Scottish Court of Session Decisions

At advising on 29th October 1976,—

LORD KISSEN .—[His Lordship read the narrative quoted above and continued.] The pursuers have now appealed to this Court. Although the notes of evidence were extended and made available, and occasional references made to them by counsel, this Court was invited to decide the appeal on the merits on the basis of the facts found by the Sheriff and his Note, with the exception of finding 21. This last finding relates to the question of "reasonable price."

The submission by counsel for the pursuers was that the Sheriff Principal had erred on both of the grounds which had formed the basis for his decision and moved that his interlocutor should be recalled and the Sheriff's decision restored. Counsel for the defenders, on the other hand, submitted that the Sheriff Principal had reached the correct decision and that the appeal should be refused. It was conceded by defenders' counsel that the reasons given by the Sheriff Principal in his alternative ground, relating to the absence of consensus in idem on the subject-matter, could not be supported in its entirety and, at one stage, defenders' senior counsel appeared to go even further than that. The other issue between the parties at the appeal was whether the Sheriff Principal was correct in holding that there was no evidence on which the Sheriff could fix a reasonable price for the steel which was delivered and accepted. Before I consider this latter issue, it will be convenient if I dispose of the question of consensus in idem. I should add that the Court was informed that the approach adopted by the Sheriff Principal on this issue had not been argued at the appeal before him.

The basis of the decision of the Sheriff Principal on this aspect was the case of Mathieson Gee (Ayrshire) Ltd. v. Quigley 1952 SC (HL) 38 which he considered to be inconsistent with Wilson v. Marquis of Breadalbane (1859) 21 D. 957. Senior counsel for the defenders agreed that there was no inconsistency between these two cases. He was perfectly justified in so agreeing. The facts in the former case are very different from the facts in the present case. The distinction is made clear in the summary of the facts in the former case given by the Sheriff Principal. The offer and the purported acceptance in that case differed in that the former was for locatio rei and the latter for locatio operis,different kinds of contracts with different incidents. In Wilson, supra, and in the later case of Stuart & Co. v. Kennedy (1885) 13 R. 221, which followed Wilson, the position was that there was a contract of sale but the misunderstanding was in relation to the price.

Following the cases of Wilson and Stuart it was agreed by defenders' counsel that if there was agreement on the subjects of sale and the goods in question had been accepted, there would have been consensus in idem. The submission, which at one stage appeared to have been abandoned, was, however, that there was no agreement on the subjects of sale. I cannot see how, on the pleadings and on the findings, it could be said that there was no agreement on the subjects of sale. These were clearly quantities of hot rolled steel. The origin of that steel, on the defenders' own averments in Ans. 2 and on the findings, was immaterial. I cannot find any basis, in the findings, especially 2, 3 and 5, for the view expressed by the Sheriff Principal that the pursuers thought that they had sold "foreign steel" or that the defenders thought that they had bought "British steel." The fact that Mr Koronka said that he "wanted to buy British steel" cannot affect the position. There was, in this case, as in Wilson and in Stuart, agreement on the subjects of sale but not on the price. This submission must fail.

It was submitted by pursuers' senior counsel that, in any event, if there was an executed contract, there did not require to be agreement on the subjects of sale because appropriation of the delivered goods amounted to the completion of the contract. Reliance for this was said to be the observations of Atkin L.J. (as he then was) in Steven v. Bromley [1919] 2 K.B. 722 at p. 728 and Lord Cowan in Wilson at p. 964. That may be the position but I would reserve my views on that. I am not convinced that acceptance of goods which are completely different in kind from those ordered, where there was no agreement about the price, would necessarily, in all cases, amount to a completed sale to which the provisions of section 8 of the Sale of Goods Act 1893 would apply. As this submission was made in the last speech, the views of the defenders' counsel on it were not explored and I say no more about it. There was, on this aspect of the case, some discussion about the position which would arise in regard to executory contracts, as opposed to executed contracts, and reference was made to some reported cases dealing with the former. I do not think that I require to consider them as they have no bearing on the matters in issue in this case, where it was agreed that we are dealing with an executed contract.

I turn now to the other issue which I have previously mentioned, and which was the major issue at the appeal, that is, whether there was evidence on which the Sheriff could fix a "reasonable price." It was agreed by defenders' counsel that the failure to aver an alternative case with appropriate averments was immaterial. Defenders' counsel, supporting the Sheriff Principal, maintained that there was no evidence which could justify a a higher price than £103.50 per ton. Pursuers' counsel, on the other hand, maintained that the Sheriff, on the material before him and stated in his findings, was justified in his conclusion.

I begin with some preliminary observations. It is, I think, important, firstly, to note the statutory definition in section 8 (2) of the Sale of Goods Act 1893, viz:—

"what is a reasonable price is a question of fact dependent on the circumstances of each particular case."

This seems to me to denote something different from the "market or current price" or the "value," expressions used in sections 50, 51 and 53 of that Act, which deal with calculation of damages for breach of contract. In Wilson, the expression "value" is used to denote the price to be paid and in Stuart the expression "market price" is used. These cases were decided before 1893 and, contrary to the submissions of defenders' counsel, I think that the Act has made a difference to the common law in that respect and the law is now closer to what I understand to have been the pre-1893 position in England, namely, that the current or market price is not necessarily the measure of a reasonable price (per Tindal C.J. in Acebal v. Levy 1834 10 Bing 376 referred to in, inter alia, Halsbury's "Laws of England", 3rd ed. Vol. 34 at p. 39). I think that, in the particular circumstances of this case, as stated in the findings, where the goods in question can have different values dependent only on their origin, because of Government control of prices of British-made steel only, and where the steel delivered was of mixed origin, market or current prices or values do not have the importance which they might have in other cases. A factor which may be of considerable importance in some cases, depending on the circumstances, is that the reasonable price must be fair and just to both parties. Circumstances may require a balancing of advantages and disadvantages to the seller and buyer which arise from the sale and consideration given to the parties' actings in regard to the sale before the "reasonable price" can be fixed.

The second observation which I have to make is that the Sheriff was asked by the parties to fix the "reasonable price" in terms of the said section 8 (2) if he could not reach a decision about the agreed price at which the steel was sold. I think that this answers the criticism by the Sheriff Principal about the lack of averments on "reasonable price" and, indeed that was, I think, conceded by defenders' counsel, whose argument was that, on the findings, the "reasonable price" was the sum of £103.50 paid by the defenders.

Finally, I would again stress an unusual feature about the subjects of this sale in that it is only the origin of the steel which affects the price. For all practical purposes, according to the findings, although not expressly stated but clearly implicit in them, there is no other difference between British-made steel and foreign imported steel.

The essence of the decision by the Sheriff Principal about the lack of evidence to enable a reasonable price to be fixed was the statement by the Sheriff in his Note that the evidence fell "far short of providing me with enough information to fix a reasonable price for such steel as at 25th January 1974." Defenders' counsel, supporting the Sheriff Principal and relying on that statement in the Sheriff's Note, submitted that the Sheriff had simply made a guess, without any evidence to support it. The onus, it was said, was on the pursuers to prove the "reasonable price" and they had not done so. On any view, so the argument ran, they had not established that they had delivered anything other than British-made steel and, accordingly, they were only entitled to the price of British-made steel, which had, in fact, been paid. The findings, on any view, on this argument, could not support a higher price than £103.50. Pursuers' counsel, on the other hand, maintained that the Sheriff, despite his criticism of lack of evidence, had sufficient material in the findings, and particularly in findings 9, 13, 16 and 19, to justify his decision on price and in his Note explained all the circumstances which he took into account to reach his decision.

A difficulty which I have is that it is not clear to me, from the Sheriff's Note, exactly how he reached a price of £135. It would appear from the figure of £135 which he fixed that he has had regard to the percentage of British steel possibly or probably contained in the quantity of steel which was delivered, and made allowance for that by deducting, very broadly, a similar percentage from £149 or £150. He indicates as much in his Note when he said that he took into account the fact that 92 per cent of the pursuers' stock was of foreign origin. Although he does refer to the advantages and disadvantages to the pursuers and defenders which would arise on the different prices of £103.50 and £149, he does not appear to have taken them into account. It seems to me that he is simply working on market prices and his invitation to the solicitors to agree to a reference to an arbiter or man of skill reinforces that view. His observations about lack of evidence, on which the Sheriff Principal relies, is further reinforcement for that view.

As I have said, there are, in my opinion, considerations and circumstances, other than market prices, to be applied in fixing the "reasonable price." It is, I think, important to bear in mind that the steel supplied was of mixed origin and that the proportion of British and foreign steel in the quantity delivered was not established. As the Sheriff points out in his Note, any material reduction in a price of £149 per ton would result in a loss to the pursuers whereas, so far as the defenders are concerned, there was no need for them to pay more than the price for British steel which, for present purposes can be taken at about £103.50 per ton, as they were buying for stock and did not require immediate delivery. It was submitted for the defenders that the pursuers, having failed to prove positively that they had delivered any foreign steel at all, would only be entitled to the price of British-made steel, the Sheriff's observation in his Note at p. 19 D not being supported by any findings and being to some extent inconsistent with finding 19. It was further argued for the defenders that in finding 2 it is stated that "Mr. Koronka said that he wanted to buy British steel" and no finding that the pursuers told him that they were delivering British or any other kind of steel. I do not think that these considerations are of any great importance because there is no finding that the contract was for delivery of British steel. The fact that Mr Koronka said that he wanted British steel may, however, be a factor for consideration among the circumstances.

The facts are that sale of the steel at a price below £140 per ton would be a sale at less than the lowest price received by the pursuers from others in sales of comparable steel at about 25th January 1974. [Finding 16.] The defenders, on the other hand, received the steel at a time when British steel, at the controlled price, cost much less but delivery was uncertain and when they anticipated a rise in prices. [Findings 14 and 17.] The value of the mixed steel to them was that they had delivery at a time when British steel companies large and small had been prepared to pay the price of imported steel to meet their requirements. [Finding 12.] Imported steel was then selling at about £140–£150 per ton. [Finding 9.] It follows, I think, from what I have said that delivery of the steel at any price below £140 would be of some advantage to the defenders who could have re-sold it without difficulty, although possibly at a small loss because of carriage costs, if they did not wish to retain the steel. Whatever its origin, it was clearly an advantage to them to have had delivery of the steel at a time of shortage of British steel. [Finding 11.]

It seems to me that fairness to both parties in all the circumstances of this case requires the fixing of a price somewhere between £100 and £140/£150 per ton [findings 9 and 16] or between £103.50 and £149 per ton. Weighing the advantages and disadvantages of the circumstances relating to each in the sale and purchase at the material time, I would have fixed a price lower than £135 per ton but I do not feel sufficiently strong about it to differ from the decision of the Sheriff and the view which your Lordships take about the reasonable price.

I move, accordingly, that the appeal should be sustained, that the interlocutor of the Sheriff Principal dated 15th April 1975 be recalled, and that the interlocutor of the Sheriff dated 20th February 1975 be restored along with his findings in fact and in fact and law.

LORD LEECHMAN .—In this action, which comes before us by way of appeal from the Sheriff Principal, the pursuers seek to recover from the defenders the unpaid balance of the price of a quantity of steel which they, the pursuers, purport to have sold to the defenders.

Before the Sheriff Principal and before us, the parties were agreed on the facts, so far as these have been set forth by the Sheriff in his findings in fact Nos. 1 to 20 inclusive. The Sheriff having made such findings, was of the opinion, as explained in his Note, that there had not been proved either a concluded agreement to sell the steel in question at £149 per tonne as contended for by the pursuers, or such an agreement to sell the steel at £103.50 per tonne as contended for by the defenders. In the circumstances, one amongst which can be taken to have been that the defenders had accepted delivery of and retained the said steel, the Sheriff was of the view that it followed, under reference to section 8 (2) of the Sale of Goods Act 1893, that the defenders must pay a "reasonable price" therefor. Indeed the parties appear to have been at one before him that, in the event of his so finding that there had been no agreement as to price, the determination of a "reasonable price" followed, and they asked him to make that determination. In his Note the Sheriff begins, on this aspect of the case, by recording a view that he did not have enough information to fix such a reasonable price, a view which he had apparently expressed to the parties during their closing submissions along with the suggestion that they should agree to a remit of that matter to a man of skill. The suggestion not having been taken up, however, the Sheriff proceeding on such evidence as was available to him, fixed a reasonable price of £135 per tonne, made finding in fact No. 21 relative thereto, and granted decree accordingly for a balance of price thus due by the defenders of £2459.58.

The defenders having appealed to the Sheriff Principal, he allowed the appeal and dismissed the action, taking the view (1) that the Sheriff's findings involved not simply a lack of consensus as to price, but a lack of consensus as to the subject matter of the purported contract of sale, with the result that there was no sale, and, in any event (2) that there was no basis either in the pleadings or on the evidence upon which the Sheriff could, assuming the lack of consensus extended only to price, have proceeded to fix a "reasonable price." The correctness or otherwise of those two views represented, in general, the issues between the parties when they appeared before us.

I agree with your Lordship in the chair that the Sheriff Principal's first view referred to above was unwarranted having regard to the pleadings and to the facts found. The case pled is in respect of the sale and purchase of a quantity of "hot rolled steel" without reference to origin, and while there is a finding that the defenders' representative when approached by the pursuers' representative said he wanted to buy British steel, there is significantly absent, and fatally so from the defenders' point of view, some such additional finding as that the defenders' representative stipulated for British steel, or, from the communings when the purported bargain was struck, understood he had purchased British steel. This case is in line with the situations in the cases of Wilson v. Marquis of Breadalbane 21 D. 957 and Stuart & Co. v. Kennedy 13 R. 221, with this proviso that whereas there the Court required to fix respectively the "value" or "the market price" of the goods sold and delivered, the Court here is required under section 8 (2) of the Sale of Goods Act 1893 to determine "a reasonable price" which the buyer must pay for the quantity of steel sold and delivered.

Like your Lordship I find it unnecessary to consider the result had the factual position been that there was lack of consensus both as regards price and origin of the steel, and yet there had been delivery to and acceptance by the defenders.

I turn now to consider the matter of "reasonable price," which must be a reasonable price having regard to the circumstances of the particular case in question. I agree that means something materially different from the market price or market value which appears to have been the criterion before 1893 and I agree that there is introduced into the determination now the element of what is fair and just to both parties.

But the first question is whether the Sheriff Principal was right in saying there was no basis in fact upon which the Sheriff could determine a reasonable price (it having been conceded by both parties that the absence of averments supporting such a case was not in itself a maintainable point in a face of a joint request to the Sheriff to decide upon such evidence as was before him). I consider there was a basis in fact upon which the Sheriff could reach a determination as to what was a reasonable price for the defenders to pay. As already noted he began by saying he did not consider there was enough information to enable him to proceed, but he then proceeded to find such a basis on a consideration of quite a number of relevant factors, contained in the findings in fact, and otherwise adverted to in his Note. It is quite true that the Sheriff has not explained how he reached the figure of £135 per tonne, rather than any other between £103.50 and £149, but at least it can be inferred that having weighed up the various factors he was of the view that a reasonable price ought to be nearer the market price for immediately available steel (of mixed origin) than the price for British steel for which no fixed delivery date was obtainable. That generally would coincide with my own view. It is not suggested that the delivery of the steel in question was an embarrassment to the defenders.

What was an embarrassment was the price charged. But on the other hand they had an asset worth around the figure which they knew they were being charged for it. They could have requested the pursuers to take it back. If the pursuers would not do that, they (the defenders) could have re-sold it, and for aught known may have done so, though possibly at some discount. There was evidence that this was a time of shortage, a time when a price increase for British steel was anticipated, and a time "when any material discount on the going market rate for steel of a type which could be delivered would be likely to attract buyers, even for stock." It may be coincidence that the figure of £135 per tonne arrived at by the Sheriff represents a discount on £149 per tonne of almost exactly 10 per cent, which as discounts go in general, does not sound immaterial to me. It is true of course that the Sheriff states that looked at from the point of view of the defenders there was no need for them to pay more than the price of British steel—they were buying for stock and not for use and so were in a position to wait for delivery of British steel at the lower price. But that must be taken subject to this that the "lower price" was likely to rise, that the shortage of British steel was likely to continue, and that meantime the third largest steel suppliers, if not others as well, were in these conditions not selling British steel separately from foreign steel.

On the whole matter it seems to me the Sheriff performed satisfactorily a difficult task on the evidence before him, sufficient as in my view it was for the purpose in hand. I think he rightly arrived, in the whole circumstances, at a figure which was nearer to that quoted for steel available for immediate delivery, than to that for British steel with its indefinite delivery date. I see no reason to differ from the Sheriff in fixing, as the appropriate figure, £135 per tonne.

I would thus be for recalling the interlocutor of the Sheriff Principal and restoring that of the Sheriff, at the same time reaffirming the findings in fact Nos. 1 to 21 inclusive on which it was based.

LORD THOMSON .—I agree entirely with the opinion of Lord Leechman and I do not think there is anything I can usefully add to it.