Scottish Court of Session Decisions

James Thompson Dowling, confectionery agent, 59 Oswald Street, Glasgow, pursuer, raised an action in the Sheriff Court at Glasgow against James Methven, Sons, & Company, Limited, wholesale confectioners, Eastcheap, London, and carrying on business in Scotland, defenders, concluding for decree for £5000 in name of damages sustained by him by reason of the defenders' failure to implement an agreement to pay him certain commissions on sales effected by him, the defenders having given notice terminating the agreement.

The pursuer averred, inter alia—“(Cond. 1) The pursuer was appointed as from 1st February 1914 sole selling agent for the goods of the defenders in Scotland, excluding certain small areas, under agreements with them dated 27th and 30th March 1914 and 19th and 25th August 1915, and the defenders are wholesale confectioners carrying on business in London, Liverpool, and Glasgow. (Cond. 2) It is provided by the first-mentioned agreement, inter alia, that the period of said agreement should be five years from said 1st February 1914, and that if it should be found at the end of three years from said 1st February 1914 that pursuer had not increased each year the previous year's turnover by at least 10 per cent. on a basis of £12,000—that is, a total increase of £3972 for said three years—the defenders should be entitled to terminate the agreements upon giving pursuer notice in writing to that effect. (Cond. 3) On or about 24th February 1917 the pursuer received a letter from the defenders, dated 23rd February 1917, intimating that in consequence of his sales for said period of three years not having reached the stipulated figure they terminated the agreements. Subsequent to that letter the defenders have declined to supply any further goods for sale and to recognise the pursuer as their agent in terms of said agreements.… (Cond. 4) The pursuer denies that his turnover has not reached the figure stipulated for in the first-mentioned agreement, i.e., a total for the said period of three years of £39,972. Pursuer avers that his turnover for said period of three years considerably exceeded this sum, and defenders are called upon to produce a statement of said turnover as alleged by them. Said termination. of the agreements by the defenders is accordingly entirely without justification, and is a breach of said agreements on their part. Defenders' statements in answer are denied. The statement of pursuer's turnover as produced by defenders for said three years is inaccurate in respect that they have taken the net sales as representing said turnover. Pursuer avers that said turnover amounted to £53,460, 7s. 8d., made up as follows, viz.—(1) £38,910, 17s. 6d., being his gross sales for said period; (2) £673, 2s. 5d., being the sum allowed on adjustment for July and August 1915 under clause 8 of the supplementary agreement of 1915; (3) £277, 18s., being the amount of goods forwarded by pursuer from his Glasgow stock to defenders' places of business in England on their instructions, to which allowance he claims to be entitled in virtue of Mr Judd's award of 12th May 1917; (4) £1790, 11s., being the selling price of a consignment of goods from the Hershey Chocolate Company in July 1916 to implement sales made by pursuer and returned by pursuer to defenders, he having had to cancel all his sales thereof; (5) £1743, 2s. 9d., being the amount of orders for goods taken by pursuer prior to 31st January 1917 and executed by delivery thereafter; and (6) £10,064, 16s., being the amount of orders for goods taken by pursuer from customers in his district during the four months ending 31st January 1917, as against which he had ordered during said period in defenders' name from various manufacturers goods to the value of £16,332, 15s. 9d., of all which defenders were well aware.… But for the delays in delivery, over which pursuer had no control, the greater part of the goods would have been delivered and the orders implemented before the end of said period of three years. Pursuer wrote to defenders repeatedly as to these delays. Pursuer believes that certain of these orders have since been implemented by defenders, who are called upon to produce a statement thereof.… (Cond. 5) Alternatively the pursuer avers that if it is held that the pursuer's turnover for said three years did not reach the figures stipulated for in the 1914 agreement, the defenders were themselves in breach as after mentioned of the said agreements between parties, and were therefore debarred from exercising the right therein contained in their favour in the event foresaid to terminate same at the end of said period. During the period of the said agreements pursuer, by arrangement with the defenders, forwarded orders for goods direct to certain manufacturers, copies of which orders were at the same time transmitted to defenders. By article 2 of the said agreement the defenders undertook to supply to the pursuer goods as theretofore supplied by them, i.e., confectionery goods, and pursuer between 1st February 1914 and 31st January 1917 placed

Page: 9↓

with defenders, or in their knowledge with the manufacturers with whom they dealt, orders for such goods amounting to £53,460, 7s. 6d., which orders defenders have failed to implement to the extent of £16,332, 15s. 9d., notwithstanding that defenders were able to get delivery in large quantities for their other agents during the last year of the currency of the said agreement, during which year the pursuer in his correspondence with defenders referred frequently to the constant delays occurring in delivery of his goods, and to the prejudicial effect these delays had in his business, as these goods were required by pursuer in the knowledge of defenders to implement orders taken by him during the said three years. Further, it was understood and agreed between the parties, and it is a custom well known in the trade, that they should intimate to him what goods falling under the agreement they were dealing in, and where necessary supply him with samples thereof. The pursuer has ascertained that the defenders were dealing, inter alia, in cocoa, cocoa butter, caramels, caustic soda, egg yolk, glace cherries, and other confectionery goods in the ordinary course of their business as confectionery agents, but failed to intimate same to pursuer or supply him with samples thereof. The defenders by these failures to implement their obligations under or arising out of the said agreements seriously prejudiced pursuer in his carrying out of said agreements. Pursuer believes and avers that this failure on their part was intentional, and for the purpose of keeping down pursuer's turnover, in order that they might be able at the earliest possible moment to take over the Glasgow business again for their own behoof, defenders being well aware that in view of the new accounts opened by pursuer, and the large increase done by pursuer, he was making a large profit as against the percentage falling to them.… (Cond. 6) Through the defenders' unjustifiable termination of said agreements as above condescended on the pursuer has suffered substantial loss, injury, and damage. His income from the agency amounted to fully £2500 per annum, and he believes and avers that during the last two years of the agreement his turnover would have increased very considerably and so earned him a greater income. Further, defenders' action seriously and adversely affects pursuer's business prospects. Pursuer estimates the loss, injury, and damage which he has suffered through the fault of the defenders as above stated at £5000, being the sum sued for, which is fair and reasonable in the circumstances.”

In their answers the defenders averred that the pursuer's turnover for the three years only amounted to £39,179; that it ought to have been £43,692; that the pursuer's turnover was only so large because of the enhanced prices existing at the time and not because of an increase in business done; that the pursuer accordingly had not earned his commission; that any shortage of supplies was due to the conditions existing at the time, e.g., the stoppage of the import of confectionery, and not to any failure of duty on the defenders' part, and that accordingly the defenders were entitled to terminate the pursuer's agency.

The pursuer pleaded, inter alia—[Plea la was added at the discussion before the Second Division]—“1. The pursuer having suffered loss through thedefenders'unjustifiable termination of said agreements as condescended on he is entitled to damages, and decree should be granted as craved. la. The defenders not having supplied the pursuer with goods necessary to enable him to make the stipulated turnover, the defenders are not entitled to terminate the contract in respect of the pursuer not having made the required turnover. 2. The defenders having been in breach of the agreements as above condescended on, they are not entitled to terminate the agreements as they have done, and are liable in damages therefor.”

The defenders pleaded, inter alia—“The pursuer's agency having been properly terminated within the provisions of the agreement, the defenders are entitled to absolvitor with expenses.”

The minute of agreement of 1914, between the defenders (therein called the first parties) and the pursuer (therein called the second party), provided, inter alia—“( First) The second party is hereby appointed sole selling agent for the goods of the first party in the district of Scotland to the south of but including Dundee.… Said agreement shall begin operation as from first February Nineteen hundred and fourteen and shall continue notwithstanding the date hereof for five years subject to the option to terminate hereinafter mentioned. If it should be found at the end of three years from first February Nineteen hundred and fourteen that the second party has not increased each year the previous year's turnover by at least ten per cent. (that is, a total increase of three thousand nine hundred and seventy—two pounds at least, on the basis of twelve thousand pounds after mentioned, for the three years subsequent to first February Nineteen hundred and fourteen) the first party shall be entitled at once to terminate the agreement with the second party upon giving him notice in writing that he is to terminate the same, and upon such notice being given the agreement shall thereupon terminate. The increase of ten per cent. for the first year shall be based upon a sum of twelve thousand pounds as the yearly turnover. ( Second) The first party undertakes to supply to the second party goods as heretofore supplied by the first party excepting those of Karl Frazer of Helsingfors, Finland, and the Manufacturing Company of America, Philadelphia, hereinafter specially provided for and which the second party undertakes to buy exclusively from the first party. The said goods shall be obtained by the second party from the first party at the nett cost prices paid for same by the first party plus five per cent., but in the case of the goods of Henry Heide such cost price is excluding such five per cent., the first party having always got from the said Henry Heide a rebate or commission of five per cent., which is not shown

Page: 10↓

on the invoices and which commission or rebate the first party will continue to receive. The second party shall be entitled to sell such goods at the best prices which he can obtain but not at any less selling price than that which is being sold by the first party elsewhere and as the same may be advised by the first party to the second party.”

On 26th February 1919 the Sheriff-Substitute ( Craigie), after sundry procedure in which it was held by the Sheriff-Substitute, and by the Sheriff ( Mackenzie) on appeal, that the term “turnover” in the agreements included only sales effected by the pursuer during the three years subsequent to 1st February 1914, and did not include the value of goods ordered by customers but not delivered and paid for till after the expiry thereof, allowed a proof before answer of the averments in condescendences 5 and 6 and the answers thereto.

Thereafter on 15th July 1920 the Sheriff-Substitute ( D. J. Mackenzie) pronounced the following interlocutor:—“Finds (1) that the pursuer is a confectionery agent at 59 Oswald Street, Glasgow, and that the defenders are a limited company of wholesale confectioners at 2 Talbot Court, Eastcheap, London; (2) that in March 1914 an agreement was entered into between the pursuer and defenders, that in said agreement it was provided [the agreement is quoted supra]; (3) that on 19th and 25th August 1915 a second agreement between the parties was entered into by which certain alterations were made on the original agreement, the principal of which was that the balance sheet between the pursuer and defenders should be made up monthly instead of every six months, and that certain adjustments were made as to the turnover for the months of July and August 1915, which was to be taken as £1100 for each of said months; that the provisions in the first agreement as to turnover were ratified; (4) that on 23rd February 1917 the defenders wrote to the pursuer the letter in which they say—‘We have to advise that owing to your sales for the three years from 1st February 1914 to January 31st, 1917, not having reached the figures provided by agreement, we hereby give notice to terminate the agreement. You will therefore note it is terminated accordingly on receipt of this advice;’ (5) that as at 1st February 1914 the pursuer's turnover had not reached the figure specified in the agreement; (6) that it is not proved that the defenders are in any way responsible for the failure of the pursuer to reach the agreed-on turnover at the end of the first three years of the agreement, but that this was mainly due to the disturbance of traffic and shipping accommodation owing to the war: Finds in law that the defenders were not in breach of their agreements with the pursuer, and are not liable to him in damages for any such breach: Therefore assoilzies the defenders from the conclusions of the action,”&c.

The pursuer appealed to the Sheriff ( A. O. M. Mackenzie), who on 18th November 1920 refused the appeal.

The pursuer appealed, and argued—The defenders were not entitled to put in operation against the pursuer the forfeiture clause in the agreement as he had not exhibited any lack of zeal or been unable to obtain insufficient orders. Where, as here, the necessary amount of orders had been secured, the defenders were not entitled to terminate the agency merely because the goods had not been paid for. The word “turnover” meant the total volume of business done within a given time. Assuming, however, that the pursuer's turnover had failed to reach the stipulated figure, that was due to the failure of the defenders to supply the goods required to meet the orders. The defenders were not entitled to rescind the contract on account of the pursuer's failure, for which they were responsible. They could not take advantage of their own wrong. The pursuer, moreover, having done all in his power to implement the terms of the contract, and the defenders having failed to do so, the pursuer was excused from further performance of it. The defenders had not only failed to supply the pursuer with the goods necessary for the fulfilment of his agreement, but had actually delivered them to other customers. The following authorities were cited—New Oxford Dictionary, “Turnover”; Dick & Stevenson v. Mackay, 1880, 7 R. 778, 17 S.L.R. 565, and 1881, 8 R. (H.L.) 37, per Lord Watson at p. 45, 18 S.L.R. 387; Taylors v. Maclellans, 1892, 19 R. 10, 29 S.L.R. 23; Roberts v. Bury Commissioners, 1869, L.R., 5 C.P. 310; Poilock on Contract (8th ed.), 452.

Argued for respondents—The defenders had done all they reasonably could to expedite deliveries of goods to the pursuer. There lay on them no obligation with regard to time except that the goods should be supplied within a reasonable time. There was nothing in the contract whereby the pursuer was to have a preference or privilege over other persons with whom the defenders had dealings. The defenders were not bound to dislocate their business in general for the benefit of the pursuer in particular. The defenders had the right under the agreement to terminate the contract in the event of the pursuer's failure to effect a particular turnover. “Turnover” meant the sale and delivery of goods, and was usually measured in terms of money. The onus lay on the pursuer of proving that he had thus turned over sufficient goods to entitle him to his commission, and he had failed to discharge this onus. The defenders were accordingly justified in exercising the right which they had reserved to themselves of terminating the agreement. There was, moreover, no evidence that the pursuer had suffered any damage through the defenders' action. Counsel referred to Hick v. Raymond & Reid, [1891] 2 QB 626, [1893] AC 22; Tennants (Lancashire), Limited v. C. S. Wilson & Company, Limited, [1917] A. C. 495; Rickinson, Sons, & Company v. Scottish Co-operative Wholesale Society, 1918 S.C. 440, 55 S.L.R. 412.

At advising—