OSMAN JAMAL AND SONS LTD Vs. GOPAL PURSHOTTAM

JUDGEMENT

(1.) In this case the plaintiff company is in liquidation and is represented by the Official Liquidator. By a contract made in July 1925 it was agreed inter alia that the plaintiff company should act as commission agents for the defendant firm in the purchase and sale of hessian and gunnies and that the defendant firm would indemnify the plaintiff company against all losses in respect of such transactions. Pursuant thereto, on or about the 2 December, 1925, the plaintiff company purchased certain hessian from one Maliram Ramjidas, which the defendant firm failed to pay for or take delivery of, with the result that the goods were resold by the vendor at less than the contract price and he has claimed the balance from the plaintiff company. Consequently the plaintiffs now seek to recover this sum from the defendants under the aforesaid indemnity, in addition to a further sum for commission which otherwise they would have received. The defendants contend, firstly, that the plaintiffs have never become liable to the vendor, because they acted only as agents for disclosed principals, namely, the defendant firm, and therefore no right to indemnity has arisen. This argument seems to rest upon a misapprehension of fact. The plaintiffs purchased through a broker as principals and not as agents which becomes evident upon perusal of the bought and sold notes. Consequently they are liable to the vendor for breach of the contract of sale.

(2.) Secondly, the defendants contend that inasmuch as it is admitted that the plaintiffs have not actually made any payment to the vendor in respect of their liability to him, they are not at present entitled to any sum on account of the aforesaid right of indemnity. In support of this contention their learned Counsel has referred to the case of In re Richardson. In re Richardson, Ex parte the Governors of St. Thomas's Hospital [1911] 2 K.B. 705 and especially to the observations therein of Fletcher Moulton, L.J. at p. 712 as follows: Suppose A has a claim upon B, but in respect of that claim, B has a right of indemnity from C.B. goes bankrupt. Is Bs trustee in bankruptcy in a position in which he can force to pay the amount of the claim to him and then can use the money so obtained for distribution amongst the creditors gonerally, whereas he only pays a dividend upon the claim which A has against the bankrupt ? If you seek guidance in the matter from common law, there is no doubt whatever that it went on this principle. It would not help a man to make a profit out of what was merely an indemnity. If, for instance, B was bound to pay a sum to A and C was bound to indemnify B, which is the case before us, then B could not sue C unless he could aver payment to A.

(3.) But the learned Lord Justice was there expounding the doctrine of the common law, which he recognized was different to the rule in equity. Moreover in that case the right of indemnity did not arise from contract but from a trust and the learned Judge goes on to say at p. 714: It would not be right for a trustee to obtain money from this right to be indemnified against payments made to the head creditor when he not only has not made those payments but comes here to say that he does not intend so to do. Therefore I come to the conclusion that, as a general principle, an indemnity like this can be used by the trustee only for the purpose of bringing about payment to the head creditor of the claim against which be is indemnified.