Scottish Court of Session Decisions

There were here four conjoined actions, all raised in the Sheriff Court at Glasgow, viz.—(1) a debts recovery summons brought by the Bellvale Chemical Company, Bellvale Chemical Works, Glasgow, against Charles Lochhead Millar, in which the pursuers claimed £20, 19s. lid. as the price of golf balls supplied by them to the defender; (2) an action at the instance of Millar against the Bellvale Chemical Company, and A. S. Bryce junior as the sole or only known partner thereof, in which the pursuer claimed £1000 as damages for breach of the contract under which the golf balls were supplied; (3) a debts recovery summons brought by Bryce & Robertson, the successors of the Bellvale Chemical Company, against Millar for £25, 3s. 10d., being the price of golf balls supplied by them to the defender; and (4) an action by Millar against Bryce & Robertson for £1000 as damages for breach of the contract under which they had supplied him with the golf balls above mentioned.

The debts recovery cases were remitted to the ordinary Court; the four actions were conjoined (the action Miller v. The Bellvale Chemical Company and Another being the leading action), and a proof before answer was allowed in the conjoined actions.

It appeared that in May 1896 and July 1897 Millar, who was an agent or merchant dealing wholesale in golf balls and golf appliances in Glasgow, contracted with the defenders the Bellvale Chemical Company, who were manufacturers, to supply him with ( a) a medium-priced golf ball made of a good class of guttapercha, such as would take the place of ordinary re-made balls, and (b) a higher class of golf balls of the best guttapercha, fit to be sold at about the same price as the ordinary first class of golf balls. It was agreed that these balls should be marked 2 XL and 1 XL respectively, and should be made for and supplied to Millar only. The balls were made and delivered in large quantities to Millar, and re-sold by him to his customers. Large numbers of the 1 XL balls were returned by the buyers to Millar as being unplayable, and therefore unmerchantable. The 2 XL balls turned out to be to a very large extent worthless, and they were also returned in large numbers to Millar. It was ultimately admitted that the balls marked 1 XL supplied to Millar were in point of fact unmerchantable balls and not fit for golf playing, and that they were disconform to contract. It was also admitted that the balls marked 2 XL supplied to Millar were in point of fact dis-contorm to contract.

In May 1897 the Bellvale Company agreed to take back all the 1 XL balls so returned as unmerchantable, and a considerable number of balls were returned by Millar for which he was allowed credit. He had still however on hand, and offered to return, 64 dozen 1 XL balls, which the Bellvale Company were bound to take back, their invoice value being £23, 11s., a sum exceeding the sum sued for by them. Millar had also still on hand 104 dozen 2 XL balls, returned by his customers, which Bryce & Robertson were bound to take back, and which Millar was ready and willing to deliver to them, the invoice value being about £26, a sum exceeding the amount sued for by Bryce & Robertson.

In view of these facts it was ultimately conceded that Millar was entitled to absolvitor in the actions brought against him, and the sole question between the parties came to be, on what principle should the damages due to Millar for breach of contract be calculated, and to what amount of damages was he entitled. Millar claimed damages (1) for expenses incurred in pushing the sale of the balls; (2) for loss of profit on balls supplied to him by the Bellvale Chemical Company and Bryce & Robertson; (3) for loss of profit which he would have obtained on balls not in fact supplied to him, but which he would have been able in all probability subsequently to take and dispose of if he had been provided with balls conform to contract; and (4) for the loss of business reputation sustained by him through the inferior quality of the balls.

When the contract between Millar and the Bellvale Chemical Company was entered into nothing was arranged as to the duration of the contract, or as to the quantity of balls which the parties were to be bound to deliver or to take respectively. It appeared, however, that the full benefit from such a contract could not be reaped by either party at first owing to the initial difficulties in the way of introducing a new article on the market. It appeared, moreover, that it was known to the defenders that the pursuer's intention and object in

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entering into the contract was to carry on an extensive wholesale trade in the sale of golf balls to be supplied by the defenders, and to give them large orders for balls, and, moreover, that he intended to give up a trade which he had formerly carried on in re-made balls.

The loss of profit on balls actually returned to Millar by his customers at the date when the action was brought, with a proportionate amount of the expenses incurred by him in pushing the sale of the balls, was about £30, or with an allowance for sundries, £40. The defenders admitted that Millar was entitled to this sum in name of damages.

The total invoice value of the balls supplied to Millar was £346, 17s. 9d. Out of this total about £05 worth was actually returned at the date when the actions were in dependence. The total amount spent by the pursuer in advertising, in labels for golf-ball boxes, and in travelling expenses and salary for himself and his traveller at the time he was pushing the sale of the golf balls supplied under the contract, was about £45, but part of the advertising and the travelling expenses and salaries was properly chargeable to other business.

In addition to 15 per cent. on the total invoice value of balls supplied and an allowance for expenses, Millar claimed £285, being 15 per cent. on the value of balls which various customers of his said they would have taken from him in one year if the balls had realised expectations. He also claimed 15 per cent. on the amount of two years' golf-ball business as formerly done by him, which he alleged had been ruined by the bad name he had acquired in the trade owing to the inferior quality of the XL balls, but the Court did not find it necessary to consider this part of his claim.

When Millar began to push the sale of the XL balls he inserted a highly laudatory advertisement in Golfing, in which it was stated that the new No. 1 XL golf ball was guaranteed to be made of the finest guttapercha, to be practically unbreakable, and to fly further than any ball yet put on the market, and it was also stated that the No. 2 XL golf ball supplied the long-felt want of a thoroughly reliable good medium-priced ball, that it was guaranteed not to split, and would stand as much punishment as the usual Is. ball. The balls supplied failed in every respect to justify the statements in this advertisement.

It appeared that if satisfactory a new golf ball has generally a good sale for a time, once it has been fairly introduced to the public, its novelty being rather than otherwise an advantage. It also appeared that there was a great demand for a good medium-priced ball.

On 16th May 1898 the Sheriff-Substitute ( Guthrie) issued an interlocutor, practically in the same terms as the interlocutor of the Court infra, whereby he assoilzied the party Millar in the actions against him, and decerned against the Bellvale Chemical Company and A. S. Bryce junior, and against Bryce & Robertson, for the sums of £150 and £75 in the actions brought by Millar against them respectively, and found Millar entitled to expenses in the conjoined actions. He added the following

Note.—“As far as I am able to make out from the somewhat complicated materials in process, each of the trading accounts, i.e., that of the Bellvale Company and that of Bryce &Robertson, is more than compensated by bad balls still held by the party Millar, and of which they are bound to relieve him. As to the quality of the balls, there is I think little doubt, and although it may be that there were many merchantable and fairly good balls among both classes, it is clear that there was such a percentage of trash as vitiated the whole deliveries. The makers themselves seem to confess this.

“The claim for damages is of a very speculative kind, and it is difficult to give effect to it as Mr Millar desires. It is clear that the purchaser must have lost all his expected profit on the balls, but it is equally certain that he is greatly exaggerating the profit he could possibly make in the time on a new ball unknown to the golfing world. It is therefore unavoidable that the assessment of damages should be to a large extent conjectural. The sums decerned for include the items of carriage, &c., in the counter claim, and the expense of journeys. As Mr Charles Millar was pushing a new business, which comprised many things besides golf balls, it would not be reasonable to include all or nearly all the expense of these journeys.

“The law of the matter in dispute is exemplified in the recent case of Duff, 19 R. 199, and in the text, notes, and cases cited in Bell's Prin. 31 and 32.” …

The parties, the Bellvale Chemical Company and A. S. Bryce junior, and the parties Bryce &Robertson, appealed to the Sheriff ( Berry), who on 28th July 1898 issued the following interlocutor:—“Adheres to the interlocutor appealed against, with the variation that the damages awarded are reduced to £60sterling against the Bellvale Chemical Company and A. S. Bryce junior, and to £20 against the defenders Bryce &Robertson: Finds the appellants entitled to the expenses of the appeal,” &.

Note“The argument on the appeal has been limited to the question as to the amount of damages awarded by the Sheriff-Substitute. His finding that the balls were unmerchantable is accepted by the appellants, but it is maintained that the damages awarded are excessive.

In the absence of explanation of the grounds kown which the Sheriff-Substitute as proceeded in making his award, I cannot help thinking that he has erred on the side of excess. The total trade done by the pursuer with the Bellvale Company was £266, 14s. 6d., and with Bryce & Robertson £80, 3s. 3d. The proof shows that 15 per cent. on these sums may be regarded as a liberal profit, and taking the pursuer to be entitled to an allowance for loss of profit, which the decision in Duff v. Iron and Steel Company, 19 R. 199, seems in the

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circumstances to justify, he would at that rate he entitled to about £40 in the one case and £12 in the other. As regards expense of journeys and traveller's salary it would be impossible to charge the whole as applicable to golf balls, and it seems to me that £20 is a sufficient allowance to give to the pursuer under that head, which may be divided between the two sets of defenders in the proportions of £15 against the Bellvale Company and £5 against Bryce &Robertson. If to the aggregate of these different sums be added £5 in the one case and £3 in the other to cover any additional small items, I think the pursuer is sufficiently compensated. This brings out £60 as the award against the Bellvale Company, and £20 against Bryce &Robertson… .

“A large portion of the case before the Sheriff-Substitute was occupied with evidence bearing on the merchantable or unmerchantable character of the balls, and I am not disposed to interfere with his award of expenses. I think, however, that the defenders are entitled to the expenses of the appeal.”

Millar appealed.

His counsel intimated that they were satisfied with the interlocutor of the Sheriff-Substitute. Millar was entitled to the damages which might have been reasonably anticipated by the parties as the result of a breach. There was no other absolute rule— Hadley v. Baxendale (1854), 9 Ex. 341. What damages where allowable under that rule was a question of circumstances in each particular case— Watt v. Mitchell, July 4, 1839, 1 D. 1157; Dunlop v. Higgins, February 24, 1848, 1 H. L. Ca. 381, per Lord Cottenham, L.C. at page 403. It was to be observed that a continuous contract was here in contemplation. Millar was to be the only person from whom these golf balls could be obtained. It was also clearly within the contemplation of parties that there should be sub-sales. Moreover, this was not an article with which the purchaser could supply himself in the open market. This was clear as regards the lower priced balls, and it was practically the case as regards the other balls too, because Millar could not get balls of the desired quality except by paying as much for them as his customers would give him; and further, what he stipulated for was a superior ball to be supplied only through him, and to be associated in the trade with his name. In these circumstances the result of the application of the general rule above stated to the facts of the present case was that Millar was entitled, in addition to an allowance for loss of profit on the balls delivered, to an allowance (1) for expenses incurred, (2) for loss of future profits which he would have got if the balls had been conform to contract, and (3) for loss of business reputation. Damages for all loss of profit resulting from the breach were allowable by the law of Scotland— Dunlop v. Higgins, February 24, 1818, 1 H.L. Ca. 381, per Lord Cottenham L.C. at pp. 401 and 403; Mayne on Damages (5th ed.) 58; Watt v. Mitchell, cit.; Duff & Company v. Ivon and Steel Fencing and Buildings Company, Dcember 1, 1891, 19 R. 199. The law of England probably differed from the law of Scotland upon this question — Dunlop, cit., and Mayne, loc. cit. English cases such as Thol v. Henderson (1881), 8 Q.B.D., were therefore not in point. The purchaser was entitled to the profits which he would have made upon sub-sales— Dunlop, cit. In this case, from the nature of the contract which was for a continuing supply of the articles contracted for over a considerable period, a continuing supply which the respondents could not give, something should be allowed for loss of future profits. At any rate, when, as here, the purchaser could not supply himself in the open market, he was entitled to an estimated amount for loss of profits — Duff & Company v. Iron and Steel Fencing and Buildings Company, cit. Even in England if he had fair notice of the action the original seller was liable for the damages and costs recovered from the purchaser in an action for breach of contract by a sub-vendee, provided that sub-sales, as in this case, were within the contemplation of the parties to the originalsale— Hammond & Company v. Bussey (1887), 20 Q.B.D. 79; see also Barkley & Sons v. Simson, January 16, 1897, 24 R. 346. (2) As to damages for loss of business reputation, these were also allowable — Thomson & Company v. Dailly. July 20, 1897, 24 R. 1173. Such damages were due when the amount of the injury could be proved with reasonable certainty, and the injury was a natural consequence of the wrong and could not have been avoided—Sedgwick on Measure of Damages (7th ed.) 138, note (a). All these conditions were fulfilled in the present case. ( Lord Trayner referred to Shearman and Redfield on Negligence, par. 597]. The damages claimed here were not more remote or consequential than those allowed in the cases of Robertson v Conolly, February 25, 1851, 13 D. 779; Smith v. Green (1875), 1 C.P.D. 92. Even if nothing were allowed for loss of business reputation, the amount of damages awarded by the Sheriff-Substitute was amply justified by the evidence as to the loss of prospective profit.

Argued for the respondents — (1) The appellant was not entitled to damages for loss of business reputation. In no case had such damages been allowed, although in very many actions of damages for breach of contract such loss could have been established. Thomson & Company v. Dailly, cit., was an action of damages for a wrong perpetrated by means of a fraud, and not an action of damages for breach of contract. Moreover, apart from the general question, no such damages should be allowed where the article to be supplied was in the nature of an experiment which proved unsuccessful. The appellant had to take the risk of that. This was especiaity so when the object in view was to supply a good article at a specially low price. (2) Where damages were claimed on account of the article supplied not being conform to contract, as here, the damages allowable were limited to loss on the articles delivered and rejected

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as not conform to contract, and further consequences could not he considered — Hadley v. Baxendale, cit.; Watt v. Mitchell, cit., per Lord Medwyn at page 1166. In Duff & Company v. Iron and Steel Fencing and Buildings Company, cit., the damages were limited to the loss of profit on huts actually supplied and returned. Here the respondents were prepared to admit liability for loss of profit in connection with the goods actually supplied and returned. There was no case in which anything more had been allowed. It was to be observed that there was here no contract for a supply of balls for any particular period. Nothing was arranged as to the duration of the contract. It was only in exceptional circumstances that anything for loss of profit was allowed at all. Even damages obtained by subvendees in consequence of the original seller's breach were not allowable unless the original seller knew that a subsale was intended— Thol v. Henderson, cit.; Grébert Borgnis v. Nugent (1885), 15 QBD 85, per Brett, M.R., at page 89; May neon Damages (5th ed.) 41. These cases were a fortiori of the present. As to the other authorities cited for the appellant, the statement in Sedgwick, cit., was only in a note to the second edition; the passage quoted from Shearman and Redfield, cit., occurred in the chapter on the measure of damages in actions for negligence; Robertson v. Connolly, cit., was a case of damages for negligence or fault; in Smith v. Green the action was laid on warranty, and here there was no warranty. Even if as a general rule damages for loss of future profits and of business reputation were allowable they should not be awarded here, because what the balls failed to do, so far as the appellant's customers were concerned, was to justify the appellant's laudatory advertisement which promised articles far superior to those contracted for. When the customers deponed that they would have taken large quantities of the balls if they had answered expectations, they were referring to the expectations held out in the advertisement, for which the respondents were not responsible. The respondents were not liable for loss of profits which might have been obtained if the balls had fulfilled the promise made in the puff which the appellant had seen fit to insert in a newspaper.