TMI Blog1950 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or yarn outside Bombay by rail without. obtaining the necessary previous permit from the Textile Commissioner at Bombay. On or about the 8th February, 1944, Mohanlal of the defendants' joint family firm came to Bombay and the plaintiffs purchased on their behalf 278 bales of piece goods. Ninety four out of those were despatched according to the defendants' instructions. The plaintiffs, according to the defendants' instructions, applied for and obtained permit to consign several more bales. On the permits being issued they were despatched on 14th February, 1944, to destinations given by the defendants. On the 10th April, 1944, the plaintiffs, after obtaining the necessary permits, despatched more bales as directed by the defendants. The dispute between the parties relates to the remaining 92 bales which were stored in godown No. 424, Baroda Street, Argyle Road, Bombay, pending the receipt of permit for consigning the same On the 14th April, 1944, there occurred a big explosion in the Bombay harbour which destroyed several immovable properties and godowns with moveable property covering a large area near the port. Fires were caused by the explosion and they also caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to insure the goods was not proved and passed a decree in favour of the plaintiffs. On appeal, differing from the view of the trial court, the appeal court held that instructions were given by Mohanlal to insure the goods and that the agreement was proved. In thus differing from the trial court's decision, they accepted the well-recognised principle to give full weight to the trial judge's observations about the witness. They however found that on the documents the view of the learned trial judge was not correct. In doing so, they principally relied on statements of account sent by the plaintiffs to the defendants in respect of bales purchased in February, 1944, and despatched by them out of the lot of 278 bales previously and where the plaintiffs had charged the defendants insurance premia at the rates mentioned in the defendants' written statement. They rejected the plaintiffs' explanation, which was accepted by the trial judge, that these entries were foolishly made out of cupidity by the plaintiffs. After a brief discussion in which this point was haltingly urged before us, the learned counsel for the plaintiffs did not very properIy dispute this conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Bombay Docks on the 14th April, 1944, to restrict litigation in connection with the said explosions and fires and to make certain other provisions in connection therewith. The other relevant provisions may be also noticed at this stage. Uninsured property was defined to mean property which was not covered whether wholly or partially by any policy of fire, marine or miscellaneous insurance at the time of the explosion. After providing for the procedure according to which compensation may be claimed and dealt with by the Claims Committee to be set up under the Ordinance and an appeal and review from their decision, section 14 provided as follows :-- 14. Subject to the provisions of this Ordinance, there shall be paid by the Central Government compensation for explosion damage to property being (a) damage caused by fire to property insured whether wholly or partially at the time of the explosion against fire under a policy (other than a policy of marine insurance) covering fire risk, or damage caused by blast without fire intervening to property insured whether wholly or partially at the time of the explosion under a pollcy (other than a policy of marine insurance) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation was to be paid under the Ordinance. The appellants have recovered that amount and have now agreed to give credit of the same to the respondents. The dispute is in respect of the remaining fifty per cent. It is not disputed that if the goods had been insured, under section 14 of the Ordinance, full compensation would have been recovered by the appellants and become payable to the respondents. The appellants' contention is two-fold. Firstly, that if they had insured the goods the ordinary fire insurance policy would not have covered the risk and therefore although they had committed a breach of the agreement or been negligent in their duty as agents, they were not liable to pay anything more to the respondents. In the alternative it was argued on their behalf that the intervention of Government in passing this Ordinance could not increase or add to the liability of the appellants for the breach of contract or breach of duty and therefore they were not liable to pay the compensation which would have been receivable by the respondents if the goods had been insured. The second contention is that the counterclaim of the respondents is barred under section 18 (2) o[ th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsurers, i.e., the Court will then be -entitled in equity to proceed on the footing as if an insurance had been effected by the appellants and the goods stood covered under a fire insurance policy. Whatever consequences follow from that position must be accepted and enforced in a court of equity against the appellants. Proceeding on that line of reasoning under section 14 of the Ordinance the only thing which is required to be considered is whether the goods were covered by a fire insurance policy. The terms of the policy are immaterial. If, therefore, the appellants are considered as having insured the goods and are precluded from saying that the goods were not covered by a fire insurance policy, the loss arising from the fact that the goods were not so covered is a direct consequence of their neglect and they must make it good. That will make them liable to pay what was claimed by the respondents. If, however, it is considered that they were not themselves insurers but that they had agreed only to keep the goods insured under a policy of insurance of a recognised insurance company on the usual fire insurance policy terms, the question is whether the damages claimed by the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of damages due to the late delivery of goods shipped for a port in Sweden, but which ship, owing to its unseaworthiness, was delayed in its voyage and owing to the outbreak of war under orders of the British Admiralty, was directed not to proceed to the Swedish port but ordered to discharge the cargo at Glasgow. The assignees of the bills of lading from the shippers had to forward the goods in neutral ships chartered for the purpose to the Swedish port. A war risks clause in the charterparty exonerated the owners of the vessel in the event of compliance with any orders given by the government of the nation under whose flag the ship sailed, as to destination delivery or otherwise. The holders of the bills of lading claimed the re-transport charges from Glasgow to the Swedish port. It was contended that these damages were too remote. The House of Lords rejected the contention. In the speech of Lord Wright most of the relevant authorities have been reviewed and the ratio decidendi has been set out. In Hadley v. Baxendale Alderson B., giving the judgment of the CoUrt, thought that the proper rule in such a case consisted of two alternatives. He said: Where two parties have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damage is a question of fact, and the only guidance the law can give is to lay down general principles which afford at times but scanty assistance.in dealing with particular cases. The Judges who give guidance to juries in these cases have necessarily to look at their special character, and to mould, for the purposes of different kinds of claim, the expression of the general principles which apply to them and this is apt to give rise to an appearance of ambiguity.-.It was necessary to balance loss and gain and no simple solution was possible. The House of Lords in Liesbosch (Owners) v. Edison (Owners) (2) has stated at page 463 that it is impossible to lay down any universal formula. The dominant rule of law is the principle of restitutio in integrum and subsidiary rules can only be justified if, they give, effect to that rule. (The italics are mine). In Smith, Hogg Co. Lid. v. Black Sea Baltic General Insurance Co. Ltd. (1), the loss of a vessel occurred through the negligence of the master operating on conditions of unseaworthiness existing since the commencement of the voyage. The loss was held to be caused by the breach of the warranty of seaworthiness and recoverable acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kburn in Livingstone v. Rawyards Coat Company. Bearing in mind this state of the law itappears clear that in the present case it was the duty of the appellants to insure the goods, as they had agreed to do. Once misconduct is admitted or proved, the fact that the Ordinance did not exist and could not have been in the contemplation of the parties is irrelevant for deciding the question of liability. The liability was incurred by reason of the breach of their duty and the appellants made themselves liable to pay damages. The measure of damages was the loss suffered by the respondents on account of the goods not being insured. The next point to be decided is what difference the promulgation of the Ordinance makes in the liability of the appellants. The relevant provisions are noted above. The scheme of the Ordinance clearly is, as stated in the preamble, to provide for and regulate the payment of compensation and to prevent litigation, amongst other things. It is thus a comprehensive legislation which replaces the rights of parties either under the policy of insurance against insurance companies, or on the ground of negligence against Government by the owners of the goods, as also cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment that their liability as an agent who had agreed to insure should be ascertained as on the date of the explosion is no answer to the claim of the respondents. The position would be this. Assuming that the appellants had insured the goods on the terms of the usual fire insurance policy. The respondents could ask them either to assign the policy to the respondents or to file a suit against the insurance company contending that the fire, and not the explosion, was the; cause of the loss and was covered by the policy of insurance. Before the Court could decide the rights of the parties, the Ordinance promulgated by the Governor-General prevented the decision of the dispute, but the Government undertook to pay the loss on the footing that the policy covered the risk. Tile misconduct gave rise to the liability to make good the damage and to put the respondents in the same position in which they would have been if their goods had been insured. On behalf of the appellants it was urged that because of the Government intervention in issuing the Ordinance they were sought to be made liable under a new liability. Their liability has been and exists on the basis that a fire insurance policy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m that the goods were destroyed without any neglect on their part by fire caused by the explosion and therefore they were not liable. The respondents' rejoinder is that they had asked the appellants to insure the goods and if the appellants had not failed in their duty they would have reimbursed the respondents. The appellants then plead that even if they had insured the goods the respondents could not have recovered anything from the insurance companies. It is in reply to this contention that the respondents say that the appellants' liability to recover money from the insurance company on the terms of the usual fire insurance policy is irrelevant because they could have recovered the money if they had insured in fact, irrespective of the terms of the policy, under the Ordinance. The respondents are not thus claiming to recover money from the appellants otherwise than under section 18 (1) of the Ordinance. Their cause of action is the misconduct of the agent in the business of agency and is quite different. It is not for compensation arising from explosion. It was argued that damages formed part of the cause of action of the respondents in framing the counterclaim and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t condition, it was contended for the appellants that even if they had effected an insurance on the goods according to the agreement, the loss of the goods by fire caused by the explosion would have been an excluded loss for which no damages could have been claimed from the insurer and that, therefore, the respondents would not be entitled to recover from the appellants anything more than nominal damages for failure to insure. This contention must, in my opinion, prevail. As pointed out by Mr. Mayne in his Treatise on Damages (p. 591, 11th Edition) When the agent can show that under no circumstances could any benefit to the principal have followed from obedience to his orders, and therefore that disobedience to them has produced no real injury, the action will fail. Therefore, if an agent is ordered to procure a policy of insurance for his principal, and neglects to do it, and yet the policy, if procured, would not have entitled the principal, in the events which have happened, to recover the loss or damage, the agent may avail himself of that as a complete defence. A complication, however, is introduced by an Ordinance promulgated by the Governor-General known as the Bombay E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation fox' the loss of the respondents' goods and have given credit to the respondents in their accounts for the amount thus received. The dispute now relates to the respondents' claim to the balance of the value of the goods as damages for the appellants' failure to keep them insured according to the agreement between the parties as the full value of the goods and have been obtained from the Government under section 14 without regard to any excepted risk if only they had been insured against fire.The scheme of the Ordinance appears to be that the Government, instead of having probably to fight out numerous law suits for compensation for loss or damage to property based upon alleged negligence of their officers in having allowed the explosion to take pleace, undertook to pay an amount equal to the proved loss in cases of loss or damage to goods which had been insured against fire, etc. and smaller amounts for loss or damage to uninsured goods, putting an end, at the same time, to all rights to compensation or damages arising out of the explosion, and barring all suits or legal proceedings for the same. On the basis of these provisions it was contended on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed in the same position, as far as compensation in money can do it, as if the party in breach had performed his contract or fulfilled his duty. That principle was once carried to its utmost logical, if grotesque, result as in an old English case to which Willes J. referred in British Columbia Saw-Mill Co. v. Nettleship: '' Where a man going, g to be married to an heiress, his horse having cast a shoe on the journey, employed a blacksmith who did the work so unskilfully that the horse was lamed, and the rider not having arrived in time the lady married another; and the blacksmith was held liable for the loss of the marriage. And the learned Judge warned We should inevitably fall into a similar absurdity unless we applied the rules of commonsense to restrict the extent of liability for the breach of a contract of this sort. The commonsense point of view was thus put by Lord Wright in Liesbosch, Dredger v. Edison S.S. (Owners)(1): ,, The law cannot take account of everything that follows a wrongful act; it regards some subsequent matters as outside the scope of its selection because 'it were infinite for the law to judge the cause of causes,' or consequence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, presumably being satisfied, or at any rate apprehending, that the explosion was due to the negligence of their servants, got the Ordinance passed providing for payment of compensation by the Government on the terms stated therein and at the same time putting an end to all rights to recover compensation save as provided in the Ordinance and barring all suits and other proceedings for that purpose. As any claim to compensation against the Government must be based upon the negligence of their servants, the Government took no note of excepted risks in insurance policies and undertook liability to pay full compensation in case of all insured property, doubtless because, under an arrangement with certain Insurance Companies the Government obtained a proportionate contribution as provided for in section 15, though on the hypothesis of their servants' negligence their liability in law would be the same in respect of insured and uninsured property. if the Ordinance had provided for partial compensation in both cases, as it would probably have done if the Insurance Companies had not agreed to come into the scheme with their contributions, the respondents could have no claim to recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies issued in common form in Bombay was legislatively abrogated is, in my opinion, extravagant and farfetched. The respondents' goods were destroyed when the explosion occurred on the 14th April, 1944, and on that date they could have recovered nothing except perhaps nominal damages for the appellants' failure to insure the goods as they agreed to do. It is difficult to see how by virtue of the Ordinance passed more than two months later, their claim against the appellants, which the respondents themselves are contending is not in any way affected by the provisions of the Ordinance, could become enlarged. The next contention raised on behalf of the appellants before us relates to the maintainability of the respondents' counter-claim. The contention is based upon section 18 (2) of the Ordinance which provides that no suit or other legal proceedings for any such compensation or damages (i.e., compensation or damages for any damage to or loss of any property, rights or interests due to or in any way arising out of the explosion) shall, save as aforesaid (exceptions not material here) be maintainable in any court against the Crown ......... or against any other perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o property, being damage caused by fire to property insured whether wholly or partially at the time of the explosion against fire under a policy covering fire risk . For, unless they said that, no claim could be made against the Government under section 14, and so the very basis of their claim against the appellants that, but for the appellants' neglect of duty, the respondents could have recovered the full value of the goods from the Government, would fail. But if they had to say that the goods were lost by explosion damage within the meaning of section 14, it seems to me, they would be bringing themselves under the bar of section 18 (2). The respondents cannot therefore claim that the loss of the goods was explosion damage within the meaning of the Ordinance so as to bring the case within section 14 and at the same time contend that the loss was not due tO or did not in any way arise out of the explosion in order to avoid the bar under section 18. Both section 14 and section 18 have in view the physical cause for the loss or damage to property for which compensation is claimed and not the cause of action in relation to the person against whom relief is sought. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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