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Cite as: [2000] ScotCS 208

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OUTER HOUSE, COURT OF SESSION

CA86/14/99

OPINION OF LORD HAMILTON

in the cause

ALEXANDER INGLIS & SON LIMITED

Pursuers;

against

FORTH PORTS PLC

Defenders:

________________

Pursuers: Clark; McKay & Norwell, W.S.

Defenders: D. E. L. Johnston; McGrigor Donald

21 July 2000

[1] The pursuers are grain merchants with premises at Ormiston in East Lothian. The defenders are port operators with premises at various locations on the Forth Estuary, including Leith. At Leith they have a facility for holding grain, known as the Imperial Grain Silo. The Silo includes in excess of 260 vertical concrete silos or bins, some of 200 and others of 100 tonne capacity, these weight capacities varying to some extent relative to the density of the particular crop. Machinery, in the form of conveyor belts and elevators, allows for the transfer of grain, in whole or in part, from one bin to another and for turning the content or part of the content on itself, i.e. by running grain out at the base of the bin and transferring it by belts and elevators ultimately to re-enter the same bin near its top. The Silo includes a small number of aeration bins in which air can be passed through the bin content. In addition there is a Dutch barn, a roofed structure with a concrete floor and three walled sides, the fourth side being open; this barn is ordinarily used as a timber store but can be and was used as a flat storage facility for grain.

[2] Mr Finlay Calder, who had been employed in the grain trade since about 1975, joined the pursuers in May 1997. In his prior employment he had had a good working relationship with A. D. M. Erith Limited, which carried on business as seed crushers in the south of England. Mr Calder saw an opportunity of developing the pursuers' business by an arrangement under which they would supply from Scotland to A. D. M. Erith Limited substantial quantities of oil seed rape. For the quantities envisaged the pursuers did not themselves have sufficient storage capacity. Discussion took place with the defenders, the total quantity initially discussed being 5,000 tonnes; later, the envisaged quantity increased.

[3] On 2 June 1997 the defenders, by the hand of their Grain Silo Manager, Mr Lennie, submitted by fax to the pursuers a "Cargo Handling Quotation". It included the following provisions -

"We thank you for your enquiry for the following:

Receive into grain silo, store and monitor, deliver ex silo oil seed rape and/or feed wheat. Price to include testing at intake and road weighing, also rental charges.

and have pleasure in quoting as follows:

£4.90 PER TONNE, 50% PAYABLE AT INTAKE, 50% PAYABLE ON UPLIFT.

Special Conditions:

Rental charges will apply from intake after 1997 harvest to maximum up to 30 June 1998.

Testing will analyse:

(a) Moisture temperature

(b) Bushel weight

(d) Green goods (oil seed)

(e) Infestation

We require a minimum daily intake of 200 tonnes with a 2 weekly average of 300 tonnes per day ..."

It concluded -

"The foregoing quotation which is valid for 60 days is subject to the whole terms and conditions of The General Trading Regulations of Forth Ports plc (a copy of which is available at the Port Office) which by your acceptance of the foregoing quotation you are deemed to have accepted ..."

By letter of 5 June Mr Calder on behalf of the pursuers responded -

"Many thanks for your quotation regarding the handling and storage of Oil Seed Rape for this coming harvest. We have pleasure confirming that we require 5,000 tonne of space with the option to take another 5000 tonnes.

We confirm the agreed all in package of £4.90 per tonne ..."

[4] The General Trading Regulations referred to in the quotation (to which it is admitted that the quotation and the contract were subject) included a force majeure regulation (regulation 18); but at the hearing on evidence Mr Johnston for the defenders intimated that in the circumstances the defenders did not seek to rely upon it in any important respect. It is accordingly unnecessary to discuss it.

[5] It is, however, further admitted that the quotation and the contract were also subject to the defenders' Grain Regulations which included the following regulation -

"21. In the event of Grain becoming heated or becoming otherwise deteriorated the Owner may have such Grain turned from one bin to another when the same may be available at such additional charges as may be published by the Company [the defenders]."

The contract having provided for testing of the goods at intake, on 28 July Mr Calder sent to Mr Lennie the pursuers' specification for such testing. It included the following -

"All goods to be sampled by Inspectorate at Porta Cabin situated at Edinburgh Dock South

Sampling to be carried out by Ukasta prescribed method

Intake moisture between 6% and 9%

Admixture between 0% and 4% (this includes reds/green seeds)

Outwith specifications above a phone call must be made to Alexander Inglis & Son Ltd

....

Samples to be held for collection for oil analysis

..."

No objection was taken by the defenders to the terms of that specification.

[6] On various dates between early August and late September 1997 oil seed rape ("seed"), which had recently been harvested, was in furtherance of the contract delivered by lorry to the defenders' premises at Leith. In excess of 12,000 tonnes were delivered in that period. (The records suggest that a further small quantity, about 300 tonnes, was delivered in December but this additional amount may be ignored for present purposes.) On delivery the seed was duly tested for the specified matters by Inspectorate Griffith Limited ("Inspectorate"), an inspection establishment held in high regard by both parties. Only seed which complied with the pursuers' specification was accepted and placed in the defenders' bins. Additionally, the seed was prior to placement checked for temperature. If any seed was found (as some was) to be more than 5°C above ambient temperature, instructions were given by Inspectorate that it be cooled in aeration bins prior to being placed in storage.

[7] On 10 November Mr Lennie reported by telephone to Mr Calder that the seed in two of the bins had shown elevated temperatures. This call was made to him after the defenders' Silo Foreman, Mr Lord, had made a routine check of grain temperatures on that day. Mr Lennie confirmed the position to Mr Calder by fax the next day in the following terms -

"Further to our telephone conversation of 10 November 1997 I would confirm two of the bulks tested today for temperature are indicating 38° and 54° respectively from the probe 3M into the silo.

The action we propose is turning the two bins into 2 empty bins and segregating the warm seed into aeration for cooling down.

We would welcome your comments and shall advise if any other bins are showing signs of heating."

The contents of these two bins were so dealt with on 10 November, Mr Calder having in the telephone conversation agreed with the proposed measures.

[8] Some time about the middle of December Mr Lennie reported to Mr Calder that an elevated temperature had been found in one bin. Similar action was taken.

[9] On 15 January 1998 Mr Lord reported to Mr Lennie that it had been discovered that seed in two bins had been showing signs of heating up with excessive moisture. This was in turn reported by Mr Lennie to Mr Calder. It was agreed between them that the seed in one of those bins should be transferred to an aeration bin immediately and that the seed in the other should be turned to examine it or cool it by turning. This was done.

[10] In late January a rumour reached Mr Calder that seed from the 1997 harvest which had been held by the defenders for another customer at the Silo had, on delivery to Hull, been rejected on the ground that it had suffered damage by heating. He spoke to Mr Lennie but was assured by him that there was no problem with the pursuers' seed, some of which was due to be shipped out of Leith early in February.

[11] At about the beginning of that month the defenders put in place an inspection arrangement of seed in their possession which involved the turning of part of the content of the bins. Seed in 200 tonne bins was to be turned for 25 minutes and seed in 100 tonne bins for 15 minutes; the bin content was to be sampled every 5 minutes during turning and sample bags labelled with the bin number and date. Certain particulars, including observations of temperature and of smell were to be recorded. This arrangement was implemented over the weekend of 7/8 February. I shall return to what was then found and recorded.

[12] The following week the MV Emmaplein docked at Leith. It was scheduled to take on board the first load of the pursuers' seed which had been stored in the defenders' bins (an earlier shipment in December 1997 had been of seed stored in the Dutch barn). Lorry loads of seed taken from the bins were inspected for quality by Inspectorate on the quay before loading. A significant proportion of the seed presented for inspection was rejected. Twelve lorry loads presented were so rejected as in an untradeable state by reason of burnt seeds. The rejected seed was initially returned to be held separately in the Silo.

[13] Over the succeeding weeks various checks were made of the remaining seed held in the defenders' bins. The indications were that a significant proportion of that seed had also been damaged by heat. Certain steps were put in hand with a view to alleviating the situation but, by the time of the last shipment in April 1998, 1,098.7 tonnes had been found to have been spoiled by heat and to be unfit for crushing purposes. That seed was at various stages removed from the Silo to the pursuers' premises at Ormiston where it has since remained.

[14] In this action the pursuers sue the defenders for damages for breach of contract. The defenders deny breach and dispute the amount of damages claimed. They also counterclaim for payment of certain invoiced charges relative to the handling of the seed. With the exception of the amount claimed on one of the invoices, the pursuers admit that the sum counterclaimed for is due but withhold payment of it against the larger claim for damages which is made in the principal action.

[15] The pursuers' case of breach of contract is presented under two heads, first, for breach of the express obligation to "monitor" the seed and, secondly, for breach of the implied obligation to "exercise reasonable care and skill in storing and monitoring the seed". It is not disputed by the defenders that obligations in these terms were incumbent on them, though there is a dispute between the parties as to the content in the circumstances of each of those obligations. For the purpose of resolving that dispute it is necessary to consider certain surrounding circumstances, some disputed and some undisputed. Although the evidence and submissions touching on that dispute arguably went somewhat beyond the terms of the pleadings, if strictly construed, no point was taken in that respect.

[16] The seed accepted by the defenders from the pursuers in furtherance of the contract was, as the defenders knew, intended to be used in due course for crushing. Seed, if kept in bulk for periods of months after harvesting, is at risk of damage from heating within the bulk - the analogy with the functioning of a compost heap was accepted as apt by one of the expert witnesses. The temperature at which the crop may safely be stored will depend on the moisture content of the crop and the proposed storage period. In broad terms, the higher the moisture content and the longer the period of storage, the greater is the risk of damage from heating. The temperature at which the crop is placed into storage may also be a factor. Aeration of seed in storage may reduce the risk of damage by heating. Where heating is detected, the risk of permanent damage to the seed may be avoided or reduced by turning it into another bin or back into the same bin, the aeration incidental to the turning process tending to cool the seed. Seed badly affected by heating may be rendered unsuitable for crushing.

[17] Seed may be stored in flat storage buildings or in vertical bins. Although some of the pursuers' seed was stored by the defenders in flat storage (the Dutch barn), none of that seed was, so far as appears, damaged and is not the subject of any part of the present claim. It may accordingly for present purposes be ignored. Vertical bins for the storage of grain, including seed, are in some establishments fitted with internal monitoring equipment which, through sensors fitted at various levels, allows temperatures within the bulk to be checked. None of the bins at the Silo was fitted with such equipment. The only equipment routinely provided by the defenders for the measurement of the temperature of seed within the bins was a number of hand-held probes, the longest of which was 3 metres, which an operative, having gained access via the distribution floor to the top of a bin, would be able to insert into the seed to a depth of about 2 metres; the operative could then read the temperature measured at the tip of the probe. As the bins were about 21 metres in height, this method allowed for direct detection of elevated temperatures only in the uppermost fraction of the bulk. Where, as occasionally happened, a bin was not substantially filled, this method did not allow for any measurement of temperature within the bulk. In some circumstances visual signs within the top of the bins (such as discolouration of the seed or condensation of moisture within the bin lid) might indicate the existence of a heating problem. An unusual smell might also be an indicator.

[18] The defenders carried out certain temperature measurements by use of the probe method. A record of temperatures of the pursuers' seed made by Mr Lord personally was kept by him. It comprises a number of sheets in column form with various dates and temperatures entered on them. The earliest date entered is 17 October 1997 and the latest 3 March 1998. Other dates entered are 10 November, 6 and 17 December 1997 and 21/22 February 1998. These entries include the two taken on 10 November which are referred to in the fax of 11 November from Mr Lennie to Mr Calder. These two entries were ringed by Mr Lord prior to his passing the relative sheet to Mr Lennie for his attention. The sheets do not contain a comprehensive record of temperatures. Many boxes are blank or contain a dash or a tick - which symbols were not explained in the evidence. There was evidence from other documentation that bin 207 had shortly before 24 February recorded a temperature of 25°C but there is no entry in the relative sheet against bin 207 for temperature on 22 February (or indeed any other date). There is an entry of 25°C for bin 205 on 22 February but, from further documentation, it does not appear that this is simply a clerical error. No other records of temperatures recorded were produced by the defenders nor was any explanation spoken to for their absence. Mr Lord testified towards the end of the defenders' proof that the tops of the silos would be checked fortnightly but, in the absence of records or any other supporting testimony, I am not satisfied that the pursuers' seed was regularly and methodically checked for temperature by means of a probe. Such temperatures as were taken and recorded were not routinely notified to the pursuers, the only information received by them prior to February 1998 being the notifications of the few individual bin temperatures in November, December and January mentioned earlier. The pursuers did not ask for routine temperature reports.

[19] An alternative method which the defenders might have employed to monitor the seed in a bin was to turn it or part of it out of the bin and, by measuring the temperature of samples of seed being so turned and by the making of visual and nasal observations, to test its condition. Such a method of inspection was employed by them during the weekend of 7/8 February 1998. On that occasion, as earlier noted, the larger bins were turned for 25 minutes and the smaller for 15. Turning for that length of time would not have resulted in the whole contents of the bins being turned - a 200 tonne bin would take about 2 hours to turn completely. However, as the seed lying centrally in the bulk would tend to run out more readily than seed lying closer to the bin sides, a fair indication of its condition at most pre-turning levels would be obtained by this method, though it would not have been infallible.

[20] When that method was employed on that weekend, a substantial number of temperatures above the "normal" range were noted, the classification of temperatures there used being "normal" (0-15°C), "warm" (15-25°C) and "hot" (25°C and over). Only a very few temperatures noted were within the normal range, most being classified as warm; of the 56 temperatures noted, 21 were in the hot range, several of these being significantly above 30°C. These results were not notified to the pursuers at that time.

[21] The express contractual obligation to "monitor" is not defined in the contract. It is thus open to interpretation against the commercial purpose of the contract and the factual background against which it was made (Reardon Smith Line Ltd. v Hansen-Tangen [1976] 1 W.L.R. 989). The word appears in the phrase "Receive into grain silo, store and monitor, deliver ex silo oil seed rape ...". Thus the monitoring which the parties must be taken to have had in mind was the monitoring of seed received into silo and stored there pending its delivery from the silo. The purpose of the monitoring aspect of the undertaking must be seen against the nature of the material to be monitored (namely, recently harvested seed) and in particular the risks to which such material might be exposed while stored in a silo. The condition of the seed on entry to the silo and the length of time for which it might be expected to remain there were also material to the character of monitoring which the parties must be taken to have agreed on. Having regard to the evident purpose of monitoring, the method or methods mutually intended to be adopted must, in my view, be taken to be such as were reasonably likely to detect the development of conditions which, if undetected and undealt with, would be liable to cause material damage to the seed.

[22] The defenders were experienced in the holding of grain in silo. They had a substantial capacity for doing so. Although seed was a commodity not regularly held by them, they were not wholly without experience in the holding of that crop, having done so on at least one prior occasion. They were aware that heating within its bulk, if undetected and undealt with, was liable to cause damage to the seed. The contract which they undertook included, as one of its terms, an obligation to "store". There was some attempt by certain of the defenders' witnesses, including their expert Mr Bolton, to suggest that this was not a "storage" contract and that the defenders should not be regarded as "storekeepers". Mr Bolton in his report stated -

"The contract is what I would expect of an 'elevation' contract where the goods are taken into a port silo a short time prior to shipment. It is not the type of contract that I would expect a merchant to use or agree to when entering into a longer term storage agreement."

I am unable to accept this gloss on the contractual terms. It may be that the defenders conceived the Silo as being essentially ancillary to the cargo handling function of their port operation. But the fact is that they agreed to store the pursuers' seed and to do so for a period which, on any view, was likely to be of some months - conceivably up to 10 months but more likely (as in fact occurred) for about 6 or 7 months. They must, in these circumstances and in the absence of other circumstances pointing to a contrary inference, be taken to have held themselves out as able and willing both to store the seed over that period and to monitor it over the same period by a method or methods which, objectively considered, were likely to detect material deterioration in the seed. The risks to which this particular seed was exposed were perhaps enhanced by the circumstances that the ambient temperature when most of it was received (in August 1997) was relatively high and that the pursuers' specification allowed for the receipt of seed with a moisture content of up to 9% (a relatively high figure). Neither of these circumstances (being then future events) was known at the time of contracting; but neither was out of the range of what might reasonably have been anticipated and the defenders were prepared in the event to accept without objection seed known by them to be so conditioned.

[23] Mr Johnston submitted that "monitor" as expressly contracted for should be construed as meaning what the defenders in the event did, namely, test the temperature of the seed at intervals with the manual probe, together with making contemporaneous observations of sight and smell. That was, he observed, in conformity with the usual practice of the defenders. The pursuers, Mr Johnston emphasised, were grain merchants who themselves stored grain and must be taken to be familiar with the conditions under which seed could safely be stored. They (in particular, their Managing Director, Mr Aitken, and their principal representative on this contract, Mr Calder) were, he submitted, familiar with the defenders' storage facilities; it would be a proper inference from the evidence that the pursuers knew at the time of entering into the contract that the method of monitoring in use by the defenders was that with the probe as in fact subsequently employed. Monitoring did not involve turning. An obligation on the defenders, at their own initiative and without further payment, to turn the seed would be inconsistent with regulation 21 of the Grain Regulations which formed part of the contract.

[24] I am unable to accept that submission. The circumstance that the probe method was that ordinarily in use by the defenders does not of itself demonstrate or tend to demonstrate that it was, objectively regarded, the method which the parties are to be taken mutually to have intended by their undefined provision in respect of monitoring. I am not satisfied that it is established that the pursuers, in the person of either Mr Aitken or Mr Calder, were sufficiently familiar with the defenders' premises, or more particularly the working practices in use there, to appreciate that the method of monitoring which would be used by the defenders was the probe method, far less that that would essentially be the sole method. Of the two Mr Calder had, in his prior employment, had the greater acquaintance with the Silo, having attended there for various purposes - primarily in the Silo office rather than in its operational parts. He denied any pre-contractual familiarity with the working practices in the Silo and in particular of the use of the temperature probe. I accept his evidence on this matter which appeared to me to be honestly given and which was not directly contradicted by any other testimony. (I shall deal in another context with what knowledge he may have acquired in the course of the contract.) It was not directly put to Mr Aitken that he had any pre-contractual knowledge of the working practices in the Silo or the use of the temperature probe. The evidence relied on for this purpose by Mr Johnston (such as the terms of Mr Aitken's reaction on discovering in February 1998 serious problems with the seed) quite failed to convince me that Mr Aitken had had any such prior knowledge.

[25] The truth of the matter, I hold, is that neither Mr Calder nor Mr Aitken directly applied his mind at or prior to the contract being entered into as to the particular method by which the defenders would perform their obligation to monitor. It might, in retrospect, arguably have been wiser of them to have done so. But they were, in my view, entitled, the defenders having offered to undertake monitoring, to assume that the latter would do so by a method reasonably likely to detect the development of harmful conditions. Mr Johnston's argument based on regulation 21 of the Grain Regulations was largely directed to the proposition that turning was something different from monitoring. But, as Mr Clark for the pursuers pointed out, turning in the context of this case can be understood in at least three distinct senses - (1) running out part of the content of a bin for the purpose of testing the condition of the seed (the seed being returned via elevators into the same bin), (2) running out the whole content of a bin as part of a routine exercise to reduce the temperature of the seed (the seed either being returned to the same bin or run into another bin) and thus guarding against it becoming overheated and (3) running the seed out for remedial purposes, namely, to deal with seed already heated or becoming otherwise deteriorated for the purpose of cooling or aerating it (the seed being run to another bin for that purpose). Regulation 21 is concerned only with the third sense of turning. It is in that sense different from sense (1) which is, however, a method of monitoring. As I have found that an obligation to monitor by turning was not inconsistent with regulation 21, it is unnecessary to consider the pursuers' contention that that regulation was, by virtue of section 17 of the Unfair Contract Terms Act 1977, of no effect for the purpose relied on by the defenders. There are accordingly no circumstances, whether based on the knowledge or imputed knowledge of the parties at the time of contracting or on the other terms of their bargain, which points to an inference other than that "monitoring" is to be understood as importing a method which, objectively considered, was reasonably likely to detect the development of harmful conditions in the seed.

[26] In my view the probe method was plainly inadequate for that purpose. Even if regularly and methodically undertaken it could not be expected to do more than measure temperatures in the top tenth of the content of a bin. Potentially harmful increases in temperature were liable to occur in the main part of the bulk without there being any reasonable prospect of detecting them. Observations, visual and nasal, made by operatives, however perceptive, from the top of the bin were no more likely to afford such a prospect. The burden of the expert testimony on both sides was that the method used by the defenders was, in respect of seed received by them into unventilated silos, inadequate for safe long-term storage. This was particularly so given the condition of the seed in terms of temperature and moisture content at the time of its reception. I have no hesitation in concluding that the method of monitoring used by the defenders, even if carried out regularly and methodically (concerning which there is at least some doubt) was, objectively considered, inadequate for the purpose of storing this seed safely. I am further satisfied that a method of such inadequacy cannot be regarded as sufficient in the circumstances to constitute the obligation to "monitor" within the meaning of the contract.

[27] The absence of in-built temperature sensing apparatus and of a sufficiency of aerated bins did not prevent the defenders from adopting a system which could reasonably constitute monitoring within the meaning of the contract. The method of inspection instituted by them on their own initiative at about the beginning of February 1998 was physically practical throughout the period of storage but was not used earlier than at that time. Such a method, or a variant of it, employed with appropriate regularity during the period of storage, would have constituted, in my view, monitoring within the meaning of the contract. The defenders' failure to adopt it constituted, my view, a breach of contract on their part.

[28] Mr Johnston submitted that it had not been proved that the adoption of monitoring by turning would have prevented the damage which in fact occurred. He submitted that the carrying through of the exercise at the beginning of February 1998 had not detected the damage which became manifest a few days later when seed was discharged from the bins for shipment on the MV Emmaplein. That being so, he argued, that was no reason to suppose that its adoption on a regular basis over the period of storage would have been any more successful in doing so.

[29] I am unable to accept this argument. As earlier noted, the exercise carried out over the weekend of 7/8 February disclosed that most of the samples showed a temperature above the "normal" range, with many in the "hot" range and several at markedly above 30°C. These temperatures point to significant heating of the seed. Those in the higher ranges may indeed be of seed rejected several days later as untradeable - a sample from one bin (no. 331) is noted on the records of the 7/8 February inspection at 57.6°C; another (bin no. 207) in the "hot" category (at 30°C) is noted to have a "slightly burnt" smell; others were noted as having an abnormal smell. The circumstance that the temperatures so found were not immediately drawn to the attention of the pursuers or otherwise acted upon points, in my view, more to a failure by the defenders properly to discharge their obligations than to monitoring by turning being a method, which if duly carried out and acted upon, would not have prevented irreversible damage to the seed.

[30] Mr Bartlett, the pursuers' expert, whom I regarded as an impressive witness, testified that, in the absence of in-built sensors, turning of the seed was the only way in which it was possible to know what was going on. He indicated that seed should be turned within six weeks of its placement. Turning would of itself tend to cool the seed. Provided that its temperature was then not greater than 15°C (the top of the "normal" range), turning every eight to ten weeks thereafter would be appropriate. This evidence, while discussing turning generally, was given in the context of discussion of the turning exercise employed by the defenders on the single occasion in February 1998. It was not suggested to Mr Bartlett in cross-examination that such an exercise, if properly carried out at appropriate intervals with the results being duly reported to the pursuers, would not have obviated the damage which ultimately occurred. In my view, on a balance of probabilities it would. The pursuers would then have been in a position to give appropriate instructions for any further measures to be taken to avoid damage. Given the responses by the pursuers in November, December and January to information then passed to them of elevated temperatures, I am satisfied that, if duly informed by the defenders of the results of monitoring by turning, the pursuers would have taken any steps (by the instruction of cooling measures or otherwise) appropriate to avoid permanent damage to the seed. The part turning method employed in February would not have been as secure as turning and observing the whole contents of each bin at intervals - a procedure which would also have constituted monitoring and which would have had the additional advantage of tending to cool the whole seed as it was turned - but it nonetheless would, if done at intervals of several weeks apart, have provided sufficient information to allow appropriate measures to be taken.

[31] Mr Johnston further argued that the chain of causation between any breach of contract on the part of the defenders and the damage to the seed had in any event been broken by the pursuers' conduct in November 1997. The conduct relied on was the pursuers' response (in effect the response of Mr Calder on their behalf) to being advised at that time that seed in two of the bins had been found to have elevated temperatures (38°C and 54°C respectively). Mr Calder, on being so advised, did not instruct that a system of regular turning of the bins be instituted. The failure by the pursuers to give such an instruction at that time, so ran the argument, constituted unreasonable conduct on their part which interrupted the chain of causation. Reference was made to British Westinghouse Electric and Manufacturing Co. Ltd. v Underground Electric Railways Co. of London Ltd. [1912] AC 673, per Lord Haldane L.C. at p. 689. Reliance was placed on the opinion expressed by Mr Bolton in his report and in evidence that this conduct on the part of the pursuers amounted to failure by them as owners of the seed to exercise due diligence in respect of their own property.

[32] The factual hypothesis upon which this contention proceeds depends on the proposition that as at November 1997 Mr Calder knew, or must be taken to have known, that the sole means of monitoring being employed by the defenders was the probe method. It is only if he had that knowledge, or is to be taken as having had that knowledge, that it could be said that the absence of an instruction by Mr Calder to institute a system of regular turning constituted a failure by the pursuers to exercise due care or diligence in respect of their property. I am not satisfied on the evidence that such a factual hypothesis has been made out. The fax of 11 November confirmed to Mr Calder that the elevated temperatures had been detected by a 3 metre probe. It then indicated the remedial action to be taken, namely, turning the two affected bins into two other bins and segregating the warm seed into an aeration facility for cooling down. It did not advise Mr Calder that the means by which these elevated temperatures had been detected was the sole means which had been used and was intended to be used for monitoring the seed. Nor was there any evidence that any such advice had been passed to Mr Calder in the telephone conversation which preceded the fax. I have already held that Mr Calder did not, at the time the contract was entered into, have close familiarity with the defenders' working practices in the Silo and in particular with their method of monitoring. The communications in November 1997 were not, in my view, such as to bring home to him the knowledge that the probe method was and would remain the only means of monitoring employed by the defenders. In these circumstances there is, in my view, no factual foundation for the proposition that the absence of an instruction by Mr Calder in November constituted a failure by the pursuers which broke the chain of causation between the defenders' breach and the damage to the seed which subsequently occurred. Even had I found that there was a measure of negligent omission on Mr Calder's part at that time, I would not have regarded it as of such a nature and degree as to render the defenders' breach otherwise than a material and effective cause of that damage.

[33] One other aspect of causation should be noted. "Monitoring" imports keeping under observation. It does not necessarily involve taking any particular action in light of what is observed. However, in the context of the present contract, it plainly, in my view, imported an obligation at least to report to the pursuers any elevated temperatures found in the course of monitoring by turning. Had such temperatures been detected and reported, I am, as I have already said, satisfied that action would have been taken (whether by an instruction from the pursuers or otherwise) to aerate or otherwise deal with the seed so as to reduce those temperatures. Had that been done, then on a balance of probabilities permanent damage would not have been sustained.

[34] As I have held that the defenders were in breach of the express term to monitor and that that breach was a material cause of the damage sustained, the pursuers are entitled to reparation from them howsoever stands the case based on an implied term. However, it is appropriate that I deal with it. The defenders accept that certain duties of care were impliedly incumbent on them but dispute that those duties were as extensive as the pursuers maintain. The pursuers' case based on an implied term was, as ultimately presented, broadly to the effect that the defenders as storekeepers had duties to monitor adequately the condition of the seed and to take reasonable steps to prevent it from permanent damage by overheating. In the circumstances these alleged duties to an extent overlap, in that the method of monitoring desiderated (namely, monitoring by turning) would have itself involved some cooling of the seed.

[35] In relation to the duties of storekeepers Mr Clark relied on Allan & Poynter v J. & R. Williamson (1870) 7 S.L.R. 214, Gibson & Stewart v Brown & Co. (1876) 3 R. 328, J. & R. Snodgrass v Ritchie & Lamberton (1890) 17 R. 712, Central Motors (Glasgow) Ltd. v Cessnock Garage & Motor Co. 1925 S.C. 796 and the Canadian cases of Carpenter v Cargill [1982] 4 W.W.R. 292 and Dunn v Prescott Elevator Co. Ltd. [1902] 4 O.L.R. 103 (C.A.). On the onus of proof in cases involving storekeepers and like holders of the property of others Mr Clark referred to Wilson v Orr (1879) 7 R. 226, McLean v Warnock (1883) 10 R. 1052, Mustard v Paterson 1923 SC 142 and Sinclair v Juner 1952 SC 35. Reference was also made to Verrico v George Hughes & Son 1980 S.C. 179.

[36] Many of the decisions on the duties of storekeepers turn on their particular facts but some general principles can be derived from them. Allan & Poynter v J. & R. Williamson was concerned with the long-term storage (some ten years) by warehouse keepers of a punchen of whisky. The cask failed when its hoops burst. The effect of the opinions delivered appears to be that there was, independently of any custom of trade, implied in the contract of storage a duty of inspection appropriate to the nature of the goods stored and an obligation to discharge that duty efficiently; that duty extended to the warehouse keepers so informing themselves as to be able to report to the owner as to the approach of danger; the onus of proving that reasonable care was used lay on the storekeepers. In Gibson & Stewart v Brown & Co. (which was primarily concerned with the competency of setting one claim off against another) Lord President Inglis made certain observations about the respective duties of storekeepers and of customers storing corn with them. But, while the circumstances of that case bear some resemblance to those of the present case, the duties there referred to were settled by usage of trade; in the absence in the present case of evidence touching directly on such usage, it would be inappropriate, in my view, to draw general conclusions from those observations. In J. & R. Snodgrass v Ritchie & Lamberton (which concerned the storage of flour) Lord Rutherford Clark (with whom the other judges concurred) observed at p. 715 -

"It cannot be disputed that storekeepers are bound to store in a proper manner the goods which they receive, and in the case of Allan [i.e. Allan & Poynter v J. & R. Williamson] it was held that they were charged with the further duty of reasonable inspection, so as to see that the goods were not sustaining damage. Thus far the parties were agreed as to the law."

The earlier of the two Canadian cases cited (Dunn v Prescott Elevator Co. Ltd.), following among other cases J. & R. Snodgrass v Ritchie & Lamberton, applied those propositions in the case of corn stored in an elevator.

[37] These authorities, in my view, sufficiently establish the propositions that in the present case there was an implied duty efficiently to inspect the seed (and that by such a method and with such frequency as was likely to detect dangerous heating of it) and to advise the pursuers immediately of any such heating found on such inspection. They do not go so far as, in the absence of a relative custom of trade, to establish that there was an obligation on the defenders, having ascertained signs of heating, on their own initiative and at their own expense immediately to aerate the whole bin or to take other physical steps to eliminate the risk of damage. The later Canadian case (Carpenter v Cargill Grain Co. Ltd.) might, it is true, be thought to give some support to the existence of this more extensive duty; but that decision appears to have proceeded, at least in part, on an admitted practice of rotating or turning over rape seed, the defenders unsuccessfully arguing that the obligation to take steps to prevent deterioration did not extend to grain held on a particular legal basis. I am not satisfied that in the circumstances of this case an obligation to turn the seed, except insofar as incidental to inspection by turning, was incumbent on the defenders. They did, however, have an implied obligation at regular and appropriate intervals to inspect by turning and to report the results, at least insofar as indicative of significant heating, to the pursuers. The content of this implied duty is essentially the same as the express obligation to monitor, as properly construed.

[38] There is, however, one other aspect which should be mentioned. It is clear that the risk of overheating during long-term storage of seed is reduced if at a relatively early stage steps are taken to ensure that the seed is at a temperature not more than about 15°C and, if it is not, to reduce it to that temperature. The prudent course at that stage (not later than some six weeks after placement) would have been to turn the whole content of each bin. That process would have allowed samples from throughout the bulk to be inspected (particularly for temperature) and would have had the incidental benefit of tending to cool the whole seed. If, notwithstanding such measures, temperatures materially in excess of 15°C persisted, further steps (by aeration or otherwise) might have been required. The taking of instructions from the pursuers before taking such further steps might well have been appropriate but the initial step of turning the whole of each bin on a single occasion at an early stage is one which a storekeeper of the pursuers' seed (particularly having regard to its condition on initial placement) would in the exercise of reasonable care have, in my view, taken. The taking of such a step is consistent with the evidence of Mr Bartlett, which was not contradicted and which I accept. It may be that the taking of such a step can properly be regarded as itself an aspect of monitoring within the express obligation (and I would be prepared, if necessary, to hold that it was) but in any event it was an aspect of the implied duty of reasonable care in storekeeping.

[39] In my view breach of the implied duty was also a material and effective cause of the damage ultimately occasioned to the seed. When the defenders did draw to the pursuers' attention signs of overheating in certain bins (two in November, one in December and two in January), measures were put in place by mutual arrangement for corrective action to be taken in respect of those bins. The proper inference is that, if the defenders had duly fulfilled their implied obligation, like action would have been taken and the damage averted. I find it unnecessary to rely in the circumstances of this case on any rule as to the onus of proof.

[40] The defenders also contend that the pursuers were at fault and that any award of damages in their favour should be reduced in terms of section 1 of the Law Reform (Contributory Negligence) Act 1945. The grounds of fault advanced (in the form of alleged negligence for their own financial interests) were in the end threefold - (1) failure, following their being advised on 10 and 11 November 1997 of the elevated temperatures in two bins, to give instructions that all bins should be turned then and regularly thereafter, (2) failure to provide an "adequate" specification for seed intended for long-term storage and (3) failure to "audit" the facilities and procedures for storage being offered by the defenders. As regards (1), I have already held in another context that the pursuers have not been shown to have been negligent in their conduct following the communications in mid-November. As regards (2), the specification issued by the pursuers on 28 July 1997 allowed for intake moisture level at between 6% and 9%. It made no provision for temperature. In the event, the majority of the seed was taken in during August when ambient temperatures were relatively high. The combination of those factors may have made the seed or some of it more susceptible to heating problems. But neither the specified range of moisture level nor the delivery of seed for storage in August immediately after harvest was abnormal. There was no evidence that the proffering for storage of seed in that combination of conditions was generally recognised as an improper or hazardous practice. The former condition was known to the defenders before the end of July and the latter was readily foreseeable by them then and earlier. Neither at that time nor on delivery did they take any objection to accepting seed so conditioned. In these circumstances the pursuers were, in my view, entitled to proceed on the basis that the arrangements which the defenders would put in place were adequate for the purposes of safe storage of such seed. As regards (3), the proposition was that the pursuers were negligent, at the outset and at the stage when they prepared and delivered their specification, in not examining the defenders' facilities and procedures before placing a large tonnage of seed with them for storage in unaerated bins. Although this aspect has given me some pause, I have come to be of the view that there was no negligence on the part of the pursuers in this respect either. The fact (of which the pursuers were aware) that almost all the defenders' bins were unaerated did not render the facilities unsuitable. Such physical facilities were adequate for the purpose provided that appropriate monitoring of the bin contents was carried out. This was not a case in which the pursuers were seeking to place with a storekeeper a commodity of which, to their knowledge, the latter had no experience of storing. The defenders had a substantial and long-established facility for holding grain. They had, as the pursuers knew, some albeit limited experience of storing seed, apparently successfully. In these circumstances the pursuers were not in my view negligent for their own interests in not first insisting on an examination of the defenders' premises and procedures. Acting reasonably, they were entitled to assume that these would be appropriate for the purpose.

[41] In these circumstances no proper basis for negligence on the part of the pursuers is, in my view, established. Thus, the issue as to whether the 1945 Act could properly be invoked in a case such as this does not arise. The scope of application of that Act in cases of breach of contract has been the subject of much discussion, judicial (particularly in England) and academic, and has been considered by both the Law Commission (Law Com No. 219) and the Scottish Law Commission (Scot Law Com No. 115). The recommendations of neither Commission has as yet been carried through into legislation. In England the issue was considered judicially at first instance (by Hobhouse J.) and in the Court of Appeal in Forsikringsaktieselskapet Vesta v Butcher. (The proceedings in the Court of Appeal and in the House of Lords are reported at [1989] AC 852 and those before Hobhouse J. at [1986] 2 All E.R. 488; although the case reached the House of Lords, this issue was not considered by their Lordships.) Hobhouse J. at p. 508 identified three classes of case as follows -

"(1) Where the defendant's liability arises from some contractual provision which does not depend on negligence on the part of the defendant.

(2) Where the defendant's liability arises from a contractual obligation which is expressed in terms of taking care (or its equivalent) but does not correspond to a common law duty to take care which would exist in the given case independently of contract.

(3) Where the defendant's liability in contract is the same as his liability in the tort of negligence independently of the existence of any contract."

That classification, which was accepted by the Court of Appeal, has subsequently been followed in that court (see Barclays Bank plc v Fairclough Building Ltd. [1995] Q.B. 24). Although the "three category test" has been criticised in argument in this court (Concrete Products (Kirkcaldy) Ltd. v Anderson & Menzies 1996 S.L.T. 587 at p. 589K), it has not, so far as I am aware, been judicially disapproved. Without expressing a view on its ultimate merits, I am content to regard it as a convenient working tool. In Scotland it has been held that a breach of the term of merchantable quality implied by statute in a contract for the sale of goods (a category (1) case in Hobhouse J.'s classification) does not open the way to a plea of contributory negligence under the 1945 Act (Lancashire Textiles (Jersey) Ltd. v Thomson Shepherd & Co. Ltd. 1986 S.L.T. 41). At p. 45H Lord Davidson said -

"The pursuers rely upon section 14 of the Sale of Goods Act 1979, but that does not mean that they sue in respect of a breach of statutory duty in the sense in which that expression is used in [section 5 of the 1945 Act - which defines "fault" for the purposes of the application of the Act to Scotland]. In my opinion a breach of contract may form the basis of a plea of contributory negligence, but only if that breach can also be described as constituting a wrongful act, breach of statutory duty or negligent act or omission within the meaning of section 5. The breaches of contract relied upon by the pursuers in the present action do not satisfy these requirements."

[42] In the present case I have held that the defenders were in breach of their express contractual obligation to monitor the seed; I have held that, construed in its context, that obligation imported an obligation to inspect the seed by turning at regular intervals. I have also held that an obligation so to inspect the seed was an aspect of the defenders' implied contractual obligation to take reasonable care of the seed in their charge. Accordingly, the particular express obligation which I have found to have been breached was in substance the same as that for which the defenders might, if sued only at common law, have been found in the circumstances delictually liable. Accordingly, it is in the circumstances "immaterial" (the expression used by Pritchard J. in Rowe v Turner Hopkins & Partners [1980] 2 N.Z.L.R. 550 at pp. 555-6 and followed in the Court of Appeal in Vesta v Butcher and Barclays Bank plc v Fairclough Building Ltd.) that there is concurrent liability in contract. I would therefore have been disposed to hold that the present case fell within Hobhouse J.'s category (3) and that under the present law contribution could have been required under the 1945 Act had the defenders established that the pursuers' loss had been partly caused by the latter's own fault. However, for the reasons stated no such fault has, in my view, been established.

[43] Parties are agreed that the amount of spoiled seed was 1,098.7 tonnes. They are further agreed that the average basic price which such seed, if unspoiled, would have achieved on sale for crushing would have been £183 per tonne, a total of £201,062. To that price, it is further agreed, would have fallen to be added premiums in respect of oil content and freedom from admixtures; the total premiums, it is agreed, can be taken at £13,200. The pursuers incurred costs in hauling the spoiled seed from Leith to their premises at Ormiston. No vouchers were produced for those costs, the work having been done by the pursuers' own transport. Mr Aitken assessed that cost at £3.50 per tonne which he testified to be the standard rate; Mr Calder had earlier suggested a figure of £3.25 per tonne. I am prepared to accept Mr Aitken's figure. The total cost of haulage to Ormiston I accordingly take at £3,845.45.

[44] The spoiled seed having been hauled to Ormiston, the pursuers retained and retain it there. They claim for the cost of handling it there (including aeration and cooling) at the rate of £2 per tonne (a total of £2,197). They also claim for storage at the rate of 24p per tonne per week over the period of storage (which they take for present purposes at 104 weeks). The defenders dispute those claims primarily on the contention that it was unreasonable for the pursuers to retain the whole tonnage over that period. They contend that, the bulk having been recorded and sampled, might reasonably have been disposed of much earlier. I reject that contention. The pursuers at an early stage claimed against the defenders for their loss in respect of the spoiled seed. They were met with a denial of liability, a denial maintained throughout the course of this litigation. At no stage did the defenders indicate that they would be prepared to accept samples taken by the pursuers as truly representative of the bulk as a whole. In these circumstances the pursuers acted, in my view, reasonably in retaining the spoiled tonnage for the purposes of it being made available, by inspection or otherwise, for litigation purposes. I am prepared accordingly to allow the handling costs claimed and in principle the claim for storage. I have, however some concern about the amount claimed under the latter head. Mr Aitken spoke in evidence to a range of costs of 18p to 30p per tonne per week for storage of oil seed rape, which he described as standard in the trade. The pursuers' claim as finally formulated by Mr Clark was the mean of those figures (24p). However no evidence was adduced indicating what dictated a particular point in the range; nor was there any satisfactory evidence that, in view of the storage of the spoiled seed at Ormiston, the pursuers incurred costs in storing other grain elsewhere or otherwise sustained loss. In these circumstances I am prepared to allow this claim only at the lower end of the range spoken to (18p). I assess this claim at £20,568.

[45] The spoiled seed will now require to be disposed of. There is an issue as to whether, albeit not usable for crushing purposes, it still has a commercial value which might be realised. The defenders maintain that it has, the pursuers that it has not and that it will require to be hauled to and deposited in a landfill site with the incurring of consequential further costs. I found the evidence on both sides of this question less than satisfactory. There was some evidence, allowed under reservation as to competency and relevancy, an objection having been taken which I now repel, that in some circumstances seed unfit for crushing might realise a price for pig feed; but there was no satisfactory evidence that this seed, now more than two years after spoilage, might realise such a price or, if so, what that price might be. The prospect of it now realising a price on disposal accordingly remains merely speculative. In these circumstances the proper inference is, in my view, that the pursuers will require to dispose of the spoiled seed as valueless waste and will require to incur costs in doing so. This will include haulage costs to a landfill site - an equivalent cost to that for the haulage of the seed to Ormiston, namely, £3,845.45. The evidence of what cost might be incurred to have the seed accepted for disposal at a landfill site was less than satisfactory. Mr Calder spoke to a cost of £17 or £18 per tonne, Mr Aitken to £30 per tonne (totals respectively of about £19,000 and £33,000). Neither of those figures was supported by any documentary evidence. No explanation was tendered for the absence of a quotation from a company operating such a facility. In these circumstances (and having regard also to the fact that no such claim is clearly pled) I am not prepared to assess this claim on the basis of either of the rates referred to. However, I accept that some cost is likely to be incurred in having the seed received for disposal at a landfill site. I am prepared to allow a nominal amount of £5,000 under this head.

[46] The pursuers also claim for the value of a shortfall in the tonnage of seed delivered out of the Silo by the defenders as against that delivered into it. This claim is unrelated to the pursuers' claim in respect of damage by heating of the seed but parties were content to deal with it in this litigation. There is no doubt that there was a shortfall but its amount is uncertain; nor is there any clear explanation as to why there was a shortfall. The pursuers claim that the shortfall was 100.93 tonnes. The defenders acknowledge a shortfall of 80.77 tonnes but maintain that part of that may be explicable by natural loss in drying out during storage or in handling the seed - it was submitted that 0.25% of the whole seed (viz. 30 tonnes) might have been lost for those reasons. It is difficult on the limited evidence given on this aspect to make an exact calculation of the true shortfall. It appears to me that there may have been some loss due to inevitable drying out or to ordinary handling but I do not accept that the loss would have been as much as 30 tonnes. The figures otherwise are not readily reconciled. In the whole circumstances it appears to me to be reasonable to assess the true shortfall for which the defenders are responsible at 80 tonnes. Applying to that tonnage the basic rate of £183 per tonne and the premiums of £11.97 per tonne, I assess the amount due by the defenders to the pursuers under this head at £15,598.

[47] I accordingly assess total damages in the principal action at £265,315.90. Interest is claimed from the date of citation until payment. I shall allow such interest at the judicial rate of 8 per cent per annum on those elements of damage totalling £256,470.45 (£265,315.90 minus £8,845.45) which have already been incurred but disallow it on the balance.

[48] The defenders counterclaim for £46,306.32 together with interest thereon at the rate of 8 per cent per annum from 29 May 1998 until payment. The sums claimed are principally in respect of undisputed invoices for storage and related costs. The only disputed item is a claim for £4,340 for the turning of 7,100 tonnes and aeration of 30 silos of seed, carried out on the pursuers' instructions in about February 1998. It appears from the evidence of Mr Calder (which was uncontradicted and which I accept) that this work was carried out primarily for the purposes of segregating good from damaged seed following the discovery of the presence of a significant amount of the latter. It was accordingly consequential on the defenders' breach of contract and designed, by segregating tradeable from untradeable seed, to mitigate the amount of the pursuers' loss. In these circumstances, although the work was instructed by the pursuers, the cost of it falls to the defenders. I shall grant decree in the counterclaim for the restricted sum of £41,966.32 with interest as concluded for, namely, from the last invoice date.

[49] Parties were agreed that it was preferable to grant separate decrees with interest in the principal action and in the counterclaim rather than a single decree for a net amount. In the whole circumstances I shall accordingly in the principal action sustain the pursuers' fourth plea-in-law, repel the defenders' third, fourth and fifth pleas-in-law and grant decree in favour of the pursuers in the sum of £265,315.90 with interest on the sum of £256,470.45 from the date of citation until payment. In the counterclaim I shall sustain the defenders' plea-in-law to the extent of the sum of £41,966.32 and grant decree in their favour in that sum with interest at the rate of 8 per cent per annum from 29 May 1998 until payment.