Under six contracts made at various dates between April and August 1911 the Plaintiff (the Appellant) was seller to the Defendants of certain 23,500 shares at prices amounting in the aggregate of Rs. 1,84,125. The date for delivery was the 30th December 1911.
The contract notes contained a term providing that in the event of the buyer not making payment on the settlement day the seller should have the option of reselling the shares by auction, and any loss arising should be recoverable from the buyer.
By 30th December the shares had fallen largely in value. On that day the vendor tendered the shares and asked payment of the price, adding: “Failing compliance with this request by today our client will be forced to sell the said shares by public auction on or about the 2nd proximo, responsible for all losses sustained thereby.”
The purchasers did not pay the sum demanded. They set up a contention that the seller was indebted to them on another transaction, and they sent cheques for the differential sum of Rs. 75,925, and called for a transfer of the shares. On the 2nd January 1912 the seller repudiated the claim to set-off. Negotiations ensued between the parties which extended to 26th February 1912.
Then the seller commenced to make sale of the shares. He sold them all at various dates from the 26th February onwards. In one case the sale was at less than 4s. 3d. In one case it was at 4s. 3d. In every other case it was at a higher price.
On the 22nd March the seller commenced a suit to recover Rs. 1,09,218 as damages for breach measured by the difference between the contract price of the shares and their market price (4s 3d. a share) on the date of the breach the 30th December 1911.
The decision under appeal is one which gives the purchaser the benefit of the increased prices which the shares realised, by giving him credit in reduction of the damages for the increased prices in fact realised over the market price on the 30th December, the date of the breach. The Appellant contends that this is wrong.
Their Lordships will first deal with the contractual term as to resale. Upon breach by the purchaser his contractual right to the shares fell to the ground. There arose a right to damages, and the stipulation in question was in their Lordships, opinion only a stipulation that the seller might, if he thought fit, liquidate the damages by ascertaining the value of the shares at the date of the breach by an auction sale as specified. If the seller availed himself of that option he was not selling the purchaser’s shares with a consequential obligation to account to him for the price but was selling shares belonging to the seller which the purchaser ought to, but failed to, take up and pay for in order to ascertain what was the loss arising by reason of the purchaser not completing at the contract price.
The question here is the general question and may be stated thus: In a contract for sale of negotiable securities, is the measure of damages for breach the difference between the contract price and the market price at the date of the breach- with an obligation on the part of the seller to mitigate the damages by getting the best price he can at the date of the breach – or is the seller bound to reduce the damages, if he can, by subsequent sales at better prices? If he is and if the purchaser is entitled to the benefit of subsequent sales, it must also be true that he must bear the burden of subsequent losses. The latter proposition is in their Lordships’ opinion impossible, and the former is equally unsound.
If the seller holds on to the shares after the breach, the speculation as to the way the market will subsequently go is the speculation of the seller, not of the buyer. The seller cannot recover from the buyer the loss below the market price at the date of the breach if the market falls, nor is he liable to the purchaser for the profit if the market rises.
It is undoubted law that a Plaintiff who sues for damages owes the duty of taking all reasonable steps to mitigate the loss consequent upon the breach and cannot claim as damages any sum which is due to his own neglect. But the loss to be ascertained is the loss at the date of the breach. If at the date the Plaintiff could do something or did something which mitigated the damage, the Defendant is entitled to the benefit of it.
But the fact that by reason of the loss of the contract which the Defendant has failed to perform the Plaintiff obtains the benefit of another contract which is of value of him, does not entitle the Defendant to the benefit of the latter contract.
Their Lordships find that upon appeal the officiating Chief Judge rested his judgment on a finding that the seller reduced his loss by selling the shares at a higher price than obtained at the date of the breach. This begs the question by assuming that loss means loss generally, not loss at the date of the breach. The seller’s loss at the date of the breach was and remained the difference between contract price and market price at that date. When the buyer committed this breach the seller remained entitled to the shares, and became entitled to damages such as the law allows. The first of these two properties, viz., the shares, he kept for a time and subsequently sold them in a rising market. His pocket received benefit, but his loss at the date of the breach remained unaffected.
Their Lordships will humbly advise His Majesty that this appeal ought to be allowed.