appellant supplied goods to respondent No. 2 on order placed with them by respondent No. l (Master of ship), while respondent No.3 orally guaranteed for respondent No.2 to reimburse amount of goods to appellants in case respondent No .2 did not make payment--Respondent No.2 failing to make payment--Respondent No.3 who guaranteed in respect of one out of the two bills submitted by appellants, claiming that he was agent of respondent No.2 for limited purposes--Held, respondent No.3 was liable for act of respondent No.2 (his principal debtor) in respect of one of bills he had guaranteed.

Schorsch Meier Gmbhv v. Hennin (1975) 1 All ER 156, 157; Miliangos v. George Frank (Textiles) Ltd. (1976) 1 Lloyd's Rep 201 (1975) 3 AER 409; Barclays Bank International Ltd. v. Levin Bros. (Bradford) Ltd. (1976) 3 AER 900 : (1977) 1 Lloyds Rep. 51 and Krant v. Albany Fabrics (1976) 2 Lloyd's Rep, 350 rel.

---S. 34--Interest for period prior to date of suit may be awarded if there is an agreement for payment of interest at a fixed rate or if it is payable by usage of trade having force of law entitling plaintiff to recover interest.

---S. 34--Interest--Appellants claiming interest from date prior to institution of suit but failing to establish their right to recover interest from that date--Interest allowed to appellants from date of institution of suit under S.34, Civil Procedure Code.

S.M. Sadiq for Appellant.

A.H. Mirza for Respondents.

Dates of hearing: 3rd and 4th February, 1987.

.--This is a High Court Appeal from the judgment and decree dated 16-9-1982 passed by a learned Single Judge in Suit No.126 of 1972 on the original side of the High Court, partly decreeing the suit of the appellant.

The facts lending to the filing of the suit are that the respondents 1 and 3 placed orders for the supply of duty free stores and necessities to "s.s. CAPETAN CHRISTOS P". and on 13-8-1969 and 9-1-1970, the appellants supplied duty free ship stores and necessities of the total value of L 2769.0 from the bonded warehouse at Karachi Port to 's.s. CAPETAN CHRISTOS P' owned by the respondent No. 2. The respondent No. 3 where the agents of respondent No. 2 at the relevant time. As per terms of said sales, the amount of L.2,769.0 was to be paid to the appellants foreign suppliers named in the bills within one month. In case of failure of such payment, the respondents were to pay to the appellants the said sum of L.2,769.0 or its equivalent in Pakistan currency with value of bonus vouchers to enable the appellants to remit the agreed payment in foreign currency with all other claims of the plaintiffs and interest at 9 per annum. It was the case of the appellants that the respondents 1 and 3 guaranteed payments accordingly. The payments were not made by the respondents. Hence the appellants filed the above suit.

The respondents 1 and 2 did not contest the suit and the same was decreed ex parte against them. The suit was contested by the respondent No.3 who filed the written statement in which the respondent No.3 had denied the liability. Several issues were framed in the suit.

After recording evidence of the parties, the trial Court by the judgment dated 16-9-1982 decreed the suit for L.2,769-0 equivalent to Rs.37,270.68 against respondents 1 and 2 jointly and severally. The appellants suit was decreed against the respondent No.3 for Rs.12,488.07. This amount has also been held to be included in the sum of Rs.37,270.68. The present High Court Appeal has been filed. by the appellants.

Mr. S.M. Sadiq, learned counsel for the appellants has assailed before us the findings of the trial Court on issues 1 (a), 3 (a) and 6 as these issues were the only issues which affected the appellants. Mr.A.H. Mirza learned counsel for the contesting respondents, namely respondent No.3 has endeavoured to support the judgment of the learned Single Judge by submitting that the findings arrived at by the trial Court were based on a correct and proper appreciation of the evidence and the facts and circumstances of the record.

We have gone through the judgment of the learned Single Judge, particularly issues 1(a) and 3(a) and find that the learned Judge has correctly decided the issues. We will now proceed to discuss and examine the findings of the learned Single Judge on issues 1(a) and 3(a) and the evidence led thereon by the parties, Issues Nos. 1(a) and 3(a) were cast by the trial Court thus:--

1(a) Did defendants No.3 and No.l not place orders for the supply of ship stores to 's.s. CAPETAN CHRISTOS P' on 13-8-1969 and 9-1-1970 as alleged in para 1 of the plaint

3(a) Did defendant No.3 alongwith defendant No.l not guarantee payments as alleged in para 2 of the plaint If so, was the guarantee not valid and legal

To begin with, we would like to refer to the pleadings of the appellants in order to show the exact material particulars averred in the plaint. The subject-matter of issue No.l (a) is to be found in paragraph 2 of the plaint at page 2 of the paper book.

"2. That as per terms and conditions of the supply of the said stores, out of the said sum of L.2,769.00 a sum of L.930.00 (as per Annexures A, B and C was to be paid to CARISBERGBREWERIES VESTER FAELLEDVEJ 100, DK-1799 COPENHAGEN 'N" DENMARK, and a sum of L.1,830, (as per annexures D & E) was to be paid to JOHN WALKER & SONS LTD. 63, St. James's Street London S.W.1, in the said foreign currency within one month. In case of failure of such, payment the defendants were to pay the plaintiffs the said total sum of L.2,769 or its equivalent in Pakistan currency with value of Bonus Vouchers to enable the plaintiffs to remit the agreed payment in foreign currency, with all other claims of the plaintiffs and interest at 9 P.A. as per contract and custom of the market. The defendants Nos. 1 and 3 also guaranteed payment accordingly."

The contesting respondents denied that "these defendants guaranteed payment as alleged and it is denied that these defendants are liable to pay. It is further submitted that there was no legal or valid contract of guarantee and the guarantee, if any, stands discharged." The orders Exhs.6 and 7 were placed by the respondent No.l. In the first order dated 12-8-1969 (Exh. 6) after the signature of the respondent No.l there is the following printed endorsement:-

"Messrs Sind Trading Company have agreed to supply the above-mentioned goods subject to the conditions stated on the reverse of this order form and in consideration of the assurance which we hereby give that if the ship owners/ purchasers fail to make payment for the goods ordered above, within a period of one month of the delivery of the goods ordered above, we shall pay M/s. Sind Trading Company for the-above-mentioned goods in foreign exchange, if necessary, even by purchasing Bonus Vouchers. We shall also pay all other claims of Messrs Sind Trading Company in relation to the above-mentioned goods. We shall make such payments to M/s. Sind Trading Company at their instruction. We also bind ourselves to meet with all demands that may be made by the Customs authorities and by Karachi Port Trust in relation to the above-mentioned goods."

In the second order (Exh.7) there is no such endorsement. The respondent No.3 were at material, times agents of respondent No. 2.

The respondent No.3's case, as set out in the written statement, was that they were agents of the respondent No.2 for a limited purpose and that they had nothing to do with the orders placed for the goods supplied by the appellants. The appellants' reply is that the respondent No.3 as agents fully competent to make payment of the goods ordered by the ship of respondent No.2 and secondly they guaranteed the payments of both the bills.

In our opinion this case has to be considered with reference to the provisions of section 230 of the Contract Act. Under section 230, an agent is personally liable under a contract made by him for sale or purchase of goods for a merchant resident abroad, or where the agent does not disclose the name of his principal, or where the principal, though disclosed, cannot be sued. The rule contained in section 230 would not apply to the present case. In the present case no contract was entered into between the appellant and the respondent No.3 for supply of the goods to the vessel mentioned above and these goods were supplied by the appellants on the orders placed with them by the Master of the ship, that is, the respondent No.l.

In our opinion this case has to be considered with reference to sections 126 to 128 of the Contrttet Act. Section 126 of the Contract Act defines a contract of guarantee as follows:-

"S. 126, A contract of guarantee is a contract to perform the premise or discharge the liability of a third person in case of his default. The person who gives the guarantee is called the 'surety'; the person in respect of whose default the guarantee is given is called the 'principal debtor' and the person to whom the guarantee is given is called the 'creditor'. A guarantee may be either oral or written."

Section 127 of the Contract Act provides that anything done or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving a guarantee. Section 128 of the Contract Act provides that the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. On this view of the matter, we consider that the liability of respondent No.3 is co-extensive with that of the respondent 2 in respect of the first bill (Exh.6) and not in respect A of second bill (Exh.7). The respondent No.3 had made themselves personally liable as guarantor in respect of first bill (Exh.6) and it was thus a case of personal liability by contract.

We have gone through the evidence adduced by the parties. We did not find any material on the record which can show that the respondent No.3 orally guaranteed to reimburse the appellants in case of non-payment by the respondent No.2. The learned Single Judge rightly held that the respondent No.3 only guaranteed payment in respect of first bill. The appellants claimed the amount due on the B bill Exh.6 ( 932.10) in the Pakistan currency equivalent of the sum due in Pound Sterling and at the date when payment should have been made. In the case of Schorsch Meier Gmbhv v. Hennin (1-1975-1 AER) at pages 156, 157 it is held as follows:-

"It is adjudged this day that the defendant do pay to the plaintiff (the sum in foreign currency) or the sterling equivalent at the time of payment."

In Miliangos v. George Frank (Textiles) Ltd. (1976) 1 Lloyd's (1975) 3 AER 409 the facts of the case are that the plaintiff, a national of Switzerland, agreed to sell, and the defendants an English company, agreed to buy, a quantity of polyster yarn. The proper law of the contract was Swiss Law and the money of account and payment was Swiss Franes. The defendants did not pay any part of the price. They filed a suit claiming payment of the Sterling equivalent of the contract price at the date when payment should have been made. Between that date and the date of the hearing of the action sterling fell in value against the Swiss Francs with the result that at the date of the hearing, the contract price on Swiss Francs was equivalent to a much larger sterling sum than it had been in 1971. The defendant did not dispute liability but contended that the plaintiff was not in law entitled to judgment for a sum of money expressed in a foreign currency. The House of Lords held that conversion should be at the date when the Court authorises enforcement of the judgment in sterling.

In Barclays Bank International Ltd. v. Levin Bros (Bradford) Ltd. (1976) 3 AER 900; (1977) 1 Lloyd's 51 Mr. Macaka, J. held as follows: -

"In my judgment, therefore, for the reasons given, the plaintiffs are entitled to judgment on each of the four bills of exchange expressed in the dollar amounts of each such bill totalling in all 92,548.70. If the plaintiffs so desire, the judgment can add or the equivalent thereof in sterling at the date of payment of this judgment of its enforcement.

The above decision was followed in the case of Krant V. Albany Fabrics (1976) 2, Lloyd's Rep. 350.

We also ascribe to the above view and we hold that the appellant is entitled to L.932.10 or the equivalent in Pakistan rupees at the -date of payment of enforcement of judgment.

The contention of the learned counsel for the appellants is, that the appellants are entitled to interest and costs.

The crucial question is whether the Court has authority to allow interest for the period prior to the institution of the suit; and the solution of this question depends, not upon the Civil Procedure Code, but upon substantive law. Interest for the period prior to the date of the suit may be awarded, if there is an agreement for the payment of interest at a fixed rate, or it is payable by the usage of trade having force of law or under the provisions of any substantive law entitling the plaintiffs/ appellants to recover interest. In the present case the appellants have not established their right to recover interest prior to the date of the suit, but they must get interest under section 34, C.P. Code, at 6 per annum on 2,769 from 25-3-1972, the date of the institution of the suit until payment. On the question of costs it is to be observed that the appellants, while succeeding on the question of interest and the equivalent sterling at the date of payment, have famed on the main points raised by them. Having regard to the amount involved in this appeal, and to the circumstances of the case, we consider that the parties should bear their own costs. The result is hat the appeal brought by the plaintiffs is allowed only to the extent that the interest which was declined by the learned Single Judge is allowed at 6% from the date of institution of suit until payment and equivalent of b.932.10 in Pakistan currency at the date of judgment or date of payment but it is dismissed on all other grounds.

M.Y.H./S-62/ K Appeal partly accepted.

Find a Lawyer Near You

Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.