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1941 Supreme(SC) 31
Privy Council At Ceylon
Sir Sidney Abrahms, Sir George Rankin, Romer, Thankerton, Justice Lords Atkin, JJ.
Esmail Lebbe Marikar Ebrahim Lebbe Marikar -Appellant
Versus
Bartlect and Company -Resopndent
Privy Council Appeal No. 93 of 1939
Decided On : 05-12-1941
O.A. Cayley, Pembertons, Lee, Stephen Chapman, N.L. Macaskie, R.K. Handoo, C.S. Rewcastle
A commercial transaction conducted through a broker who is personally liable to third parties for the contract's performance is not a wagering transaction, even if no delivery occurs, provided the broker only earns a commission and does not gamble on price fluctuations.
Headnote:(A) Wagering Transactions - Definition and Distinction from Commercial Speculation - The essence of a bet is that both parties agree that they will pay and receive respectively on the happening of an event in which they have no material interest. To establish a bet, it must be proven that commercial documents are merely a cloak and that neither party intended them to have any effective legal operation.
(B) Commercial Speculation through Brokers - Where documents show an ordinary commercial transaction, and one of the parties incurs personal obligations on a genuine transaction with third parties so that he himself is not a winner or loser by the alteration of price, but can only benefit by his commission, the inference of betting is destroyed. In such cases, the fact that no delivery is required or tendered is of practically no value.
Facts of the case:
A rubber grower instructed brokers to purchase rubber on a foreign market. The grower later contended that the arrangement was a bet, asserting there was to be no delivery and that only price differences were to be settled. However, the brokers had executed formal contracts through agents and were personally liable to those agents for the performance of the contracts, charging commissions and interest on payments made. The grower had paid the accounts until the final installments, for which a mortgage bond was eventually given.
Findings of Court:
The courts found that the transactions were genuine commercial speculations and not wagering transactions, as the brokers acted as intermediaries with personal liability to third parties and did not gamble on the price fluctuations themselves.
Issues: Whether the transactions between the parties were wagering transactions (bets) or genuine commercial transactions.
Ratio Decidendi: A transaction conducted through a broker who is personally liable to third parties for the performance of the contract cannot be classified as a bet, regardless of whether delivery is actually taken, provided the broker's only benefit is commission and they are not a winner or loser by the alteration of price.
Result: Appeal dismissed.
Legal Category Hierarchy
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contract law
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wagering agreements
- bets
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wagering agreements
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commercial law
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brokerage
- speculative transactions
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brokerage
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property law
- mortgages
Lord Atkin.:-
This is an appeal from the Supreme Court of Ceylon, (Poyser and Wijeyewardena JJ.), who affirmed a decree of the District Judge of Colombo in favour of the plaintiffs in an action on a mortgage bond. The defence was that the sum mentioned in the bond was an amount due as the result of wagering transactions on the price of rubber. There has been no dispute at any time in the present action that in accordance with the law of Ceylon as decided in the Supreme Court in (1934) 36 New Law Reports 145, Tarrant v. Marikar such a plea if established would be a valid defence. The only question in the case is one of fact, whether the transactions between the parties were wagering transactions, in other words, were bets. Both Courts decided this issue in favour of the plaintiffs in judgments which fully discuss the facts, and it is only necessary shortly to state the circumstances which gave rise to the action. The defendant is a grower of rubber in Ceylon: the plaintiffs are a long-established firm of share and produce-brokers, members of the Colombo Brokers' Association and of the Colombo Rubber Traders' Association. The defendant alleges that in May 1929, it was arranged between him and one Parera, who at the time was a Ceylonese broker employed by the plaintiffs' firm, "that Perera should buy rubber for him on the London market." "There was to be no delivery . . . the arrangement was that I should pay the differences when the market was against me and that I should be paid the differences when the market was in my favour." Mr. Parsons, the senior partner of the firm, denied that he bad ever entered into any such bargain. Perera, who at the hearing of the case had left the plaintiff's employment, was not called. The evidence showed that on 10th May 1929 the defendant wrote to the plaintiffs the following letter :
E.L. Ebrahim Lebbe Marikar.
Phone No. 1438
9, Gas Works Street,
Colombo, 15th May, 1929.
Messrs Bartleet and Co.,
Colombo.
Dear Sir,
As arranged please buy 700 (seven hundred) tons Rubber on London June December 1929 at the rate of 100 (one hundred) tons each month at the current market rate and also I allow you to have the selling as well.
Yours faithfully,
E.L. Ebrahim Lebbe Marikar.
(Signed)
The plaintiffs carried out these instructions by cabling to their London agents, George White, Yuille and Co., Ltd., "Please buy for our account delivery in equal monthly lots 700 tons June-December delivery this year." Yuille and Co., carried oat these instructions, and as the rubber was bought sent contracts to the plaintiffs of which the following is a sample :
Geo. White, Yuille and Co., Ltd.,
3. Mincing Lane, E.C.3.
2079
Messrs. Bartleet and Co.
Bought Delivery Contract.
London and / or Liverpool.
London, May 15th, 1929.
We have this day bought by your order and for your account upon the terms of this Contract, including the Rules endorsed hereon and the Regulations and Bye-Laws of The Rubber Trade Association of London, of our Principals, whose solvency we guarantee,
Seventy-five (75) tons Plantation Rubber in cases, at Elevenpence seven-eighths (11 7/8d.) per lb.
Standard Quality Hevea Brasiliensis, Ribbed Smoked Sheets. To be ready for delivery in Warehouse in London and/or Liverpool, any time or times, at Seller's option, during the month of June 1929.
(File)
Any dispute arising out of this contract shall be settled by Arbitration in London, according to the Regulations and Bye-Laws of the Rubber Trade Association of London. This Contract shall be construed according to the laws of England, whatever be the residence or nationality of the parties, and its performance shall, in every part and incident be considered due in England for the purpose of jurisdiction, and the Courts of England or Arbitrators in England, as the case may be, shall have conclusive jurisdiction over all disputes which may arise under this Contract, and their decisions shall be enforceable as final judgments in any British Colony or Dependency or Foreign Country. Bro
