United Kingdom House of Lords Decisions

Lord Chancellor.—In this case the appellants purchased 103,000 bags of barley, shipped from Portland in Oregon by the steamship “Strathlorne,” of which vessel the respondents are the owners. The vessel arrived at Leith on the 10th April 1913 and the appellants insisted on taking delivery of their barley in the bags in which it had been shipped. The respondents disputed their right to take delivery in this method, and instituted these proceedings against the appellants claiming for freight, demurrage, and the extra cost that was occasioned by this particular method of delivery. To that claim the appellants made answer by saying that, as against the freight, they were entitled to set off damages incurred by the respondents failing to deliver according to contract; and as to demurrage and the extra cost they said that they were not liable.

Now the bills of lading which covered the goods in question were bills which, on the face of them, related to barley in sacks; they were four in number and were all in the same form. The first one is in these terms: “Shipped in good order and condition by M. H. Houser in and upon the good ship or vessel … ‘Strathlorne’ … bound for Teneriffe for orders to discharge according to basis of charter-party, 40,310 sacks said to contain” a certain amount of white barley “being marked and numbered as per margin and are to be delivered in the like good order and condition at the aforesaid port.” The charter-party provided that the vessel was to discharge according to the custom at the port of discharge for steamers except as otherwise provided. The respondents aver that the custom of the Port of Leith, at which this vessel was discharged, was a custom which bound the appellants to accept delivery of barley in bulk, and it was upon proof of that averment that the pursuers' success in the action depended.

The question of custom is undoubtedly a question of fact, but none the less it is a question of fact which it is quite right and proper for this House to review if there be reason to think that the learned Judge who tried the action either misapprehended the evidence that was given, or that he misunderstood or misconstrued the correspondence which forms part of that evidence. I desire to make that statement lest it be thought that the House in a case of this kind would be prepared to avoid the necessity of investigation by the simple assertion that the matter was one of fact which had been determined by the learned Judge who heard the witnesses. Excepting in cases where the findings of fact by certain tribunals are made final by statute, there is no reason why questions of fact should not be reviewed by this House, just as questions of law are, subject to this, that where the question of fact depends upon determining as to which, between two groups of witnesses, are to be believed in their oral evidence, in the absence of special and unusual circumstances their Lordships would greatly hesitate before they interfered with the finding of the learned Judge who had the opportunity of seeing and hearing the witnesses by whom the evidence was given.

The custom in the present case is alleged in terms to be this: that in the case of all cargoes of grain from North Pacific ports discharged at the Port of Leith, the bags in which the cargoes are contained are opened in the ship's hold, the grain is raised in buckets, weighed on deck, and there put into shore bags supplied by the consignees. It was that custom which the respondents set out to establish.

In order that a custom or, to use a more exact phrase, a commercial usage, may be binding upon parties to a contract, it is essential that it should be certain, that it should be uniform, that it should be reasonable, and that it should be notorious. To use the words of Sir George Jessel in the case of Nelson v. Dahl, “It must be so notorious that everybody in the trade enters into a contract with that usage as an implied term. It must be uniform as well as reasonable, and it must have quite as much certainty as the written contract itself.”

I do not think it is necessary to consider in this case a matter which has been the subject of some slight discussion, as to whether or no this was a reasonable custom. I cannot help thinking that, when you are dealing with a custom of this description, which is nothing but a mercantile usage as between people engaged in a particular and important trade, if once it were established that the practice possessed the other attributes necessary for it to be recognised as a custom, the question of its reasonableness would be almost necessarily involved in the facts which were necessary to show that it was a uniform and accepted practice. Nor again do I wish to dwell upon the question of its being notorious. Notoriety in this connexion does not mean that it must be known to all the world, it does not even mean that it should be known to the person against whom it is asserted; but it certainly does mean that it must be well known at the place to which it applies, and be capable of ready ascertainment by any person who proposes to enter into a contract of which that usage would form part. It is in fact to be regarded as though it were a term so well known in connexion with the particular transaction that it was nothing but waste of time and writing to introduce it into the contract.

The question then is whether the respondents in this case satisfactorily established that such a custom existed. The Lord Ordinary found that they did not, and the learned Judges of the Second Division of the Court of Session have reversed his finding. The evidence upon which this custom depends is really to be found in the consideration of a document which has been prepared showing the number of grain cargoes that have been discharged at the Port of Leith coming from the North Pacific Coast from the year 1896 down to the present time. It is not suggested that before the year 1896 there was any such considerable body of trade as could be relied upon for the purpose. Proof of the custom is confined to transactions between the years I have mentioned. Now, I think Mr Watson was right in calling your Lordships' attention to the fact that the period of time during which a custom has run is only one of the matters that have to be considered. It is not essential that it should run for any great length of time; all that is necessary is that during a sufficient period it should have been so well settled and so established that everybody connected with any contract to which it would be attached must be assumed to have accepted it as one of the terms of the bargain.

From 1896 down to the time of the present dispute it appears that there were some 80 and odd cargoes from the North Pacific Coast discharged in the port in question, and the list of those cargoes shows that in point of fact, with only two exceptions, they had uniformly been delivered in the manner which is said to be the custom of the port. If that were accepted without some further investigation and explanation it would undoubtedly afford a very strong argument in support of the respondents' case. But examination of the list shows two things of great importance. The one is this: that of these cargoes 44 out of 80 were cargoes that were received by two firms—the firm of Herdman & M'Dougal and the firm of Cochrane, Paterson, & Co.; and, even more important still, in the last ten years during which this practice is said to have crystallized, these firms have between them received 24 cargoes out of 32.

If, therefore, there were a custom well established and settled at this port, recognised and accepted by people having transactions in this trade, Messrs Herdman & M'Dougal and Messrs Cochrane, Paterson, & Co. would most undoubtedly be the people who would be best cognisant of the fact. Now it is a striking incident, I think, in this case that representatives of both those firms have been called for the appellants, and they both deny that the method of delivery which they have adopted is anything but a method of delivery which they have adopted for their own convenience, and which, if they desired, they might at any moment repudiate. Mr Paterson's evidence seems to me particularly clear on this point; he says, at page 218: “There is no custom that I know of in Leith that prevents the consignee from getting delivery in bags if it suits his convenience to take it”; and he says a little earlier in his evidence: “I discharge a good many of those cargoes—I usually discharge them by bulking if I can do so. I do it for my own convenience; it saves me expense.” I think his evidence should be qualified by saying that he always discharged in bulk; but the point was that he did it not because he was bound to receive cargoes in that form, nor because he recognised any obligation to that effect at all, but merely because it suited his convenience. And Mr M'Dougal gives very similar evidence at page 224; he says: “There is no custom so far as I am aware which prevents the consignee getting delivery in bags if he should so choose”; then he adds: “As matter of law it is an open question. It suits us to take delivery in bulk, because if the cargo is sold it makes a more even delivery.” The first part of this statement is fairly open to the criticism of the appellants' counsel that it is outside the province of the witness, but the latter shows that the practice is not associated with all persons receiving such cargoes, but only with those who deal with the grain in a particular way. Therefore the two people whose practice in connexion with this matter must be the practice mainly relied upon by the respondents, are both of them people who say that their act is due to the deliberate election on their own part to accept the cargo in this particular form to suit their particular business, and that they have never regarded that they were doing it in connexion with any general practice; but that, if occasion arose and their convenience would be better suited by another method of delivery, that method of delivery they would adopt.

But the matter does not entirely end there, because the respondents' own witness, Mr Burrell, speaks to this custom in terms that are certainly not identical with the terms in which the custom is alleged on the respondents' behalf. He gives at page 39 his view of the custom. He is asked: “So the custom is not merely for delivery in bulk, but a custom of wiping out any claim on the part of the receiver for the number of bags which you admit you have got?” and the answer is, “Yes, when it goes into bulk I say the number of bags goes by the board.” Mr Macmillan has quite fairly argued that this witness is attempting to impose upon the custom a further consequence in his own favour, but I cannot accept that view of his evidence at all, because this is a man who has been acting as a shipowner throughout the history of the time during which this custom is alleged to have arisen, and he says he does not accept the custom itself as settled, and then attempt to extend its terms, but that he regards this condition as something which has grown up with the custom, and become inseparable from it; in other words one of the essential conditions of a custom, that it should be settled, and certain and definite, seems to me to be entirely lacking from the view presented by Mr Burrell.

Therefore, so far as those witnesses are concerned it appears to me that the proof of the custom is sadly lacking; and that is a matter of considerable consequence, because an essential condition of this custom being as I have stated, that anyone engaged in this trade should be able whenever he entered into a bargain to find out if it existed, the appellants in this case would have been quite unable, if they had applied either to the two large firms of receivers or to the shipowners in this case, to have ascertained, in answer to their inquiry, that the custom which the respondents allege existed in fact at all.

In my view that really disposes of the whole of this case. But there are two other considerations which have been the subject of argument, and deserve attention. It is said, and said truly, that there are only two exceptions to this uniform routine, one is in the case of the steamship “Siam,” and the other is in the case of a vessel that was wrecked. In the case of the steamship “Siam” there is no doubt that the delivery took place in bags. If the delivery took place in bags because the receiver asserted his right to receive it in bags and nothing more was done, that would be a very serious blot on the evidence upon which the respondents rely. The evidence does not affirmatively establish this fact, but on the other hand, there is no evidence to show that this delivery in bags was by concession of the shipowner. I think it cannot be more fairly stated in favour of the respondents than this, that the evidence upon the matter so far as arrangement between the shipowner and the receiver is concerned is blank, and the only fact that we know is that it was delivered in bags, and that a question arose as between the stevedores and the receivers as to what the terms of remuneration should be in those circumstances.

Finally there remains a matter which in some ways is the most significant feature of the case. I refer to the correspondence which has passed between the receivers and the shipowners when these cargoes were being delivered. It begins in 1895, and the first letter which is written by the master of the ship to a firm of receivers is in these terms: “As you are taking delivery of the cargo per this steamer in bulk instead of in bags as received on board by me, I beg to inform you that I cannot be held responsible in the event of any bags turning out short.” It seems to me impossible to suggest that that letter can be read as proof of the recognition of a custom by the master of the ship. Nor indeed is it so suggested, because it was written at the very inception of the trade. Nothing transpires between that date and 1907. 1907 is an important date, because after 1907, as I have already pointed out, of the remaining 32 cargoes that were received—the cargoes during the last ten years being much fewer than those in the first ten years—24 were taken by the firms to which I have referred. The next letter in 1907 is written to one of those very firms, and it is in these terms: “Seeing you have elected to empty the bags containing this vessel's cargo in the ship's hold please note that owners will not be responsible for any shortage in the number of bags that may be found.” That is a clear statement by the owners of the ship to the receivers that the receivers have adopted a method of delivery which relieves the shipowners from certain obligations which would otherwise be imposed upon them. They say: “If you are going to take this method of delivery you may do it if you will, but we will not in those circumstances be responsible for loss in the number of bags,” in other words they were adding on to the contract on their own behalf a further term which had never been the subject of express arrangement between themselves and the receivers, which they intended to insist upon if the receivers took delivery in the manner mentioned. Now that class of letter—not quite so distinct possibly in terms—continues throughout the whole of the subsequent history of this case. It is quite true, as Mr Macmillan pointed out more than once, that the letters written by receivers frequently asserted that their right to accept delivery in bulk was a right due to the custom of the port, and I think he is well founded when he says that the shipowners, when they answer, do not in terms deny that a custom exists; but their letters achieve such repudiation by implication just as effectually, because if such a custom existed the shipowners would have had no right whatever to have imposed upon the receivers of the cargo the position that they, the shipowners, should be freed from liability for the bags, yet throughout the whole of this correspondence that note is constantly to be found. This matter is of considerable consequence since, if this custom exists, it must bind not only the receiver, but the shipowners as well, and a custom of this kind could not be established against the shipowners who, throughout the whole period during which the custom is said to have arisen, have been definitely asserting that the delivery of cargoes by this method frees them from responsibility which they would otherwise have been under. There is no suggestion either that in any one of those cases, although it may well be that there has been a shortage in bags, the shipowners have in fact been made responsible.

The evidence, therefore, to my mind falls far short of the evidence that is required to establish a custom which must possess the attributes and qualities to which I have already referred. I think, therefore, that the appellants in this case must succeed upon this point; and I desire to avoid making any statement to show that the other points to which the appellants refer have been subjects for consideration by your Lordships' House. They may be points of great consequence, but they are not involved in this decision. I cannot part with this case without expressing my personal appreciation of the extremely fair and able manner in which counsel for the respondents have dealt with a case of undoubted difficulty.

Lord Kinnear.—I agree entirely with my noble and learned friend on the woolsack, and have nothing to add to what he has said.

Lord Atkinson.—I also concur with my noble and learned friend on the woolsack, and as he has entirely expressed everything I should desire to express myself, and better probably than I should have done it, I have nothing further to add.

Lord Shaw of Dunfermline.—I concur. Having considered the documents and evidence I accept with full agreement the very careful analysis made thereof, and the cogent conclusions reached thereon, by the learned Lord Ordinary. I regret to have to differ from the judgment of the Second Division. I have anxiously examined that judgment to ascertain what appeared to be the grounds upon which the learned Judges felt warranted in differing from the Lord Ordinary upon this question of fact as to the existence of a certain custom of the port. I gather that the learned Judges appear to have considered that the custom of the Port of Leith was established by the number of instances in fact in which the practice of unloading in bulk had been adhered to. There was much plausibility in the observation made by the learned counsel who addressed this House that that view was justified by the language of Lord Blackburn in the case of Postlethwaite v. Freeland, in which that distinguished Judge grounded the question of custom upon what he called “settled and established practice.” If by settled and established practice the learned Judge meant (as I am certain he did not) that all that was required to establish an obligatory custom was to tick off through a course of years a number of instances in which a certain practice had been followed, then I should certainly venture to doubt whether such an opinion was sound.

For I would venture to add to a general proposition as to settled and established practice this. In the first place, no number of contracts to do a thing which is expressly specified can ever establish a binding custom to do that thing without its being specified. In the second place, you cannot build up a custom of trade or of a port out of a series of protests against it. These protests may be expressly against the admission of a custom, or they may be by implication against it in respect of making demands which would have been unfounded if such a custom had already bound the parties. With regard to this case the letters founded on contain the characteristics of both of these protests.

I desire respectfully to offer these observations because, in view of the grounds of judgment of the Court below, I think that the distinction should be made plain between a settled and established practice in the general sense of the mere occurrence of instances (many of which may have sprung from express contract), and a settled and established practice which amounts to the acceptance of a binding obligation of a custom apart from particular bargain.