KAIKHUSHROO RUSTOMJI WALLACE Vs. BOMBAY COMPANY LIMITED

JUDGEMENT

(1.) This action was brought by the appellant, Mr. Wallace, to recover a balance of commission, alleged to be due to him under an agreement dated the 9 February, 1920, between himself and the respondents, his former employers. Ultimately the question is one of construction, and the words which are chiefly material are these: 1918-1919 Accounts.--You will receive a sum equivalent to 5 per cent of the nett profits (as shown in the books) of the Bombay Branch of the Bombay Company, Limited, as accruing from the sales of all goods for which you were salesman, whether on purchase or joint account. In addition to this ... you will be credited with a further sum equivalent to 5 per cent. of the nett profits as shown in the books of the Bombay Branch ... as having accrued from the sale of all goods sold on joint account and for which you were salesman during the years 1916-1917, 1917-1918, and 1918-1919. 1919-1920 Accounts.--As regards other goods sold by you prior to the 7th February, 1920, the results of which have not been included in our closed accounts up to 31 July, 1919, you will be given remuneration on the same basis detailed above. The total sum due to you will be paid as soon as the nett profit is ascertained, and you will be asked to give us a final receipt in full settlement of all claims whatever against us.

(2.) The circumstances under which the agreement was entered into are these. After twenty- six years in their service as a salesman, Mr. Wallace desired to end his connection with the respondents, certain fresh terms, which he suggested, not proving acceptable. All that remained was to agree the method and ascertain the figures, according to which his outstanding commissions should be paid to him. Their course of business was this. They purchased piece goods in England at prices reckoned in pounds sterling and sold them through their salesmen to dealers in or near Bombay at prices which were reckoned in pounds sterling also. Long credit was given to these buyers and accordingly the respondents often lay out of their money for a considerable time. To pay for the goods in England and for other purposes they remitted funds generally to their English correspondents, who paid the English sellers for the goods, and they made these remittances from time to time as was convenient, by means of sterling drafts on England procured in Bombay at the current rate of exchange. It was not necessary that specific remittances should be made for specific parcels of goods or that the date of the remittance and the due date of the invoices for the goods should coincide, and they found it sufficient to treat payments in their own books as having been made at the average rate of exchange for the customary period within which they fell.

(3.) The respondents are also what is called a rupee, company. Their financial arrangements are computed in Indian currency, and in particular their profit and loss accounts and balance sheets are made upon a rupee basis. Owing to the length of time intervening between payment for the goods imported and receipt of the sale proceeds from the Indian buyers, they had to show their financial results for office purposes and for presentation to their shareholders during this interval by converting the apparent sterling proceeds into Indian currency at a rate of exchange which was, in the first instance, provisional. An average rate was again made use of, not necessarily over a period corresponding to that used for converting remittances to Europe, nor even always a uniform period. For their own purposes this closed the transactions, and the rupee profit so appearing was treated as realised and final, subject only to reduction in the event of bad debts. These seem to have been of rare occurrence before 1919, but such as there were could be dealt with in the subsequent accounts as occasion might require. So long as the rate of exchange remained fairly stable, questions as to the best method of calculating it did not arise.