dedol-hf/india-case-legal-rag huggingface dataset:
correct;the  only difficulty has been in applying  it..  The
distinction  drawn  is  between  damages  arising  naturally
(which  means in the normal course     of things) and  cases
where  there were special and  ex-traordinary  circumstances
beyond  the reasonable prevision of the parties.   The  dis-
tinction between these types is usually described in English
Law  as that between generaland special damages; the  latter
are  such that if they are not communicated it would not  be
fair  or  reasonable to hold the defendant  responsible  for
losses which he could not be taken to contemplate as  likely
to result from his breach of contract. Viscount Haldane L.C.
in  The  British Westinghouse Electric &  Manufacturing  Co.
Ltd. v, The Underground Electric Railways Co. of London (1),
on the question of damages said :In some of the cases  there
are  expressions as to the principles governing the  measure
of  general damages which at first sight seem  difficult  to
harmonize.  The  apparent   discrepancies   are,    however,
mainly due to the varying nature of the particular questions
submitted for decision.  The quantum of damage is a question
of  fact, and the only guidance the law can give is  to  lay
down  general  principles which afford at times  but  scanty
assistance.in dealing with particular cases.  The Judges who
give  guidance to juries in these cases have necessarily  to
look  at  their  special character, and to  mould,  for  the
purposes of different kinds of claim, the expression of  the
general  principles which apply to them and this is  apt  to
give  rise to an appearance of ambiguity.-.It was  necessary
to  balance loss and gain and no simple solution was  possi-
ble."  The  House of Lords in Liesbosch (Owners)  v.  Edison
(Owners) (2) has stated at page 463 that it is impossible to
lay down any universal formula.  The dominant rule of law is
the principle of restitutio in integrum and subsidiary rules
can only be justified if
(1) [1912] A.C. 678. 689.             (2) [1933] A.C. 449,
993
they  give,  effect to that rule.  (The italics  are  mine).
In  Smith,  Hogg & Co. Lid. v. Black Sea  &  Baltic  General
Insurance  Co.  Ltd.  (1), the loss  of  a  vessel  occurred
through   the   negligence   of  the  master   operating  on
conditions  of   unseaworthiness  existing  since  the  com-
mencement  of  the  voyage.   The  loss  was  held   to   be
caused  by  the   breach  of  the warranty of  seaworthiness
and  recoverable  accordingly.  There was  an  exception  of
negligence.  At page 1005 in the judgment of that case it is
stated  "no distinction could be drawn between  cases  where
the  negligent  conduct of the master is a cause  and  cases
where  any other cause, such as perils of the sea, is a  co-
operating cause.  A negligent  act is as much a co-operating
cause  if  it  is a cause at all., as an act  which  is  not
negligent."   What  was  then being emphasized  was  that  a
voluntary  act  (negligent or not) of a human agent  is  not
generally an independent or new cause for this purpose which
breaks  the  chain of causation, as it is called, so  as  to
exclude  from consideration the causal effect of the  unsea-
worthiness.  In that case it was held that the  unseaworthi-
ness created in the vessel instability which, combined  with
negligence  of the master, caused the loss. No new  law  was
laid  down in that case.  Similarly in The Standard Oil  Co.
o[  New  York  v. Clan Line Steamers Ltd.  C"),  the  vessel
capsized  because  the  master not being instructed  by  his
owners     as  to  the peculiarities of a  turret  ship,  so
handled  her that she capsized.  That loss  was  immediately
due  to  perils of the sea which overwhelmed  her  when  she
capsized, liability for which was excepted, but the dominant
cause  was her unseaworthiness in that her  master,  though'
otherwise  efficient, was inefficient in not being aware  of
the  special danger. In general, all the authorities are  in
agreement  in  this respect and embody the  same  rule.  TIm
shipowner,  of course, under the familiar general  rule,  is
debarred by his breach of duty from relying on the  specific
exception.   Though  he would not be liable for  the  conse-
quences  caused by the specific excepted peril or the  acci-
dent alone if he
(1)[1940] A.G. 997.               (2) [1924] A.C. 100.
994
were not in default, though the unseaworthiness existing  at
the  commencement  Of the voyage might not be  operative  or
known until the time when the accident occurs, yet then  the
breach  of  the warranty operates directly as a  cause  and,
indeed,  a dominant cause. Causation in law does not  depend
on remoteness or immediacy in time," These observations meet
the  appellants' contention about the  Government  Ordinance
intervening to fix the damages.  They show that such  inter-
vention  does not break the chain of causation, nor does  it
make  the loss, i.e., damages, remote. The statement of  law
in Mayne on Damages quoted above, only reproduces  the prin-
ciple  of law stated by Lord Blackburn in    Livingstone  v.
Rawyards Coat Company(1).
    Bearing  in mind this state of the law  itappears  clear
that  in the present case it was the duty of the  appellants
to insure the goods, as they had agreed to do. Once  miscon-
duct is admitted or proved, the fact that the Ordinance  did
not  exist and could not have been in the  contemplation  of
the   parties  is  irrelevant for deciding the  question  of
liability.   The  liability was incurred by  reason  of  the
breach  of  their duty and the  appellants  made  themselves
liable  to pay damages. The measure of damages was the  loss
suffered  by  the respondents on account of  the  goods  not
being insured. The next point to be decided is what  differ-
ence the promulgation of the Ordinance makes in the liabili-
ty  of  the appellants. The relevant  provisions  are  noted
above. The scheme of the Ordinance clearly is, as stated  in
the  preamble,  to provide for and regulate the  payment  of
compensation  and  to  prevent  litigation,  amongst   other
things.   It is thus a comprehensive legislation  which  re-
places  the  rights of parties either under  the  policy  of
insurance  against insurance companies, or on the ground  of
negligence against Government by the owners of the goods, as
also  claims by insurance companies against Government.  The
validity  of this legislation is not challenged. Section  18
gives  it a retrospective effect.  Therefore  the  Ordinance
only
(1) (1880) 5 App. Cas. 25
995
substitutes  a new basis for assessing compensation for  the
ordinary  basis  for  assessing  unliquidated  damages.  The
compensation under the Ordinance is payable on proof of  the
existence  of  a fire insurance policy irrespective  of  the
terms of the policy.  The non-recovery of half the amount of
the  respondents' claim from the Government under the  Ordi-
nance  because  of the absence of a fire  insurance  policy,
thus  directly arises from the neglect of the appellants  to
insure  the  goods,  as they had been instructed  to  do  or
agreed  to do and which in fact they represented  that  they
had done.  In our opinion, these are not indirect or  remote
damages.
    The  contention that under the policy of  insurance  the
assured could not have recovered anything for loss caused by
the fire due to explosion cannot be accepted. Firstly,  this
contention of the assured's inability to receive any compen-
sation because of clause 7 of the form of common policy  was
not  raised in the trial court. No issue was raised  in  re-
spect thereof and no arguments in support or against it were
heard.  It was suggested for the first time, as appears from
the  judgment  of Chagla J., in the court  of  appeal.   The
assumption that because of clause 7 of the policy no  insur-
ance  company would have paid the loss cannot be assumed  to
be  necessarily and unquestionably sound and in view of  the
terms  of  the Ordinance not capable  of  being  determined.
There  appears no reason under the circumstances to  proceed
as  if  an  adverse decision on the  interpretation  of  the
policy  had been given against the respondents and  to  hold
the  appellants free from liability for not recovering  half
the  value of the goods which could have been  recovered  if
the  goods  had been insured (irrespective of the  terms  on
which the policy stood) as agreed to be done by them.  I  do
not  think when the relations between the parties are  of  a
principal  and an agent and the agent is found to have  com-
mitted a breach of his duty, it is correct to take a  narrow
view  of  the situation.  The agent chose to gamble  in  not
insuring the goods and desired to charge the agreed  premia,
on  the  footing that the goods were covered  by  insurance.
If so,  he must take the
996
consequences  of his default.  The argument that  their  li-
ability  as  an  agent who had agreed to  insure  should  be
ascertained as on the date of the explosion is no answer  to
the  claim of the respondents.  The position would be  this.
Assuming  that the appellants had insured  the goods on  the
terms of the usual fire insurance  policy..  the respondents
could  ask them either to assign the policy to the  respond-
ents  or to file a suit against the insurance  company  con-
tending that the fire, and not the explosion, was the; cause
of  the  loss and was covered by the  policy  of  insurance.
Before the Court could decide the rights of the parties, the
Ordinance promulgated by the Governor-General prevented  the
decision of the dispute, but the Government undertook to pay
the  loss on the footing that the policy covered  the  risk.
Tile misconduct gave rise to the liability to make good  the
damage  and to put the respondents in the same  position  in
which they would have been if their goods had beeen insured.
    On behalf of the appellants it was urged that because of
the  Government intervention in  issuing the Ordinance  they
were sought to be made liable under a new liability.   Their
liability  has  been  and exists on the basis  that  a  fire
insurance policy existed, as they were instructed to  insure
the  goods  and which they represented they  had  done.  The
liability arises not because of the Ordinance but because of
the  breach  of their duty in failing to insure,  which  has
taken  place apart from the Ordinance and which is  not  af-
fected by the Ordinance.  The utmost that they could urge is
that  the extent of their liability arising from their  mis-
conduct  was  not anticipated by them when  they  agreed  to
perform their duty. That however is no defence in law if the
damages directly flow from the breach of duty. The Ordinance
only quantifies the damages instead of leaving the  unliqui-
dated  damages to be assessed in the usual way.   The  Ordi-
nance  lays down the yardstick for fixing the damages  under
different circumstances, which cover all alternative  situa-
tions,  and the liability for failure to insure must now  be
measured  by the new basis. It does not create any  new  li-
ability.
997
The  appellants' contention on this point therefore must  be
rejected.
    The  only other point urged before us was based  on  the
construction of section 18 of the Ordinance. It  was  argued
on   behalf of the appellants that apart from what could  be
recovered  under  clause (1) of section 18,   the  Ordinance
extinguished  all right,  whether in  contract or   tort  or
otherwise,  to any compensation or damage for loss  of  an),
property due to, or in any way arising out of, the explosion
and provided that no suit or other legal proceedings for any
such  compensation or damages shall, save as  aforesaid,  be
maintainable  in any court against the Crown or against  any
other  person whatsoever. It was urged that in  establishing
their claim, the respondents must plead the right to recover
the  amount due to explosion and that was barred under  sec-
tion  18  (2). In our opinion, this contention  is  unsound.
The appellants have filcd this suit to recover the price  of
the  goods  on the ground of  indemnity.   The  respondents'
answer is that the appellants are not entitled to the indem-
nity  because  they are guilty of a breach of  duty  in  the
business  of  the agency. They contend that  they  would  be
liable to pay for the goods only if the appellants give them
the  goods or deliver the same according to  their  instruc-
tions.  They counterclaim that if the appellants are  unable
to give them the goods, they must pay them the value  there-
of.  The appellants plead by way of defence to the  counter-
claim  that the goods were destroyed without any neglect  on
their  part  by fire caused by the explosion  and  therefore
they  were not liable.  The respondents' rejoinder  is  that
they had asked the appellants to insure the goods and if the
appellants  had  not failed in their duty  they  would  have
reimbursed  the respondents. The appellants then plead  that
even if they had insured the goods the respondents could not
have recovered anything from the insurance companies.  It is
in  reply to this contention that the respondents say   that
the appellants'  liability to recover money from the  insur-
ance company on the terms of the usual fire insurance policy
is irrelevant
998
because  they  could have recovered the money  if  they  had
insured  in fact, irrespective of the terms of  the  policy,
under the Ordinance.  The respondents are not thus  claiming
to  recover money from the appellants otherwise  than  under
section  18 (1) of the Ordinance. Their cause of  action  is
the misconduct of the agent in the business of agency and is
quite  different.  It is not for compensation  arising  from
explosion.
    It  was argued that damages formed part of the cause  of
action  of the respondents in framing the  counterclaim  and
therefore  section 18 (2) stood in the way of  the  respond-
ents.  The contention is unsound because the cause of action
is completed by the averment that there was a duty or agree-
ment  to  insure, that there was a failure to  perform  that
duty, that loss had occasioned to the respondents because of
the  failure  to perform the duty and  the  appellants  were
therefore liable for the  breach of the duty. The quantum of
damages is not a part of the cause of action. It is a matter
to  be ascertained by the court according to well laid  down
principles of law.
The  result  is that the appeal fails and  is  dismissed
with costs.
PATANJALI SASTRI J.--I regret I am unable to agree with  the
judgment  just  delivered  by my Lord which I  have  had  an
opportunity of reading.  As the facts of the case have  been
fully stated in that judgment it is unnecessary to  re-state
them here.
    The  main  question arising for  determination  is  what
damages are the appellants liable to pay to the  respondents
for  their  failure to insure the respondents'  goods  which
were  destroyed by fire caused by the big  explosions  which
occurred  in  the Bombay Docks on 14th April,  1944  ?   The
goods had been purchased by the appellants in Bombay as  the
commission agents of the respondents and were left in  their
godowns pending their despatch to the respondents' place  of
business.  It was found by the appellate bench of the  Court
below  that  the appellants had agreed to  keep  'the  goods
insured against fire while in their custody
    999
and  had  debited the respondents in their  books  with  the
insurance  charges.  A suggestion was made in the course  of
the arguments before us that the appellants agreed to be the
insurers themselves, but the findings of the appellate bench
leave no room for doubt that all that the appellants  agreed
to  do  was  to procure a policy of fire  insurance  in  the
ordinary or common form and subject to the conditions usual-
ly  stipulated  in that form of policy.  This is  also  made
clear  by the concession of the respondents' counsel in  the
court  below that "he was only relying on the  agreement  to
the  extent that the insurance was to be   effected  against
fire  on an ordinary fire insurance policy".  It  is  common
ground  that one of the general conditions in that  form  of
policy is that "it does not cover" among others any loss  or
damage occasioned by or through or in consequence of  explo-
sion".  Relying on that condition, it was contended for  the
appellants  that even if they had effected an  insurance  on
the goods according to the agreement, the loss of the  goods
by fire caused by the explosion would have been an  excluded
loss  for which no damages could have been claimed from  the
insurer  and that, therefore, the respondents would  not  be
entitled  to recover from the appellants anything more  than
nominal  damages  for failure to  insure.   This  contention
must, in my opinion, prevail. As pointed out by Mr. Mayne in
his  Treatise  on Damages (p. 591, 11th Edition)  "When  the
agent can show that under no circumstances could any benefit
to the principal have followed from obedience to his orders,
and therefore that disobedience to them has produced no real
injury,  the action will fail.  There fore, if an  agent  is
ordered to procure a policy of insurance for his  principal,
and  neglects  to do it, and yet the  policy,  if  procured,
would  not have entitled the principal, in the events  which
have happened, to recover the loss or damage, the agent  may
avail himself of that as a complete defence."
    A complication, however, is  introduced by an  Ordinance
promulgated   by  the  Governor-General known as the  Bombay
Explosion  (Compensation)
1000
Ordinance  (No.  32 of 1944) which came into  force  on  1st
July, 1944.  The preamble states ',Whereas  an emergency has
arisen which makes it necessary to provide for and  regulate
the payment of compensation for.........  damage to property
due  to, or arising out of, the explosions and  fires  which
occurred  in  the Bombay Docks on 14th April, 1944,  to  re-
strict    litigation   in   connection   with    the    said
explosions......".  By section 2 "the explosion" is  defined
as  meaning  "the explosions which occurred  in  the  Bombay
Docks on 14th April, 1944, and the fire. which ensued there-
from."  An  "explosion damage" is defined as  "damage  which
occurred, whether accidentally or not, as the direct  result
of  the explosion..." "Uninsured proPerty  means  "pro-perty
which  was not covered whether wholly or partially  by    an
policy     of     fire,     marine     or      miscellaneous
explosion"   Section  14  insurance  at  the  time  of  tile
1  ..... so far as it is material here, provides that "there
shall  be  paid by the Central Government  compensation  for
explosion damage to property, being damage caused by fire to
property insured whether wholly or partially at the time  of
the  explosion  against fire under a  policy  covering  fire
risk...of  an amount  equal to the proved  loss."Section  15
provides for coutribution to Government by insurance  compa-
nies.  Section 16 provides  for compensation for such damage
to  uninsured property on a certain scale mentioned in  that
section.   Section 18(2) enacts, subject to certain  exccep-
tions  not  material  here, "no person shall  leave,  or  be
deemed ever to have had, otherwise than under this Ordinance
any  right, whether in contract or in tort or  otherwise  to
any compensation or damages for any...or damages to or  loss
of any property, rights or interests. due to  or in any  way
arising  out  of the explosion; and no suit or  other  legal
proceedings for any such compensation or damages shall, save
as  aforesaid.  be  maintainable in any  court  against  the
Crown...or against any servants or agents of the Crown  ....
or against any other person whomsoever; and no act or  omis-
sion  which caused or contributed to the explosion shall  be
deemed  to  have been done or omitted to be  done  otherwise
than lawfully."
1001
    It  is admitted that the appellants recovered  from  the
Central  Government under section 16 nearly one-half of  the
value of the goods destroyed by fire while in their  custody
as  compensation  fox' the loss of the  respondents'   goods
and   have  given credit  to  the respondents in  their  ac-
counts  for the amount thus received.  The dispute  now  re-
lates to the respondents' claim to the balance of the  value
of the goods as damages for the appellants'  failure to keep
them insured according to the agreement between the  parties
as  the full value of the goods and have been obtained  from
the  Government under section 14 without regard to  any  ex-
cepted  risk if only they had been insured against  fire.The
scheme  of the Ordinance appears to be that the  Government,
instead  of having probably to fight out numerous law  suits
for  compensation for loss or damage to property based  upon
alleged  negligence of their officers in having allowed  the
explosion  to take pleace, undertook to pay an amount  equal
to  the  "proved loss" in cases of loss or damage  to  goods
which  had  been  insured against  fire,  etc.  and  smaller
amounts  for loss or damage to uninsured goods,  putting  an
end,  at  the same time, to all rights  to  compensation  or
damages arising out of the explosion, and barring all  suits
or legal proceedings for the same.
On  the  basis of these provisions it was  contended  on
behalf of the respondents that the appellants, by reason  of
their  failure to keep the goods insured, were liable  under
the law to place the respondents, who had suffered the loss,
in  the  same position as if the  appellants  had  performed
their  agreement  or  carried out the  instructions  of  the
respondents.  Learned counsel for the respondents based  the
claim  on the neglect of duty on the part of the  appellants
as  commission  agents in carrying out the  instructions  of
their  principals, and relied on the provisions  of  section
212 of the Indian Contract Act, which provides, inter  alia,
that an agent is bound "to make compensation to his  princi-
pal in respect of the direct consequence of his own neglect,
want  of skill or misconduct, but not in respect of loss  or
damage which are indirectly or remotely
1002
caused by  such neglect,  want of skill or misconduct."   On
the  other  hand, it was urged on behalf of  the  appellants
that  the  question had to be determined on the basis  of  a
breach  of contract for the consequences of which  provision
is  made  in  section 73 of the Indian  Contract  Act.  That
section  says  that "when a contract has  been  broken,  the
party  who suffers by such breach is entitled  to   receive,
from  the  party  who  has broken the contract, compensation
for any loss or damage caused to him thereby, which natural-
ly arose in the usual course of things from such breach,  or
which  the parties knew, when they made the contract, to  be
likely to result from the breach of it. Such compensation is
not  to be given for any remote or indirect loss  or  damage
sustained  by reason of the breach." I do not think that  it
makes  much difference, so far as the assessment of  general
damages is concerned, whether the default of the  appellants
is  treated as a breath of contract between two  contracting
parties  or a neglect of duty by agents in failing to  carry
out the instructions of their principal. Although the Indian
Contract Act makes separate provisions for the  consequences
in  each case, the rule laid down as to measure of   damages
is s the same, namely, the party in breach must make compen-
sation  in respect of the direct consequences  flowing  from
the  breach and not in respect of loss or damage  indirectly
or remotely caused, which is also the rule in English common
law. The rule is based on the broad principle of  restitutio
in integrum, that is to say, that the party who has suffered
the  loss should be placed in the same position, as  far  as
compensation  in money can do it, as if the party in  breach
had  performed  his  contract or fulfilled  his  duty.  That
principle  was once carried to its utmost logical,  if  gro-
tesque, result as in an old English case to which Willes  J.
referred    in    British   Columbia   Saw-Mill    Co.    v.