Court Cases – Spurling (Red Hand Rule)

BETWEEN:

RTA (Business Sales) Limited

(Claimant)

And

Mr Defendant

(Defendants)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL

B e f o r e :

LORD JUSTICE DENNING,
LORD JUSTICE MORRIS
and

LORD JUSTICE PARKER.
____________________

Between:

____________________

(Transcript of the Shorthand Notes of the Association of Official Shorthandwriters,  Ltd .,
Room 392, Royal Courts of Justice, and 2, New Square, Lincoln’s Inn, W.C.2.)

____________________

Mr JONATHAN SOFER (instructed by Messrs Shindler & Co.)
appeared on behalf of the Appellant.
Mr JOHN MEGAW, Q.C. and Mr C.F. DEHN (instructed by Messrs Hyde, Mahon & Pascall)
appeared on behalf of the Respondents. 
____________________

Crown Copyright ©

LORD JUSTICE DENNING: In the first part of June, 1953, Mr  Bradshaw  bought eight wooden casks of orange juice, containing 6.0 gallons apiece. He bought them “to clear for £120”. He sent them to some warehousemen, J.  Spurling Ltd ., who on the 10th June, 1953, sent a receipt for them, called a “landing account”, which said:

“We have pleasure in advising you that these goods consigned to you arrived at our premises this day and are subject to either warehouse, wharfage, demurrage ‘or other charges”.

Then, after one or two other sentences, they went on:

“The Company’s conditions as printed on the back hereof cover the goods held in accordance with this notice. Goods will be insured if you instruct us accordingly; otherwise they are not insured”.

Then on the back there were “Contract Conditions” and many lines of small print, which included, towards the end, these words:

“We will not in any circumstances when acting either as warehousemen, wharfingers, contractors, stevedores, carriers by land, or agents, or in any other capacity, be liable for any loss, damage or detention howsoever, whensoever, or wheresoever occasioned in respect of any goods entrusted to or carried or handled by us in the course of our business, even when such loss, damage or detention may have been occasioned by the negligence, wrongful act or default of ourselves or our servants or agents or others for whose acts we would otherwise be responsible”.

On the same date, 10th June 1953, the warehousemen sent an invoice to Mr  Bradshaw :

“To receiving, warehousing and redelivery, £4”,

and there was a note at the bottom of it:

“All goods are handled by us in accordance with the conditions as over and warehoused at owner’s risk and not insured unless specially instructed”.

There were no conditions “as over”.

Mr  Bradshaw  paid the £4 due on the invoice and he also paid the warehouse rent for a time on these goods, but he afterwards fell into arrear on these and other goods. On the 9th March, 1954, the warehousemen sent to him an account for the balance owing by him which was, they said, rather old.

Within three days Mr  Bradshaw  issued a delivery order in favour of a Mr Tuson directed to the warehousemen, asking them to release to him the eight barrels of orange juice; and on the 23rd April, 1954, Mr Tuson, who was a cartage contractor, collected these eight barrels. I will refer a little later to what Mr Tuson said was their condition when he collected them; but, so far as the correspondence is concerned, there was not a word of complaint about the barrels for a long time. The warehousemen wrote letters asking Mr  Bradshaw  to pay their account, but he failed to do so. Over £60 was due to them. They wrote time and again for it, and got no reply. They put it into the hands of a debt collecting agency who wrote twice demanding the money. At last on the 17th December, 1954, there was a reply. Mr  Bradshaw  by his Solicitors then said that he had a counterclaim for damages in respect of the storage of these barrels. Thus it was eight months after the goods were collected before there was any written complaint. The warehousemen issued a writ for their charges amounting to £6l. 12. 6. Mr  Bradshaw  put in a Defence admitting the charges, but he also set up a Counterclaim which, as I read it, was a counterclaim for negligence in the storage of the goods. He said that, when collected, five barrels were empty without lids, one barrel contained dirty water, and two barrels were leaking badly. He counterclaimed £180. The warehousemen put in a Defence to the Counterclaim in which they denied the charge of negligence and further said it was an express term of the contract that they should not be liable for any loss or damage of or to or in connection with the barrels, and they relied on the “landing account” for that purpose. In all the circumstances, it was not surprising that the warehousemen relied on the exempting clause.

When the matter came before the Judge of the Mayor’s and City of London Court, the counterclaim was the only matter in dispute. The cartage contractor Mr Tuson was called. He said that when he collected the barrels they were at the far end of an alley-way, with lorry wheels in front of them, girders on top, and some tarpaulin sheets. He said that he later discovered they were damaged and spoke to the crane driver about it. Then Mr  Bradshaw  was called. He said he had received landing accounts from the warehousemen many times before; and he said as soon as he saw the condition of the barrels he saw the yardman in the office. He went on to say that when he received the letters and demands for payment of the overdue account, he went and saw someone at the warehousemen’s office and raised the matter of the barrels. The Judge intervened before he was cross-examined, and asked Mr  Bradshaw ‘s Counsel “Why is not the exempting clause a complete answer to the case?” Having heard what he had to say, the Judge there and then decided in favour of the warehousemen on the ground that the exempting clause exempted them from all liability. The Judge in his Judgment found that the warehousemen were negligent. That was a finding which was not open to him, seeing that Mr  Bradshaw  had not been cross-examined and that the warehousemen had not had an opportunity of giving their evidence. But, nevertheless, assuming they were negligent, the question for us is whether the clause excuses the warehousemen from liability.

If the clause is taken literally, it is wide enough to exempt the Company from any obligation to redeliver the goods. It would mean that if the managing director sold the orange juice to somebody else, or used it up for the Company’s purposes, maybe by mistake or even dishonestly, the Company would not be liable; or if some discontented storeman took the bung out of a barrel and let the orange juice escape, the Company still would not be liable. If the clause went to those lengths, it would be very unreasonable and might for that reason be invalid on the lines which Baron Bramwell indicated in Parker  v . South Eastern Railway, (1877) 2 Common Pleas Division, at page 428; but I do not think this clause is to be construed as widely as that. These exempting clauses are nowadays all held to be subject to the overriding proviso that they only avail to exempt a party when he is carrying out his contract, not when he is deviating from it or is guilty of a breach which goes to the root of it. Just as a party who is guilty of a radical breach is disentitled from insisting on the further performance by the other, so also he is disentitled from relying on an exempting clause. For instance, if a Carrier by land agrees to collect goods and deliver them forthwith, and in breach of that contract he leaves them unattended for an hour instead of carrying them to their destination, with the result that they are stolen, he is disentitled from relying on the exempting clause. That was decided in 1944 by this Court in the case of Bontex Knitting Works  v . St. John’s Garage, in 60 Times Law Reports at page 253, expressly approving the judgment of Mr Justice Lewis in the same volume at page 44; or if a bailee by mistake sells the goods or stores them in the wrong place, he is not covered by the exempting clause:’ see the decision of Mr Justice McNair in Woolmer  v . Delmer Price in 1955 1 Queen’s Bench at page 291.

The essence of the contract by a warehouseman is that he will store the goods in the contractual place and deliver them on demand to the bailor or his order. If he stores them in a different place, or if he consumes or destroys them instead of storing them, or if he sells them, or delivers them without excuse to somebody else, he is guilty of a breach which goes to the root of the contract and he cannot rely on the exempting clause. But if he should happen to damage them by some momentary piece of inadvertence, then he is able to rely on the exempting clause: because negligence by itself, without more, is not a breach which goes to the root of the contract (see swan Hunter  v . France Fenwick, 1953 1 Weekly Law Reports, at pages 1030 and 1032), any more than non-payment by itself is such a breach: see Mersey  v . Naylor, (1884) 9 Appeal Cases, at page 443. I would not like to say, however, that negligence can never go to the root of the contract, if a warehouseman were to handle the goods so roughly as to warrant the inference that he was reckless and indifferent to their safety, he would, I think, be guilty of a breach going to the root of the contract and could not rely on the exempting clause. He cannot be allowed to escape from his obligation by saying to himself: “I am not going to trouble about these goods because I am covered by an exempting clause”.

Another thing to remember about these exempting clauses is that in the ordinary way the burden is on the bailee to bring himself within the exception. A bailor, by pleading and presenting his case properly, can always put on the bailee the burden of proof. In the case of non-delivery, for instance, all he need plead is the contract and a failure to deliver on demand. That puts on the bailee the burden of proving either loss without his fault (which, of course, would be a complete answer at common law) or, if it was due to his fault, it was a fault from which he is excused by the exempting clause: see Cunard  v . Buerger, 1927 Appeal Cases, 1, and Woolmer  v . Delmer Price, 1955 1 queen’s Bench, 291. I do not think the Court of Appeal in Alderslade  v . Hendon. 1945 1 King’s Bench, 189, had the burden of proof in mind at all. Likewise with goods that are returned by the bailee in a damaged condition, the burden is on him to show that the damage was done without his fault: or that, if fault there was, it was excused by the exempting clause. Nothing else will suffice. But where the only charge made in the pleadings – or the only reasonable inference on the facts – is that the damage was due to negligence and nothing more, then the bailee can rely on the exempting clause without more ado. That was, I think, the case here. As I read the pleadings, and the way the case was put to the Judge, Mr  Bradshaw  was complaining of negligence and nothing more. The clause therefore avails to exempt the warehousemen, provided always that it was part of the contract.

This brings me to the question whether this clause was part of the contract. Mr sofer urged us to hold that the warehousemen did not do what was reasonably sufficient to give notice of the conditions within Parker  v . South Eastern Railway. I quite agree that the more unreasonable a clause is, the greater the notice which must be given of it. some clauses I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient. The clause in this case, however, in my judgment, does not call for such exceptional treatment, especially when it is construed, as it should be, subject to the proviso that it only applies when the warehouseman is carrying out his contract and not when he is deviating from it or breaking it in a radical respect, so construed, the Judge was, I think, entitled to find that sufficient notice was given. It is to be noticed that the landing account on its face told Mr  Bradshaw  that the goods would be insured if he gave instructions; otherwise they were not insured. The invoice, on its face, told him they were warehoused “at owner’s risk”. The printed conditions, when read subject to the proviso which I have mentioned, added little or nothing to those explicit statements taken together.

Next it was said that the landing account and invoice were issued after the goods had been received and could not therefore be part of the contract of bailment; but Mr  Bradshaw  admitted that he had received many landing accounts before. True he had not troubled to read them. On receiving this account, he took no objection to it, left the goods there, and went on paying the warehouse rent for months afterwards. It seems to me that by the course of business and conduct of the parties, these conditions were part of the contract.

In these circumstances, the warehousemen were entitled to rely on this exempting condition. I think, therefore, that the counterclaim was properly dismissed, and this appeal also should be dismissed.

LORD JUSTICE MORRIS: I am of the same opinion. Although the range of the discussion in this case covered a number of important points of law, it does not seem to me that all of them in fact arise. The claim that the Plaintiffs brought, when the action was an action in the High Court, was one for money due for rent and wharfage charges to an amount of over £60. Only a very small part of that amount relates to any of the matters now in issue. When, however, the Defendants delivered their pleading while the action was in the High Court, they pleaded, in March of 1955, a Defence and a Counterclaim, and by their counterclaim they raised matters in connection with the storage of the eight barrels that have been in question. It seems to me that the pleading was perfectly clear and was a good pleading, I do not think that any criticism really has been made or is made of the pleading. It is quite explicit and states what was the issue raised. The Defendant pleaded that the eight barrels had been stored by the Plaintiffs. Then in paragraph 3 he said:

“It was an implied term of the said contract of bailment that the Plaintiffs would take reasonable care of the said barrels of orange juice while storing them as aforesaid”;

and then in paragraph 4:

“In breach of the said term and/or negligently”

— pausing there,

“the said term”

I think means the implied term pleaded in the previous paragraph —

“the Plaintiffs stored the goods in the open air and further damaged them while in their possession. By reason of the said matters when the Plaintiffs delivered the said goods to a customer of the Defendant they were in the following condition”,

and then the condition of the goods is set out. It seems to me that that, as a pleading, is quite unexceptionable, and what it is saying is, not “These goods were lost” or “These goods were never delivered when a demand was made”; what is said is:

“The Defendant asked that these goods should be delivered to a customer of his. They were delivered, but when delivered they were in defective condition because of the way in which they had been stored”;

in other words, because they had been stored negligently and in breach of an implied term of the contract that the Plaintiffs would take reasonable care of the barrels while storing them. So this case does not raise questions that might arise if there were simply a claim that goods had been asked for and had not been returned.

The learned Judge heard the evidence of Mr Tuson, the cartage contractor, as to the state of the goods when he first deposited them with the Plaintiffs and their state when they were removed. The evidence of Mr  Bradshaw  in chief was heard, but before he was cross-examined the Judge intervened. The Judge said in his Judgment:

“I have no doubt that the Plaintiffs were negligent in looking after these barrels”.

I think the Plaintiffs are entitled to have it known that, although there is that finding against them, their evidence had not been heard, although (as I say) the evidence of the carter had been heard. But the learned Judge proceeded on the basis that there was negligence and negligence was the case that was raised.

Then there was brought into consideration the question of the conditions on the contract, and one question is whether the conditions were a part of the contract. The learned Judge said this:

“But this was one of many transactions undertaken as between the plaintiffs and the defendant for the storage of goods. Mr  Bradshaw  was most truthful and honest about the whole matter. He said he had had lots of these landing accounts, where, on the front, is clearly printed: ‘The Company’s conditions as printed on the back hereof cover the goods held in accordance with this notice’. Although his eyesight is not as good as it might be, perhaps, he told me that he had never taken the trouble either to read or get somebody else to read those conditions, and that many of those landing notes had passed through his hands over the course of trading”.

It is true, as Mr Sofer said, that because the evidence of the Plaintiffs was not heard, there is no positive evidence that the conditions on previous landing accounts were the same as the conditions in the present case. But it is clearly established that Mr  Bradshaw  knew that there were conditions. I think there can be no question that it is abundantly plain on the face of the document that there are conditions. On the face of the document the following words are plainly legible:

“The Company’s conditions as printed on the back hereof cover the goods held in accordance with this notice. Goods will be insured if you instruct us accordingly; otherwise they are not insured”.

The learned Judge went on to say that he himself, looking at the back, could read the back; accordingly he was finding as a matter of fact that the conditions on the back of that document were legible, and I think it follows, therefore, that the learned Judge was finding as a matter of fact that the conditions were a part of the contract. In so doing, I cannot think that he is not following the line of approach to be found in a passage relied upon by Mr Sofer in the Judgment of Mr Justice Bailhache in Roe  v . R.A. Naylor Limited, reported in 1917 1 King’s Bench. At page 715 Mr Justice Bailhache said:

“Therefore the question in the present case is whether this printed clause is a clause which is so printed that from its position in the document and the size of the type an ordinary careful business man, reading the document with reasonable care, might miss it”.

It seems to me implicit in the learned Judge’s Judgment in the present case that he is saying

“The words are quite clear on the face of the contract that there are conditions on the back, and those conditions on the back are in fact legible”.

Therefore, in finding that the conditions formed part of the contract, it does not seem to me that the learned Judge was out of line with what Mr Justice Bailhache said. Nor that there is anything that controverts what was said by Mr Justice Lush in Crooks  v . Allan in 5 Queen’s Bench Division, page 38; at page 40, where there is another passage relied upon by Mr Sofer. It seems to me, therefore, that these conditions were a part of the contract. Then in this case the question becomes whether, assuming that the goods were negligently kept by the Plaintiffs, the conditions protect. It seems to me that they plainly do. InAlderslade  v . Hendon Laundry, 1945 1 King’s Bench, Lord Greene, Master of the Rolls, in his Judgment at page 192, said this:

“It must be remembered that a limitation clause of this kind only applies where the damage, in respect of which the limitation clause is operative, takes place within the four corners of the contract. But there is no room for the application of that principle in the present case, because there is no material for finding that the loss of these handkerchiefs was due to some act by the defendants outside what they had contracted to do”.

In the present case, similarly, it seems to me that there is no material before us for finding that the claim results from some act of the Plaintiffs outside what they contracted to do. In those circumstances, it seems to me that the conditions exempting the Plaintiffs from negligence are conditions that availed, and therefore which excused the Plaintiffs, even on the assumption that they had been guilty of negligence.

I therefore agree that the appeal fails.

LORD JUSTICE PARKER: I have come to the same conclusion, and would only add a few words on Mr Sofer’s last submission. He contends that even if the exemption clause is binding on the Appellant, the circumstances of the loss were such that, wide as the clause is, it still may not cover the loss. That being so, it is said that the learned County Court Judge should not have stopped the case, but should have allowed the Respondents to call evidence to show, if they could, that the clause applied. I confess that for myself I have seldom seen a wider clause, and it is I think impossible to think of any circumstances in which the loss occurred which are not covered, provided, and provided always — and this is conceded by the Respondents — that there has been no breach of a fundamental term akin to deviation. Thus, if, for instance, the contract had been to store indoors whereas these barrels were in fact stored in the open air, the clause would not, I think, apply. Indeed, at one time that was, I think, going to be the Appellant’s case, but it was abandoned. Mr Sofer, however, goes on to contend that, even so, the onus is on the Respondents to show that the exemption clause has not been, as it were, displaced by any such breach of a fundamental term, and in this regard he relies strongly on the decision of Mr Justice McNair in Woolmer  v . Delmer Price Limited, 1955 1 Queen’s Bench, page 291. In that case a fur coat had been stored with the defendants under a contract which provided that “all goods are left at customers’ risk”, a clause which it was held exempted the bailees from liability for negligence. They were, however, unable to show how the loss occurred, and Mr Justice McNair said this at page 294:

“But if, as is the case here, they have failed to adduce satisfactory evidence of how the loss occurred, and the loss may have occurred in a way which would not be covered by the protective clause, then the protective clause does not avail them”.

Mr Justice McNair went on to point to two sets of fact which might have occurred in that case, both amounting to breaches of fundamental terms, in which case the exempting clause would not apply. For my part, I think it is necessary to see the nature of the present proceedings and the way the pleadings are framed. I would observe that it is not a case of a mere failure to redeliver. The goods were redelivered, and redelivered damaged. In those circumstances, as it seems to me perfectly properly, the Counterclaim alleged a breach of an implied contractual term to exercise reasonable care and alternatively negligence. It was said that by reason of that breach or that negligence the loss had occurred. I think in the course of the argument, when I raised this matter, Mr Sofer took it as a criticism of his pleading. I would like to make it quite clear that I did not intend to criticise the pleading. It is a perfectly good pleading, and it pleaded the complaint made, and the only complaint that could be made. In those circumstances, it seems to me that the County Court Judge, having found that the negligence alleged was proved, was perfectly right in saying that the exemption clause applied. I am far from saying that the onus is not on defendants in a case where they have failed completely to redeliver or where the plaintiff has alleged a breach of a fundamental term. Thinking, as I do, that this is quite a different case from that which was before Mr Justice McNair, I find it unnecessary to go into the submissions of Mr Megaw on behalf of the Respondents that that case, Woolmer  v . Delmer Price Limited, was wrongly decided.

I would only add this, that while sympathising with the course that the County Court Judge took, I think it is a pity that the case was not heard out; but it is only right to say that, in my view, the only parties aggrieved thereby are the Respondents, against whom there is a finding of negligence, albeit they are exempted from liability therefor, when they had never had an opportunity of proving that they were not negligent.

I would dismiss the appeal.

MR DEHN: Would your Lordships dismiss the appeal with costs?

LORD JUSTICE DENNING: Yes. Is any party legally aided?

MR SOFER: No, my Lord.

LORD JUSTICE DENNING: The appeal will be dismissed with costs.