Mogul Steamship Company v McGregor

JurisdictionUK Non-devolved
Judgment Date18 December 1891
CourtHouse of Lords
Date18 December 1891

Conspiracy - Combination to keep up Freights - Contract in Restraint of Trade - Illegal Contract - Engrossing particular Trade - Exclusion of Rival Traders from Combination.

Owners of ships, in order to secure a carrying trade exclusively for themselves and at profitable rates, formed an association and agreed that the number of ships to be sent by members of the association to the loading port, the division of cargoes and the freights to be demanded, should be the subject of regulation; that a rebate of 5 per cent. on the freights should be allowed to all shippers who shipped only with members; and that agents of members should be prohibited on pain of dismissal from acting in the interest of competing shipowners; any member to be at liberty to withdraw on giving certain notices.

The plaintiffs, who were shipowners excluded from the association, sent ships to the loading port to endeavour to obtain cargoes. The associated owners thereupon sent more ships to the port, underbid the plaintiffs, and reduced freights so low that the plaintiffs were obliged to carry at unremunerative rates. They also threatened to dismiss certain agents if they loaded the plaintiffs' ships, and circulated a notice that the rebate of 5 per cent. would not be allowed to any person who chipped cargoes on the plaintiffs' vessels. The plaintiffs having brought an action for damages against the associated owners alleging a conspiracy to injure the plaintiffs:—

Held, affirming the decision of the Court of Appeal (23 Q. B. D. 598), that since the acts of the defendants were done with the lawful object of protecting and extending their trade and increasing their profits, and since they had not employed any unlawful means, the plaintiffs had no cause of action.

APPEAL from a decision of the Court of AppealF1. The action was brought by the appellants against the respondents. The statement of claim alleged as follows:—

1. The plaintiffs have suffered damage by reason of the defendants (other than Sutherland, Barnes, Holt, and Swire), as and being owners of numerous steamers trading between ports in the Yangtsekiang River and London, and the defendants Sutherland, Barnes, Holt, and Swire, as and being interested in the steamers owned by the defendants the Peninsular and Oriental Steam Navigation Company and the Ocean Steamship Company, conspiring together and with other persons at present unknown to the plaintiffs to prevent the plaintiffs from obtaining cargoes for steamers owned by the plaintiffs from shippers to be carried from ports in the said river to London, for reward to the plaintiffs in that behalf.

2. The conspiracy consisted and consists of a combination and agreement by and amongst the defendants (other than Sutherland, Barnes, Holt, and Swire) as and being owners of steamers trading as aforesaid and having by reason of such combination and agreement control of the homeward shipping trade, and the defendants Sutherland, Barnes, Holt, and Swire, as and being interested in the steamers owned as aforesaid, pursuant to which shippers were and are bribed, coerced and induced to agree to forbear and to forbear from shipping cargoes by the steamers of the plaintiffs.

3. In the alternative the conspiracy consisted and consists of a combination and agreement by and amongst the defendants, as and being owners of and interested in steamers as aforesaid, pursuant to which the defendants, with the intent to injure the plaintiffs and prevent them obtaining cargoes for their steamers trading between the said ports, agreed to refuse and refused to accept cargoes from shippers except upon the terms that the said shippers should not ship any cargoes by the steamers of the plaintiffs, and by threats of stopping the shipment of homeward cargoes altogether, which threats they had the power and intended to carry into effect, did and do prevent shippers from shipping cargoes by the plaintiffs' steamers and threaten and intend to continue so to do.

The plaintiffs claimed damages and an injunction to restrain the defendants from continuing the said wrongful acts. An application for an interim injunction was refused by Lord Coleridge C.J. and Fry L.JF2. The following are the material facts proved at the trial of the action before Lord Coleridge C.J. without a jury.

The appellant company was incorporated in 1883 and took over the steamers owned by Gellatly & Co., and among them the SS. Pathan, Afghan, and Ghazee, which were in China in the tea seasons of 1884 and 1885. Gellatly & Co. were the principal owners in and managers of the appellant company, and were also the London outward loading brokers of the Ocean Steamship Company. The respondents were owners of, or managing owners interested in, steamers engaged in the trade between China and England and elsewhere.

The “tea season” in China lasts about five to six weeks, beginning from the latter part of May. Tea exported during the season from Hankow for England is either shipped there (600 miles up the river Yangtsze) direct for England or sent to Shanghai (at the mouth of the river) and there re-shipped. The defendants desired to secure this trade for themselves and to maintain freights at remunerative rates. With this object they had in some previous years agreed among themselves to regulate the amount of tonnage to be sent up to Hankow and the freights to be demanded. In the spring of 1884 they held a conference, as the result of which they issued to merchants and shippers in China the following circular:—

“Shanghai, 10th May 1884.

To those exporters who confine their shipments of tea and general cargo from China to Europe (not including the Mediterranean and Black Sea ports) to the P. & O. S. N. Co.'s, M. M. Co.'s, O. S. N. Co.'s, Glen, Castle, Shire and Ben lines and to the SS. Oopack and Ningchow, we shall be happy to allow a rebate of 5 per cent. on the freights charged.

Exporters claiming the returns will be required to sign a declaration that they have not made or been interested in any shipments of tea or general cargo to Europe (excepting the ports above named) by other than the said lines. Shipments by the SS. Albany, Pathan, and Ghazee on their present voyages from Hankow will not prejudice claims for returns. Each line to be responsible for its own returns only, which will be payable half-yearly commencing the 30th of October next. Shipments by an outside steamer at any of the ports in china or at Hong Kong will exclude the firm making such shipments from participation in the return during the whole six-monthly period within which they have been made, even although its other branches may have given entire support to the above lines.

The foregoing agreement on our part to be in force from present date till the 30th of April 1886.”

The plaintiffs (who were not members of the conference) were admitted to the benefits of the arrangement in respect of their vessels the Pathan and Ghazee for the homeward voyage of that season only.

In 1885 the defendants held another conference and came to a written agreement, dated the 7th of April, which regulated as between the defendants the tea trade with China and Japan, and provided for a certain division of cargoes, for the determination of the rates of freight and for the continuance of the rebate of 5 per cent. It also provided that if “outsiders” should start for Hankow, Conference steamers must meet them there, the selection of tonnage to be employed for this purpose being left to the Shanghai agents of the lines in consultation together, the number to be limited as much as consistent with effective opposition. That should there not be a Conference steamer in port or named for despatch within a week with available cargo space, shipments made by an outsider during that period should not invalidate the claim for the rebate of 5 per cent. on the freights. That agents of Conference steamers in China and Japan should be prohibited from being interested directly or indirectly in opposing steamers, or in the loading of sailing vessels of outsiders. And that the agreement might be terminated at any time on notice being given by the party wishing to retire to each of the others, but only by principals at home and not by agents abroad. Copies of this agreement were sent by the defendants to their agents at Shanghai. The plaintiffs desired to join this conference, but were excluded from it and from all its benefits, and in May 1885 sent the Pathan and Afghan to Hankow to endeavour to secure homeward cargoes. The defendants' agents at Shanghai thereupon sent to shippers at Hankow the following circular:—

“Private. Shanghai, 11th May 1885.

Referring to our circular dated the 10th of May 1884 we beg to remind you that shipments for London by the S.S. Pathan, Afghan and Aberdeen, or by other non-Conference steamers at any of the ports in China or at Hong Kong, will exclude the firm making such shipments from participation in the return during the whole six-monthly period in which they have been made even although the firm elsewhere may have given exclusive support to the Conference lines.”

The defendants also despatched some Conference steamers to Hankow to oppose the Pathan and Afghan and secure the freights if possible to the exclusion of non-Conference vessels, and with this object they underbid the plaintiffs and caused a general reduction of freights at Hankow. In the result the Pathan and Afghan obtained freights, but at very low and unremunerative rates. A letter of the 1st of May was put in from the chairman of the P. & O. Co. to...

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