1933 Present :  Koch A.J.

ATTORNEY-GENERAL v. CADER.

271-C. R. Colombo, 79,979.

Telephone-Contract with Postmaster-General-Agreement to rent telephone- Rent in arrear-Right to recover damages-Liquidated damages not penalty.

By an agreement entered into for the rent of a telephone, the Postmaster-General reserved to himself the right to terminate the contract by notice in writing, if, at any time, the renter was in arrear in respect of the payment of the annual rent for one month after it was due.

The right to recover from the renter as liquidated damages and not by way of penalty a sum equal to one-fourth of the annual rent was also secured to the Postmaster-General on such determination of the contract.

Held, that the sum stipulated as recoverable from the renter on the termination of the contract for failure to pay the rent was in the nature of liquidated damages and recoverable as such in law.

APPEAL from a judgment of the Commissioner of Requests, Colombo.

M. F. S. Pulle, C.C., for plaintiff, appellant.

L. A. Rajapakse, for defendant, respondent.

Cur. adv. vult.

September 5, 1933. KOCH A.J.-

This appeal raises an interesting point of law as regards the interpretation of a term in agreements in respect of telephones read in conjunction with the conditions contained in the schedule annexed thereto, to which such term is expressly made subject. I am informed that although the

um involved in the case is not considerable, quite a number of disputes have arisen between the Postmaster-General and renters of telephones which will be set at rest as the result of this appeal. The point is, therefore, of some importance.

The facts are briefly these. The defendant had rented a telephone under an agreement with the Postmaster-General. This agreement was executed on November 11, 1929. According to its terms, the defendant had agreed to rent the instrument and telephone line for one year commencing from the aforesaid date and thereafter until determined, subject to the conditions in the schedule aforesaid. The schedule is annexed to the contract. The agreement provided for either party determining the lease at the end of the term of one year or at any time afterwards by giving to the other three calendar months' previous notice, whatever the reason may be. In addition the Postmaster-General, under the schedule of conditions, further reserved to himself the right to terminate the contract by notice in writing, if at any time the renter was in arrear in respect of payment of the annual rent for one month after the same ought to have been paid. The renter undertook to pay to the Postmaster-General annually in advance a rent of Rs. 130. The right also to recover from the renter as liquidated damages and not by way of penalty a sum equal to one-fourth of the annual rent was also secured to the Postmaster-General on such determination of the contract. After two years of use the defendant, although attention had been previously called to the matter, failed to pay his third year's rent in advance. The latest date on which this rent was payable was November 11, 1931. In fact the 1931-32 rent was never paid at all, and the Postmaster-General after the expiry of one month after the date of default terminated the agreement by a notice in writing dated December 17, 1931. The seventh clause of the schedule further provided a right in the Postmaster-General to disconnect the telephone without notice, inter alia, if the subscription is overdue. Acting under this power, the telephone rented by the defendant was disconnected on November 23, 1931.

The Attorney-General thereafter as plaintiff instituted this action against the renter on May 4, 1932, for the recovery of a sum of Rs. 71.33. In this is included a sum of Rs. 32.50, which was claimed as liquidated damages calculated on the basis of one-fourth of the annual rent. The learned Commissioner allowed the clai