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McRae v. Commonwealth Disposals Commission


84 CLR 377
HCA 79; (1951)


Commonwealth Disposals Commission


(27 August 1951).


Webb J.(1)


Dixon(2), McTiernan(3) and Fullagar(2) JJ.




Melbourne, 1950, March 20-24, 27, 28;
Sydney, 1950, May 8;
Melbourne, 1950, May 23. 23:5:1950
Melbourne, 1951, February 23, 26-28; March 1, 2, 5; August 27. 27:8:1951
APPEAL from Webb J.




[378] 1950, May 8.


WEBB J. delivered the following written judgment:—


The plaintiffs claim against the defendants damages for breach of contract, the plaintiffs by the defendant Commonwealth Disposals Commission in April 1947.


[379] The defendants offered to deliver to the plaintiffs an oil barge as being the oil tanker sold, but the plaintiffs refused to accept delivery of it as not being an oil tanker. The defendants submit that a barge is an oil tanker, or alternatively, that if it is not an oil tanker, then there was a misdescription of the thing sold, and the defendants are not liable under the conditions of tender and the conditions of the sales advice note. In the further alternative the defendants submit that, if there was not a misdescription, then there had been a mutual mistake as to the identity of the subject matter, and therefore no contract. They also denied deceit and negligence.


I find that sometime before April 1945 an oil barge was wrecked on a reef surrounding Jomard Islands. Its position on the reef was latitude eleven degrees sixteen minutes forty seconds south, longitude one hundred and fifty-two degrees eight minutes east. It was still in that position when the defendants offered to give delivery of it to the plaintiffs. It was a steel vessel two hundred feet six inches long, forty feet broad and fourteen feet deep. It contained four tanks for the carriage of liquid cargo. It was not self-propelled. It was inspected by a salvage officer on behalf of the Commonwealth on 9th April 1945. Nos. 1 and 4 tanks were then dry and Nos. 2 and 3 contained about 1,000 tons of oil. On 11th April 1945 the Commonwealth endeavoured to salvage the vessel by lightening the buoyance by discharging some of the oil and towing the vessel off the reef. As a result the transverse bulkheads were strained and Nos. 2, 3 and 4 tanks contained about the same amount of oil; the hull was straining badly, and on 20th April there was a constant oil slick spreading.


[380] In October 1946 one Jarrett, an officer of the civil administration in New Guinea, told Bowser, who was then regional manager in New Guinea for the defendant Commission, that he wanted to make an offer for an oil tanker, which he said was within a radius of 200 miles of Samarai. He would not give Bowser a more precise position. Jarrett made an offer of 50 pounds. This offer was chiefly for the oil, but was for the tanker as well. Bowser told Jarrett the offer appeared too low, and that he could not consider it until Jarrett could tell him where the tanker was. Bowser suggested that Jarrett should see Sheehan, who was then the district superintendent of the defendant Commission at Port Moresby. Jarrett then saw Sheehan and told him he knew of an oil tanker and wanted to buy it; that it was outside Samarai, and that only he, Jarrett, knew where it was, and that it contained oil. Sheehan asked Jarrett what price he was offering. Jarrett asked Sheehan what he thought would be a fair price. Sheehan said he did not know. Then Jarrett asked whether 50 pounds would be a fair price. Sheehan again said he did not know. Jarrett said he was not particularly interested in the boat; that he was more interested in the oil. Sheehan suggested to Jarrett that he should make an offer. Jarrett agreed and dictated one. In this written offer Jarrett described the goods as "Contents of wrecked vessel situated at Jormound Islands — Fuel oil". Sheehan told Jarrett he would not approve of the sale, as he did not know whether the offer was reasonable, and would have to try to trace the oil tanker in the office lists. The next day Jarrett told Sheehan it was an American vessel as far as he knew. Sheehan replied that if it was it would not be on the Commission's lists. Sheehan, however, had authority to sell it even if it were an American vessel. He did not find it on the lists. He then sent a signal to the district officer at Samarai (Exhibit 6), stating that an application had been received for the purchase of "fuel oil said to be on reef at Jormound Islands" and asking whether the district officer knew anything about it. On 7th November 1946 one McMullen, who was the defendant Commission's liaison officer in New Guinea, told Sheehan he knew of a wrecked tanker on Jomard Island. Sheehan replied that he had received an offer of 50 pounds for its contents. McMullen inquired whether Sheehan meant "that American tanker". He promised Sheehan he would see what he could find out about it. Later he told Sheehan he did not get any information. In the same month, November 1946, one Davis, the general manager of the defendant Commission, was in New Guinea and wrote a memorandum to Bowser reading: "I discussed with Mr. McMullen this morning the question of the tanker lying on a reef about a hundred miles north of Samarai. Mr. McMullen was good enough to indicate that he would send out a party and I suggest that Mr. Strange go with this party to establish whether she is worthwhile for sale as a salvage job. If there is equipment of value on her, she could be offered for sale at the termination of the Rabaul Sale whilst the buyers from the South who will be interested in such vessels as the Naroota are still in the area."


Bowser believed Davis was referring to the same vessel as Jarrett. Bowser then spoke to McMullen, who said he was sending signals to the district officers.


In December 1946 Bowser took up a position in the Melbourne headquarters of the defendant Commission in charge of clearance of goods declared but not cleared in New Guinea.


On 5th January 1947 Sheehan wrote to the Australian Broadcasting Commission at Port Moresby arranging for the broadcasting on 7th, 8th and 9th January of the following announcement:—


"The Commonwealth Disposals Commission invites tenders for an oil tanker wrecked on Jourmaund Reef approximately 100 miles north Samarai. The vessel is said to contain oil. . . . Tenders should be lodged not later than 25th January 1947."


A copy of this letter was sent by Sheehan to the defendant Commission in Melbourne.


[381] On 13th February 1947 Bowser sent a signal to Sheehan at Port Moresby asking whether "the vessel containing oil and approximately 200 miles off Samarai" had been sold, and he received a reply that no offers had been made.


On 10th March 1947 Sheehan again wrote to the Australian Broadcasting Commission arranging for a similar announcement to be made on 12th, 13th and 14th March.


Bowser referred to Currie, who was the sales superintendent of the defendant Commission in Melbourne, the copy of the Port Moresby announcement received from Sheehan. Tenders were then advertised for in the Melbourne papers from about 7th March. There were three such advertisements, the last being on 29th March. Whether the advertisements in Melbourne were all in the same terms as the Port Moresby announcement does not appear; but the following advertisement appeared in the Melbourne Argus of 29th March 1947:— "Tenders are invited for the purchase of an oil tanker lying on Jourmaund Reef, which is approximately 100 miles North of Samarai. The vessel is said to contain oil. Offers to purchase the vessel and its contents should be submitted to the Commonwealth Disposals Commission . . . and should be lodged not later than 2 p.m. March 31, 1947."


[382] About the middle of March the plaintiff F. E. McRae, who is a Melbourne merchant dealing in metals and chemicals in partnership with the other plaintiff Keith McRae, as McRae Trading Company, and two other men saw Currie at the Commission's office in Melbourne. McRae said he had seen an advertisement regarding a "wrecked tanker" and would like to get additional information. Currie told him he had no further information than appeared in the advertisement, but that Bowser might know something. Currie also told McRae that from the very limited information available he did not think any considerable tender would be warranted. He then introduced McRae and the men with him to Bowser. Currie told Bowser that McRae was interested in the tanker on the Jourmaund Reef and would like additional information. Bowser said he was sorry he could not add to the information already given to McRae. He added that when he was in New Guinea he received an offer for "the wreck and contents" and that it was refused. McRae told Bowser either that he was going or thought of going to New Guinea. He asked what surplus goods were available there, and if there were any other wrecks. Bowser replied there were wrecks in New Guinea, but he was not sure whether they had been sold, and that McRae should talk to Sheehan about them when he reached New Guinea.


Before tendering McRae looked at maps and could not find Jourmaund Reef but he found Jomard Reef. He took this to be the one with which he was concerned.


Bowser next saw the plaintiff F. E. McRae about 2 p.m. on 31st March 1947, when the latter put an envelope on the typiste's table in the defendant Commission's Melbourne office. Bowser asked McRae whether he had managed to get to New Guinea. McRae replied that he had not. He added "that one often had a couple of hundred pounds on a horse on a Saturday and I might as well have a gamble on this". The plaintiff's tender was as follows:— "Offer for Vessel on Jourmaund Reef by McRae Trading Co. 345 Exhibition Street, Melbourne. 1 oil tanker as advertised 'Age' 29.3.47, 'Argus' 29.3.47. Lying on the Jourmaund Reef off Samarai. Price 285 pounds. Cheque enclosed deposit 20% 28 pounds 10.0."


On 11th April the Commission wrote a letter to the plaintiff informing him that his tender had been accepted. The letter also stated that a sales advice note to cover the transaction would be forwarded in the course of the next few days. On 15th April the sales advice note was sent to the plaintiffs by the defendant Commission. It states inter alia "your offer to purchase, the general conditions contained in Form O, and this acceptance shall constitute the contract". Form O contains four conditions, including Condition 3, which reads:— "Condition of property: The property shall be sold as and where it lies, with all faults, (if any), and save as expressly notified to the purchaser no warranty or condition whatsoever is given by the Commonwealth. While every effort shall be made to describe property correctly, the Commonwealth shall not be liable for compensation or otherwise by reason of any misdescription or alleged variation of property delivered, from sample or property inspected. Where, however, any purchaser considers himself prejudiced by reason of any alleged misdescription or variation from sample or property inspected, the Commonwealth, at its discretion may make such adjustment as is fair and reasonable."


[383] During the first half of April 1947 native craft had been wrecked or blown out of their course by storms in the vicinity of the Solomons. Shortly after, Sheehan met Campbell, the Harbour Master at Port Moresby, and asked him how far along the coast the storms would extend. Sheehan added that the defendant Commission had "a wrecked tanker for sale up Jomard way". Campbell replied that it could be blown off or washed off the reef, but he could not say definitely. On 14th April Sheehan sent a signal to the district officer Samarai (Exhibit X) reading:— "Would appreciate urgent reply details oil tanker Jourmaund Reef. Understand vessel now moved under water and contents nil. Can this be confirmed."


Actually Sheehan had no information except what Campbell gave him. He had no understanding that a vessel had moved under water and that the contents were nil. He said he sent the signal in this form for the sake of brevity, and, with some hesitation, I believe him. I can suggest no reason why he should be disbelieved. The barge had not moved under water, and it is common ground that there was in fact no oil tanker there. To this signal Sheehan received the following reply on 17th April (Exhibit Y):—


"Large approx. 100 ft. barge type tanker carrying oil machinery etc. apparently drifted on reef Jomard Entrance high water during 1944. When inspected . . . 1945 large hole stern admitted sea. Machinery ruined. Understand oil still in hold but quantity unknown. Vessel exposed low tide. Only partly submerged high tide. Can inspect when district vessel available. . . . . D.O. Misima"


Apparently Sheehan's signal to Samarai was referred to the assistant district officer Misima.


[384] On 15th April McRae asked Bowser whether he could give him a better position of the vessel, as otherwise he might spend some days searching for it. McRae mentioned that Jomard was more east of Samarai than north. Bowser said he would try to get some more information and would wire the district superintendet at Port Moresby, who Bowser said he assumed would obtain information from the district officers at Samarai and Misima. He also told McRae they were the people who would assist him in finding the locality. McRae asked Bowser whether he could give the name and size of the tanker. Bowser replied that he could not. Bowser then suggested that what McRae was endeavouring to get was the latitude and longitude. McRae assented. Bowser then sent a signal to Sheehan at Port Moresby. On receipt of this signal Sheehan took it to the Harbour Master, Campbell, and asked Campbell whether he could give the information. Campbell replied that he could, and appeared to work out bearings from a map and read them to Sheehan. Sheehan telegraphed them to Melbourne on 17th April. In this telegram the latitude was given as eleven degrees sixteen and a half minutes south and longitude one hundred and fifty-one degrees fifty-eight minutes east. The contents of this telegram were telephoned to the plaintiffs and then confirmed by letter on 18th April. On 19th April Sheehan wrote to the Melbourne office confirming his telegram of 17th April and enclosing a copy of the reply he had received from the assistant district officer Misima about the vessel on the reef at Jomard Entrance and the ruined condition of its machinery. This letter was received in the defendant Commission's Melbourne office on 22nd April.


On 23rd April the plaintiffs paid the balance of the purchase money, 256 pounds 10s. 0d.


On receipt by the plaintiffs of the particulars of location the Gippsland, which was then being altered for the King Island trade, was refitted for service in the tropics. A diver was engaged and salvage equipment obtained.


On 24th April Sheehan received a letter from the general manager of the defendant Commission stating that payment for the oil tanker had been effected and that a copy of the sales advice note had been forwarded to Port Moresby. Sheehan then advised the assistant district officer, Misima, that the vessel had been sold, and that the inspection referred to in the latter's telegram to Sheehan of 17th April, was not required.


In May 1947 Lindsay McRae, a brother of the plaintiffs, produced a copy of the sales advice note to Sheehan at Port Moresby. He had flown there with one Johnstone. Lindsay McRae said he had bought the tanker. Sheehan told him he could not personally deliver the tanker as he had never seen it, and that Lindsay McRae would have to go down to the district officer at Samarai or Misima and show him the sales advice note. He also told Lindsay McRae that Jarrett had made an offer earlier, but that he did not know where Jarrett was. Further conversation followed, which is now rejected. It was admitted under the impression at the time that the McRae who produced the sales advice note to Sheehan was one of the plaintiffs. Lindsay McRae asked for the bearings of the tanker and Sheehan showed him the letter he had sent to Melbourne on 19th April containing the bearings. He told Lindsay McRae he had obtained them from Campbell, and introduced him to Campbell.


[385] On 28th June the Gippsland left Sydney for Port Moresby and foundered on 24th July. The plaintiffs were on board, but they and the master and crew reached Port Moresby, where the Betty Joan was chartered by the plaintiffs for salvage operations. On 15th August 1947 Johnstone and Lindsay McRae proceeded in the Jessie from Port Moresby to the location given by the defendant Commission. They went ashore and walked around the reef there. They saw no boat or ship or any sign of wreckage; but they saw a log sixty feet long.


In October plaintiff F.E. McRae saw Bowser at the latter's office in Melbourne and told him a cable had been received from New Guinea that a through search had been made for the tanker at the location given by the defendant Commission; and that only a log was found; but that there was a barge eleven or twelve miles away to the east. Bowser said he would signal New Guinea and endeavour to get some information. He then sent the following signal to Civil Administration Port Moresby, dated 17th October (Exhibit E):— "Commission sold oil tanker located Jourmaund Reef to McRae Trading Company Melbourne. Grateful you check bearing supplied by District Officer Misima April 1947, latitude eleven degrees sixteen and half minutes south longitude one hundred and fifty one degrees fifty eight minutes east. Previous advices indicated location approximately one hundred miles north Samarai. Firm alleges thorough search made for oil tanker in area specified but unable locate. Understand barge containing oil and machinery located approximately twelve miles from bearing specified. Appreciate advice indicating whether barge was confused with oil tanker and any further details enable firm locate oil tanker. . . . Disposals".


On 11th December 1947 the acting general manager of the defendant Commission wrote to the plaintiffs (Exhibit I) setting out the following information received from the Acting Administrator of the Territory in reply to the defendant Commission's signal:— "Investigation into the matter contained in the attached signal has disclosed that on the last maintenance trip to Jomard Reef Light on 29.7.47, a search was made for the tanker in question. The search was carried out by Mr. B.M. Ritchie of this Department and Lieut, Salisbury, R.A.N.R. (S) of H.M.A.S. Tarangau. No trace of the wreck was found, but a number of objects resembling ship's frames were sighted in the position given by the District Officer Misima, and, as the barge (which is in fact an L.S.T. loaded with oil drums) was also sighted in its accepted position, there seems no doubt that the tanker has disintegrated and slipped into deeper water. There has been definitely no confusion between barge and tanker."


[386] After some correspondence between the solicitors for the parties the Commonwealth Crown Solicitor for the defendants wrote to the plaintiff's solicitors on 29th October 1948 (Exhibit R) stating that at the date of sale the vessel was located approximately in the position mentioned in the defendant Commission's letter to the plaintiffs of 18th April 1947 and that it was still there in May 1948. The letter proceeded to say the confusion that might have arisen from the Acting Administrator's letter of 11th December was regretted and that the defendants were prepared to make a refund or to make the vessel available.


[387] However, I do not think that this oil barge was an oil tanker as that term was understood in shipping circles in Melbourne and by the parties. In the American book by Day, published in 1923, there is a glossary of terms used in the petroleum industry, and the term "oil tanker" is defined to include an oil barge. This book was said by Johnstone, an expert witness for the plaintiffs, to be authoritative, although Johnstone did not agree with that definition. But whatever may have been the meaning of "oil tanker" in America in 1923 I am satisfied that in 1947 in Australia an oil tanker was understood to be a vessel not merely specially constructed for the carriage of oil in bulk but also self-propelled and ocean-going. Currie thought an oil tanker would be self-propelled. When Bowser on 17th October inquired whether the oil tanker had been confused with the barge he indicated his understanding that they were different types of vessel. Therefore the defendants cannot rely on the barge being an oil tanker. Nor can they set up that the barge was sold but was misdescribed as an oil tanker and that they are expressly exempted from liability for misdescription under the conditions of contract. If the defendants, knowing what the vessel they advertised was like, yet wrongly described it as a barge, it might be a case of misdescription, because an oil tanker and an oil barge are vessels and also have in common the feature of special construction for the carriage of oil in bulk, although a barge is not self-propelled or ocean-going. But neither Bowser nor Currie, nor any other servant of the defendants having any power or duty in connection with this transaction, thought that an oil barge was an oil tanker. What both the plaintiffs and the defendants had in mind throughout was an oil tanker as distinct from an oil barge. But there was no oil tanker to sell, and so there was no contract (Couturier v. Hastie [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065)). It was conceded by counsel for the plaintiffs that, if Jarrett had told the plaintiffs and the defendants that there was an oil tanker on the reef at Jomard Islands and thereupon the plaintiffs and the defendant Commission agreed on a sale, there would be no contract. But counsel also submitted that this was not the position because on 15th April 1947 the plaintiffs asked for the location of the vessel, and it was pin-pointed by giving Latitude and longitude. Counsel submitted that the plaintiffs could assume from this that there was something valuable at the location, and that, as the plaintiffs acted upon this information to their prejudice, the defendants were estopped from denying the existence of an oil tanker there. But, to furnish ground for an estoppel the statement must have been made as an inducement. It was not made to induce a contract, as the tender had then been accepted. The inducement, if any, could only have been to pay the balance of purchase money, which was still unpaid on 15th April, and to proceed to take delivery of the vessel at the location given. But I find that the only purpose the plaintiffs had in asking for the exact location, and that the defendant Commission had in giving it, was to save the time of the plaintiffs in looking for the vessel on the reef. The plaintiff, F.E. McRae, told Bowser as much on 15th April 1947. He admitted he had a conversation with Bowser on those lines.


Then as to the claim for damages for deceit or neglect of duty: The plaintiffs submit that the information in the telegram from the assistant district officer Misima to Sheehan on 17th April, stating that the vessel was a 100 ft. barge-type tanker and its machinery ruined, should have been disclosed to the plaintiffs forthwith or at latest on 22nd April 1947 when it was received in Melbourne. The balance of the purchase money was not paid until 23rd April. This information revealed that the vessel was not an oil tanker of a type the parties had in mind. Bowser then had a duty to inform the plaintiffs on 22nd April of the mutual mistake of the parties. But he remained silent and has failed to give a satisfactory explanation why he did so. Even if he thought that the plaintiff F.E. McRae had gone to New Guinea he could still have communicated with him or with the other plaintiff or with the office of the McRae Trading Company in Melbourne. The natural consequence of his silence was that the plaintiffs paid the balance of the purchase money, and went to the expense of searching for the oil tanker. But the refitting and equipment of the Gippsland and her dispatch to the wreck before it was surveyed was not a natural consequence. I find that Bowser, in keeping silent, intended these natural consequences, and that the defendant Commission is liable for the resulting damages to the plaintiffs. I assess the damages at 756 pounds 10s. 0d.


I find no further deceit or negligence.


I give judgment for the plaintiffs for 756 pounds 10s. 0d. As to the costs I desire to give the parties an opportunity of being heard. I will hear argument if necessary in Melbourne on May 23rd at 9.30 a.m.


[388] His Honour awarded the plaintiffs half the costs of the action.


From the above decision in so far as it was unfavourable to them the plaintiffs appealed to the Full Court of the High Court, and the defendants cross-appealed.  


[393] O.J. Gillard K.C. (with him L.S. Lazarus) for the appellants. 1. The Commission agreed to sell and the plaintiffs agreed to purchase "an oil tanker lying on Jourmaund Reef" for the sum of 285 pounds on the terms and conditions indorsed on the tender form on Exhibit B. 2. The agreement is comprised of the following documents:— (a) Advertisement in Argus 29/3/47, incorporated by reference in Exhibit B. (b) Tender Form, Exhibit B. (c) Letter dated 11th April 1947 from the Commission to the plaintiffs. 3. (a) The Court is bound to look at the whole correspondence between the parties to discover if and when the parties entered into contractual relations (Hussey v. Horne-Payne (1879) 4 App Cas 311; Williams v. Brisco (1882) 22 Ch D 441, at p 448, per Jessel M.R.). (b) But, there being a clear acceptance of the tender by letter dated 11th April 1947, any correspondence thereafter was otiose (Perry v. Suffields Ltd. (1916) 2 Ch 187; Lennon v. Scarlett & Co. [1921] HCA 42;(1921) 29 CLR 499). (c) If any new term were intended to be introduced into the contract by reference to the "sales advice note" so as to defeat the clear acceptance of the tender, then the expression of such intention should have been clear and unambiguous (Proprietors &c. of the English & Foreign Credit Co. Ltd. v. Arduin (1871) LR 5 HL 64, at p 79, per Lord Westbury). (d) The mere reference in the letter of 11th April to the forwarding of a sales note was at the most an ambiguous introduction of a new term into the contractual relations. (e) By the letter a definite contract of sale consisting of an accepted tender, the notification of acceptance thereof and the conditions therein set out was expressly established. 4. The contract so established requires the Commission to deliver "an oil tanker", and a failure to do so is a breach of condition, at least (Couchman v. Hill (1947) KB 554): cf. s. 18 of the Goods Act 1928 (Vict.). 5. The exonerating clause in clause 8, Exhibit B, only covers "warranty or guarantee", not "condition", and accordingly does not exonerate the Commission from delivering "an oil tanker" (Wallis, Son & Wells v. Pratt & Haynes (1911) AC 394; Baldry v. Marshall (1925) 1 KB 260; Andrews Bros. (Bournemouth) Ltd. v. Singer & Co. Ltd. (1934) 1 KB 17; Nicholson & Venn v. Smith Marriott (1947) 177 LT 189: cf. Hope v. R.C.A. Phototone of Australia Pty. Ltd. [1937] HCA 90; (1937) 59 CLR 348; L'Estrange v. F. Graucob Ltd. (1934) 2 KB 394. 6. The provision that the goods are sold "as and where they lie with all faults (if any)" means "an oil tanker" with all faults and does not exonerate the Commission from delivering "an oil tanker" (Shepherd v. Kain (1821) 5 B & Ald 240 (106 ER 1180); Taylor v. Bullen [1850] EngR 844; (1850) 5 Ex 779, at p 784 [1850] EngR 844; (155 ER 341, at p 343); Cowdoy v. Thomas (1877) 36 LT 22; Robert A. Munro & Co. Ltd. v. Meyer (1930) 2 KB 312, at p 327, per Wright J.): cf. Champanhac & Co. Ltd. v. Waller & Co. Ltd. (1948) 2 All ER 724, at p 726, per Slade J. 7. Alternatively by the terms of reference in the letter of 11th April 1947 the contract is comprised of the documents mentioned in clause 2 above, together with the sales advice note. 8. In the absence of proof the plaintiffs received or knew of Form O, it is submitted that they are not bound by the conditions. There was no proof that Form O was ever sent to or received by the plaintiffs, and until the conclusion of the case no reliance was placed on this document in the pleadings. (He referred to Cheshire & Fifoot, Law of Contracts, 1st ed. (1945), p. 87; Olle v. Marlborough Court Ltd. (1949) 1 KB 532, at p 549.) 9. If Form O is incorporated, then:— (a) In order to relieve the Commission from liability for non-delivery, it must be expressed in clear and unambiguous terms. "An ambiguous document is no protection" (per Lord Macnaghten in Elderslie S.S. Co. Ltd. v. Borthwick (1905) AC 93, at p 96 ): see also Wallis, Son & Wells v. Pratt & Haynes (1910) 2 KB 1003, at p 1016, per Fletcher Moulton L.J.; s.c. in House of Lords (1911) AC 394 ; Chartered Bank of India, Australia & China v. British India Steam Navigation Co. Ltd. (1909) AC 369, at p 375; Szymonowski & Co. v. Beck & Co. (1923) 1 KB 457, at pp 464, 466; (1924) AC 43, at p 48. (b) Form O was devised alio intuitu and was never intended to relieve the Commission from its responsibility to carry out the fundamental condition of delivering an oil tanker: see Vigers Bros. v. Sanderson Bros. (1901) 1 KB 608; J. Aron & Co. v. Comptoir Wegimont (1921) 3 KB 435; Szymonowski's Case (1923) 1 KB, at p 467; Green v. Arcos (1931) 47 TLR 262, at p 336; Wilensko &c. v. Fenwick & Co. (West Hartlepool) Ltd. (1938) 3 All ER 429. 10. To evade responsibility to deliver an oil tanker the defendants over there is no contract because— (a) the parties were under a mutual mistake of fact as to the existence of an oil tanker on Jourmaund Reef, or (b) alternatively it was an implied condition that there was an oil tanker lying on the reef. 11. As to the mutual mistake:— (a) There was no mutual mistake on the facts. There was a vessel which the Commission and Bowser chose to describe as an oil tanker, and this was the subject of the contract. The nature of the vessel which Bowser or Currie intended to sell is irrelevant; the vendor was the Commission (or Commonwealth). (He referred to Clare v. Lamb (1875) LR 10 CP 334, at p 338; Barker v. Janson (1868) LR 3 CP 303.) (b) The defendants Bowser and Currie and the Commission were negligent in representing that there was an oil tanker on Jourmaund Reef which induced the plaintiffs to enter into contract; they cannot rely upon any mistake induced by their own carelessness (Anson on Contracts, 19th ed. (1945), p. 159; Pollock on Contracts, 12th ed. (1946), pp. 400-402). Bowser on behalf of the Commission assumed the risk of the ability of the Commonwealth to perform the contract entered into with the plaintiffs. (He referred to Williston, Law of Contracts (1938), vol. 1, p. 31. s. 20; Smith v. Hughes (1871) LR 6 QB 597, at p 606; Raffles v. Wichelhaus (1864) 2 H & C 906 (159 ER 375); Scott v. Littledale (1858) 8 El & Bl 815, at p 821 [1858] EngR 226; (120 ER 304, at p 306).) (c) Assuming that there was no contract initially, then after the representation implied in the letter of 18th April 1947 written by the defendant Currie on behalf of the Commission and the conversation with Bowser at that time, the Commission is estopped from denying the existence of the contract or of the oil tanker (Low v. Bouverie (1891) 3 Ch D 82, at p 111, per Kay L.J.; Cornish v. Abington (1859) 4 H & N 549, at p 556 [1859] EngR 512; (157 ER 956); Smith v. Hughes (1871) LR 6 QB 597, at pp 606, 607; Sullivan v. Constable (1932) 48 TLR 267, at p 369; Balkis Consolidated Co. Ltd. v. Tomkinson (1893) AC 396, at pp 407, 410, 412; Consensus & Estoppel, by Prof. Hughes, 54 L.Q.R. 370; Cheshire and Fifoot, Law of Contracts (1945), pp. 194-196: Salmond & Williams, Law of Contracts, 2nd ed. (1945), p. 239; Pollock, Principles of Contract, 12th ed. (1946), pp. 421, 501). (d) Since Bell v. Lever Bros. Ltd. [1931] UKHL 2; (1932) AC 161 the proper analysis of the law is that the fact of non-existence does not bring about an avoidance on the ground of mistake, but results in non-performance of an implied condition as to the continued existence of the subject matter (per Denning L.J. in Solle v. Butcher (1950) 1 KB 671, at p 691): cf. Barr v. Gibson (1838) 3 M & W 390, at pp 399, 400 [1836] EngR 984; (150 ER 1196, at pp 1200, 1201); and Couturier v. Hastie [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065); ss. 11, 12, Goods Act. The test is: On what basis did the parties intend to contract? Here Bowser and the Commission intended to sell the vessel on the reef of Jourmaund Island and represented it as an oil tanker. The plaintiffs purchased the vessel so described. No implication can be made in these circumstances that it was fundamental to the contract, or there was a condition precedent thereto, that an oil tanker existed. 12. The duty of the Commission or the Commonwealth was to deliver an oil tanker. What was tendered was an oil barge, not an oil tanker. Even if there was formal delivery of the barge qua tanker at Port Moresby, the plaintiffs are not to be taken to have accepted until they have had a reasonable opportunity of examining the vessel (ss. 39 and 41, Goods Act 1928 (Vict.)). 13. The plaintiffs are entitled to the estimated loss directly and naturally resulting in the ordinary course of events from the seller's breach of contract (s. 55(2), Goods Act 1928). 14. In the alternative, the plaintiffs sue for damages for deceit arising out of— (a) the advertisement Exhibit A; (b) the letter Exhibit D. 15. The Commission and the Commonwealth were vicariously guilty of deceit through their officers, as at least McMullen knew of the oil barge and deliberately described it as an oil tanker. The others were so ignorant of the true position that with the knowledge they possessed they could not reasonably have believed that "an oil tanker" was lying on Jourmaund Reef 100 miles north of Samarai. (He referred to Derry v. Peek (1889) 14 App Cas 337, at p 376 , per Lord Herschell; Kerr on Fraud and Mistake, 6th ed. (1929), p. 33.) They were recklessly careless as to whether the statement was true or false. 16. In the alternative, knowledge of the true facts must be imputed to the Commonwealth, which (having this knowledge) made a false representation to induce persons to purchase an oil tanker. See Pearson & Son Ltd. v. Dublin (1907) AC 381; London County Freehold & Leasehold Properties Ltd. v. Berkeley Property & Investment Co. Ltd. (1936) 2 All ER 1039. 17. "There is a duty upon a seller to disclose to a buyer the fact that material representations true when made have become false before final consummation of the sale" (Williston, Law of Contracts (1938), vol. 5, p. 4187, s. 1499; Davies v. London & Provincial Marine Insurance Co. (1878) 8 Ch D 469, at p 475; Dalgety & Co. Ltd. v. Australian Mutual Provident Society [1908] VicLawRp 70; (1908) VLR 481, at p 506; [1908] VicLawRp 70; 14 ALR 299, at p 308; Brownlie v. Campbell (1880) 5 App Cas 925, at pp 949, 950; With v. O'Flanagan (1936) Ch 575 ; Bradford Third Equitable Benefit Building Soc. v. Borders (1941) 2 All ER 205, at p 220; Robertson & Moffat v. Belson (1905) VLR 555; Salmond & Williams, Law of Contracts, 2nd ed. (1945), p. 247; Cheshire and Fifoot, Law of Contracts (1945), p. 173). See also per Romer L.J. in Scott v. Coulson (1903) 2 Ch 249, at p 252; cf. Arkwright v. Newbold (1879) 17 Ch D 301. 18. As to damages for deceit, the plaintiffs are entitled to such expenses as they have incurred by reason of the misrepresentation, setting off any benefit gained by them (Halsbury, 2nd ed., vol. 23, p. 60; Mullett v. Mason (1866) LR 1 CP 559; Nicholls v. Taylor [1939] VicLawRp 20; (1939) VLR 119; Neal v. Ayers [1940] HCA 21; (1940) 63 CLR 524; Potts v. Miller [1940] HCA 43; (1940) 64 CLR 282, at p 294; McAllister v. Richmond Brewing Co. N.S.W. Pty. Ltd. (1942) 42 SR (NSW) 187; 59 WN 147; Milne v. Marwood [1855] EngR 181; (1855) 15 CB 778 (139 ER 632); Burrows v. Rhodes (1899) 1 QB 816, at p 834; Barley v. Walford [1846] EngR 7; [1846] EngR 7; (1846) 9 QB 197 (115 ER 1249)). 19. As to the action for negligence, it is submitted that, because of the relationship created by the tender and its acceptance, both parties were under a duty to co-operate in doing such things as were necessary to carry out the terms of the contract (Mackay v. Dick (1881) 6 App Cas 251, at p 263, per Lord Blackburn; Marshall v. Colonial Bank of Australasia [1904] HCA 31; (1904) 1 CLR 632, at pp 647, 652; Mona Oil Equipment & Supply Co. v. Rhodesia Railways Ltd. (1949) 2 All ER 1014, at p 1017; Luxor (Eastbourne) Ltd. v. Cooper (1941) AC 108, at p 118 , per Viscount Simon L.C.). As there was great doubt as to the true location of the subject matter, the Commission, in order to give effectual delivery, was under a duty to give a better location than set out in the advertisement and sales advice note. 20. In carrying out this co-operation the law would treat the Commission and the plaintiffs as "neighbours", thereby requiring the Commission to exercise proper care in giving the location of the subject matter of the contract. Heaven v. Pender (1883) 11 QBD 503; M'Alister (or Donoghue) v. Stevenson [1931] UKHL 3; (1932) AC 562; Le Lievre v. Gould (1893) 1 QB 491 and Old Gate Estates Ltd. v. Toplis (1939) 3 All ER 209 are distinguishable. (He referred to Grant v. Australian Knitting Mills (1936) AC 85, at p 103.). See also Winfield, Law of Tort, 3rd ed. (1946), pp. 377-379; International Products Co. v. Erie R.R. Co. (1927) 244 NY 331. Cf. Courteen Seed Co. v. Hong Kong & Shanghai Banking Corporation (1927) 245 NY 377; Halsbury, 2nd ed., vol. 7, p. 147. 21. As to damages for breach of contract, omnia praesumuntur contra spoliatorum (Wilson v. Northampton & Banbury Junction Railway Co. (1874) LR 9 Ch App 279 ). 22. What was purchased and sold was an oil tanker, and the plaintiffs should be compensated for the failure to deliver, remembering that the contract provided for delivery at some far distant place, thereby requiring the plaintiffs to incur expense (Monarch S.S. Co. Ltd. v. Karlshamns Oljefabriker(1948) AC 196, at pp 204, 210; Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (1949) 2 KB 528 ). Assuming "foreseeability" to be necessary for an award of substantial damages (see per Denning J. in Minister of Pensions v. Chennell (1947) KB 250 , the nature of the contract required the plaintiffs to take delivery, involving salvage operations. The plaintiffs were bound to accept delivery, which required them to undertake expensive provision therefor. It was "on the cards" that the plaintiffs, having acquired such a valuable thing cheaply, would make all preparations to recover it. 23. Difficulty in assessing damages is no reason for refusing substantial damages. It is necessary to distinguish between cases where there is no proof of loss at all and those in which there is difficulty in proving the value of the loss (Chaplin v. Hicks (1911) 2 KB 786; Howe v. Teefy (1927) 27 SR (NSW) 301; 44 WN 102: Cf. Sapwell v. Bass (1910) 2 KB 486 ; Fink v. Fink [1946] HCA 54; [1946] HCA 54; (1946) 74 CLR 127.


[395] J.B. Tait K.C. (with him P. Murphy), for the respondents. Logically the first question is whether any enforceable contract arose out of the circumstances of this case. It is submitted, in the first place, that — unless the barge is to be regarded as a "tanker"— Webb J. was right to the extent to which he decided, on the authority of Couturier v. Hastie [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065), that the purported contract was void. If, however, it must be assumed that there was a contract, the conditions of the sales advice note are necessarily a part of it. It may be that the letter of 11th April 1947 advising the plaintiffs that their tender was accepted fixes the day of acceptance; but this letter refers to the sales advice note. It is submitted, therefore, that the note fixes the date; and this note is not pleaded as part of the contract. It may well be that great difficulty could occur in reconciling and applying provisions of the various documents which would have to be looked at as constituting the contract; but the parties themselves (including the plaintiffs) are to blame for that. If they will incorporate documents in stereotyped form which are not appropriate and then add further provisions by correspondence, they take on themselves the burden of difficulties of interpretation; but that does not mean that, when they do incorporate a particular document which presents difficulty, the Court can treat it as not being part of the contract. If there was a contract, the sale was by description, and what the plaintiffs' got was an "oil tanker" within the description of the thing sold. The test is whether the thing delivered (or tendered) differs so greatly from the thing described that they are really different things. That is not so here. There is no implication that what is sold is of any substantial value; indeed, the tender price suggests otherwise. The only implication is, under the Goods Act (Vict.), that the thing sold shall be of merchantable quality. Whatever provisions of the documents may be inappropriate, the exception relating to misdescription is certainly not so. It precisely meets this case. If the barge was not a "tanker", then the exception applies. Such an exception is clearly intended to put the responsibility on the buyer. It is the sort of provision one would expect to find in contracts of sale made by the Disposals Commission. The proper measure of damages for non-delivery of the thing contracted to be sold is the estimated loss directly and naturally resulting in the ordinary course of events (Pollock on Contracts, 12th ed. (1946), p. 529). Regard must be had to such consequences as may reasonably be supposed to be in the contemplation of the parties at the time the contract was made. The buyer is entitled to be put in the position in which he would have stood if the thing sold had been delivered (Williams Bros. v. Ed. T. Agius Ltd. (1914) AC 510; Benjamin on Sale, 7th ed. (1931), p. 1001; Goods Act (Vict.), s. 51(3)). See also Hasell v. Bagot Shakes & Lewis Ltd. [1911] HCA 62; (1911) 13 CLR 374, at p 381. The true practical measure of damages here on the assumption that there was non-delivery is at most the sum the plaintiffs were prepared to pay for what they expected to get — the tender price of 285 pounds. An objection to many of the items of damage claimed by the plaintiffs is that they were not proved in the sense of having been shown to flow from the non-delivery. Moreover, the loss of the ship Gippsland could not have been within the contemplation of the parties. As to the expense of the salvage expedition as a whole, it does not appear that this was lost because there was no tanker at the place specified. If there had been a tanker there but it had proved not worth the expense of salvage, the plaintiffs would have had the same loss, but it would not have been due to any breach of contract. As to deceit, it is submitted that there is no warrant in the evidence for the decision of Webb J. against the defendants. The most that appears from the evidence is innocent — not fraudulent — misrepresentation. As to the claim on the basis of negligence, it does not appear that at the relevant time the defendants were under any duty of care in relation to the plaintiffs. See Charlesworth on Negligence, 2nd ed. (1938), p. 14. In any event the observation already made as to the loss of the expense of the salvage expedition would apply similarly on the question of damages under this head. (He referred to Mayne on Damages, 11th ed. (1946), at pp. 75 et. seq., and, in particular, as to damages in tort, to Re An Arbitration between Polemis and Furness, Withy & Co. Ltd. (1921) 3 KB 560; Weld-Blundell v. Stephens (1920) AC 956, at pp 983, 984.) There is no parallel between this case and Chaplin v. Hicks (1911) 2 KB 786 . In the latter it was certain that a prize of fixed value would go to someone. In the present case it cannot be shown that the plaintiffs would have received anything of value under the contract.


O.J. Gillard K.C., in reply.


Cur. adv. vult.

1951, August 27.


The following written judgments were delivered:—


DIXON AND FULLAGAR JJ. This is an appeal from a judgment of Webb J. in an action in which the plaintiffs claimed damages on three causes of action alleged alternatively — breach of contract, deceit and negligence. The judgment, as passed and entered, was in favour of the plaintiffs against the Commonwealth Disposals Commission for 756 pounds 10s. 0d. as damages for deceit, and his Honour awarded the plaintiffs one-half of the costs of the action. The plaintiffs appeal, asserting that they are entitled to damages far in excess of 756 pounds 10s. 0d. The defendants cross-appeal, asserting that the maximum amount recoverable by the plaintiffs on any view of the case was 285 pounds. The amounts actually claimed by the statement of claim were, on the basis of one set of allegations, some 250,000 pounds, and, on the basis of another set of allegations, some 10,000 pounds.


[396] The case presents serious difficulties, the facts being in some respects of an extraordinary character. Some aspects of them are probably not fully explained by anything that appears in the evidence. They are summarized chronologically in the judgment of Webb J., and that summary need not be repeated here. Though it may be necessary for some purposes to go back in point of time, we think that, for the purposes of this appeal, the proper starting-point is the acceptance by the Commission of a tender by the plaintiffs for the purchase from the Commission of a wrecked or stranded oil tanker. It would be premature to speak of that acceptance as creating a contract, because the defendants have contended throughout that the "contract" was "void", or, in other words, that no contract was ever made. Only one thing need be said before proceeding to the starting point. In the assumed background of the case lay the facts that during the war a considerable number of ships, including "oil tankers", became wrecked or stranded in the waters adjacent to New Guinea, that after the war the Commission had the function of disposing of these as it thought fit, and that a purchaser from the Commission of any of these wrecked or stranded vessels might, but not necessarily would, make a very large profit by salving and selling the vessel, or the materials of her hull and equipment, or her cargo. The realization of a profit in this way (and the evidence suggests that a purchaser would not contemplate a realization of profit by an immediate resale of what he had bought as such) could, of course, only be achieved after the expenditure of large sums of money. Such a purchaser would naturally regard himself as acquiring, at best, a chance of making a profit. But he would not regard himself as acquiring a certainty of making a loss.


[397] In the Melbourne newspapers, Age and Argus, of 29th March 1947, appeared an advertisement inserted by the Commission. The advertisement read:— "Tenders are invited for the purchase of an OIL TANKER lying on JOURMAUND REEF, which is approximately 100 miles NORTH OF SAMARAI. THE VESSEL IS SAID TO CONTAIN OIL. OFFERS TO PURCHASE THE VESSEL AND ITS CONTENTS should be submitted to the COMMONWEALTH DISPOSALS COMMISSION, Nicholas Building, 37 Swanston Street, Melbourne, indorsed 'OFFER FOR VESSEL ON JOURMAUND REEF', and should be lodged not later than 2 p.m., March 31, 1947." In response to this advertisement, the plaintiffs, who are brothers trading in partnership, submitted a tender dated 31st March 1947. The tender was on a printed form. It was headed "Offer for vessel on Jourmaund Reef". The form was divided into columns. In a column headed "Description of Goods" the words "1 oil tanker lying on Jourmaund Reef as advertised Age, Argus, 29/3/47" were inserted. In the next column, which was headed "Location of Goods" the words "On Jourmaund Reef, off Samarai" were inserted. The price quoted was 285 pounds, and a cheque for 28 pounds 10s. 0d. being the required deposit of ten per cent, was forwarded with the tender. Indorsed on the printed form of tender were a number of conditions. On 11th April 1947 the Commission wrote to the plaintiffs a letter saying:— "With reference to your tender of 31st March 1947, I desire to advise that your offer of 285 pounds net has been accepted. A sales advice note to cover this transaction will be forwarded in the course of the next few days." This letter was followed by another letter of 15th April 1947, which says:— "I wish to inform you that your offer to purchase dated 31.3.47 is accepted for the quantities, the items, and at the price set out hereunder and/or in the attachment hereto bearing the same sales advice number as this acceptance". Below appear the words "One (1) Oil Tanker including Contents wrecked on Jourmaund Reef approximately 100 miles north of Samarai. Price 285 pounds." Then come some provisions as to payment and delivery, followed by the signature on behalf of the Commission. After the signature come the words "Your offer to purchase, the general conditions contained in Form O, and this acceptance, shall constitute the contract. Kindly acknowledge receipt of this communication by return post". Finally, certain further "terms" are set out. The plaintiffs apparently did not, by return post or otherwise, acknowledge in writing the receipt of this remarkable "communication". Form O is a printed form which contains a number of "conditions of sale", most of which are entirely inappropriate to the particular case.


[398] The contention of the Commission that no contract ever came into existence between itself and the plaintiffs was based on extrinsic facts which will have to be considered in a moment. It was not denied that, apart from those facts, a contract would have been made, and, on the assumption that a contract was made, a good deal of argument took place as to what were the terms of that contract. It will be convenient to deal with this matter at this stage. No less than five documents are involved — the advertisement, the tender, the letter of 11th April, the letter of 15th April, and "Form O". Mr. Gillard, for the plaintiffs, contended that the terms of the contract made were to be found in the first three documents only. He said that the letter of 11th April was an unequivocal acceptance of the offer contained in the tender, that the reference to "sales advice note" was not to be understood as contemplating the addition of further terms so as to make the letter in effect a counter-offer, and that the letter of 15th April was merely an ineffective attempt to add further terms to a contract which was concluded on the receipt of the plaintiffs' letter of 11th April. He referred to a well-known line of cases of which Bellamy v. Debenham (1890) 45 Ch D 481 and Lennon v. Scarlett & Co. [1921] HCA 42; (1921) 29 CLR 499 are good examples. Mr. Tait, for the Commission, contended that the plaintiffs must be taken to have accepted the terms set out and referred to in the second letter, and that the terms of the contract were to be found in all five of the documents. He admitted that in the terms so found there was overlapping and inconsistency, and that some of those terms were entirely inappropriate to the subject matter of the contract, but he said that these facts merely meant that difficult problems of construction might arise. We are disposed to accept the view put by Mr. Gillard, but the question does not seem to us to matter, and for this reason. The only condition on which Mr. Tait affirmatively relied was a condition which is contained in clause 8 of the terms indorsed on the tender form. That clause provides that the goods "are sold as and where they lie with all faults" and that no warranty is given as to "condition description quality or otherwise". This clause cannot, in our opinion, help the Commission in this case. What the Commission sold was an "oil tanker". It was, therefore, a condition of the contract that what was supplied should conform to the description of an oil tanker, and it is settled that such a clause as clause 8 has no application to such a condition: see, e.g., Wallis, Son & Wells v. Pratt & Haynes (1911) AC 394 and Robert A. Munro & Co. Ltd. v. Meyer (1930) 2 KB 312; and cf. Shepherd v. Kain (1821) 5 B & Ald 240 (106 ER 1180).


[399] There was, however, another communication from the Commission to the plaintiffs, which is of considerable importance. The accepted tender described the subject matter as an "oil tanker lying on Jourmaund Reef as advertised Age, Argus, 29/3/47". The advertisement described her as "lying on Jourmaund Reef, which is approximately 100 miles North of Samarai". Now there appears to be no reef anywhere in the locality which is charted or officially known as "Jourmaund Reef". There is a channel between two islands or reefs charted as "Jomard Entrance", and a few miles to the east of that channel is an island or reef charted as "Jomard Island". Jomard Island, however, is not approximately 100 miles from Samarai, but approximately 170 miles from Samarai, and its bearing from Samarai is not North but a little South of East. The plaintiffs, having bought as they thought, their tanker, looked for "Jourmaund Reef" on a map. They, of course, failed to find it, but they found Jomard Island, and thereupon, not unnaturally, asked the Commission to give them the precise latitude and longitude of the tanker. The Commission gave a latitude and longitude by telephone on 18th April, and confirmed this by a letter written on the same day. The letter read:— "Confirming our telephone conversation of this morning, in connection with the location of the Oil Tanker on Jourmond" (sic) "Reef, I wish to advise it is located as follows:— Latitude 11 degrees 16 1/2 minutes South: Longitude 151 degrees 58 minutes East". The result of this letter was to resolve any ambiguity in the description of the locality of the tanker and to identify with precision, as against the defendant Commission, the place referred to in the relevant documents as the place where the thing which they were purporting to sell was lying.


Now, the simple fact is that there was not at any material time any oil tanker lying at or anywhere near the location specified in the letter of 18th April. There was, at a point about eleven miles east of the location specified, a wrecked vessel described as an "oil barge". Some years before 1947 strenuous but unavailing efforts to salve this vessel had been made by a fully equipped expedition sent out by the Commonwealth Salvage Board. It was contended before Webb J., and also, though faintly, before us, that this vessel was a tanker and that delivery of her to the plaintiffs would constitute performance of the contract by the Commission. Webb J. rejected this contention, and the evidence clearly establishes that a "tanker", according to common understanding, is a self-propelled, ocean-going vessel, fully equipped both for navigation and for the carriage of oil in bulk. A barge is merely a floating repository for oil, adapted to be towed, but not otherwise capable of movement under control. The existence of the wrecked barge in question here is not, we think, a directly relevant factor in the case, though it may serve to explain to some extent how a rumour that there was a wrecked tanker somewhere began to circulate in the offices of the Commission.


[400] We say advisedly that such a rumour began to circulate, because there was indeed no better foundation for any supposition on the part of the officers of the Commission that they had a tanker to sell. They had no more definite information than was derived from an offer by a man named Jarrett to buy for 50 pounds the contents of a wrecked vessel, which he said was within a radius of 200 miles from Samarai, and from what can be quite fairly described as mere gossip. The reckless and irresponsible attitude of the Commission's officers is clearly indicated by the description in the advertisement of the locality of the tanker. In an even worse light appears an attempt which was made later, without any foundation whatever, to suggest that at the time of the making of the contract there had been a tanker in the place specified but that she had since been washed off the reef in a storm. Unfortunately the plaintiffs, for their part, took the matter seriously. They believed, and there is evidence that they had some reason for believing, that an oil tanker wrecked at the place indicated was likely to prove a profitable proposition, and accordingly they paid on 23rd April the balance of their purchase money, and then proceeded to fit up a small ship, which they owned, with diving and salvage equipment, and they engaged personnel, and proceeded from Melbourne to New Guinea. It is sufficient at this stage to say that they expended a large sum of money in discovering that they had bought a non-existent tanker.


The plaintiffs, as has been said, based their claim for damages on three alternative grounds. They claimed, in the first place, for damages for breach of a contract to sell a tanker lying at a particular place. Alternatively they claimed damages for a fraudulent representation that there was a tanker lying at the place specified. In the further alternative, they claimed damages for a negligent failure to disclose that there was no tanker at the place specified after that fact became known to the Commission. The second and third of these alleged causes of action depend wholly or partly on certain further facts which have not so far been mentioned. On 19th April 1947 a telegram was sent from the District Officer at Misima to the Port Moresby office of the Commission, which read: "Your S4382 stop Large approx. 100 ft. barge type tanker carrying oil machinery etc. apparently drifted on reef, Jomard Entrance high water during 1944 stop When inspected by Lieut. Middleton 1945 large hole stern admitted sea Machinery ruined stop Understand oil still in hold but quantity unknown Vessel exposed low tide only partly submerged high tide Can inspect when district vessel available". This unquestionably refers to the wrecked barge. How and why this telegram came to be sent is one of the minor mysteries of this case: no Port Moresby message numbered S4382 was produced. It seems reasonable to infer that the plaintiffs' request for a precise "fix" for their tanker prompted the making of inquiries which ought to have been made much earlier, and that the missing "S4382" was a belated attempt to find out whether the Commission had really had anything to sell to the plaintiffs. On 14th April the Port Moresby office of the Commission had telegraphed the District Officer at Samarai, saying:— "S4392 Would appreciate urgent reply details oil tanker Jourmaund Reef stop Understand vessel now moved under water and contents nil stop Can this be confirmed?" It seems quite possible that one of the quoted numbers is a mistake for the other, and that the telegram of 17th April is really in response to that of 14th April, which had been passed on from Samarai to Misima. Anyhow, the telegram of 17th April was set out in a letter of 19th April from the Port Moresby office to the Melbourne office of the Commission. The letter was minuted by Bowser, one of the officers of the Commission who were mainly responsible for the "selling" of the "tanker", as follows:—


"Received 21/4/47. McRae (successful tenderer) already advised and confirmed by letter location of vessel". In the meantime Port Moresby had replied to Misima, saying:— "Appreciate report stop Vessel sold Melbourne syndicate Inspection not required".


[401] The plaintiffs put their claim in deceit in this way. They said, first, that there was a false and fraudulent representation in the original advertisement. They said, secondly, that, even if the original representation as to the existence of a tanker was innocent, the representation was a continuing representation and the Commission knew, on 21st April at the latest, that it was false. By thereafter allowing the plaintiffs, on the faith of the truth of the representation, to pay the balance of purchase money and incur expenditure, they rendered themselves liable in deceit. The plaintiffs put their final alternative claim in this way. They said that, when the Commission was asked for the precise location of the vessel, they owed to the plaintiffs a duty to exercise reasonable care in obtaining the information required. The duty arose from the position of the parties. They at least believed that they were contractually bound. It must have been obvious to the Commission that the plaintiffs were likely to spend real money in reliance on the information supplied. So far from exercising any sort of care in the matter, they merely obtained a rough estimate of the latitude and longitude of Jomard Entrance and gave the result to the plaintiffs. The grossness of the negligence is emphasised by the fact that, on the very day (17th April) on which the latitude and longitude were telegraphed from Port Moresby to Melbourne, the Port Moresby office of the Commission received the telegram from Misima which should, the plaintiffs say, have made it plain to them that there was no tanker at Jomard Entrance.


[402] Webb J. held that the contract for the sale of a tanker was void — in other words, that no contract for the sale of a tanker was ever made. He considered that the well-known case of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065) compelled him to this conclusion. His Honour held, however, as we read his judgment, that the plaintiffs had made out their case on the second aspect of their claim in deceit. He assessed damages on the basis that the plaintiffs were entitled to the return of the price paid plus an amount (necessarily, of course, approximate only) representing what it would have cost (without any preparations for salvage operations) to inspect the locality and ascertain that there was no tanker there. His Honour has not expressly stated the basis of his assessment, but it was common ground before us that this was the basis on which he proceeded.


The first question to be determined is whether a contract was made between the plaintiffs and the Commission. The argument that the contract was void, or, in other words, that there was no contract, was based, as has been observed, on Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065). It is true that Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) has been commonly treated in the text-books as a case of a contract avoided by mutual mistake, and it is found cited in the company of such cases as Gompertz v. Bartlett [1853] EngR 970; (1953) 2 El & Bl 849 (118 ER 985) and Strickland v. Turner [1852] EngR 199; (1852) 7 Ex 208 (155 ER 919). Section 7 of the English Sale of Goods Act 1893 is generally regarded as expressing the effect of the case. The case has not, however, been universally regarded as resting on mistake, and Sir Frederick Pollock, in his preface to vol. 101 of the Revised Reports, at p. vi, says:— "Couturier v. Hastie shows how a large proportion of the cases which swell the rubric of relief against mistake in the textbooks (with or without protest from the text-writer) are really cases of construction". And in Solle v. Butcher (1950) 1 KB, at p 691 Denning L.J. observed that the cases which it had been usual to classify under the head of "mistake" needed reconsideration since the decision of the House of Lords in Bell v. Lever Bros. Ltd. [1931] UKHL 2; (1932) AC 161. No occasion seems to have arisen for a close examination of Couturier v. Hastie [1852] EngR 774; [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 120 (156 ER 43); (1856) 5 HLC 673(10 ER 1065), but such an occasion does now arise.


[403] The facts of the case were simple enough. A question of del credere agency was involved, which has no relevance to the present case, and the facts may be stated without reference to that question. A sold to B "1,180 quarters of Salonica Indian corn of fair average quality when shipped, at 27/- per quarter f.o.b., and including freight and insurance, to a safe port in the United Kingdom, payment at two months from date upon handing over shipping documents." At the date of the contract the vessel containing the corn had sailed from Salonica, but, having encountered very heavy weather, had put in at Tunis. Here the cargo had been found to have become so heated and fermented that it could not be safely carried further. It had accordingly been landed at Tunis and sold there. These facts were unknown to either party at the date of the contract. On discovering them, B repudiated the contract. After the expiration of the two months mentioned in the contract, A, being able and willing to hand over the shipping documents, sued B for the price. The case came on for trial before Martin B. and a jury. Martin B. directed the jury that "the contract imported that, at the time of the sale, the corn was in existence as such, and capable of delivery" (1852) 8 Ex, at p 47 (155 ER, at pp 1253, 1254). The jury found a verdict for the defendant, and the plaintiff had leave to move. The Court of Exchequer (Parke B. and Alderson B., Pollock C.B. dissenting) made absolute a rule to enter a verdict for the plaintiff. This decision was reversed in the Court of Exchequer Chamber, and the House of Lords, after consulting the Judges, affirmed the decision of the Exchequer Chamber, so that the defendant ultimately had judgment.


[404] In considering Couturier v. Hastie [1852] EngR 774; (1952) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) it is necessary to remember that it was, in substance, a case in which a vendor was suing for the price of goods which he was unable to deliver. If there had been nothing more in the case, it would probably never have been reported: indeed the action would probably never have been brought. But the vendor founded his claim on the provision for "payment upon handing over shipping documents". He was not called upon to prove a tender of the documents, because the defendant had "repudiated" the contract, but he was able and willing to hand them over, and his argument was, in effect, that by handing them over he would be doing all that the contract required of him. The question thus raised would seem to depend entirely on the construction of the contract, and it appears really to have been so treated throughout. In the Court of Exchequer, Pollock C.B., in the course of argument, said (1852) 8 Ex, at p 49 (155 ER, at p 1254):— "The question is purely one of construction. I certainly think that the plain and literal meaning of the language here used imports that the thing sold, namely the cargo, was in existence and capable of being transferred." This was, in effect, what Martin B. had told the jury, and what it means is that the plaintiff had contracted that there was a cargo in existence and capable of delivery. Parke B., in giving the judgment of the majority of the Court (1852) 8 Ex, at p 54 (155 ER, at p 1256), said:—


"It is very true that, when there is a sale of a specific chattel, there is an implied undertaking that it exists; and, if there were nothing in this case but a bargain and sale of a certain cargo on the 15th May, there would be an engagement by the vendor, or a condition, that the cargo was in existence at that time." He went on to say, however, that there was very much more in the contract, and that there was enough to make it plain "that the true meaning of the contract was that the purchaser bought the cargo if it existed at the date of the contract, but that, if it had been damaged or lost, he bought the benefit of insurance but no more" (1852) 8 Ex, at p 55 (155 ER, at p 1257).

[405] The judgment of the Exchequer Chamber was delivered by Coleridge J. The view that the contract was void is probably derived from certain expressions which were used in the course of this judgment. But it does seem clear that again the question of construction was regarded as the fundamental question in the case. In stating the question for decision Coleridge J. (1853) 9 Ex, at p 106 (156 ER, at p 45) refers first to the direction of Martin B. to the jury, and says that the Lord Chief Baron had agreed with the opinion of Martin B. whereas the other learned Barons had differed from him. The judgment below, he says (1853) 9 Ex, at p 107 (156 ER, at pp 45, 46), "turned entirely on the meaning of the contract", and he proceeds to set out its terms in full. "The question", he says, "turns entirely upon the terms of the contract". The argument for the defendant is then put as including the proposition "that a vendor of goods undertakes that they exist", and (1853) 9 Ex, at p 108 (156 ER, at p 46) the argument for the plaintiff as being "that this was not a mere contract for the sale of an ascertained cargo, but that the purchaser bought the adventure, and took upon himself all risks from the shipment of the cargo". The final conclusion reached is expressed at the end of the judgment (1853) 9 Ex, at p 110 (156 ER, at pp 46, 47) by saying that "the basis of the contract in this case was the sale and purchase of goods, and all the other terms in the bought note were dependent upon that, and we cannot give to it the effect of a contract for goods lost or not lost". In the light of these passages it seems impossible to regard the expressions (1853) 9 Ex, at p 109 (156 ER, at p 46) "If the contract for the sale of the cargo was valid" and "the contract failed as to the principal subject-matter of it" as meaning that the contract was treated as being void. All that the passages in which those expressions occur seem in their context to mean is that the principal subject matter of the contract was a cargo of goods, that the purchaser did not buy shipping documents representing non-existent goods, that the consideration to the purchaser had failed, and that he could not therefore be liable to pay the contract price.

In the House of Lords again the Lord Chancellor, in giving judgment (1856) 5 HLC, at p 681 (10 ER, at pp 1068, 1069), said:— "The whole question turns upon the meaning and construction of the contract". A little later he said:— "What the parties contemplated . . . was that there was an existing something to be sold and bought, and, if sold and bought, then the benefit of insurance should go with it." In other words, there was not an absolute obligation to pay the price on delivery of the shipping documents (as the plaintiff contended), but an obligation to pay on delivery of those documents only if they represented at the time of the making of the contract goods in existence and capable of delivery. And this is all that the Lord Chancellor really had in mind, we think, when later he says:—

"If the contract of the 15th May had been an operating contract, and there had been a valid contract at that time existing, I think the purchaser would have had the benefit of insurance in respect of all damage previously existing."


[406] In Bell v. Lever Bros. Ltd. [1931] UKHL 2; (1932) AC 161, at pp 218-222 Lord Atkin, though he does not mention Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 E.R., 1065). itself, discusses Gompertz v. Bartlett [1853] EngR 970; (1853) 2 El & Bl 849 (118 ER 985) and Gurney v. Womersley [1854] EngR 845;[1854] EngR 845; (1854) 4 El & Bl 133 (119 ER 51) and other cases which have sometimes been regarded as turning on mistake avoiding a contract ab initio, and His Lordship concludes the discussion with a very important observation. He says (1932) AC, at p 222:— "In these cases I am inclined to think that the true analysis is that there is a contract, but that the one party is not able to supply the very thing, whether goods or services, that the other party contracted to take; and therefore the contract is unenforceable by the one if executory, while, if executed, the other can recover back money paid on the ground of failure of the consideration". This observation accords with the reasons actually given for the decisions in Gompertz v. Bartlett [1853] EngR 970; [1853] EngR 970; (1853) 2 El & Bl 849(118 ER 985) and Gurney v. Womersley (1854) 4 El & Bl 133 (119 ER 51) . In the former case, in which the action was for money had and received, Lord Campbell C.J. (1853) 2 El & Bl, at p 853 (118 ER, at p 987) said:— "The action is maintainable on the ground that the article does not answer the description of that which was sold." And Coleridge J. (1853) 2 El & Bl, at pp 854, 855 (118 ER, at pp 987, 988) said:— "The vendee is entitled to have an article answering the description of that which he bought". So in Gurney v. Womersley [1854] EngR 845; (1854) 4 El & Bl 133 (119 ER 51), where also the action was for money had and received, Wightman J. (1854) 4 El & Bl, at p 142 (119 ER, at p 55) said that the defendants had "professed to sell a genuine bill" and that the bill given "failed in what was the substance of the description". So again in Strickland v. Turner [1852] EngR 199; (1852) 7 Ex 208 (155 ER 919) the case is put by Pollock C.B., who delivered the judgment of the Court, entirely on the ground of failure of consideration. "The money which was paid", he said, "was paid wholly without consideration, and may be recovered back" (1852) 7 Ex, at p 219 (155 ER, at p 924). This language clearly imports the existence of a contract. If there were no contract, there could be no failure of consideration. The case of Scott v. Coulson (1903) 1 Ch 453; (1903) 2 Ch 249 stands on a different footing and belongs to a class of case in which relief is given on equitable grounds.


[408] The observation of Lord Atkin in Bell v. Lever Bros. Ltd. (1932) AC, at p 222 seems entirely appropriate to Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 E.R. 1065). In that case there was a failure of consideration, and the purchaser was not bound to pay the price: if he had paid it before the truth was discovered, he could have recovered it back as money had and received. The construction of the contract was the vital thing in the case because, and only because, on the construction of the contract depended the question whether the consideration had really failed, the vendor maintaining that, since he was able to hand over the shipping documents, it had not failed. The truth is that the question whether the contract was void, or the vendor excused from performance by reason of the non-existence of the supposed subject matter, did not arise in Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 E.R. 1065).  It would have arisen if the purchaser had suffered loss through non-delivery of the corn and had sued the vendor for damages. If it had so arisen, we think that the real question would have been whether the contract was subject to an implied condition precedent that the goods were in existence. Prima facie, one would think, there would be no such implied condition precedent, the position being simply that the vendor promised that the goods were in existence. That is the real meaning of the direction of Martin B. to the jury, and so the argument for the defendant, as has already been pointed out, included the proposition that "a vendor of goods undertakes that they exist and that they are capable of being tranferred, although he may not stipulate for their condition" (1853) 9 Ex, at p 107 (156 ER, at p 46). So in Barr v. Gibson [1836] EngR 984; (1838) 3 M & W 390 (150 ER 1196) , where the contract was for the sale of a ship, Parke B. (1838) 3 M & W, at pp 399, 400 (150 ER, at pp 1200, 1201) said:— "And therefore the sale in this case of a ship implies a contract that the subject of transfer did exist in the character of a ship". It should be noted in this connection that in Solle v. Butcher (1950) 1 KB 671, at pp 691, 692 Denning L.J. said that the doctrine of French law, as enunciated by Pothier, is no part of English law. His Lordship was without doubt thinking of the passage quoted from Pothier in a note to the report of the argument in the House of Lords in Couturier v. Hastie (1856) 5 HLC, at p 678 (10 ER, at pp 1067, 1068). Although we would not be prepared to assent to everything that is said by Denning L.J. in the course of this judgment, we respectfully agree with this observation. When once the common law had made up its mind that a promise supported by consideration ought to be performed, it was inevitable that the theorisings of the civilians about "mistake" should mean little or nothing to it. On the other hand, the question whether a promisor was excused from performance by existing or supervening impossibility without fault on his part was a practical every-day question of which the common law has been vividly conscious, as witness Taylor v. Caldwell (1863) 3 B & S 826 (122 ER 309), with its innumerable (if sometimes dubious) successors. But here too the common law has generally been true to its theory of simple contract, and it has always regarded the fundamental question as being: "What did the promisor really promise?" Did he promise to perform his part at all events, or only subject to the mutually contemplated original or continued existence of a particular subject-matter? So questions of intention or "presumed intention" arise, and these must be determined in the light of the words used by the parties and reasonable inferences from all the surrounding circumstances. That the problem is fundamentally one of construction is shown clearly by Clifford v. Watts (1870) LR 5 CP 577.


[409] If the view so far indicated be correct, as we believe it to be, it seems clear that the case of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43);(1856) 5 HLC 673 (10 E.R. 1065). does not compel one to say that the contract in the present case was void. But, even if the view that Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 E.R. 1065). was a case of a void contract be correct, we would still think that it could not govern the present case. Denning L.J. indeed says in Solle v. Butcher (1950) 1 KB, at p 692:— "Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew he was under a mistake. A fortiori if the other party did not know of the mistake, but shared it". But, even if this be not wholly and strictly correct, yet at least it must be true to say that a party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any reasonable ground, and, on the other hand, deliberately induced by him in the mind of the other party. It does not seem possible on the evidence to say that Bowser or Sheehan was guilty of fraud in the sense that either knew at the date of the contract that the Commission had no tanker to sell. And even at the later stage, after the receipt of the message from Misima, it is difficult to impute to them actual knowledge that there was no tanker at Jomard Entrance. The message should have conveyed to them the fact that the only vessel lying in the vicinity was almost certainly worthless, and ordinary commonsense and decency would have suggested that the contents of the message ought to be communicated to the plaintiffs. But the message referred to a "barge type tanker", and it is quite possible that this description would fail to bring home to their minds that there was no tanker. A finding of actual knowledge that they had nothing to sell does not seem justified by the evidence, though it is difficult to credit them at the time of the publication of the advertisements with any honest affirmative belief that a tanker existed. The confusion as to locality in the description advertised is almost enough to exclude the inference of any such affirmative belief. But, even if they be credited with a real belief in the existence of a tanker, they were guilty of the grossest negligence. It is impossible to say that they had any reasonable ground for such a belief. Having no reasonable grounds for such a belief, they asserted by their advertisement to the world at large, and by their later specification of locality to the plaintiffs, that they had a tanker to sell. They must have known that any tenderer would rely implicitly on their assertion of the existence of a tanker, and they must have known that the plaintiffs would rely implicitly on their later assertion of the existence of a tanker in the latitude and longitude given. They took no steps to verify what they were asserting, and any "mistake" that existed was induced by their own culpable conduct. In these circumstances it seems out of the question that they should be able to assert that no contract was concluded. It is not unfair or inaccurate to say that the only "mistake" the plaintiffs made was that they believed what the Commission told them.


[410] The position so far, then, may be summed up as follows. It was not decided in Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent. Whatever might then have been held on the facts of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065), it is impossible in this case to imply any such term. The terms of the contract and the surrounding circumstances clearly exclude any such implication. The buyers relied upon, and acted upon, the assertion of the seller that there was a tanker in existence. It is not a case in which the parties can be seen to have proceeded on the basis of a common assumption of fact so as to justify the conclusion that the correctness of the assumption was intended by both parties to be a condition precedent to the creation of contractual obligations. The officers of the Commission made an assumption, but the plaintiffs did not make an assumption in the same sense. They knew nothing except what the Commission had told them. If they had been asked, they would certainly not have said: "Of course, if there is no tanker, there is no contract". They would have said: "We shall have to go and take possession of the tanker. We simply accept the Commission's assurance that there is a tanker and the Commission's promise to give us that tanker." The only proper construction of the contract is that it included a promise by the Commission that there was a tanker in the position specified. The Commission contracted that there was a tanker there. "The sale in this case of a ship implies a contract that the subject of the transfer did exist in the character of a ship" (Barr v. Gibson (1838) 3 M& W, at pp 399, 400 (150 ER, at pp 1200, 1201)). If, on the other hand, the case of Couturier v. Hastie [1852] EngR 774; [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) and this case ought to be treated as cases raising a question of "mistake", then the Commission cannot in this case rely on any mistake as avoiding the contract, because any mistake was induced by the serious fault of their own servants, who asserted the existence of a tanker recklessly and without any reasonable ground. There was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there has been a breach of contract, and the plaintiffs are entitled to damages for that breach.


Before proceeding to consider the measure of damages, one other matter should be briefly mentioned. The contract was made in Melbourne, and it would seem that its proper law is Victorian law. Section 11 of the Victorian Goods Act 1928 corresponds to s. 6 of the English Sale of Goods Act 1893, and provides that "where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made the contract is void". This has been generally supposed to represent the legislature's view of the effect of Couturier v. Hastie [1852] EngR 774; [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065). Whether it correctly represents the effect of the decision in that case or not, it seems clear that the section has no application to the facts of the present case. Here the goods never existed, and the seller ought to have known that they did not exist.


The conclusion that there was an enforceable contract makes it unnecessary to consider the other two causes of action raised by the plaintiffs. As to each of these, the plaintiffs would have been, to say the least, faced with serious obstacles. We have already referred to the evidence bearing on the issue of fraud. And the claim based on negligence would have encountered the difficulties which were held by a majority of the Court of Appeal to be fatal to the plaintiff in Candler v. Crane Christmas & Co. (1951) 1 All ER 426.


[411] The question of damages, which is the remaining question, again presents serious difficulties. It is necessary first to arrive at the appropriate measure of damages. The contract was a contract for the sale of goods, and the measure of damages for non-delivery of goods by a seller is defined in very general terms by s. 55(2) of the Goods Act 1928 as being "the estimated loss directly and naturally resulting in the ordinary course of events from the seller's breach of contract". This states, in substance, the general prima-facie rule of the common law as to the measure of damages for breach of contract. But, if we approach this case as an ordinary case of wrongful non-delivery of goods sold, and attempt to apply the ordinary rules for arriving at the sum to be awarded as damages, we seem to find ourselves at once in insuperable difficulties. There was obviously no market into which the buyers could go to mitigate their loss, and the rule normally applied would require us to arrive at the value of the goods to the buyer at the place where they ought to have been delivered and at the time when they ought to have been delivered. But it is quite impossible to place any value on what the Commission purported to sell. The plaintiffs indeed, on one basis of claim which is asserted in their statement of claim, assessed their damages on the basis of an "average-sized tanker, 8,000-10,000 ton oil tanker, valued at 1,000,000 pounds, allowing for the said tanker lying on Jourmaund Reef, valued at 250,000 pounds", and, for good measure, they added their "estimated value of cargo of oil" at the figure of 50,000 pounds. But this, as a basis of damages, seems manifestly absurd. The Commission simply did not contract to deliver a tanker of any particular size or of any particular value or in any particular condition, nor did it contract to deliver any oil.


[412] It was strongly argued for the plaintiffs that mere difficulty in estimating damages did not relieve a tribunal from the responsibility of assessing them as best it could. This is undoubtedly true. In the well-known case of Chaplin v. Hicks (1911) 2 KB 786, at p 792 Vaughan Williams L.J. said:— "The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract". That passage, and others from the same case, are quoted by Street C.J. in Howe v. Teefy (1927) 27 SR (NSW) 301, at pp 305-306; 44 WN 102, at pp 103, 104, but the learned Chief Justice (1927) 27 SR (NSW), at p 306; 44 WN, at p 104 himself states the position more fully. He says:— "The question in every case is: has there been any assessable loss resulting from the breach of contract complained of? There may be cases where it would be impossible to say that any assessable loss had resulted from a breach of contract, but, short of that, if a plaintiff has been deprived of something which has a monetary value, a jury is not relieved from the duty of assessing the loss merely because the calculation is a difficult one or because the circumstances do not admit of the damages being assessed with certainty". The present case seems to be more like Sapwell v. Bass (1910) 2 KB 486 than Chaplin v. Hicks (1911) 2 KB 786. And see Fink v. Fink [1946] HCA 54; (1946) 74 CLR 127, at p 143, per Dixon and McTiernan JJ. It does not seem possible to say that "any assessable loss has resulted from" non-delivery as such. In Chaplin v. Hicks (1911) 2 KB 786, if the contract had been performed, the plaintiff would have had a real chance of winning the prize, and it seems proper enough to say that that chance was worth something. It is only in another and quite different sense that it could be said here that, if the contract had been performed, the plaintiffs would have had a chance of making a profit. The broken promise itself in Chaplin v. Hicks (1911) 2 KB 786 was, in effect, "to give the plaintiff a chance": here the element of chance lay in the nature of the thing contracted for itself. Here we seem to have something which cannot be assessed. If there were nothing more in this case than a promise to deliver a stranded tanker and a failure to deliver a stranded tanker, the plaintiffs would, of course, be entitled to recover the price paid by them, but beyond that, in our opinion, only nominal damages.


[413] There is, however, more in this case than that, and the truth is that to regard this case as a simple case of breach of contract by non-delivery of goods would be to take an unreal and misleading view of it. The practical substance of the case lies in these three factors— (1) the Commission promised that there was a tanker at or near to the specified place; (2) in reliance on that promise the plaintiffs expended considerable sums of money; (3) there was in fact no tanker at or anywhere near to the specified place. In the waste of their considerable expenditure seems to lie the real and understandable grievance of the plaintiffs, and the ultimate question in the case (apart from any question of quantum) is whether the plaintiffs can recover the amount of this wasted expenditure or any part of it as damages for breach of the Commission's contract that there was a tanker in existence. In the opinion of Webb J. it would have been reasonable, and within the proper contemplation of the Commission, that the plaintiffs should take steps, but should do no more than take steps, to see whether there was a tanker in the locality given, and, if so, whether any and what things should be done to turn her to account. And his Honour estimated the reasonable cost of taking such steps at the sum of 500 pounds. This view, however, seems to assume that the plaintiffs would be, or ought to be, in doubt as to whether they really had succeeded in buying a tanker. But they were clearly entitled to assume that there was a tanker in the locality given. The Commission had not, of course, contracted that she or her cargo was capable of being salved, but it does not follow that the plaintiffs' conduct in making preparations for salvage operations was unreasonable, or that the Commission ought not to have contemplated that the course in fact adopted would be adopted in reliance on their promise. It would be wrong, we think, to say that the course which the plaintiffs took was unreasonable, and it seems to us to be the very course which the Commission would naturally expect them to take. There was evidence that salvage operations at the locality given would not have presented formidable difficulties in fair weather. The plaintiffs were, of course, taking a risk, but it might very naturally seem to them, as business men, that the probability of successful salvage was such as to make the substantial expense of a preliminary inspection unwarranted. It was a matter of business, of weighing one consideration with another, a matter of which business men are likely to be the best judges. So far as the purpose of the expenditure is concerned, the case seems to fall within what is known as the second rule in Hadley v. Baxendale [1854] EngR 296; (1854) 9 Ex 341 (156 ER 145). A fairly close analogy may be found in a case in which there is a contract for the sale of sheep, and the buyer sends a drover to take delivery. There are no sheep at the point of delivery. Sheep have not risen in price, and the buyer has suffered no loss through non-delivery as such. But he will be entitled to recover the expense which he has incurred in sending the drover to take delivery: cf. Pollock v. Mackenzie (1866) 1 QSCR 156 , and see also Foaminol Laboratories Ltd. v. British Ortid Plastics Ltd. (1941) 2 All ER 393, esp at p 397.


[414] There is, however, still another question. Mr. Tait not only strongly opposed the view so far expressed, but he also contended that, even if that view were accepted, it still could not be held that the alleged damage flowed from the alleged breach. Let it be supposed, he said in effect, that the plaintiffs acted reasonably in what they did, and let it be supposed that the Commission ought reasonably to have contemplated that they would so act. Still, he said, the plaintiffs are faced with precisely the same difficulty with which they are faced if the case is regarded as a simple and normal case of breach by non-delivery. Suppose there had been a tanker at the place indicated. Non constat that the expenditure incurred by the plaintiffs would not have been equally wasted. If the promise that there was a tanker in situ had been performed, she might still have been found worthless or not susceptible of profitable salvage operations or of any salvage operations at all. How, then, he asked, can the plaintiffs say that their expenditure was wasted because there was no tanker in existence?


The argument is far from being negligible. But it is really, we think, fallacious. If we regard the case as a simple and normal case of breach by non-delivery, the plaintiffs have no starting-point. The burden of proof is on them, and they cannot establish that they have suffered any damage unless they can show that a tanker delivered in performance of the contract would have had some value, and this they cannot show. But when the contract alleged is a contract that there was a tanker in a particular place, and the breach assigned is that there was no tanker there, and the damages claimed are measured by expenditure incurred on the faith of the promise that there was a tanker in that place, the plaintiffs are in a very different position. They have now a starting-point. They can say: (1) this expense was incurred; (2) it was incurred because you promised us that there was a tanker; (3) the fact that there was no tanker made it certain that this expense would be wasted. The plaintiffs have in this way a starting-point. They make a prima-facie case. The fact that the expense was wasted flowed prima facie from the fact that there was no tanker; and the first fact is damage, and the second fact is breach of contract. The burden is now thrown on the Commission of establishing that, if there had been a tanker, the expense incurred would equally have been wasted. This, of course, the Commission cannot establish. The fact is that the impossibility of assessing damages on the basis of a comparison between what was promised and what was delivered arises not because what was promised was valueless but because it is impossible to value a non-existent thing. It is the breach of contract itself which makes it impossible even to undertake an assessment on that basis. It is not impossible, however, to undertake an assessment on another basis, and, in so far as the Commission's breach of contract itself reduces the possibility of an accurate assessment, it is not for the Commission to complain.


[415] For these reasons we are of opinion that the plaintiffs were entitled to recover damages in this case for breach of contract, and that their damages are to be measured by reference to expenditure incurred and wasted in reliance on the Commission's promise that a tanker existed at the place specified. The only problem now remaining is to quantify those damages, but this is itself a most serious problem, because the evidence is left by the plaintiffs in a highly unsatisfactory state. Whether the evidence has been so left because of the loss of records or because of misplaced confidence in the view that any wrecked or stranded tanker must be worth something like a quarter of a million pounds need not be considered. Two things seem clear, for what they are worth. The first is that the plaintiffs did expend and waste a sum of money very considerably in excess of 500 pounds. The second is that the plaintiffs have, in their statement of claim, and also in their evidence, sought to exaggerate grossly the amount of their claim.


What actually happened may be summarized as follows. The plaintiffs owned a small steam vessel named the Gippsland. This vessel was, at the date of the making of the contract, being refitted in Sydney for trading between Melbourne and King Island. After the making of the contract the plan of refitting seems to have been modified in some respects with a view to making her suitable for salvage work. Certain salvage equipment was purchased and placed on board. A crew was engaged, and Mr. J.E. Johnstone, a shipwright and diver, and an acknowledged expert in salvage work, was also engaged. The ship sailed from Sydney for the supposed locality of the tanker on 28th June 1947. While she was on the voyage north, Mr. Johnstone and a brother of the plaintiffs proceeded together by air to Port Moresby. The ship foundered in the vicinity of Port Moresby on 24th July 1947. Why she took so long to reach this locality from Sydney is not explained, but she appears to have called at Brisbane and other northern ports. No lives were lost when she sank, and the ship's company landed at Port Moresby. Mr. F.E. McRae, one of the plaintiffs, entered into negotiations for the charter of a vessel named the Betty Joan, but in the meantime his brother and Mr. Johnstone went to Samarai and there chartered a boat named the Jessie for the purpose of looking for the tanker. They found, of course, no tanker, and returned to Port Moresby, where they informed Mr. McRae of the position.


[416] The plaintiffs make their claim on the basis of wasted expenditure under ten heads, several of which it is plainly impossible to support at all. The first claim is under the head of "equipment", and relates to certain equipment purchased for the Gippsland. This claim is wholly untenable. Some of the items in it, such as navigating lights and signalling lamps, are ordinary necessities of a ship's equipment, and some were purchased months before the date of the contract. But in any case this was all capital expenditure represented by acquired assets, and it is out of the question to claim it as damages. One would assume, though there is no clear evidence on the matter, that it was covered by insurance.


The second claim is under the head of "reconditioning", and refers to work done on the Gippsland herself. Again it is plain that this claim must be wholly disallowed. About one-third of the amount claimed proves to relate to work done long before the date of the contract, but again the whole of it is capital expenditure.


[417] The third claim is of a different character and does not relate to actual expenditure at all. It is made under the head of "loss of revenue", and represents the profit which the Gippsland might have been expected to make if she had not been devoted to the futile tanker enterprise. As framed, this claim was based on the profit anticipated as likely to accrue from the use of the vessel under a contract with a company called King Island Scheelite No Liability. In April 1947 no contract with that company had been concluded, but negotiations were proceeding for the use of the vessel in trading between King Island and Melbourne. Mr. Laird, the witness who gave evidence for the plaintiffs on these matters, said that in consultation with Captain Guthrie he had estimated that, if the last offer of the King Island company had been accepted, a profit of 75 pounds per week would have been realized, and he said or implied that that offer would have been accepted if better terms could not have been obtained. On this basis the claim ultimately put forward under this head was for 1,050 pounds, a sum which represents 75 pounds per week for fourteen weeks. Put baldly as a claim for this estimated loss of profit as such, the claim might be thought to be in its nature too remote, and in its amount conjectural to a degree. But the plaintiffs would be entitled to include in their damages the daily value of their vessel for a period which would not be excessively estimated as ten weeks, and the estimate based on Mr. Laird's calculations may be used as a basis — though it can only provide a rough and approximate basis — for arriving at this daily value. It would appear from cross-examination that the estimate was made after taking into account the obvious physical contingencies, but it has, we think, to be substantially discounted for the contingency of the ship being idle for part of the period. There is no evidence as to her earnings in the past. To allow 50 pounds per week does not seem unreasonable, and at that rate the plaintiffs should be allowed 500 pounds under this head.


The next four heads of claim are heads under which we think that the plaintiffs are entitled to recover damages. But, whereas one would have expected that the claim in each of these four cases would be capable, if not of precise computation, at least of a close approximation, we find that the evidence is for the most part of the vaguest kind. In most cases it is not possible to do more than make an estimate as best one can.


The fourth claim is made under the head of travelling expenses. It is difficult to avoid the conclusion that better evidence could have been given about this. It is said by Mr. Laird to include 200 pounds for the cost of searching for the wreck, and, as such, may be taken to include the cost incurred by McRae and Johnstone in going from Port Moresby to Samarai and the hire of the Jessie. We know also that McRae and Johnstone travelled by air from Melbourne to Port Moresby, and it seems proper to allow a further sum of 200 pounds in respect of this expense. Beyond this, either the evidence is too vague to justify any claim or it shows that the claim is unjustified or made under another head. The plaintiffs should recover 400 pounds under this head.


The fifth claim is made under the head of "Ship's Stores, etc." The plaintiffs would, we should think, be entitled to the value of coal and other stores consumed before the Gippsland foundered but not for what went down with the ship. So far as coal is concerned, an invoice in Exhibit NN shows that about sixty tons was loaded at Bowen at a cost of about 100 pounds, and a note on the invoice states that the balance on board when the ship went down was twenty-five tons. Since Bowen is about half-way between Sydney and Port Moresby, this probably justifies an estimate that the ship had used about seventy tons between leaving Sydney and foundering and an allowance of 120 pounds for coal consumed may be made. Beyond this, there is no real material on which to found any estimate. Exhibit NN consists simply of a mass of invoices, which include a host of articles which are not ship's stores in any relevant sense, and for which no claim could be made. The best that can be done seems to be to make a rough man-day estimate for two months, and allow (say) 720 pounds. We would allow 840 pounds under the fifth head of claim.


[418] The sixth head of claim relates to special expenses of Mr. Johnstone, which are itemised in Exhibit PP. The account has only been paid in part by the plaintiffs. Mr. Johnstone's travelling expenses have already been allowed at 100 pounds under the fourth head of claim. It is not clear why he spent eight weeks in Port Moresby, though the amount claimed in respect of these eight weeks seems moderate enough. He had some undefined financial interest in the venture, and no clear evidence was given as to his contract or arrangement with the plaintiffs. Mr. Johnstone, however, had very special qualifications and experience in matters of salvage. It was certainly reasonable to engage his services, and his claim cannot be narrowly scanned. The sum of 400 pounds should be allowed under this head of claim.


The seventh head of claim relates to "crew's wages". Here at last we get something like definite evidence, though it reveals that the amount of the claim is again exaggerated, and the evidence is still defective. However, it finally appeared from evidence given by Captain Guthrie that a total sum of 1,400 pounds was paid in wages. This sum apparently includes Captain Guthrie's own salary, and it covers a period commencing on 13th November 1946 and ending on the dates on which the members of the crew arrived back at their home ports. But, while this figure may be taken to represent the whole wages bill of the Gippsland for the period mentioned, it cannot be taken to mean that all the members of the crew who sailed from Sydney were paid from 13th November 1946, because Captain Guthrie gave the monthly rate of pay of each man, and, if every man were paid at the rate stated for the whole period mentioned, the total sum paid would be very much larger than 1,400 pounds. The monthly rates of pay given by Captain Guthrie seem reasonable and it seems proper to allow a wages bill at those rates for two months. On this basis we arrive at a figure of 768 pounds.


Nothing can be claimed under either of the next two heads of claim. The eighth is "Claims by Crew" and represents amounts claimed by the crew in respect of clothing and other property lost when the ship foundered. These claims appear to have been, in part at least, covered by insurance and met by the insurers, but the Commission cannot in any case be responsible for consequences of the sinking of the ship. The ninth claim is for insurance premiums. The carrying of insurance is an ordinary incident of the ownership and operation of a ship, whatever she is doing. The tenth and last claim is for 150 pounds for office expenses. It seems reasonable to suppose that some office expenses were incurred and wasted, and, though nothing much better than a guess is possible, it is probably fair enough to add 100 pounds for these.


[419] The total amount now arrived at is 3,008 pounds, and we may fairly take the figure of 3,000 pounds as representing, as nearly as can be estimated on the very defective evidence, the loss suffered by the plaintiffs for which damages are recoverable. To this must be added the sum of 285 pounds paid by the plaintiffs.


For convenience we have throughout treated the Commission as the party responsible to the plaintiffs. But, in our view, the cause of action lies in contract, and reg. 7 of the National Security (Disposal of Commonwealth Property) Regulations provides that the Commission may make contracts on behalf of the Commonwealth. Accordingly we think that the judgment should be against the Commonwealth.


The appeal should be allowed and the judgment of Webb J. set aside. In lieu thereof there should be judgment for the plaintiffs against the Commonwealth for the sum of 3,285 pounds as damages for breach of contract. There is no reason why the plaintiffs should not have the full costs of the appeal. With regard to the costs of the action, Webb J. gave no reasons for allowing the plaintiffs only one-half of their costs, but it was doubtless because he considered that the costs had been increased by the raising of matters (whether technically "issues" or not) on which the plaintiffs had failed and by the generally extravagant nature of their claim. We think that the costs may have been to some extent increased by the raising of unjustifiable claims. On the other hand, the whole case was one of very exceptional difficulty, the plaintiffs were fully justified in raising alternative bases of claim, and the extent to which costs were necessarily increased by the claim based on the supposed value of a tanker and by the unwarranted claims in respect of expenditure would be proportionately very small and hardly such as, in our opinion, to justify any attempt to apportion costs either by direct order or on taxation. It may be added that the conduct of the Commission's officers throughout, including their attitude when a claim was first made, is not such as would incline any court readily to exercise any discretion in favour of the defendants. We think that the plaintiffs should have their costs of the action. The cross-appeal should be dismissed with costs.


[420] McTIERNAN J. I concur in the conclusions that there was a contract, that it was not void for mistake and that the plaintiffs should recover from the Commonwealth Disposals Commission the sum mentioned in the order of the Court as damages for breach of the contract; that the appeal should be allowed and the cross-appeal dismissed, in each case with costs.




Appeal allowed with costs. Discharge judgment of Webb J., and in lieu thereof adjudge that plaintiffs do recover from the defendant Commonwealth of Australia the sum of 3,285 pounds as damages for breach of contract. Order that defendant Commonwealth pay plaintiffs' taxed costs of action. Cross-appeal dismissed with costs.