Hasell v Bagot, Shakes & Lewis Ltd

The case of *Hasell v Bagot, Shakes & Lewis Ltd* concerned a contract for the sale of 5,000 tons of Japanese superphosphates. The appellant, Hasell, agreed to sell this quantity to the respondents, Bagot, Shakes & Lewis Ltd, for delivery in Port Adelaide. The contract stipulated shipment from Japan during late December 1909 and/or January 1910. By the end of January 1910, Hasell had not shipped any goods, nor had he notified the respondents of any shipment. The respondents, after notifying Hasell of their intention, purchased 3,000 tons of similar superphosphates from an Australian agent of a Japanese firm at a higher price. They also accepted 2,000 tons of British superphosphates from Hasell in part performance of the original contract, expressly reserving their rights regarding the remaining 3,000 tons. Hasell sued for the balance of the purchase price for the British superphosphates, and the respondents counterclaimed for damages for breach of the original contract. The Supreme Court of South Australia found in favour of the respondents on their counterclaim. Hasell appealed to the High Court of Australia.

The High Court was required to determine two principal legal issues. Firstly, whether the damages awarded on the counterclaim were correctly assessed based on a failure to deliver 3,000 tons, or if the quantity should have been less due to the "ten per cent. more or less" clause in the contract. Secondly, the Court had to consider whether the measure of damages applied by the lower court was appropriate, particularly in relation to the price paid by the respondents for the substitute goods, and whether this price represented a reasonable amount a prudent buyer would pay in the absence of a local market.

The High Court affirmed the decision of the Supreme Court. On the first issue, the Court held that the respondents were entitled to claim damages for the non-delivery of 3,000 tons. Despite the "ten per cent. more or less" clause, the appellant's complete failure to perform the contract meant the respondents were justified in purchasing 3,000 tons to mitigate their loss. The subsequent agreement to accept 2,000 tons of British superphosphates was made without prejudice to their rights concerning the remaining 3,000 tons. On the second issue, the Court applied the principle that in the absence of a market at the place of delivery, damages are assessed by determining what a reasonable person, acting sensibly and at their own risk, would pay to obtain the goods at the stipulated time and place. This amount is calculated by considering the price at the source of manufacture, the cost of carriage, and a reasonable profit for the importer. The Court found that the price paid by the respondents to the agent, which included a profit of approximately 6 per cent, was not shown to be unreasonable, especially given the lack of a local market and the respondents' need to secure the goods for their business. The Court deferred to the trial judge's assessment of reasonableness in the absence of specific evidence to the contrary.

The appeal was dismissed, with the High Court upholding the judgment of the Supreme Court of South Australia. The respondents were entitled to recover damages based on the difference in price for 3,000 tons of superphosphates, as the amount paid was deemed to be a reasonable measure of their loss in the circumstances.