Scottish Court of Session Decisions

On 8th May 1877 Walter Grieve, Son, & Company, merchants, Greenock, bought, through Messrs J. V. Drake & Company, sugar-brokers, from Konig & Company, merchants, Sourabaya, from 500 to 700 tons of Java sugar. J. V. Drake & Company also acted as brokers for A. P. Francke of London, the agent of the sellers, and the contract of sale was contained in the following letter:—

“9 Mincing Lane,

London, E.C., 8th May 1877.

Mr A. P. Francke.

We have this day sold by your order for account of Messrs Konig & Co., of Sourabaya, to Messrs W. Grieve, Son, & Co., of Greenock, about 5/700 tons Java sugar Shipment to be made during August next by first-class sailing vessel (of neutral flag at time of shipment), chartered to call off English coast for orders for any safe U.K. port, and with usual Continental option, but if buyers order vessel to Continent all extra freight to be for their account.

“Sellers to declare ship's name in due time for insurance to be effected here.

Buyers undertake to accept sellers’ drafts for invoice amount (without any interest or discount) at six months' sight, payable in London with B/L's attached thereto, said B/L's to be delivered up on payment of drafts. Buyers also agree to confirm a credit available against this purchase….

J. V. Drake & Co.”

On 16th August 1877 Konig & Company wrote to Messrs Walter Grieve, Son, & Company a letter in which they, inter alia, stated that—“Mr A. S. Francke, of London, who sold to you for our account a cargo 500 700 tons Java sugar, sent us a letter of credit by which you open as a credit available against our shipment of sugar, in consonance with the contract passed between you and him. We proceeded to the execution of the contract in chartering the British barque ‘Truth,’ Captain Edward George, of about 550 tons carrying capacity.” The charter-party was dated “Batavia, July 27, 1877.” On the 6th of September 1877 Konig & Company wrote to Messrs Grieve with invoice of the shipment of sugar per the “Truth,” comprising 2886 baskets of sugar,’ amounting to £18,146, 19s. 3d., minus freight. Against this amount they intimated that they had valued on them, in terms of the letter of credit given by them dated 26th May 1877, per six bills of exchange dated 6th September 1877, and payable six months after sight, which drafts Konig & Company requested the pursuers to protect on presentation. They also intimated that the bills of lading and charter-party accompanied the drafts, which they had negotiated with the Chartered Bank of India, Australia, and China, Batavia agency. The bills of exchange were in due course presented to Messrs Grieve & Company for acceptance, but before accepting them Messrs grieve made inquiry at the holders of the bills of lading in order to ascertain from the dates upon them whether the cargo had been shipped during August 1877. They were informed that the dates of the bills of lading were 27th and 31st August 1877 respectively.

The bills of lading were made out in tripticate, and were dated 27th August for 1232 baskets of sugar shipped at Sourabaya, and 31st August 1877 for 1654 baskets shipped at Passoeroean. Messrs Grieve thereafter sold the cargo to Messrs Blair, Reid, & Steele, sugar-refiners, Greenock, and delivered over the bills of lading to them. It subsequently came to the knowledge of Messrs Grieve that the whole cargo in question had not been on board the “Truth” during the month of August, as stipulated in the contract of sale, and they brought this action of damages against Messrs Konig & Company, the sellers of the sugar, Edward George,

Page: 326↓

the master of the “Truth,” and John Eills, ship-chandler in Liverpool, and others, the owners of that vessel. The summons concluded for payment of £5000, the amount which the pursuers stated they had lost by the re-sale of the sugar to Messrs Blair, Reid, & Steele, sugar having, as they stated, fallen greatly in price since the date of their purchase from Konig & Company.

The pursuers stated that it was upon the faith of the representations of the defenders, and in the belief that the bills of lading were truly of the dates they bore, that they accepted the bills of exchange, and did not reject the cargo, which they would have done had they known that part of the sugar had, disconform to the contract, not been shipped during August. They further averred—“(Cond. 6) After the arrival of the said vessel at Greenock, after the acceptance and payment of said bills of exchange, and after the sale of the said cargo and transfer of the bills of lading to the purchasers, the pursuers on 2d January 1878 discovered by examination of the said ship's log-book, and they aver, that a large portion—at least one-fourth part—of the said sugar that was said to have been shipped at Passoeroean had not been shipped on board of said vessel till during the month of September 1877, and consequently that the Passoeroean bills of lading, which purported that the sugar therein mentioned had all been shipped at the date they bore, viz., 31st August 1877, was in that particular false and fraudulent. If the pursuers had known these facts they would have rejected the said cargo, and would not have accepted or paid the said bills of exchange or sold the said cargo. The false date given to the said Passoeroean bills of lading was so given for the purpose of deceiving the pursuers, and it did deceive them into believing that the cargo had been all shipped during August 1877, as stipulated for in the contract for the purchase thereof, and in the said letter of credit. The said bills of lading, which were falsely antedated as aforesaid, were fraudulently granted by the defender Edward George, the master of the said vessel, and were fraudulently taken by the defenders Konig & Company, or their agents at Passoeroean, being in the knowledge of the said fraud, and fraudulently sent by the defenders Konig & Company for delivery to the pursuers on payment of the said bills of exchange. The said fraud was committed for the purpose of deceiving the pursuers, and had the effect of deceiving them, to their loss, injury, and damage. The defender George was in the knowledge of the contract between the pursuers and the defenders Konig & Company, and, in particular, he knew the provisions of the said contract with reference to the time of shipment of the said sugar. He also knew that the bills of lading were made, contrary to the fact, to set forth shipment in August in order to conceal from the pursuers that shipment had not been made till September. He signed the bills of lading fraudulently in that knowledge, and his owners have benefited by the fraud. (Cond. 7) Sugar has fallen greatly in price since the pursuers purchased the same from the defenders Konig & Company, and in the re-sale by the pursuers of the said sugar they have sustained a loss of £5000 sterling or thereby, which they would not have suffered had they not been fraudulently imposed upon, deceived, and induced to accept the said cargo by the fraud before mentioned. The intent, effect, and object of the said fraud was to lead the pursuers into the belief that the defenders Konig & Company were not in breach of contract of sale, and thus fraudulently to induce the pursuers to take delivery of the sugar. The defenders, the owners of the barque ‘Truth,’ benefited by the said fraud of the defenders Konig & Company, and of the defender George, to the extent at least of £2000 sterling, being the amount of freight paid in respect of the said voyage.”

Arrestments were used to found jurisdiction against all the defenders.

Konig & Co. did not appear to defend the action.

George in answer to the statements in the pursuers' condescendence denied that the bills of lading bore a false and fraudulent date. He stated that he entered into the charter-party mentioned above, and that in terms of it the “Truth” “left Batavia on the 5th day of August for Sourabaya, where she arrived on the 17th day of August, and proceeded to load 1232 baskets of sugar. On the 28th day of August she left Sourabaya for Passoeroean, where she arrived on the following day, and proceeded to take on board the remainder of said cargo, being 1654 baskets of sugar. The loading was completed with due despatch, and she sailed on or about the 7th day of September for Falmouth, where she arrived on or about the 9th day of December 1877.” He stated in answer to condescendence 6—“Admitted that part of the cargo was not actually on board of the vessel until the beginning of September, but explained that at and prior to the date of the Passoeroean bills of lading the cargo, which was partly on board and partly in course of shipment by lighters, was all under the control of the defender the said Edward George. The loading was carried on with all possible despatch. The defender signed the said bills of lading without fraudulent intent, and he was not aware of the contract founded on by the pursuers, or of any of the terms thereof. It is further believed and averred that the pursuers had sold the said cargo previous to the arrival of the vessel in Greenock, and that the purchasers from the pursuers fulfilled their contract by taking delivery of the sugar and paying the price.” He further denied that the alleged loss had been sustained.

Bills and others, in addition to the defences which they had in common with George, stated further—“Explained that the defender George had no authority to act for these defenders except such as belonged to him in respect of his employment as master of the vessel ‘Truth.’” They further explained that they had not received payment of the freight due to them under the charter-party.

The pursuers pleaded, inter alia—“(1) The pursuers having contracted for shipment in the month of August 1877, were not bound to implement the contract failing compliance with that condition thereof. (3) The pursuers having been induced by the fraud and false representation condescended on to give implement of the contract when they were not really bound to have done so,

Page: 327↓

are entitled to be restored against the effect of the said falsehood and fraud. (4) The pursuers having suffered loss, injury, and damage through the falsehood and fraud complained of, are entitled to damages as concluded for. (5) The defenders, the owners of the barque ‘Truth,’ having taken benefit through the fraud of their agent, are not entitled to retain the said benefit.”

The defender George pleaded—“(1) The pursuers' averments are not relevant or sufficient to support the conclusions of the summons against the present defender. (2) The statements of the pursuers being unfounded in fact, the defender is entitled to absolvitor.”

The pleas for the defender Eills and others were similar.

Parties were heard in the Procedure Roll before the Lord Ordinary ( Craighill) upon the plea against relevancy, but his Lordship thereafter pronounced an interlocutor allowing a proof before answer, and upon a reclaiming-note the First Division adhered to the Lord Ordinary's interlocutor.

Thereafter a proof was led, the purport of which sufficiently appears from the Lord Ordinary's interlocutor and the note appended thereto. These were as follows:—

“ Edinburgh, 21 st March 1879.—The Lord Ordinary … in the first place, as regards the liability imputed to the defenders, the registered owners of the vessel ‘Truth,’ for the reparation sued for, Finds, as matters of fact, (1) that … the pursuers purchased from the defenders Konig & Co. a quantity of Java sugar at the price and on the terms specified in the sale-note; (2) that one of the conditions of this contract was that ‘shipment was to be made during August next’ (1877) ‘by first-class sailing vessel;’ another was that the buyers should ‘accept seller's drafts for invoice amount (without any interest on discount) at six months' sight, payable in London, with bills of lading attached thereto;’ and a third was that the buyers should ‘confirm a credit for this purchase;’ (3) that this contract having been made, Konig & Co. on 27th July 1877 entered into the charter-party with Edward George, master of the said vessel ‘Truth,’ then lying at anchor in Batavia, whereby it was agreed that the said ship ‘should, with all convenient speed, proceed to Sourabaya, and there and at one other port at the eastward prepare to receive on board a full and complete cargo, consisting of dry sugar in baskets, which the said merchants bound themselves to ship;’ and being so loaded should ‘therewith proceed to Falmouth or Queenstown, or any adjacent port, for orders to discharge at one safe port in the United-Kingdom, or on the Continent between Havre and Hamburg inclusive, and to deliver the same on being paid freight at the rate of £3, 2s. 6d. per ton nett weight delivered;’ (4) that in terms of this charter-party the said vessel left Batavia on 5th August 1877 for Sourabaya, where she arrived on the 17th of that month, and there 1232 baskets of sugar were taken on board, the bill of lading for which, signed by the said Edward George, and bearing date 27th August 1877, is No. 59 of process; (5) that on 28th August 1877 the said vessel, by the orders of Konig & Co., left Sourabaya for Passoeroean, to take in the remainder of her cargo, and on the following day she arrived at the latter port; (6) that between the 29th August and 6th September inclusive there were shipped on board the said vessel at Passoeroean 1654 baskets of sugar, the remainder of her cargo, and thus loaded she set sail for Falmouth on 7th September 1877; (7) that though only 923 of the said number of 1654 baskets, shipped as aforesaid between 29th August and 6th September inclusive, had been received on board between 29th and 31st August inclusive, the bill of lading bearing date 31st August, and also bearing that the said quantity of 1654 baskets had been shipped, was signed by the said Edward George, master of the said vessel ‘Truth,’ and was on that day delivered by him to Konig & Co., who thereupon drew upon the pursuers six bills of exchange for sums amounting in all to £18,146, 19s. 3d., the invoice price of the said cargo of sugar; and on 6th September following, Konig & Co. having negotiated the said bills with the Batavia agency of the Chartered Bank of India Australia, and China, wrote to the pursuers the letter No. 25 of process, transmitting said invoice, intimating that the pursuers had been valued on for the amount by means of the said bills of exchange, and requesting that these should be protected on presentation; (8) that said bills of exchange were in due course presented to the pursuers for acceptance, but the value of sugars having fallen in the market since the date of the contract with Konig & Co., and the pursuers having consequently resolved not to abide by the contract if the condition as to shipment during August 1877 had not been fulfilled, they on 23d October 1877 wrote to the manager of the said Chartered Bank of India, Australia, and China in London, asking to be furnished with ‘the date and or dates of the bills of lading;’ (9) that in answer to this inquiry the pursuers were informed that the dates of the bills of lading were 27th and 31st August 1877, which as aforesaid is the fact; and on the faith of the representation that the cargo had been shipped during August 1877, conveyed by said bills of lading, the pursuers accepted said bills of exchange; (10) that after said bills of exchange had been accepted the sugars were sold by the pursuers, and the purchaser took delivery and paid the agreed-on price upon their arrival in this country; (11) that sugars fell in value after May 1877, when the contract was entered into by the pursuers with Konig & Co., and this depression was still felt in the market when the cargo in question was sold as aforesaid by the pursuers, the consequence being that the loss, reparation of which is sued for in the present action, was sustained by the persent pursuers; (12) that the said Edward George had no authority from the defenders, the owners of the said vessel ‘Truth,’ to sign bills of lading, except the authority which he derived from his appointment as master of the said vessel; and (13) that the said defenders took no benefit from the signing and delivery on 31st August 1877, when only a part of the sugars had been shipped, of the said bill of lading No. 60 of process: Finds, as matters of law, the facts being as above set forth, (1) that the said Edward George, by virtue of his appointment as master of the said vessel, was not authorised to sign and deliver, and did not act as the agent of the defenders the owners of the said vessel in signing and delivering, the said bill of lading dated 31st August 1877, bearing the shipment of sugars

Page: 328↓

which had not been shipped; and (2) that the defenders are not answerable for the consequences resulting to the pursuers from the signing and the delivering by the said Edward George of the said bill of lading. In the second place, as regards the liability of the defender the said Edward George for the reparation sued for, (1) Holds as repeated the first eleven of the foregoing findings as to matters of fact; and (2) Finds further, as matter of fact, that it has not been proved that the said defender when he signed and delivered the said bill of lading was cognisant of the terms of the contract betwixt the pursuers and Konig & Co. or that he fraudulently signed said bill of lading for the purpose of deceiving the pursuers, and thereby enabling Konig & Co. to obtain from them the said bills of exchange for the price of the said cargo of sugar: Finds, as matters of law, the facts being as above set forth, that the defender Edward George is not liable to the pursuers in the reparation sued for: Therefore assoilzies the defenders, the registered owners of the said vessel ‘Truth,’ and also the defender the said Edward George, master of the said vessel, from the conclusions of the summons, and decerns: Finds the pursuers liable in the expenses of process, allows accounts thereof to be given in, and remits the same when lodged to the Auditor for his taxation and report.

“ Note.—There is little, if there be any, controversy as to the facts of the case between the pursuers and the defenders the owners of the vessel ‘Truth,’ so far as these have been found by the Lord Ordinary. The dispute turns upon the law of the case, and the question at issue, as things are viewed by the Lord Ordinary, is, whether the bill of lading No. 60 of process, bearing date 31st August 1877, was signed by the master with the authority or as agent of the said defenders?

The law upon this subject, it is thought, has been settled by the English case of Grant v. Norway, 10 Scott's Common Bench Reports, 665, and by the case of M'Lean & Hope v. Munck, decided in the Court of Session June 14, 1867, 5 Macph. 893. The counsel for the pursuers no doubt attempted to distinguish the present case from both of these cases, on the ground that the portion of the cargo which had not been shipped when the bill of lading was signed and delivered was afterwards received on board; but the Lord Ordinary is unable to see how this distinction can create any difference on the legal principle by which the contention must be decided. If the bill of lading, when signed and delivered, was not signed and delivered by authority of the owners, the subsequent reception of the goods falsely represented to have been previously shipped could not confer an authority or create an agency not conferred or created when the bill of lading was signed and delivered.

As to the case against the defender George, the master of the vessel, the Lord Ordinary has experienced difficulty in coming to a conclusion so far as the facts are concerned. Was he or was he not a party to a fraud in signing and delivering the bill of lading No. 60 of process? If he was, there can, in the opinion of the Lord Ordinary, be little or no doubt that he ought to answer for the consequences which ensued. But if he was not, there appears to the Lord Ordinary to be no ground upon which he can be made to answer for results which were not and which could not have been anticipated. On the issue of fact the only conclusion which the Lord Ordinary has been able to arrive at is that the alleged fraud has not been proved. That the conduct of this defender was suspicious is certain; but the Lord Ordinary thinks that the case has not been carried by the proof beyond suspicion; and for that reason, and for that reason only, the Lord Ordinary, giving him the benefit of the doubt, has assoilzied him also from the conclusions of the summons.”

The pursuers reclaimed, and argued—The action was based upon the non-observance of the plain stipulation of the contract that the sugar was for shipment during August. The fact that one-fourth of it was not on board till September was enough.. That this was so was clear from the case of Bowes v. Shand, June 7, 1877, L.R., 2 H. of L. 455. The right to rescind being clear, it further appeared from the evidence that there had been a conspiracy on the part of the shippers and the master of the vessel to deceive the purchasers. It was not clear when the bills of lading were signed, but in any case they were intended to misrepresent that the cargo was all on board when it was not. In so acting the master bound his owners, who were responsible for his conduct in such a matter. Of. Swift v. Winterbotham, Feb. 1873, 8 L.R., Q.B. 244, 9 L.R., Q.B. 201; Swire v. Francis, 1877, L.R., 3 App Cas 106; Mackay v. The Commercial Bank of New Brunswick, 1874, L.R., 5 P.C. Apps. 394. Grant v. Norway, Feb. 20, 1851, 10 Scott's C.B. Reps. 665, did not apply, because in the present case the whole cargo was subsequently put on board the vessel.

Argued for the respondents Eills and Others—Assuming the fraud of the master, which was not admitted, the owners could not be liable. The case was ruled in this respect by Grant v. Norway, 10 Scott's C.B. Reps. 665; Hubbersty v. Ward, Jan. 26, 1853, 8 Welsby, Hurl and Gordon, 330; Maclean & Hope v. Munck, June 14, 1862, 5 Macph. 893; Maclean & Hope v. Fleming, 9 Macph. (H. of L.) 38, 2 L.R., Scot. Apps. 128. Further, the case of Craig & Rose v. Delargy, July 15, 1879, 16 Scot. Law Rep. 750, ruled that the onerous endorsees of a bill of lading, which the pursuers here were, were subject to the same liabilities in respect of the goods contained in the bills of lading as the shippers. But the shippers here were primarily to blame. The misrepresentation was at their instance. Therefore there could be no recourse by the endorsees against the owners of the vessel. They could not be made answerable for the fault of the shippers. The Bills of Lading Act 1856 (18 and 19 Vict. cap. 3) recognised what was in practice quite common, that such documents were often signed before the goods were actually on board. Besides, the date was not an essential of a bill of lading. There was no authority for such a proposition— Cf. Bell's Principles, 418; Bell's Comms. i. 590, 214, 215 ( note). Further, in order to succeed against the owners the pursuers must show that they had been benefited by the alleged misrepresentation. The benefit stated was the payment of the freight. But that would have been earned in any case. The charter party was entered into prior to the dates of the bills of lading. Besides, it was not proved that the master had any knowledge of the terms of the contract between the sellers and purchasers

Page: 329↓

That was necessary for the pursuers' success.

Argued for the respondent George—The fact that the cargo was not all on board in August did not entitle the purchasers to rescind the cargo. It [might entitle them to an action for any damage they might qualify, but no further. Such a stipulation must be substantially performed. But no more was required — Bell's Comms. i. 602; Benjamin on Sale, 450; Davidson v. Gwynne, 12 East's Reps. 381; Constable v. Cloberie, Palmer's Reps. 397; Hall v. Cazenove, 4 East's Reps. 484; Tennent v. Carmichael, Feb. 16, 1843, 5 D. 639. The case of Bowes v. Shand was special. The ground of judgment there was to be found in Lord Blackburn's opinion (p. 483). The contract was for a purchase of goods for a March and/or April shipment. The fact was that the whole cargo with the exception of a very small portion was put on board in February. The shipment was a February one. There was also evidence that a strict adherence to the stipulation as to shipment was of materiality to the purchasers. It was not so in the present case. It was only a fourth of the cargo which was not on board here till September. The contract has been substantially performed. Besides, it had not been shown that the fact that the cargo should all have been shipped in August was of importance to the purchasers. Further, there was no evidence that the master had been guilty of any misrepresentation—the bills had been presented signed to him, and his explanation that he signed to oblige the shippers who had given him despatch was quite natural. Besides, the cargo was then constructively on board the vessel, because it was in lighters on the shore or by the side of the ship. That was proved.

At advising—