The case of Pankhurst v Gairdner & Co involved an action for breach of contract and professional negligence against a share broker who failed to sell shares at the stipulated price and time. The applicant sought damages for the amount lost as a result of this failure to sell. The court found in his favour with findings of breach of contract and professional negligence and was awarded the amount the shares would have been if sold at the instructed price, less commission and tax, on the condition that the appellant let the respondent have the shares.
For a number of years the appellant had been a customer of the respondent sharebroker, who was an investment dealer. The events leading to this case were that the appellant gave to the broker an open order to sell 1000 shares in a particular company once the price of those shares reached $3.40 (an open order meaning that it would remain in effect until it has been carried out or cancelled).
When the appellant noticed that the shares had reached that price, he telephoned the share broker to check that the shares had been sold. The respondent replied that he “forgot to put it in this morning” to which the appellant replied “Well, you had better get busy and reinstate the order, make it alive and do something about it”. However by this stage it was too late to sell the shares at that price and the next day only 450 shares were able to be sold at the price. Following this, the appellant contacted the broker’s manager and was informed that there was no fund established to account for employees’ mistakes (breach of duty and/or negligence) and was unable to get a straight answer as to what the manager planned to do in regards to dealing with the matter.
A number of weeks later the appellant sent a letter to confirm that the order to sell the remaining shares at that price still stood, before cancelling the order the following month after none were sold and eventually receiving his share certificate back. Consequently the appellant then commenced an action against the respondent for his failure to act as instructed.
The trial judge reached the conclusion that the appellant elected to retain the shares as his own when he stated “Well, you had better get busy and reinstate the order, make it alive and do something about it”. The judge stated that, had the appellant instead instructed him to sell at that time, he would have taken a loss of 15 cents per share due to the failure of the share broker and therefore that was the only damage he could claim. Accordingly this significantly smaller amount without costs was awarded at trial and he appealed claiming he should be entitled to the loss of the shares at $3.40 each.
In the appeal the broker argued, much like the trial judge, that the appellant elected to treat the shares as his own property by instructing the sharebroker to “do something about it” and therefore was not entitled to damages as he chose to take a risk that the shares would rise in price rather than immediately selling at that time when the price was lower than he stipulated.
On appeal the court took the view that the appellant’s statement was not for the purpose of retaining the shares and accepting the drop in the market price, but confirmation that he was insisting upon the respondent fulfilling his obligation of selling the shares at $3.40 each or compensating him if that was no longer going to be possible. The court held that the appellant at no time waived his rights against the respondent and did not fail to exercise his duty to mitigate by not selling the shares when he received his share certificate back, because at that point they were of no value.
Accordingly the share broker was ordered to pay damages for the amount lost due to his failure to sell at the stipulated price, less commission and tax. In return the appellant was ordered to allow the respondent to have the shares themselves.