Brooks Wharf & Bull Wharf Ltd v Goodman Brothers
[1936] 3 ALLER 696(Judgment by: Lord Wright MR)
Brooks Wharf
&
Bull Wharf Ltd
vGoodman Brothers
Judges:
Lord Wright MRRomer LJ
MacNaghten J
Legislative References:
Import Duties Act 1932 - s 1
Customs Laws Consolidation Act 1876 - The Act
Judgment date: 18 November 1936
Judgment by:
Lord Wright MR
The defendants are a firm of furriers, who had imported from Russia a consignment of Russian squirrel skins in August 1934. Out of the consignment 10 packages were stored by the defendants in the bonded warehouse of the plaintiffs. While in the warehouse they were stolen on the night of 7-8 September 1934.
The plaintiffs, as bonded warehousemen, were compelled by law at the demand of the customs to pay the duties on those packages out of their own moneys. The defendants had refused to supply the plaintiffs with the necessary funds for that purpose. The plaintiffs claimed from the defendants the amount of the duties, £823 17s 10d, which they had thus been compelled to pay to the customs, on the ground that, as between themselves and the defendants, the defendants were primarily liable for the duties. There was also a claim for the landing and warehousing charges, amounting to £41 3s 11d, but, as to these, no question arises on this appeal. The defendants counterclaimed for £4,119 9s 3d, as being the value of the furs, on the ground that the furs were stolen by reason of the negligence of the plaintiffs and of their failure to exercise due care in the safe keeping of the goods. Branson J, who tried the case, held that there was no breach of duty on the part of the plaintiffs and that they were not liable to the defendants on their counterclaim. He also held, as regards the claim for £823 17s 10d that the plaintiffs were entitled to recover it. The appeal is brought from this judgment.
I think it convenient to deal first with the defendants' counterclaim. The allegation of negligence, if proved, would also furnish a defence to the plaintiffs' claim, because they could not recover a sum for duties paid on goods which had been lost through their negligence. Whether that allegation is made out or not is a question of fact. The law as to the position of warehousemen in such circumstances and the extent of the duty of care which rests upon them has been discussed in various cases, but I proceed on the basis of the statement of the law on the liability of warehousemen contained in two passages from the judgments in the House of Lords in an unreported case of Morison Pollexfen & Blair v Walton quoted by Kennedy LJ, in Joseph Travers & Sons Limited v Cooper , at p 90. The first passage is quoted from the judgment of Lord Loreburn LC, in the following words:
' "Here is a bailee ... who, in violation of his contract, omits an imporant precaution, found by the learned judge upon ample evidence to be necessary for the safety of the thing bailed to him, and which might have prevented the loss. And this breach of contract has the additional effect of making it impossible to ascertain with precision, and difficult to discover at all, what was the true cause of the loss. I cannot think it is good law that in such circumstances he should be permitted to saddle upon the parties who have not broken their contract the duty of explaining how things went wrong. It is for him to explain the loss himself, and if he cannot satisfy the court that it occurred from some cause independent of his own wrongdoing he must make that loss good." '
Then Kennedy LJ, says:
'And so Lord Halsbury: "It appears to me that here there was a bailment made to a particular person, a bailment for hire and reward, and the bailee was bound to show that he took reasonable and proper care for the due security and proper delivery of that bailment; the proof of that rested upon him." '
In the present case, the stealing of the goods being admitted, the plaintiffs have given evidence that they have taken all reasonable precautions to protect the goods against the risk of theft, and they say that they have satisfied the burden of proof which rests upon them and that they are outside the rulings I have just quoted. They further rely on a statement of the rule given (in a dissenting judgment, it is true) by Lord Dunedin in Ballard v North British Ry Co at p 54 Lord Dunedin there said:
'I think this is a case where the circumstances warrant the view that the fact of the accident is relevant to infer negligence. But what is the next step? I think that, if the defenders can show a way in which the accident may have occurred without negligence, the cogency of the fact of the accident by itself disappears, and the pursuer is left as he began, namely, that he has to show negligence. I need scarcely add that the suggestion of how the accident may have occurred must be a reasonable suggestion.'
I think this is merely stating the same rule as that stated by Lord Loreburn LC, and Lord Halsbury from another aspect. If the plaintiffs show that they took all reasonable and proper care of the goods, the mere fact that they were, notwithstanding, stolen is not sufficient any longer to make them liable for negligence. Their explanation is, then, that the thieves must have shown ingenuity and daring against which reasonable precautions could not avail. Hence, I think the plaintiffs discharge the burden of proof upon them if they can show that the theft took place notwithstanding that they had taken all reasonable precautions to guard against the danger. The learned judge has held that they have shown that, and I entirely agree with his conclusion.
I do not think it necessary to repeat in any detail the analysis which the learned judge has made of the facts. It seems to me to be fully justified by the evidence. The plaintiffs' warehouse is a large building in four blocks. The furs in question were stored on the fourth floor of the block called block R. The warehouse was naturally visited, while it was open, from time to time not only by the owners of furs, but by traders who came in with orders to view, from time to time, in order to examine the goods that were stored, so as to determine whether or not to buy. A large portion of the furs was hung on the walls; other portions were stacked. It appears from the circumstances that were discovered afterwards that the thieves must somehow have got into the building the night before the theft or during the day before the theft when the warehouse was open and concealed themselves until the next morning. The theft involved a difficult series of operations. Not only had they to get into the warehouse and secrete themselves, but during the night they had to break open doors and to pack into a number of cases the furs, which weighed about half a ton in all, and get them down to the door, on the ground floor, opening on to the lane. In order to get them away in the morning it was necessary to have in the lane outside at the proper moment a lorry or other conveyance and to effect the removal in the short period between 7.5 in the morning, when in the ordinary course of business the inspection of the outside lock took place, and 7.30, when the lane was again visited by the plaintiffs' watchman. It is clear that the thieves were persons of great daring and of great ingenuity and I agree with the learned judge in thinking that the success of such individuals in carrying out their scheme is not inconsistent with the system of vigilance exercised by the plaintiffs being reasonably careful. The learned judge has found that the plaintiffs adopted the system which is in vogue in big warehouses in the city of London. It was argued that, according to the general system of the plaintiffs, no one was admitted into the bonded warehouse unless under permits from owners of goods, and persons so admitted were never let out of the supervision of the keeper of the particular portion of the warehouse and that his duty was to see that everyone who came in left before the warehouse was shut up. Hence, it was argued that the thieves could only have been allowed to remain if there had been some negligence on the part of the plaintiffs' employees who were charged to see that nothing of the sort happened. It was further alleged that the search which was made in due course before the premises were locked up for the night must have been inadequate. I agree, however, with the learned judge that the system adopted was a reasonable and proper system, and I think that it is impossible to say by what ingenious contrivances the thieves managed to effect their nefarious scheme.
The duty of the plaintiffs cannot be put higher than that they must do what is reasonable. They are not insurers and they have established their defence here by satisfactory evidence that the precautions they took were such as reasonable and prudent care demanded. The counterclaim accordingly fails and so does the defence to the claim so far as it is based upon the allegation that the loss was due to want of care in the custody of the goods.
The plaintiffs' claim thus depends on considerations of law. Customs duties are charged on goods under the charging section, which in this case is the Import Duties Act 1932, s 1. That section provides that there shall be charged on all goods imported into the United Kingdom, subject to certain exemptions, a duty of customs equal to 10 per cent of the value of the goods. That means, I think, that the importer is the person who is primarily liable for the duties. The general principle is stated in A-G v Ansted , at p 528. Parke B, said:
'The defendants clearly were, by the general law, liable, as importers of the goods to the payment of these duties.'
He was there referring to the system under the earlier Acts operative in 1844; but the same general principle applies under the law now in force, and under that law I think it is true to say that the duties became a debt to the Crown immediately on the importation. It is true that the actual levying of these duties is the subject of complicated machinery now to be found in the Customs Laws Consolidation Act 1876; but throughout all that machinery there remains the basic principle that the duties are due on importation from the importer and remain due from the importer until the goods have been duly discharged from the customs' custody. "Importer"is defined in s 284 in these terms:
' "Importer" shall mean, include, and apply to any owner or other person for the time being possessed of or beneficially interested in any goods at and from the time of the importation thereof until the same are duly delivered out of the charge of the officers of customs.'
The machinery embodied in the Act includes a system of bonded warehouses, of which the plaintiffs' warehouse was one. The owner of the bonded warehouse is required under s 13 of the Act to give security by bond for the payment of the full duties chargeable on any goods warehoused with him or for the due exportation thereof. The importer of goods may make what is described as "a perfect entry" under s 55, if he intends them to be delivered for home use, on the landing from the importing ship. A special form is provided for that purpose. In that case he must pay the duty immediately on the entry; but the importer has also the option under s 57 of warehousing goods without payment of duty on the first entry, and for that purpose another form is provided. Such an entry was made of the furs now in question. If goods are so entered, they may be dealt with by being taken out of bond for export or the goods may be entered for ships' stores. In neither of these cases will duty be payable; the goods will have been duly delivered out of the charge of the customs. Thus it is clear that the duties become due on importation and only cease to be due on being actually paid when the goods are taken out for home use or if they are entered for exportation or ships' stores.
The sections which deal with the entry of warehoused goods for home consumption and exportation and for their delivery are s 97 and the following sections. S 97 provides:
'No warehoused goods shall be taken or delivered from the warehouse, except upon due entry and under the care of the proper officers, for exportation, or upon due entry and payment of the full duties payable thereon for home use, except goods duly delivered to be shipped as stores, in such quantities--'
as the customs may direct.
It is, however, clear, in my opinion, that the importer is and remains liable for duty as at the date of the importation, though he may relieve himself of that liability either by selling the goods subject to the same liability for duties or by entering them for exportation or for use as ships' stores. That the time at which the duty attaches is the time of importation is shown by s 40 of the Act. The Customs Act has, however, also imposed upon bonded warehousemen a liability for the duties so due in certain events. Thus in s 82 it is provided that a warehouseman failing to produce to an officer of customs on request goods deposited which have not been duly cleared and delivered from the warehouse, shall be liable to a penalty of £5 in respect of every package or parcel not so produced, besides the duties due thereon; and by s 85, if goods are taken out of any warehouse without due entry, the warehouseman shall pay the duties due upon such goods. In each of these sections the phrase is used "duties due on the goods," and I think these words refer to the duties due from the importer as from the date of importation. The purpose of these provisions appears to me to be to enable the customs to have ready recourse to the warehouseman wherever goods are improperly removed from the warehouse. It is for this reason that the security referred to in s 13 is taken. In accordance with that section the plaintiffs were required to enter into and did enter into a bond in the sum of £10,000, guaranteed by a surety company, and condition 4 of the bond was in the following terms:
'All goods which have been deposited or warehoused in the warehouses and not duly cleared therefrom or otherwise accounted for to the satisfaction of the commissioners or which hereafter shall be deposited or warehoused therein shall be safely and securely kept therein until duly delivered under the law and with the authority of the proper officer of customs and excise for the purpose of being exported or warehoused in some approved warehouse or used as ships' stores or for home consumption upon payment of the full and proper duties of customs and excise chargeable thereon.'
That is an undertaking that the requirements of the Act as to the payment of duty shall be duly complied with; but, in my opinion, the obligations so imposed on the plaintiffs as warehousemen are ancillary to and by way of security for the due payment to the Customs and do not supersede the liability of the importers, though, if the warehousemen pay the duty, the importers cannot be made by the customs to pay it over to them a second time.
In the present case a demand was made on the warehousemen under s 85 and the customs refused to remit the duties payable on these goods, as they were entitled to do under s 87, which provides:
'If any goods warehoused or entered to be warehoused, or entered to be delivered from the warehouse, shall be lost or destroyed by unavoidable accident, either on ship board or in removing, landing, or receiving into the warehouse, or in the warehouse, the commissioners of customs may remit or return the duties due or paid thereon.'
The duties due under that section must, I think, refer to duties due from the importers under the charging section. S 87 may apply before the goods are delivered to a warehouse at all; the accident may have occurred on board the importing vessel or in removing, landing, or receiving into the warehouse and in all these cases the warehouseman cannot be liable in any sense for the duty. The only person from whom the duties are due in these cases must be the importer. In the present case the demand on the warehouseman was made under s 85, because the goods had been taken out of the warehouse without due entry. Under these circumstances, the plaintiffs claim that they are entitled to recover from the defendants the amount which they have paid to the customs in respect of duties due on the defendants' goods. They make their claim as for money paid to the defendants' use on the principle stated in Leake on Contracts. The passage in question is quoted in the Exchequer Chamber by Cockburn CJ, in Moule v Garrett , at p 104, and is in these terms:
'Where the plaintiff has been compelled by law to pay, or, being compellable by law, has paid money which the defendant was ultimately liable to pay, so that the latter obtains the benefit of the payment by the discharge of his liability; under such circumstances the defendant is held indebted to the plaintiff in the amount.'
This passage remains, with a slight verbal alteration, in the eighth edition of Leake on Contracts, at p 46. The principle has been applied in a great variety of circumstances. Its application does not depend on privity of contract. Thus, in Moule v Garrett , it was held that the original lessee who had been compelled to pay for breach of a repairing covenant was entitled to recover the amount he had so paid from a subsequent assignee of the lease, notwithstanding that there had been intermediate assignees. In that case the liability of the lessee depended on the terms of his covenant, but the breach of covenant was due to the default of the assignee and the payment by the lessee under legal compulsion relieved the assignee of his liability.
That class of case was discussed by Vaughan Williams LJ, in Bonner v Tottenham & Edmonton Permanent Investment Building Society , where Moule v Garrett was distinguished. The essence of the rule is that there is a liability for the same debt resting on the plaintiff and the defendant and the plaintiff has been legally compelled to pay, but the defendant gets the benefit of the payment, because his debt is discharged either entirely or pro tanto , whereas the defendant is primarily liable to pay as between himself and the plaintiff. The case is analogous to that of a payment by a surety which has the effect of discharging the principal's debt and which, therefore, gives a right of indemnity against the principal.
I need not refer to more than two of the numerous cases in which this principle has been applied. In Pownal v Ferrand , an endorser of a bill had been compelled on default by the acceptor to make a payment on account to the holder. He sued the acceptor for the money so paid as money paid to his use. The money so paid was a part only of the amount of the bill. He was held entitled to recover. Lord Tenterden CJ, said, at p 443:
'I am of opinion that he is entitled to recover upon the general principle, that one man, who is compelled to pay money which another is bound by law to pay, is entitled to be reimbursed by the latter.'
As an instance of money payable under a statute, I may refer to Dawson v Linton , where a tax was due from the landlord, but there was power to enforce payment by distress, if necessary, from the tenant. Abbott CJ, said, at p 523:
'It is clear that this tax must ultimately fall on the landlord, and that the plaintiff has paid his money in discharge of it; he has therefore a right to call upon the landlord to repay it to him.'
These statements of the principle do not put the obligation on any ground of implied contract or of constructive or notional contract. The obligation is imposed by the court simply under the circumstances of the case and on what the court decides is just and reasonable, having regard to the relationship of the parties. It is a debt or obligation constituted by the act of the law, apart from any consent or intention of the parties or any privity of contract. It is true that in the present case there was a contract of bailment between the plaintiffs and the defendants, but there is no suggestion that the obligation in question had ever been contemplated as between them or that they had ever thought about it. The court cannot say what they would have agreed if they had considered the matter when the goods were warehoused. All the court can say is what they ought as just and reasonable men to have decided as between themselves. The defendants would be unjustly benefited at the cost of the plaintiffs if the latter, who had received no extra consideration and made no express bargain, should be left out of pocket by having to discharge what was the defendants' debt.
I agree with the learned judge in holding that this principle applies to the present case. As I have explained, the duties were due from the importer. There is nothing in the machinery of the Customs Act which had removed this liability from him when the warehousemen paid the duties, as they were compelled to do under s 85. The payment relieved the importer of his obligation. The plaintiffs were no doubt liable to pay the customs, but, as between themselves and the defendants, the primary liability rested on the defendants. The liability of the plaintiffs as warehousemen was analogous to that of a surety. It was imposed in order to facilitate the collection of duties in a case like the present, where there might always be a question as to who stood in the position of importer. The defendants as actual importers have obtained the benefit of the payment made by the plaintiffs and they are thus discharged from the duties which otherwise would have been payable by them. It may also be noted that the goods which were stolen were the defendants' goods and the property remained in them after the theft. If the goods had been recovered, the defendants could have claimed them as their own and would have been free to apply them for home use without further payment of duty.
I think there is every reason in this case for applying the general principle which I have stated. In commercial dealings of this character it is difficult not to think of the case of the point of view of insurance; but I do not know whether these particular goods were insured by the defendants for their full arrived value as duty-paid goods or were not, nor do I know whether the plaintiffs have insured their contingent liability under s 85 as an ordinary trade risk. Either course would be in accordance with prudent commercial practice. I do not, however, lay emphasis on that aspect of the case.
I agree with the learned judge that the claim for the amount of the duties succeeds. I think that the judgment of the learned judge should be affirmed and the appeal as a whole dismissed with costs.