Kenyon, Son & Craven Ltd v Baxter Hoare & Company Ltd
| Jurisdiction | England & Wales |
| Date | 1971 |
| Court | Queen's Bench Division |
Contract - Exceptions clause - Fundamental breach of contract - Bailment - Clause exempting bailees from liability except for wilful neglect or default - Consignment of nuts seriously damaged by rats in warehouse - No wilful neglect or default - Whether fundamental breach
Between July 1965 and January 1967, 250 tons of groundnuts in bags were stored by the plaintiffs in the defendants' warehouse. The contract between the parties provided by clause 11 that the defendants “shall not be liable for loss or damage to goods … unless such loss or damage is due to the wilful neglect or default of the company or its own servants.” The nuts were apparently in good condition when they were received by the defendants but on redelivery to the plaintiffs they were in a seriously damaged condition both as regards quantity and quality, the effective cause of the damage being the action of rats in eating the bags thereby releasing the contents which they ate or contaminated. The defendants knew of the presence of rats in their warehouse, and made ineffectual attempts to control them and to conserve the nuts by mending bags and restacking.
In their action against the defendants claiming damages in respect of their loss, the plaintiffs contended that, even if the defendants were not guilty of “wilful neglect or default,” their acts or omissions amounted to a fundamental breach of the contract, with the result that they were not protected by clause 11: —
Held, that in the circumstances the defendants' purported performance of the contract was not so deficient as to constitute a fundamental breach of the contract and did not amount either to wilful neglect or default; accordingly, condition 11 must be construed to protect the defendants from liability.
The following cases are referred to in the judgment:
City Equitable Fire Insurance Co. Ltd., In re [
Farnworth Finance Facilities Ltd. v. Attryde [
Forder v. Great Western Railway Co. [
Harbutt's “Plasticine” Ltd. v. Wayne Tank & Pump Co. Ltd. [
Heyman v. Darwins Ltd. [
Hongkong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd. [
Suisse Atlantique Societe d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [
Williams v. Glasbrook Bros. Ltd. [
The following additional cases were cited in argument:
Brabant & Co. v. King [
Czarniknow (C.) Ltd. v. Koufos [
Lewis v. Great Western Railway Co. (
Sheppard & Son v. Midland Railway (
Lady Gwendolen, The [
Young v. British Aeroplane Co. Ltd. [
ACTION
The plaintiffs, Kenyon Son and Craven Ltd., makers of salted peanuts issued an amended writ on April 28, 1969, against Baxter Hoare and Co. Ltd and Barnes Warehouses Ltd., both warehousemen, claiming that by reason of their negligence and/or breach of duty in connection with the storage of the plaintiffs' groundnuts, the latter were redelivered in a damaged condition; and they claimed damages in respect of the loss they had suffered. The first defendants denied liability and relied on clauses 11 and 13 of the conditions of business. The second defendants admitted liability.
The parties agreed that all issues as to quantum should be deferred until the question of liability was settled.
The facts are set out in the judgment of Donaldson J.
Adrian Hamilton and B. Shaw for the plaintiffs.
A. D. Colman and Ian Hunter for the first defendants.
D. J. Donaldson for the second defendants.
December 7. DONALDSON J. read the following judgment. The plaintiffs are the makers of K.P. salted peanuts and similar commodities. The defendants are both warehousemen. Between July 1965 and May 1966 the first defendants took delivery from ocean carriers of nine parcels of shelled groundnuts in bags. Three of these parcels were warehoused by the second defendants and six by the first defendants. The nuts were eventually delivered to the plaintiffs in a damaged condition. the damage having occurred during the period of warehousing. Hence this action. The second defendants have admitted liability, although issues of quantum remain. The first defendants deny liability and agree with the plaintiffs that all issues of quantum shall be deferred until after the question of liability has been settled.
Liability turns upon the facts found and the true construction of two of the first defendants' conditions of business which are, I am told, not exclusive to them but are widely used by shipping and forwarding agents. The first of these conditions is:
“11. The company shall not be liable for loss of or damage to goods unless such loss or damage occurs whilst the goods are in the actual custody of the company and under its actual control and unless such loss or damage is due to the wilful neglect or default of the company or its own servants.”
It is agreed that at all material times the goods were in the actual custody of the first defendants to whom I will refer hereafter as “the defendants” and under their actual control.
The primary issue which arises is whether the damage was due to the wilful neglect or default of the company or its servants, the burden of proving that this was not the case being upon the defendants. A secondary issue is whether, assuming that this burden is discharged, the condition will protect the defendants if, as the plaintiffs contend, the acts or omissions of the defendants or their servants, whilst not amounting to wilful neglect or default, amounted to what is commonly known as “fundamental breach.”
The second condition is:
“13. In no case shall the liability of the company exceed the value of the goods or a sum at the rate of £50 per ton of 20 cwt. of goods lost or damaged, whichever shall be the smaller.”
Here the issue is whether the defendants' breach of contract, if any, was of such a character that this limitation is inapplicable and reliance was again placed upon the authorities which are concerned with “fundamental breaches.”
The quantity of nuts was very considerable — over 5,000 bags weighing at least 250 tons. They were stored in the defendants' warehouse at Field Lane, Bootle, the first two parcels being received in September and October 1965 and the remainder in the months of February, March, April and May 1966. When received the nuts were in apparent good order and condition, but a few bags were slack or burst. When the nuts were redelivered to the plaintiffs in January 1967, they were so seriously damaged both quantitatively and qualitatively that special procedures had to be devised and operated in order to sort the nuts into categories of those which could be used after cleaning and those which were valueless. The damage alleged exceeds 20 per cent. of the value of the nuts.
The effective cause of the damage was rats which ate the bags, thereby releasing the contents, ate some of the nuts and contaminated part of the remainder with urine and droppings. The plaintiffs also complained of contamination by cellaton powder which was stored in the same warehouse, but I am quite satisfied that this powder, which is used as a filtration substance is quite harmless and did no more damage to the nuts than would inevitably have been done by dust in the atmosphere. It, like the ordinary atmospheric dust, could easily have been removed by washing.
Before considering the history of the storage of these nuts, it may be useful to consider what was the defendants' duty in relation to them and for what breaches of that duty they would be liable on the true construction of condition 11 of their standard terms of business. The defendants were bailees for reward and as such it was their duty to redeliver the nuts in the like good order and condition as when received, subject only to such loss or damage as might arise despite the exercise of all reasonable skill and care in their preservation and custody. I put it this way rather than that simply it was the defendants' duty to exercise all reasonable skill and care in the preservation and custody of the nuts because it better reflects the burden of proof. The plaintiffs need only prove redelivery in a condition worse than when the goods were delivered to the defendants and it is then for the defendants to show that the damage arose despite the exercise of all reasonable skill and care. I doubt, however, whether it matters which way round the duty is expressed save in relation to the burden of proof.
Protective conditions are of three distinct types, namely, first, those which limit or reduce what would otherwise be the defendants' duty; second, those which exclude the defendants' liability for breach of specified aspects of that duty and third, those which limit the extent to which the defendant is bound to indemnify the plaintiff in respect of the consequences of breaches of that duty.
A condition which provided that a warehouseman should be under no obligation to take...
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