Ellerman & Bucknall Steamship Co.
Ltd. Vs. Sha Misrimal Bherajee  INSC 91 (29 March 1966)
Mercantile Law-Deceit-Shipowner had knowledge
materials ordered to be supplied in new drums-giving 'clean bill of lading' though
packing in old drum-taking indemnity bondwhether liable for deceit for loss
caused to buyer-"Letters of Credit", "bill of lading",
"clean bill of lading", considered.
The respondent entered into two contracts
with the B Company (sellers) of New York to purchase certain chemicals and in
pursuance of the contracts placed three indents for the material in December
1950 and January 1951. The indents specified that the materials were to be
packed in new fibre drums.
The respondent thereafter opened and confirmed
irrevocable letters of credit to be negotiated by his bankers' agents in New York. These agents were authorised to make payment to the sellers against "clean
on board" bills of lading.
When the sellers shipped the, goods by one of
the appellant's vessels, the Mate's receipt given to the sellers on the arrival
of the goods at the wharf described them as being packed in refused drums. The
sellers then approached the appellant with a request to grant them a clean bill
of lading as against the reference in the Mate's receipt to refused drums. Upon
the sellers furnishing the appellant with an indemnity bond against any claims
etc., the appellant issued them a clean bill of lading which described the
drums simply as drums.
The sellers then negotiated the bills of
lading against the letters of credit and obtained payment of the contract
price. When the shipment arrived in India it was discovered that the drums
contained only coal dust and not the chemicals ordered.
The respondent took appropriate proceedings
against the sellers in the American Courts and recovered part of his loss. He
then instituted the present suit against the bank and the appellant. The Trial
Court dismissed the claim against the appellant but decreed the suit in part
against the bank. However, the High Court, on appeal, held that the appellant,
with the knowledge that the bills of lading would be negotiated, gave at the
request of the seller, clean bills of lading though only unclean bills of
lading should have been given. It therefore held the ship owners responsible
for the loss caused to the respondents and allowed a separate appeal filed by
On appeal to this Court it was contended on
behalf of the appellants that while respondent had based his cause of action on
a breach of contract, the High Court had given relief founded on deceit. that
under common law or contract the appellant had no duty or obligation to make a
statement in the bills of lading that the drums were old ones; and that the
bills of lading were clean ones, for the oldness or newness of drums had no
real impact on the contents thereof, as both were equally suitable containers
for the materials to be supplied.
HELD:(i) There was no merit in the contention
that the High Court gave relief founded on deceit whereas the respondents cause
of action was based on a breach of contract. It was clear from the pleadings
that a claim on the basis of misrepresentation was made in the plaint, denied
by the appellant in the written statement and argued in the Courts below. [96 G-H]
(ii)The High Court was right in holding that the appellant was liable in
damages for the loss incurred by the respondent.
It was one of the terms of the contract
between the seller and the buyer that the goods should be placed in new fibre
drums. The standard of good order and condition of the packages was agreed upon
by the parties to the contract.
The shipowners knew that condition as
disclosed by the Mate's receipt. If the drums had been mentioned as old in the
bill of lading, that bill would not have been a clean bill. Though the apparent
condition of the drums was old, the shipowners made an assertion that they were
not old drums, i.e., they gave a clean bill. This representation was obviously
intended, in collusion with the sellers, to enable them to operate upon the
credit with the Bank. This collusion was also apparent from the indemnity bond
they took from the sellers to guard themselves against the consequences of the
said representation. All the elements of deceit were therefore present. [102
D-F] Case law reviewed.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 274 of 1964.
Appeal from the judgment and decree dated November 3, 1960 of the Madras High Court in C.C.C. Appeal No. 61 of 1957.
A. K. Sen, V. Bhagat and D. N. Gupta, for the
S. T. Desai, Kesawlal and R. Ganapathy Iyer,
for the respondent.
The Judgment of the Court was delivered by
Subba Rao, J. The appellant, Ellerman Bucknall Steamship Company Ltd.,
hereinafter called the shipowners, are a limited liability company incorporated
under the law in the United Kingdom carrying on business as common carriers by
sea. They own a ship named "CITY OF LUCKNOW". Messrs.
Best & Co., Ltd., having their office at
Madras are the local agents of the shipowners.
Sha Misrimal Bherajee, the respondent herein,
hereinafter called the buyer, entered into two contracts with the British
Mercantile Company Limited, New York, herein-after called the seller, for the
purchase of Fresh Monsanto Polystyrene Injection Moulding Power (not reground)
in granueles manufactured by Monsanto Chemical of New York. In respect of the
first contract, the purchaser placed two indents dated December 26, 1950, and
December 27, 1950, for the said stuff of value of Rs. 13,500/and Rs. 6,750/respectively.
The buyer entered into a second contract with the seller for the purchase of 24
drums of the same material of the value of Rs. 16,000/under an indent dated
January 23, 1951. In respect of the first contract and indents the 94 buyer
opened and confirmed an irrevocable Letter of Credit No. 4748 dated December
28, 1950, for U.S. $4535 plus war risk with the Eastern Bank Limited. In regard
to the second contract he opened another irrevocable Letter of Credit No. 5012
dated January 31, 1951 for U.S. $3,330. As the said Bank had no branch of its
own at New York, it arranged with the Marine Midland Trust Company of New York
for payment of the bills that might be presented by the seller in New York.
Pursuant to the said contracts, the seller
delivered to the shipowners certain consignments in reused fibre drums. The
bills of lading issued by the shipowners described the drums simply as drums.
After taking a letter of indemnity to cover against any loss, the shipowners
issued clean bills of lading. The seller negotiated the bills of lading with
the Marine Midland Trust Company, New York and obtained payment of U.S.
$6,998.75 under the letters of credit. Thereafter, the bills of lading were
forwarded to the Eastern Bank Limited, Madras, and the buyer paid to the said
Bank a sum of Rs. 33,012-5-9 against the said letters of credit. When the
shipment arrived it was discovered that the goods sought to be delivered did
not answer the description given in the documents. Indeed', the drums contained
only coal dust and factory shavings. The buyer took appropriate proceedings
against the seller in the American, courts and realized a sum of Rs.
13,604-9-0. Thereafter, he instituted the present suit in the City Civil Court,
Madras, for the recovery of a sum of Rs. 23,760-15-6 against the Bank as well
as the shipowners. To that suit the Bank was made the 1st defendant and the
shipowners, the 2nd defendant. Broadly stated, the basis of the claim against
the Bank was that, though under the letters of credit the Bank had the
authority to pay only against clean bills of lading, it paid against unclean
bills of lading. The cause of action against the shipowners was that they made
a misrepresentation that the bills of lading were clean whereas in fact they
were not so, with the result, acting on that misrepresentation, the agent of
the Bank paid against the said bills of lading which it would not have done had
it known the real facts.
The learned City Civil Judge held that the
bills of lading were clean ones but in respect of one of the letters of credit
the Bank should not have accepted the shipping documents which related only to
a part of the goods contracted for. On that finding the learned Judge held that
the Bank was liable to refund the amount paid only under one of the letters of
credit. As against the shipowners he came to the conclusion that even if the
bills were not clean, the Bank would nevertheless have paid the amount, as the
terms of the letters of credit were comprehensive enough to authorize such
payments. In the result, he dismissed the suit against the shipowners but
decreed it in part against the Bank. The Bank and the shipowners preferred
appeals to the High Court against the said decree insofar as it went against
each of them.
95 The appeals were heard by a Division Bench
of the Madras High Court. The learned Judges of the High Court came to the
conclusion that the shipowners with the knowledge that the bills of lading
would be negotiated gave, at the request of the seller, clean bills of lading
while as a matter of fact only unclean bills of lading should have been given.
They further held that the purchaser was
damnified, as on the basis of the misrepresentation found in the bills of
lading the Bank paid the amount against the shipping documents which it would
not have done if it had known that the bills of lading were unclean. In the
result, they gave a decree for the entire suit claim against the shipowners.
They allowed C.C.C.A. No. 61 of 1957 against
the shipowners but dismissed it against the Bank. C.C.C.A. No. 54 of 1957, the
appeal filed by the Bank, was allowed. The shipowners have preferred the
present appeal against the decree given by the High Court against them.
The argument of Mr. A. K. Sen, learned
counsel for the appellant, may broadly be placed under the following three
heads: (1) While the respondent based his cause of action on a breach of
contract, the High Court gave the relief founded on deceit; (2) under common
law or contract the appellant had no duty or obligation to make a statement in
the bills of lading that the drums were old ones and, therefore, the
non-mention of that fact could not have misled the Bank into paying against the
shipping documents under the letters of credit; and (3) the bills of lading
were clean ones, for the oldness or newness of drums had no real impact on the
contents thereof, for both, were equally suitable containers of the articles to
Mr. S. T. Desai. learned counsel for the
respondent, while made a faint attempt to sustain the decree of the High Court
on the basis of breach of contract, seriously sought to support it on the
doctrine of deceit. He argued that there was a fraudulent misrepresentation by
the appellant in collusion with the seller to the effect that the bills of
lading were clean while in fact they were not and that, acting on that
misrepresentation, the Bank, through its agent at New York, paid the amount to
the seller under the letters of credit against the shipping documents, which it
would not have done if such a misrepresentation had not been made. He countered
the contentions of the learned counsel for the appellant that the High Court
gave a decree on a cause of action different from that on which the plaint was
The first contention turns upon the pleadings
as well as on the conduct of the parties during the trial and the appeal.
A perusal of the plaint discloses that the
2nd defendant was sought to be made liable both in contract and in tort.
Paragraph 9 of the plaint reads thus:
"if the first defendants state that they
acted on the terms of the bills of lading and are therefore protected, the
plaintiffs 96 also charge that in any event the second defendants are liable,
for issuing the bills of lading without disclosing the true state of facts and
for inserting statements in the bills of lading which are now admitted to be
untrue. The plaintiffs also charge that the defendants are precluded from
denying the correctness of the statement in the bills of lading as regards the
apparent good order and condition as mentioned in the bills, of lading. The
plaintiffs charge that the second defendants and the shippers acted collusively
with a view to enable if possible the shippers to obtain moneys against goods
which were not the goods agreed to be sold and which were not consigned according
to the contract. The very fact that the second defendants have obtained an
indemnity for issuing the bills of lading without disclosing the real state of
facts would show their consciousness that they were not right in issuing the
bills of lading in the terms they did and whatever their rights as against the
shippers may be on the indemnity, the plaintiffs are not concerned with the
same, but the second defendants are liable to the plaintiffs to make good the
loss resulting by reason of a representation acted on by which the plaintiffs
have been damnified".
This passage in the plaint contains all the
necessary allegations to sustain a claim in tort. It is clear, therefore, that
the claim of the buyer against the ship owners was also based upon the misrepre.
sentation made by the latter in the bills of lading. In the writtenstatement
the appellant denied the allegations in para 9 of the plaint and stated that
there was no secret arrangement between them and the seller in regard to the
goods or the containers. The shipowners also denied that they inserted any
untrue statement in the bills of lading acting in collusion with the seller to
enable the latter to obtain money against the bills of lading. Issue 6 framed
by the learned City Civil Judge reads:
"Did the second defendant act bona fide
throughout in issuing the bills of lading and in taking an indemnity from the
The judgment of the learned City Civil Judge
discloses that the question of misrepresentation by collusion was argued and
the learned Judge held that the Bank was not misled, as under the letters of
credit it had to pay the amount against the bills of lading, whether clean or
unclean. Before the High Court also the question of misrepresentation by the
shipowners was expressly raised and was accepted by it. We cannot, therefore,
agree with the contention of the learned counsel for the appellant that the
High Court had made out a new case which was not raised in the plaint: indeed,
the claim on the basis of misrepresentation was made in the plaint, denied by
the appellant in the written-statement and argued in both the courts below.
There are, therefore, no merits in the first contention.
97 On the question of the appellant's
liability to the buyer in contract, we are satisfied that there is no basis for
Indeed, learned counsel for the respondent
did not seriously press the point, though he did not give it up altogether.
A bill of lading serves three purposes, viz.,
(i) it is receipt for the goods shipped containing the terms on which they have
been received; (ii) it is evidence of the contract for carriage of goods-, and
(iii) it is a document of title for the goods specified therein. The contract
of the shipowners in the bill of lading is that they will de.liver the goods at
their destination "in the like good order and condition" in which
they were when shipped. In terms of the contract the shipowners delivered the
goods to the buyer in the drums. The consignee incurred damages not because of
any defect in the drums but because the seller sent goods different from those
he had agreed to sell to him.
Therefore, the shipowners were not liable for
any damages to the purchaser on the basis of breach of any of the terms of the
contract. No further elaboration on this point is called for, as finally this
point was not seriously pressed by the learned counsel for the respondent.
Now we shall consider the main point raised
in the appeal, namely, the liability of the appellant in tort. Before we advert
to the question of law it would be convenient to notice the relevant facts.
Exhibit A-1 dated December 26, 1950, the
indent placed by the buyer with the seller in respect of Fresh Monsanto
Polystyrene Injection Moulding Powder of value of Rs. 13,500/-. The packing was
to be in new fibre drums each containing 250 lbs. nett. Exhibit A-2 is another
indent dated December 27, 1950, placed by the buyer with the seller. The
quantity required thereunder was of the value of Rs. 6,750/and the packing was
to be in new fibre drums each containing 250 lbs. nett. Exhibit A-5 is the
third indent dated January 23, 1951, for the same goods worth Rs.
16,500/with similar terms. The buyer opened
two letters of credit, Exs. B-1 and B-2, with the Eastern Bank Limited, Madras,
for U.S. $ 7,625. Exhibits B-28 and B-29 are the letters written by the Eastern
Bank Limited, Madras, to the Marine Midland Trust Company, New York, to open
letters of credit for payment of the bills that might be presented by the
Exhibit B-1 reads:
"We hereby authorise and request you
and/or your Agents and/or Representatives at New York to open a confirmed and
irrevocable bank credit in favour of Messrs. British Mercantile Company Limited
etc., and to make payment or payments there under on our behalf............
against documents purporting to be invoices, shipping specifications, Bills of
Lading and Policies and/or Certificates of Insurance covering Marine and War
Risks............ We agree that this credit is subject to U.S.A. regulations
and practice." 98 Exhibit B-2 is also a similar letter of credit. Clause 3
of Ex. 28 reads:
" Clean on Board" Bills of Lading
in complete sets of at least two signed copies to be made out to the order of
the Eastern Bank Limited.
or to order blank endorsed and marked by the
shipping company 'Freight paid'." Exhibit B-29 also contains similar
recitals. It will be seen that though the words "clean on board"
bills of lading are not found in Ex. B-1 and B-2, but in the directions given
to the Marine Midland Trust Company, New York, the said words are clearly
found. The following relevant recitals are found in a sample of the bills of
"Received in apparent good order and
condition from British Mercantile Company, Limited, City of Lucknow, to be
transported by the good Vessel City of Lucknow to sail from the Port of New
York for the East Indies...........................
Total 21 packages, said to weigh 9,920 lbs.
said to be marked and numbered as below
(weight, gauge, measurement, contents, conditions, quality and value unknown,
statements of same herein being made solely on shipper's declaration and this
bill of lading not to be deemed any evidence thereof) to be delivered as
provided hereunder (liability as carrier to end without notice) in like good
order and condition at Madras or so near thereto as the vessel may safely get
unto order of the Mercantile Bank of India, Limited, or to his or their
bill of lading gives the number of packages as 21 drums and under the column
"description of goods" it states "Polystyrene, Powder". The
Mate's receipt given to the seller on the arrival of the goods at the wharf for
being carried by S.S. City of Lucknow describes them is being packed in refused
drums. The seller gave an indemnity bond to the shipowners and the material
part of it reads:
"We shall be obliged by your granting us
Clean Bills of Lading for the under mentioned goods, Mate's receipt being
claused Reused Drumsand in consideration of your so doing we undertake to pay
on demand all freight and/or General and particular Average and/or charges
there may be thereon, to indemnify you and each of you against all claims
and/or demands which may be made against you or any of you in respect of the
undermentioned goods and to hold you harmless from any and all consequences
that may arise by your granting such clean B/L and acting thereon including
losses, damages, costs or any other expenses which you or any of you may
sustain or incur by reason of the premises or in any way relating thereto."
99 After obtaining the said indemnity bond, the shipowners issued the bill of
lading wherein instead of "reused drums" only "drums" was
mentioned. It will be seen from the said documents that according to the
indents the seller had to pack the goods in new fibre drums. that the Bank
opened letters of credit for payment against bills of lading, that the Marine
Midland Trust Company of New York, the agent of the Eastern Bank Limited,
Madras, opened letters of credit whereunder payments could be made only against
clean bills of lading, that in the Mate's receipt given to the seller on the
arrival of the goods at the wharf for being carried by S.S. City of Lucknow the
drums were described as reused drums and that thereafter, after giving
indemnity against any loss to the shipowners, in the bill of lading the drums
were not described as reused drums but only as drums. The learned City Civil
Judge on the said documents gave the following findings:
.lm0 Thus, if the Bills of Lading were
unclean certainly the banks would not have paid the money to the shippers. In
fact it was for the very purpose of enabling the shippers to obtain monies from
the banks that they wanted clean Bills of Lading and were prepared to give
letters of indemnity to the shipping company. With such description in the
Bills of Lading it is extremely doubtful whether even the underwriters would
have insured the goods as required under the letters of credit. If the shippers
had not produced either clean Bills of Lading or Certificates of Insurance as
required under the letters of credit then certainly the shippers could not have
realised the money from the bank.
Thus the second defendants have certainly
helped the shippers in this matter by suppressing the real condition of the
goods from the Bills of Lading." The High Court, agreeing with that
finding, held "the shipowner with the knowledge that the bills of lading
would be negotiated, gave at the request of the seller clean bills of lading,
while as a matter of fact only unclean bills of lading should have been
given". The question is whether on the said facts and the findings given
by the courts below the purchaser could maintain an action for deceit against
"Deceit is a false statement of a fact
made by a person knowingly or recklessly with the intent that it shall be acted
upon by another who does act upon it and thereby suffers damage"; see
"A Text-book of the Law of Tort" by Winfield; 5th Edn., at 6. 379. In
order to make the shipowners liable for deceit, the first ingredient to be
satisfied is that they knowingly issued a clean bill of lading, when it should
not have been given, with intent that on that basis payment would be made to
the holder of the bill under the letters of credit. In order to come to a
correct conclusion whether the ingredients of the definition of
"deceit" have been satisfied in the present case, it is necessary to
know the exact scope of the following three terms: "letters of
credit", "bill of lading", and "clean bill 100 of
lading". The said three expressions are evolved in the law merchant to
facilitate international trade. The origin and importance of letters of credit
in the international commerce has been stated by Denning, L. J., in Pa via
& Co., A.P.A. v., Thurmann Neilsen(1) as follows:
"The sale of goods across the world is
now usually arranged by means of confirmed credits. The buyer requests his
banker to open a credit in favour of the seller and in pursuance of that
request the banker, or his foreign agent, issues a confirmed credit in favour of
the seller. This credit is a promise by the banker to pay money to the seller
in return for the shipping documents.
Then the seller, when he presents the documents,
gets paid the contract price. The conditions of the credit must be strictly
fulfilled, otherwise the seller would not be entitled to draw on it." But
when issuing banker has no branch in the relevant country where the beneficiary
operates, the services of an intermediary banker may be requisitioned. The
intermediary banker may be asked to advise the beneficiary of the credit or may
be asked to add his confirmatory undertaking to it.
In the latter event the beneficiary has the
promise of both the bankers.
As letters of credit are issued or opened on
conditions on which the request is made, the banker can only negotiate the
shipping documents if the conditions are strictly complied with. If, for
instance, the mandate of the buyer is that the banker shall pay on a clean bill
of lading, the banker can only honour a clean bill and not an unclean one. When
a purchaser specifically directs the banker to pay against a clean bill of
lading, the condition for payment is an obvious one. But, when a credit calls
for bills of lading without any qualification, in normal circumstances it means
clean bills of lading: see British Imex Industries Ltd. v. Midland Bank
A clean bill of lading is defined in
Halsbury's Laws of England, 3rd Edn., Vol. 2, at p. 218, as "one which
does not contain any reservation as to the apparent good order and condition of
the goods or the packing". Carver in his book "British Shipping
Laws", Vol. 2, Part 1, in para. 82, explains the expression "good
order and condition" thus:
"The general statement in the bill of
lading that the goods have been shipped "in good order and condition"
amounts (if it is unqualified) to an admission by the shipowner that, so far as
he and his agents had the opportunity of judging, the goods were so shipped. If
there is no clause or notation in the bill of lading modifying or qualifying
the statement that the goods were "shipped in good order and
condition" the bill is known as a clean bill of lading." Decisions
have held that the "condition" refers to external and apparent
condition, and quality, to something which is usually not (1)  2 Q.B. 84,
(2) L.R.  1 Q.B. 542, a 551.
101 apparent at all events to an unskilled
person: see Compania Naviera Vasconzada v. Churchill & Sim(1). The words
like "quality and measure unknown" found in Compania Naviera
Vasconzada v. Churchil & Sim(1) "weght, contents and value
unknown" in The Peter der Grosse(1); "weight, quality, condition and
measure unknown" in The Tromp(3) were held to be not qualifying words. In
The Restitution Steamship Co., Ltd., v. Sir John Pirie and Co.(1) it was held
"if you insert in the margin of a bill of lading weights, quantities, or
anything that is not contained in the bill of lading itself, that is not a
clean bill of lading". If such words found a place in the body of a bill
of lading, they would not have the effect of making the bill an unclean one, we
do not see how their mention in the margin would make a difference. But we need
not express our final opinion thereon, as in the present case the words are
found in the body of the bill itself.
But it is said that the omission of the
adjective "new" qualifying the word "drums" or indeed the
addition of the adjective "old" to qualifying the same would not
necessarily make the bill any the less a clean bill, if old drums were suitable
vehicles for conveying the articles supplied therein. The newness or the
oldness of the container, the argument proceeded, was not decisive of its
suitability, for in the main it depended upon its condition and contents.
This argument as a proposition of law appears
to be sound.
In The Tromp(3) potatoes, to the knowledge of
the defendants' master who signed the bill of lading, were shipped in wet bags
and in a damaged condition. The court held that as in the bill of lading the
potatoes were described as shipped in good order and condition, which represented
the external condition of the bags, the defendants were estopped from denying
that the bags were dry when shipped. But it would be noticed that the packing
in that case was defective and that was the main cause for the rotting of the
potatoes and, therefore, the bill of lading was not a clean one. In Silver v.
Ocean Steamship Co., Ltd.(1), damage was caused to frozen eggs as the can
wherein they were packed were gashed, perforated or punctured and the eggs were
insufficiently packed. So the court held that having given a clean bill of
lading the shipowner was estopped from proving that the cans were not in
apparent good order and condition. In Brown Jenkinson & Co., Ltd. v. Percy
Dalton (London) Ltd.(1) orange juice was shipped in barrels. Some of the
barrels were old and frail and some were leaking. Yet the ship owners gave a
clean bill of lading. They were estopped from denying that the barrels were in
apparent good order and condition.
These decisions establish that good order and
condition of packages depends upon the suitability of the packages for the
(1)L.R.  1 K.B. 237. (2) L.R.lp.414.
(3)L.R.  p. 337. (4) L.R.  5
(5)L.R.1 K.B.416. (6) L.R.  2
102 particular goods or articles packed
therein and other relevant circumstances of each case.
What is the real scope and legal effect of
the statement in the bill of lading that the goods were shipped in good order
and condition? We have already noticed that a bill of lading with such a
statement, which does not contain any further reservation or qualification, is
known as a clean bill of lading. The said words are affirmation of a fact.
It is an admission creating an estoppel as
between the shipowners and an endorsee, who on the faith of that admission has
become endorsee for value of the bill of lading. The shipowners are estopped
from denying that the goods and the packages were not in good order and
The estoppel applies only where the bad
condition is discernible on a reasonable examination of the containers, having
regard to their contents. Any qualification of the said affirmation must only
refer to the external and apparent condition of the containers: see The
Skarp(1), Silver v. Ocean Steamship Co., Ltd.(") Companies Naviera
Nazconzada v. Churchill & Sim(1), and The Tromp(4). It is not necessary to
consider the said decisions in detail as the principle is well settled.
Now let us look at the relevant facts of the
It was one of the terms of the contract
between the seller and the buyer that the goods should be packed in new fibre
drums. The standard of good order and condition of the packages was agreed upon
by the parties to the contract.
The shipowners knew that condition as the
Mate's receipt disclosed the same. If the drums had been mentioned as old in
the bill of lading, the said bill would not have been a clean bill. Though the
apparent condition of the drums was old, the shipowners made an assertion that
they were not old drums, i.e., they gave a clean bill. This representation was
obviously intended, in collusion with the seller, to enable him to operate upon
the credit with the Bank. This collusion is also apparent from the indemnity
bond they took from the seller to guard themselves against the consequences of
the said representation. All the elements of deceit are present.
The decision in Brown Jenkinson & Co.,
Ltd. v. Percy Dalton (London) Ltd.(1) is apposite. There, the defendants had a
quantity of orange juice which they wish to ship to Hamburg.
The plaintiffs, as agents of the owners of
the vessel on which the orange juice was to be shipped, informed the defendants
that the barrels containing the orange juice were old and frail and that some
of them were leaking and that a claused bill of lading should be granted. The
defendants required a clean bill of lading, and the shipowners, at the
defendants' request and on a promise that the defendants would give to them an
indemnity, signed bills of lading (1)L.R.134. (2) L.R.  1 K.B. 416.
(3) L.R.  1 K.B. 237. (4) L.R. 
(5) L.R.  2 Q.B. 621.
103 stating that the barrels were
"shipped in apparent good order and condition". The defendants,
pursuant to their promise, entered into an indemnity whereby they undertook
unconditionally to indemnify the master and the owners of the vessel against
all losses which might arise from the issue of clean bills of lading in respect
of the goods. The barrels when delivered at Hamburg, were leaking and the
shipowners had to make good the loss. The plaintiffs sued the defendants under
the indemnity, the benefit of which had been assigned to them. The defendants
refused to pay, alleging that the contract of indemnity was illegal, because it
had as its object the making by the shipowners of a fraudulent
misrepresentation. The court held that the shipowners by making in the bill of
lading a representation of fact that they knew to be false with intent that it
should be acted upon were committing the tort of deceit, and that the
defendants' promise to indemnify the shipowners against loss resulting from the
making of that representation was accordingly unenforceable. The only
difference on facts between that case and the present one is that in that case
the barrels were not only old and frail but also some of them were leaking. But
there, as here, the shipowners made a representation of fact which they knew to
be false with intent that it should be acted upon. If so, it follows that the
High Court was right in holding that the appellant was liable in damages for
the loss incurred by the respondent.
Learned counsel for the appellant sought to
raise three further points, namely, (i) the shipowners were not bound by the
representation made by the ship's mate; (ii) the bill of lading was governed by
the American law and not by common law; and (iii) the plaintiff-buyer, having
obtained a decree against the seller in the American court, could not maintain
the present suit for damages.
The first point was not raised till now and,
therefore, we can. not permit the learned counsel to raise it for the first
time before us.
The second point, namely, what is the
American law? is a question of fact. We have not got sufficient material on the
record to know what the American law on the subject is.
We cannot, therefore, permit the appellant to
raise this point either.
The third point is also one not pressed in
the courts below and, therefore, does not call for our decision.
In the result, the appeal fails and is
dismissed with costs.