AG Smyth & Co Ltd v Fa'apu'u [1959] WSLawRp 1; [1950-1959] WSLR 137 (11 February 1959)

[1950-1959] WSLR 137

HIGH COURT OF WESTERN SAMOA

A.G. SMYTH & CO LTD

V

NANAI FA'APU'U

HIGH COURT. Apia.
1959, 4, 11, February.
ROTHWELL J.

Trader managing store for plaintiff - goods and money of plaintiff received and not accounted for - action or recovery - duties of trader.

In the absence of a formal agreement providing for the extension of credit by a trader (as under the General Laws Ordinance), it is the duty of a trader who receives goods from a merchant to account for those goods either by production of unsold goods, by production of cash representing cash sales or by individual records of debits against customers for credit sales.

Porter v. Coleman [1909] NZGazLawRp 46; (1909) 28 N.Z.L.R. 1110 at 1113 followed as to reduced award of costs, where the Court receives no assistance from Counsel as to authorities and general principles.

Judgment for plaintiff.

Metcalfe, for plaintiff.
Phillips, for defendant.

Cur. adv. vult.

ROTHWELL J.: This was a claim for £696.12.6 described in the statement of claim as being for goods and money of the plaintiff received by the defendant in his capacity as a trader for the plaintiff and not accounted for. The whole trend of the evidence, however, placed emphasis upon the suggestion that credit had been improperly allowed by the defendant and that the amount of £600.19.8 was referable to this alleged unauthorised act.

The first point which requires attention in order to put consideration of this claim into its proper perspective is that there was no formal agreement as is provided by the General Laws Ordinance. The usual form of such agreement provides that extension of credit by the trader without the authority of the merchant is an offence punishable by imprisonment. Whether such activity gives rise to a civil claim for debt I do not know and it is not necessary to know for the purpose of this judgment. In the absence of the provisions of the formal agreement the position in my view is quite different. If the normal requirements of a business such as the one involved in this claim necessitated a limited amount of credit operation, then the extension of credit by the trader would be a legal action unless it had been expressly prohibited by the merchant. Extension of credit, however, even if prohibited, in itself does not give rise to any cause of action because it is not necessarily accompanied by any loss. If the debtor meets his obligation in due course (or indeed even as a result of pressure and litigation) there is no loss and no cause of action. In the present case, it is impossible to ascertain from the evidence whether loss, if any, arose from the alleged improper extension of credit and accordingly the efforts of Counsel to establish a liability on this basis were not successful.

In my view, however, whether the credit which was undoubtedly given was authorised or unauthorised is immaterial as the liability of the defendant if any, must be ascertained upon an entirely different basis. It is clear that there was in fact some visit to the Head Office of the plaintiff company by a number of chiefs from Falelatai with the object of arranging for considerable bulk supplies of foodstuffs for the purpose of a church dedication ceremony. Such a visit is deposed to by Mr Slade although he was not present at the interview, and is strongly confirmed in detail by the defendant and several of the chiefs concerned. It is clear that as a result of that visit there were two large bulk supplies of goods to the station operated by the defendant in the month of August 1956. There were also some nineteen individual debits to customers of the station during the same period but these were independent of the supplies obtained by individuals from the large orders. The defendant said in respect of the distribution of the goods comprised in those orders-

"A truck came from Apia with kegs of beef, biscuits, etc. This was in August. There was another load about the 21st or 22nd. I distributed the goods in these loads to the people who had ordered them. I made no record of this distribution."

Again in cross-examination he said,

"I handed the goods out as the customers came. I checked what I handed out. If anyone asked for goods I took his word that he had ordered."

The defendant had been engaged on an oral contract without special terms to manage the Falelatai trading station of the plaintiff company. It was clearly his duty in the course of such management to account for all goods which were sent to him and debited to his station account in one or other of three ways. Firstly, the goods might remain in his possession unsold. Secondly, they might be sold for cash and represented accordingly by cash on hand, or thirdly, they might be sold on credit and represented by a corresponding debit against the person who had purchased on credit. It appears from the evidence that in the month of August, goods to the approximate value of £900 were supplied to the station by the plaintiff, and that the greater part of this bulk supply was handed out to various customers on credit, and that the defendant did not keep records of these credit deliveries, and that this failure was the cause of the subsequent shortage discovered on stocktaking shortly afterwards. The duty of the defendant to keep proper records is clear, and if he sets up any arrangement which would negative this duty, the onus of proof of such arrangement rests clearly on the defendant. It is suggested by the defendant that individual debits had been recorded by Mr McKinnon, but it must have been clear to him that this was not the case when he received a truck load of goods with one comprehensive debit to his station account of £504.14.4. The balance of evidence is clearly against any arrangement which would relieve the defendant of his duty to keep proper records. He did in fact keep some records and supplied the company with a list of creditors totalling £291.19.8.

It is clear therefore, that the total amount of the claim represents goods which had been supplied by the plaintiff to the defendant in his capacity as trader for the Falelatai station, and that there has been a breach of duty on his part in failing to account for these goods either by production of unsold goods, by production of cash representing cash sales, or by individual records of debits against customers for credit sales. It is true that the defendant is entitled to credit for any amount which may be collected by the plaintiff, but it appears that all collections which might reasonably be expected have already been effected. There must be judgment therefore in favour of the plaintiff for the full amount of the claim. In view of the fact that evidence and argument was largely devoted to proof of lack of authority to extend credit, and that this judgment proceeds upon an entirely different basis on which the Court had no assistance from Counsel, the Court will follow the principle enunciated by Edwards J. in Porter v Coleman [1909] NZGazLawRp 46; (1909) 28 N.Z.L.R. 1110 at page 1113 and the allowance of costs will be by disbursements as certified by the Registrar with Counsel's fee of £5.5.0. only.