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FARAH v. ROBIN HOOD FLOUR MILLS LTD. AND ANOTHER


  • New
  • 1962-05-21
  • HIGH COURT
  • GLR 377-383
  • Print

CHARLES, J.


Summary

Contract?-c.i.f. contracts?-Passing of property?-"Conditional property"?-Buyer's right to reject goods.

Contract?-Sale of flour?-Undertaking as to fitness for human consumption.

Contract?-Breach of warranty?-Quantum of damages?-Loss of anticipated profits?-Whether damage in contemplation of parties at time of contract.

Headnotes

On the 4th June, 1961, 2,000 bags of flour ordered by the plaintiff, a baker, from the first defendants, a Canadian company, arrived at Takoradi, c.i.f., on board the S.S. Kindat. On the 9th June, the plaintiff paid the cost of G4,276 0s. 5d. to the Bank of West Africa Ltd., and was given the bill of lading and other documents to enable him to take delivery of the flour from the harbour. He started to remove the flour from the harbour to his warehouse in town. He completed the removal on the 12th June, 1961. He opened ten bags and found that all ten were infested with weevils. He immediately reported to a Mr. Millington, a local representative of the defendants. He told Mr. Millington that he did not like the whole consignment. Mr. Millington suggested a survey. A survey by Lloyds confirmed that the flour was weevil-infested. All the bags were subsequently collected by the medical officer of health and destroyed on the 16th June, 1961, as unfit for human consumption. The plaintiff sued the defendants for a refund of the purchase price as money paid for a consideration that has wholly failed, and other damages, including the profits he would have made if he had baked all the 2,000 bags flour.

Judgement

ACTION to recover money paid for goods on the grounds that they did not conform to the contract of sale.

The plaintiff's claim against the defendants briefly is for G5,221 5s. 5d. damages being the refund of money paid by him for 2,000 bags of flour which were unfit for human consumption and loss of profits as is more fully set out in the particulars attached to the statement of claim. Alternatively, the plaintiff also claims from the defendant the said sum paid for a consideration that has wholly failed. The defendants in their defence deny liability and contend that the flour supplied was in accordance with the contract and only 339 bags of flour were damaged by sea-water which damage is covered by the certificate of insurance. They also contend that if the flour was found to be infested with weevil on their arrival the defendants were not liable for any damage caused thereby. They further contend that the flour should not have been destroyed because it was infested with weevil.

The plaintiff, who has been carrying on a bakery business for the past fifteen years, has been purchasing flour for the past twelve years from the first defendants who knew that he has been carrying on this business. On the 20th April, 1961, the first defendants, manufacturers and exporters of flour carrying on business in Halifax, Canada, agreed to sell and the plaintiff to buy 2,000 bags of Robin Hood flour to be shipped on S.S. Kindat which was due to sail on about the 9th May, 1961, c.i.f. Takoradi. About the 1st June, 1961, the plaintiff was notified [p.379] by Elder Dempster, Ltd. that S.S. Kindat would be arriving at Takoradi harbour on the 4th June, 1961, and on the 9th June, 1961, the plaintiff paid the Bank of West Africa, Ltd., G4,276 0s. 5d. and he received from the bank the bill of lading, four invoices, the insurance certificate and the bank draft. The plaintiff then delivered the bill of lading to Elder Dempster Ltd., and obtained from them a delivery order to take delivery of the goods. The plaintiff passed the bill of entry and was authorised by the Customs Department to clear the goods. Before the flour was cleared by the plaintiff the harbour authority issued certificates showing that 339 bags of flour were caked.

On the 9th June, 1961, the plaintiff started removing the flour to his warehouse in Takoradi and he completed removing the 2,000 bags of flour on the 12th June, 1961. On the 10th June, 1961, the plaintiff, according to his practice when he receives a new consignment of flour, sent ten bags of this flour to his bakery for examination, and when these ten bags of flour were opened at his bakery they were found to be infested with weevil so he took them back to his warehouse. He later inspected the other bags of flour which he had conveyed to his warehouse and found they were heavily infested with weevil and caked. On the said date the plaintiff immediately applied in writing to Lloyds' agent for a survey of the flour.

On the 13th June, 1961, Mr. Millington, an employee of the second defendants who are the local agents and representatives of the first defendants, came to Takoradi and he inspected about 60 bags of flour and found them to be caked and infested with weevils. The plaintiff refused at the suggestion of Mr. Millington to accept a depreciation allowance on the flour as the plaintiff told him the flour was no good. The plaintiff there and then rejected the flour and as a result of this Mr. Millington requested him to have the flour surveyed by Lloyds' agents. He assured the plaintiff that the first defendants would make good any loss suffered by the plaintiff so there was no need for him to worry. Later that day Mr. Smith, a representative of Lloyds' agents, carried out a survey of the 2,000 bags of flour which arrived on the S.S. Kindat on the 4th June, 1961, and he issued the following report as appears in his report exhibit G.

"Harbour waybills endorsed for approximately 20 per cent found partly caked. At the time of survey it was found that the consignment was weevil infested and consignee stated his reluctance to use the flour for baking. Sieving was suggested but rejected by consignee and it was agreed that the Medical Officer of Health should be consulted for an expert opinion. Consignee to produce destruction order from Medical Officer of Health."

In his evidence-in-chief Mr. Smith who was called by the defence stated that the bags of flour he examined appeared to be sound externally, but on opening the bags he found the flour fairly heavily infested with weevil and slightly discoloured. During the hearing of the case there was a veiled suggestion by counsel for the defendants that the plaintiff was guilty of fraud in that 10,900 bags of flour had arrived on the S.S. Kindat in Ghana and that there was no complaint from any of the other customers in Ghana. But there is the irrefutable fact that more than twenty per cent of the plaintiff's flour was caked before he took physical delivery, and the second defendants' representative and Lloyds' agents confirmed that the flour was infested with weevil. I do not believe or accept the evidence of Mr. Freeman, who is not an expert and who had [p.380] no opportunity of examining the flour, wherever his evidence is in conflict with that of other witnesses who examined the flour. Moreover, I am satisfied that the flour examined by Lloyds' agent was the flour which arrived on the S.S. Kindat and which was subsequently destroyed on the 16th June, 1961, by the Senior Superintendent of Health (P.W.1).

It is true that P.W.1 said that he found more than 2,000 bags of flour in the plaintiff's warehouse but he never stated how many. He never counted all the bags of flour in the plaintiff's warehouse so I do not rely on this aspect of his evidence. I accept the evidence of the plaintiff who impressed me as a witness of truth when he said that there was no other flour apart from the 2,000 bags of flour in his warehouse, and this is in a way supported by the evidence of Mr. Millington who stated that in his opinion the plaintiff's warehouse could hold just about 2,000 bags of flour.

At the request of the plaintiff P.W.1 examined 2,000 bags of flour at plaintiff's warehouse on the 15th and 16th June, 1961, and found them to be unfit for human consumption. He therefore seized them, removed them in public health lorries and caused them to be destroyed in the presence of himself and other officers. The plaintiff did not pay for the removal.

On the 8th July, 1961, the plaintiff wrote a letter exhibit K to the second defendants in which he enclosed the relevant documents including Lloyd's survey report, exhibit G and the condemnation certificate exhibit H. In this letter, the plaintiff claimed, inter alia, the c.i.f. value of the 2,000 bags of flour which amounted to G4,233 6s. 9d. As the plaintiff received no reply to this letter, he wrote the second defendants another letter, exhibit L, dated the 26th July, 1961, reminding them of his previous letter exhibit K. The first defendants then replied to the plaintiff in a letter dated the 1st August, 1961, exhibit M.

Mr. Millington was not an impressive or truthful witness. In the application for leave to defend he swore on the 11th November, 1961, to an affidavit, exhibit Q, paragraphs 8, 9, 10, 11, 12 and 13 of which read as follows:

"8. That if the goods were found to have become infested with weevil on arrival at destination then it is the ocean carrier who is in law liable for any damage caused thereby and not the seller.

9. That the seller (i.e. the second defendants) has a clean receipt for the delivery to the plaintiff of 1661 bags of sound flour, the remaining 339 having been found to have been slightly caked at the edges as a result of sea-water damage, and insurance certificates were issued to cover these discrepant bags.

10. That the plaintiff's first complaint of weevil infestation was made about a fortnight after he had paid the draft presented to him and had taken delivery of the flour, and had kept the flour in his warehouse in which already were stored quantities of flour from previous consignments.

11. That Mr. T. F. Millington, the Managing Director, of the first defendant company went to the plaintiff's warehouse and the plaintiff opened up about 50 or 60 bags of flour which Mr. Millington found to be infested with weevil, but it was impossible for Mr. Millington to say if these bags belonged to the consignment by the S.S. Kindat.

12. That shortly after Mr. Millington's visit to the plaintiff's warehouse a Lloyds' surveyor surveyed the flour for sea-water damage (the consignment was not insured against weevil infestation as the plaintiff did not request such an insurance) and was shown a number of bags of flour infested with weevil.

13. That the Lloyds' surveyor was not, and is not, in position to say whether the bags of flour found to be weevil-infested were part of the consignment by S.S. Kindat aforesaid."

However, when he gave evidence he was forced to admit in cross examination that he had no reason to doubt that the flour which he saw at the plaintiff's warehouse on the 13th June, 1961, came from the S.S. Kindat and that was why he told the plaintiff to have a survey made. He also stated in cross-examination that he examined twenty bags of flour externally, but when he was confronted with his affidavit exhibit Q, he was again forced to admit that the plaintiff opened about 50 to 60 bags of flour which he examined and found to be infested with weevil. I am satisfied that the defendants are making a belated attempt to impugn the integrity of the plaintiff by suggesting that the flour which was found to be unfit for human consumption and consequently destroyed was not the 2,000 bags of flour which arrived at Takoradi on the S.S. Kindat on the 4th June, 1961.

It was suggested by counsel for the defendants that the plaintiff never informed the defendants that the flour was destroyed until he wrote the letter dated the 8th July, 1961, exhibit K, but Mr. Millington in his examination-in-chief admitted that the plaintiff went to Accra about two to three weeks before they received his letter, exhibit K, and informed him that the flour was destroyed.

There can be no doubt that it was a condition of the contract that the defendants would sell flour which was fit for human consumption and on the evidence I find that the defendants committed a breach of this condition.

In Hardy and Company v. Hillerns Fowler1 Atkin L.J. said:

"My own view is that if the goods are not in accordance with the contract the property does not pass to the purchaser upon his taking up the documents if he has not had at that time an opportunity of ascertaining whether the goods are in conformity with the contract. Though it may be that the property passes subject to its being revested when the buyer exercises his right of rejection."

However in Kwei Tek Chao v. The British Traders Shippers Ltd.2 Devlin, J., after considering the two views expressed by Atkin L.J. said:

"I think that the true view is that what the buyer obtains, when the title under the documents is given to him, is the property in the goods, subject to the condition that they revest if upon examination he finds them to be not in accordance with the contract. That means that he gets only conditional property in the goods, the condition being a condition subsequent. All his dealings with the documents are dealings only with that conditional property in the goods. It follows, therefore, that there can be no dealing which is inconsistent with the seller's ownership unless he deals with something more than the conditional property.... If the property passes conditionally the only ownership left in the seller is the reversionary interest in the property in the event of the condition subsequent operating to restore it to him. It is that reversionary interest with which the buyer must not, save with the penalty of accepting the goods, commit an inconsistent act."

An essential feature of a c.i.f. contract is that the property in the goods passes only conditionally on the acceptance of the documents by the buyer who is entitled to reject the goods on actual delivery if the [p.382] goods are not in accordance with the contract. Furthermore, if the goods to the knowledge of the seller are to be actually delivered to the buyer to a further destination and the nature of the goods and the way in which they are packed make it unreasonable for the buyer to inspect them immediately on delivery the right to reject will be extended to a later date. See Van Den Hurk v. Martens.3 But the buyer must reject the goods within a reasonable time, and if he does any act in relation to the goods inconsistent with the ownership of the seller he loses his right to reject.

On the evidence I find that the plaintiff could only reasonably inspect the 2,000 bags of flour when he took them to his warehouse, a fact of which the second defendants were aware, and as all the bags of flour were not delivered to his warehouse until the 12th June, 1961, he elected to reject the flour within a reasonable time when he told Mr. Millington on the 13th June, 1961, that he did not want the flour. This was elicited in cross-examination and no evidence was led by the defence to contradict it. As the 2,000 bags of flour were rejected by the plaintiff, the property in the flour which passed conditionally to him revested in the first defendants. Therefore, when the plaintiff agreed to have the 2,000 bags of flour surveyed at the suggestion of Mr. Millington, he was only holding them as a bailee for the first defendants. It was Mr. Smith, the surveyor who suggested that the 2,000 bags of flour should be examined by the Medical Officer of Health to determine whether or not they were fit for human consumption and the Superintendent of Health subsequently confirmed the opinion of the plaintiff that the flour was unfit for human consumption. In my view when he went down to Accra about two to three weeks before he wrote the letter exhibit K dated 8th July, 1961, and informed Mr. Millington that the flour had to be destroyed as unfit for human consumption and requested, inter alia, a refund of the money he paid for the flour he was again rejecting the flour, the property in which had passed to him conditionally.

In Hardy Co. v. Hillerns Fowler, supra, Banke L.J. said:

"Where under a contract of sale goods are delivered to the buyer which are not in accordance with the contract, so that the buyer has a right to reject them, the seller upon receipt of notice of rejection is entitled to have the goods placed at his disposal so as to allow of his resuming possession forthwith, and if the buyer has done any act which prevents him from so resuming possession that act is necessarily inconsistent with his right."4

I do not regard the plaintiff's request to the Health Authority for an examination of the flour and the subsequent seizure and destruction of the flour as an act or acts inconsistent with the ownership of the first defendants. It was Mr. Millington who instructed the plaintiff to have a survey made although the plaintiff had previously applied for a survey, and when the survey was made the plaintiff said he would not accept the goods at a reduced price. As a result it was Lloyds agent who suggested that the flour be examined by the medical officer. It is immaterial that the flour was in fact examined by the Superintendent of Health (P.W.1) because he is empowered by law to act as he did. Counsel for the defendants submitted that the plaintiff had no right to surrender [p.383] the goods when he was requested to do so, but instead he should have informed the second defendants. This contention is fallacious because if the plaintiff had prevented P.W.1 from seizing the flour he would have exposed himself to a criminal prosecution and run the risk of not having his licence renewed to carry on his bakery business.

If it can be rightly contended that the plaintiff never rejected the 2,000 bags of flour on the 13th June, 1961, when he told Mr. Millington he did not want the flour and when he wrote the letter on the 8th July, 1961, claiming the refund of the money he paid for the flour and that he lost his right to reject the 2,000 bags of flour when they were destroyed, then the defendants deprived him of his right to reject by supplying him with flour which was unfit for human consumption and consequently had to be destroyed. In such circumstances the plaintiff would be so far as money is concerned in the same position as regards damages as if he had exercised his right to reject: see J. Finlay Co. Ltd. v. Kwik Hoo Tong, etc.5 which was followed in Kwei Tek Chao's case, supra.

If I am right in holding that the plaintiff rejected the flour within a reasonable time then his claim for money paid for a consideration which has wholly failed is well-founded and not otherwise. If I am wrong in holding that the plaintiff did reject the goods or that he was deprived of the right to reject them, then the property in the goods passed to the plaintiff. In other word she has not repudiated the contract, but this will not preclude him from treating the breach of the condition as a breach of warranty for which he could sue. Even if the plaintiff sued for a breach of warranty he would be entitled to the same damages as if he had rejected the flour because he suffered a total loss, as the flour had to be destroyed. If this is the correct view I can amend the plaintiff's claim, but I do not consider this necessary.

As regards the quantum of damages the plaintiff will be entitled to recover the amount he paid to the bank including bank charges as well as the cost he incurred in delivering the flour to his warehouse. He would also be entitled to the amount he paid for the survey. Furthermore the plaintiff is entitled to claim for loss of profit as the defendants knew he purchased the flour for his bakery business and this damage is deemed to be in the contemplation of the parties when they entered into the contract. The plaintiff claimed G870 as loss of profit but he gave no particulars on which this claim is based. Counsel for the defendants never challenged this evidence in cross- examination but yet he contends that there is no proof of loss of profit. Counsel for the defendants submitted that the plaintiff, by surrendering the flour for destruction, failed to minimise the damage, but I find on the evidence that there was nothing which the plaintiff could reasonably do to minimise any damage. I consider G650 a reasonable sum which can be awarded as damages for the loss of profit.

For these reasons I enter judgment in favour of the plaintiff against the defendants for the sum of 5,001 5s. 5d. with costs fixed at 200 guineas inclusive of fee to both counsel.

Decision


Plaintiff / Appellant

F. A. Williams, with him R. S. Blay

Defendant / Respondent

Bannerman, with him O. Y. Asamoah

Referals

(1)  Hardy & Co. v. Hillerns & Fowler [1923] 2 K.B. 490

(2)  Kwei Tek Chao v. British Traders & Shippers [1954] 2 Q.B. 459; [1954] 1 All E.R. 779

(3)  Van Den Hurk v. Martens [1920] 1 K.B. 850

(4)  J. Finlay & Co. Ltd. v. Kwik Hoo Tong, etc. [1929] 1 K.B. 400

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