Chapman Bros v Verco Bros Co Ltd

[1933] HCA 23
(1933) 49 CLR 306

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(Decision by: Dixon J)

Chapman Bros
vVerco Bros Co Ltd

Court:

Judges: Rich J
Starke J

Dixon JEvatt J
McTiernan J

Judgment date: 8 May 1933

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Decision by:
Dixon J

The respondent company is now in voluntary liquidation and its assets appear to be insufficient for the discharge of its liabilities. It carried on business as a wheat merchant and miller at Adelaide and elsewhere in the State of South Australia. During the season of 1931, besides wheat which it simply bought, it took deliveries of quantities of wheat supplied to it under the terms of a special contract which it made in the same form with many wheatgrowers. The wheat, by whichever transaction it was obtained, was stacked together in several different stacks. All wheat was contained in bags of the same class, and no marks were placed upon the bags containing the wheat of the various supplies so that they could be distinguished. It is now claimed that the property in the wheat supplied under the terms of the special contract was not transferred to the respondent company, and, accordingly, that each of the many suppliers who delivered wheat under such a contract remains entitled to his wheat in specie, if it can be traced and identified, and, if, as is probable in every case, his wheat cannot be traced, then to a proportionate share as co-owner with other suppliers in the entire mass of which it may be shown to form a part. The claim means that suppliers under the company's form of special contract did not take under it personal obligations only in exchange for the wheat supplied, but delivered the wheat under a bailment upon special terms by which they retained the general property in the wheat until the company exercised an election resulting in a transfer of property to it. This claim appears to receive strong initial support from the title of the formal document used by the company and from its first operative words, which are: "Received for storage." But these words are followed by the qualification, "subject to the conditions hereon, and on the back hereof." The conditions describe a transaction entirely at variance with the notion of bailment for safe custody, and deprive the supplier in every event of all right to redelivery to him or at his direction of the identical wheat which he has delivered. It appears from South Australian Insurance Co. v. Randell ^[F5] , that even in 1866 the words "store" and "storage" were used in South Australia of a transaction in which wheat was transferred to a miller on terms contemplating payment of a price or return of an equivalent of wheat, and it is not surprising to learn from the Judges of the Supreme Court of South Australia that in that State the general nature of "wheat storage" contracts, which apparently they were prepared to notice judicially, is that wheat is delivered to merchants or millers on the understanding that it will be mixed with the general stock, the property passing and the merchant or miller being obliged to return only money or equivalent wheat ( Copping v. Commercial Flour and Oatmeal Milling Co . ^[F6] ). The argument relied upon is that the purpose of the contract is to give in the first instance the possession of the wheat to the company as a mandatory but with an option in the supplier either of selling or terminating the mandate and that, in the latter case, because of the nature of the commodity and for no other reason, the mandatory is relieved of his strict duty of returning the identical property entrusted to him, but that the condition providing for this substituted mode of performing his duty of redelivery does not operate to transfer the general property in the wheat received under the mandate unless and until the company avails itself of the power. A similar argument was unsuccessfully urged in Randell's Case ^[F7] . It attributes to the parties an intention that property in the commodity shall not be transferred although upon delivery the supplier has contractually disabled himself from enforcing any right of property against the person receiving delivery. It confesses that the agreement between the parties recognizes that upon delivery the wheat may or will lose its identity and, therefore, that the recipient can incur only a personal obligation in exchange for its possession; but it asserts the continuance of the supplier's property in the thing which will or may become unidentifiable. It ignores alike the trade carried on by the recipient, which involves the reselling or gristing of wheat, and what upon the face of the contract would appear to be its primary business purpose. The purpose so appearing is the disposition of the wheat by the farmer or other supplier but at a market price which up to the commencement of the next wheat season he can obtain at any time as effectually as if he had withheld his wheat from sale in expectation of a rising market. If, before the end of November, he decides to wait for the prices of next season or to sell wheat elsewhere, he can obtain an equivalent of the wheat he has delivered.

The first clause of the conditions provides that the company, which the instrument calls the purchasers, will give free storage and insurance if the wheat is purchased by them. The next clause provides that they will, at any time that the supplier, called "the storer," desires, purchase and pay for the whole or any part of the wheat, but that on 30th November next the purchasers without further notice shall purchase and pay for the balance of the wheat then covered by the contract. The price shall be the purchasers' current market price at the receiving station on the day or days of purchase. Although in the appellants' case no advance was in fact made, the contract provides for advances, and it enables the purchaser to reduce them by purchasing sufficient of the wheat at their current price. Dockages of amounts to be specified for inferior wheat and secondhand bags are provided for by the form, although, again, in the appellants' case the wheat was f.a.q. Clause 3 of the conditions is as follows:-"The purchasers agree at any time upon request to return to the storer (unless prevented by any government or other legal authority) at any shipping port or ports or at the receiving station at the purchasers' option, a quantity of f.a.q. wheat equal to that then remaining unpurchased on storage with the purchasers. The purchasers shall not be required to return the identical wheat. The storer shall pay to the purchasers before such return buyer's commission, advance and accrued interest (if any) and any dockages shown in this warrant (unless same shall have been previously deducted), together with storage charges at the rate of 1/4d. (one farthing) per bushel per month or part of a month from the date of this warrant. In the case of return at shipping port or ports the storer shall also pay transport from the receiving station to such port or ports and handling charges." From this clause it follows that, except by mere accident, the supplier or "storer" can never get his wheat back, and, if any of his wheat is of inferior quality or contained in secondhand bags, the contract actually excludes the possibility of such an accident because it requires that other wheat shall be redelivered.

Now, upon the difference between specific and unascertained goods or money, the distinction turns between bailment and debt or bare contractual obligation. In the present case, in exchange for a bare contractual obligation the company took complete possession and control of the wheat. No obligation to redeliver to the owner or anyone else was incurred and none was expressly undertaken to deal with it otherwise than as owner. It seems inevitable in all these circumstances that the property in the wheat was transferred to the company on delivery.

In my opinion the judgment of Richards J. is right and the appeal should be dismissed.