THE BANK OF BENGAL v. THE JAFFNA TRADING COMPANY

110-NLR-NLR-V-16-THE-BANK-OF-BENGAL-v.-THE-JAFFNA-TRADING-COMPANY.pdf


( *17 )
Present: Wood Benton A.C.J. and Ennis J.THE BANK OF BENGAL v. THE JAFFNA TRADINGCOMPANY.149—D. C. Colombo, 32,193.Bill of lading—Righto of holder—English law—Separate action fordamages for wrongful sequestration—Civil Procedure Code? s. 659—Estoppel—Agent for collection.
The right of the holder of a bill of lading to the possession ofgoods to which it relates, and his qualified power to sell suoh goods,are governed by Tflngliah and not Roman-Dutch law.
Section 659 of the Civil Procedure Code contains no machineryfor the trial of actions for damages; it does not bar a regular suitfor damages for wrongful sequestration before judgment.
T
TTF, facts are set out in the judgment of the Additional DistrictJudge (L. Maartensz, Esq.):—
The plaintiff bank in thi« action seeks to recover the sum of Bs. 1,863as damages sustained by it by reason of the wrongful sequestration bydefendant of a consignment of rice, of which the plaintiff was theendorsee of the bill of lading.
The parries went to trial on the following issues, namely
Is the plaintiff a duly incorporated banking corporation ?
Was the bill of lading of the shipment of rice in questionendorsed and delivered for value by Govindasamypifi aito the plaintiff bank ?
Was the sequestration and detention of the rice under theorder in D. C. Colombo, C 31,766, wrongful and unlawful,and if so, what damage, if any, has the plaintiff banksustained ?
Is the plaintiff bank precluded from claiming damages causedby the sequestration in D. C. 31,766 by .the operation ofsection 659 of the Civil Procedure Code ?
Is the plaintiff bank precluded from claiming for all or any ofthe items A, B, and C in paragraph 9 of the answer byreason of its having failed to claim the same in D. C*Colombo, 31,766 ?
(7) Did the endorsement of the bill of lading transfer the propertycovered by the bill to the plaintiff so as to entitle theplaintiff to recover the damages claimed ?
Was the sequestration adverse to and inconsistent with theplaintiff bank’s claims to or rights in the rice, and if so,did not the plaintiff bank incur the expense by reason of itsfailure or neglect to comply with the defendant company’sproposal contained in the letter of the defendant company’sproctor to the plaintiff bank’s proctor of December 10,1910 ?
Vol. XVI.141913.
32-^—J. N. 85177 (1/34)
MIS.
( 418 )
The Bank ofBengal ».The JaffnaTradingCompany
Did the plaintiff bank procure the release of the rice from thesequestration ordered in D. C. Colombo, C 31,766 t
The shipper of the rice in question was one Banohikal Abichan;he had endorsed the bill of lading in blank and delivered it to Govinda-samy. The rice was consigned to Nile3, and shipped at Rangoon fortransport to Colombo.
Govindasamy endorsed the bill of lading in blank and delivered itto the Rangoon branch of the Bank of Bengal, and the bank paid himRs. 4,790 annas 16 for the bill of lading. The amount was not paidin cash, but Govindasamy’s account was credited with that amount; ofthis sum, Rs. 4,780 was paid to the shipper Banohikal Abichan on acheque drawn in his favour by Govindasamy.
The Bank of Bengal specially endorsed the bill of lading to the Bankof Madras, Colombo, and sent it with a bill of exchange drawn againstthe consignee Niles to the Colombo branch of the Bank of Madras forcollection. Niles refused to pay the amount due on the bill of exchange,and it was noted for non-payment on December 3, 1910, and the ricewas advertised for sale on December 8.
On November 26 the defendant company filed an action, D. C.Colombo, 31,766, against Govindasamy, and on the same date appliedfor and obtained a mandate directing the Fiscal to seize and sequesterthe consignment of rice. On December 6, 1910, the defendant obtainedan order authorizing the Fiscal to sell the rice and bring the proceedsinto Court.
On December 29, 1910, the Bank of Madras filed a claim to theproperty sequestered.
On December 30, 1910, the defendant company, without notice tothe Bank of Madras, moved for and obtained an order recalling themandate, and directing the Fiscal to release the rice sequestered.
On January 9, 1913, the Bank of Madras moved that a day be fixedfor inquiry.
The application stood over for January 13. No inquiry was neces-sary, and the Bank of Madras obtained an order for costs on January 13.
As agreed on, I answer the first issue in the affirmative.
The plaintiff bank has proved conclusively that the bill of ladingwas endorsed and delivered to it for value, and I answer the secondissue in the affirmative.
The main objection to plaintiff’s claim is raised in issues (7) and (8).The defendant company contends that there is no evidence to showthe nature of the contract entered into between Govindasamy and theplaintiff bank, in consequence of which Govindasamy endorsed anddelivered the bill of lading to the bank, and that the evidence ofMr. Stephenson, that any surplus remaining over, after the claim ofthe bank had been satisfied, would be paid to. Govindasamy, provedthat the goods were only pledged to the bank, and were not sold to itoutright.
In support of this contention defendant’s counsel cited the case ofSewell v. Burdick,1 in which case it was held that the mere endorsementand delivery of a bill of lading does not pass the property in the goodsto the endorsee where it was not the intention of the parties to thetransaction that the endorsement should have that effect.
* (1884) JO A. C. 74.
101*.
( 419 )
Shortly stated, the ease for the defence is that Govindasamy had asaleable interest in the consignment of rice, as he had only pledged therice with the plaintiff bank, and that the defendant company wastherefore entitled to sequester the property.
Mr. Drieberg, for the plaintiff bank, contended that Govindasamyhad no interest in the rice enforceable against the* bank* even if theintention of the parties was to effect only a pledge, and relied on the-case of SetaeU v. Burdick,1 Qlyn v. E. <b W. India Dock Co.,* andMirabitta v. The Ottoman Bank.9
In the case of Sewell v. Bendick1 goods were shipped to a foreign portunder bills of lading, making the goods deliverable to the shipper orhis assigns. After the goods had arrived and been warehoused theshipper endorsed the bills of lading in blank, and deposited them withthe endorsees as security for a loan. The endorsees never took posses*sion of or dealt with the goods.
The House of Lords held, reversing the judgment of the Court ofAppeal, that “ the property m the goods did not pass to the endorseeswithin the mAiming of the Bills of Lading Act so as to make them liablein an action by the shipowner for the freight.”
Lord Selbome, in the course of his judgment, after discussing severalcases, said: “ None of the cases to which I have referred arose uponthe statute with which your Lordships have now to deal; they related,some to the right of stoppage in transitu, some to competing claimsbetween holders for value of different parts of the same set of bills oflading. It may well be that, as against all such claims, and againstparties setting up interests adverse to the title of the endorsee for value,such words as the ‘legal ownership,’ ‘legal right,’ ‘right of pro-perty ’ might be used, and the property which passed to the endorseemight be described as * absolute ’ in a sense substantially true, eventhough such property might* as between the endorsee receiving and theshipper depositing the bill of lading for collection, be special only andnot general; and though the most apt term for a scientific definitionof the transaction as between the borrower and the lender may be notassignment or transfer, but pledge.”
Lord Blackburn, in discussing the case of Qlyn v. E. ds W. India DockCo.,* quoted from his judgment in that case the following passage:“ I do not think it necessary to express any opinion on a question muchdiscussed by Brett L.J. I mean, whether the property which the bankerswere to have was the whole legal property in the goods, Cotton & Co.’sinterest being equitable only, or whether the bankers were to have aspecial property as pawnees, Cotton So Co. having the legal generalproperty. Either way the bankers had a legal property, and at lawthe right to possession subject to the shipowner’s lien, and were entitledto maintain an action against any one who, without justification orlegal excuse, deprived them of that right.” He continued: ” All thenoble and learned Lords agreed in this. I think, therefore, that thedecision of thin house is a strong authority in support of the position,that the rights of a mortgagee having taken a bill of lading and therights of a pawnee having taken a bill of lading are in substance the»
The Bank ofBengal v.Thd JaffnaTradingCompany
1 (1884) 10 A. C. 74.
* S Ex. D. 164.
*6 Q. B. D. 480.
1918.
. The Bank ojBengal v.The) JaffnaTradingCompany
( 420 )
Hie decision in SeweU v. Burdick 1 did not, as far as I can see, affectthe right of a pawnee who has taken a bill of lading; he is in the sameposition as a mortgagee, who undoubtedly has the right of propertysubject to redemption.
Qlyn v. E, do W. India Dock Co.9 The plaintiffs were the endorsees of abill of lading, and sued the Dock Company for the value of the goodswhich the Dock Company had delivered to persons holding deliveryorders from.the endorsees of the bill of lading. The bill of lading wasendorsed to plaintiffs in consideration of a sum of £13,000 advanced onthe security of the cargo.
Field J. gave judgment for plaintiffs (1879, 49 L. J. Q. B. 808).His judgment was reversed by the Court of Appeal, Brett L.J.dissenting (1880, 50 L. do Q. B. 62). Brett and Baggabag L.J.held that the endorsement of the bill of lading gave the plaintiffsthe legal property, only reserving to the endorsees an equity of redemp-tion. Bramwell L.J. held that the property did not pass, but thatthere was a pledge of them with a right of redemption in the endorsees.The passage in his judgment relied on by the plaintiff is the following:“ They (plaintiffs) did, however, by the handing over to them of thebill of lading endorsed under the agreement, acquire a special propertyand right of possession. And I cannot doubt that as against on actualwrongdoer, and against any person who had actually converted thesugar to his own use, or dealt with them under a claim of title, theymight have maintained an action such as the present.'*
In the House of Lords Lord Blackburn held that a mortgagee andpawnee were practically in the same position. Section 514 of the Lawof England (Halsbury's), vol. XXII., p. 245, lays down that wherejudgment has been obtained against the pawnee of goods and executionissued thereon, the Sheriff' cannot seize the goods pawned unless hesatisfies the claim of the pawnee. In the case under consideration therice was sequestered without any attempt to satisfy the debt of thepawnee.
I am of opinion, on the authority of the cases of Sewell v. Burdick 1and Qlyn v. E. do W. India Dock Co.,* that so far as the English law appliesthe endorsement of the bill of lading transferred the property coveredby the bill to the plaintiff so as to entitle the plaintiff to recover thedamages claimed.
I am further of opinion that the case is one to which the English lawapplies. But even if the Roman-Dutch law applied, the goods havingbeen pledged and delivered by the endorsement of the bill of lading, theplaintiff bank would have the same rights over the rice.
I accordingly answer the 7th issue in the affirmative.
I find on the 8th issue that the sequestration was adverse to andinconsistent with plaintiff bank’s claim to and rights in the rice.
Another defence set up was that the plaintiff bank could not maintainthis action, as it had endorsed the bill of lading to the Bank of Madras.This detence might have been successful, if it had not been held in thecase of Sewell v. Burdick1 that the mere endorsement of a bill of ladingdid not pass the property in the goods to the buyer, but that the effectthe endorsement depended on the contract between the parties.
i (1884) 10 A. C. 74.* (1882) House of Lords, 52 L. d Q. £. 146.
*6 §. B. D. 480.
1013.
( 421 )
It has been conclusively proved that the Bank of Madras were merelythe agents of the plaintiff bank, and that the bill of lading and bill ofexchange were endorsed to the Madras Bank only for the purposes ofcollection. The endorsement of the bill of lading hid not, therefore,pass the property in the goods, and the sequestration of the goods wasnot a violation of the rights of the Madras Bank, and I am of opinionthat the plaintifE bank was the proper party to bring the action, and thatthe action is maintainable.
The 4th and 5th issues practically raise the some objection, viz.,that the damages should have been claimed in the case No. 31,766 ofthis Court, in which the mandate issued.
There was, however, in case No. 31,766 no investigation of the claimmade by the Madras Bank on behalf of the plaintiff bank; the sequestra-tion was withdrawn without any notice to the claimant, and the claimanthad no opportunity of proving either title or damages.
As a matter of fact, the Bank of Madras had no authority to claimthe rice, and if the claim had been investigated, it was bound to fail forwant of title to the rice in question.
In the circumstances the plaintiff bank cannot be affected by anyaction on the part of the Bank of Madras in case No. 31,766.
I am of opinion, therefore, that issues 4 and 5 must be answered inthe negative.
As regards the amount of damages, the plaintiff olaims only the extrawarehouse rent which had to be paid owing to its not being able to sellthe property as soon as possible owing to the sequestration.
The plaintiff bank restricted its claim to damages under this head,which admittedly amounts to Bs. 1,135*84 if the bank is entitled tocharge for warehouse rent up to December 30, 1910, the date on whichthe mandate was recalled.
The defendant seeks to restrict the amount of damages to rent upto December 10 on account of the refusal of Messrs. F. J. & G. de Saramto agree to a sale of the rice by the Fiscal.
The defendant’s proctor on December 10 wrote to Messrs. F. J. & G.de Saram refusing to release the sequestration, and suggesting that therice should be sold by the Fiscal, and the proceeds brought into Courtto the credit of case No. 31,766 to abide the orders of the Court.
The Bank of Madras could not have acceded to this proposal, as it ranthe risk of destroying the rights vested in the plaintiff as pawnee of therice. Further, a sale by the Fiscal is, as a rule, less successful than aprivate sale, and there is absolutely no reason why the Madras Bankshould have agreed to an arrangement which might have been pre-judicial to the plaintiff bank.
I am of opinion, accordingly, that the defendant company is notentitled to a reduction of damages on the ground put forward.
I answer the 3rd issue, which includes issues 7 and 8, in theaffirmative. There appears to me to be no merits in the defence; the ricein question was consigned to Niles. Niles is the manager of the defend-ant company, and I have little doubt that the rice was intendedfor the company. Niles, instead of accepting the bill of exchange,sought to recover a debt due from Govindasamy to the company by asequestration of the very goods consigned to him.
The 'Sank ofBengal o.Th& JaffnaTradingCompany
( 422 )
1913.
The Bank ofBengal t».Thet JaffnaTradingCompany
I give plaintiff judgment for Bs. 1,136*84 and costs. The amountto which the plaintiff would have been entitled to recover up to Decem-ber 10 was to be agreed on end the amount mentioned to the Court.This has not been done. In case of an appeal a statement should befiled of the amount agreed on before the record is forwarded to theSupreme Court.
I find that I have overlooked the 9th issue. I must confess that Ido not understand the object of the issue, nor was any argument basedon it. It is extremely vague and difficult to answer.
Treating the Bank of Madras as agent of the* plaintiff bank, andassuming that the claim made by the Bank of Madras caused thedefendant to recall the mandate, it may be said that the plaintiff bankprocured the release of the seizure.
But, on the other hand, the defendant’s proctor refused to releasethe seizure when requested by the letter dated December 6, 1910; andon the evidence before me there is nothing to show that any act of theplaintiff bank was the direct cause of the release of the seizure. Iaccordingly answer the 9th issue in the negative.
H. J. C. Pereira, Elliott, and Ourusamy, for defendant, appellant.
Allan Drieberg, for the plaintiff, respondent.
Cur. adv. vult.
July 8, 1913. Wood Benton A.C.J.—
The facts in this case have been fully explained by tbe learnedDistrict Judge, and I propose to accept his statement of them forthe purposes of the present judgment. The respondent's counseladmitted that the position of the Bank of Bengal in the presentcase as regards the rice shipped under the bill of lading endorsedover to it by Govindasamy may fairly be described as that of apledge with a right to possession and to certain powers of sale ifthe bill of exchange drawn against Niles, the consignee of the rice,was not met, when due, by Niles. The appellant's counsel, on hisside, admitted that under the English law merchant the pledgorunder such circumstances would have a right to the possession ol*the rice and -a qualified power of sale. But he suggested that inmatters of this kind, raising as they do questions of the mortgageor pledge of movables, Boman-Dutch law and not the English lawmerchant should be applied, and contended that in any case, sincethe Bank of Bengal had not intervened in the claim proceedingsinstituted by its agent, the Bank of Madras, on the sequestrationof the rice under Chapter XLVII. of the Civil Procedure Code at theinstance of the appellant, the Jaffna Trading Company, it wasbarred now from setting up a claim to damages, which, undersection 659 of the Civil Procedure Code, could have been, andought to have been, put forward in the claim proceedings. Heargued further that the Bank of Bengal had, through its proctors,acted in such a way as to estop itself from now putting forwardany claim to damages, altogether apart from the objection to sucha claim under section 659 of the Code.
( 423 )
After the best consideration that I have been able to give to thesubject, I cannot accept any of these contentions. The right of theholder of a bill of lading to the possession of the* goods to which itrelates, and his qualified power to sell such goods, are, in my opinion,matters of substantive and not of adjective law. By virtue, there-fore, of section 1 of Ordinance No. 5 of 1852, section 1 of OrdinanceNo. 22 of 1886, and sections 2 and 7 of Ordinance No.. 8 of 1871, theyare governed by English and not. by Roman-Dutch law. A decisionin a contrary sense would, I am sure, create widespread consternationamong banking companies, shipowners, and merchants in Ceylon.The language of the enactments above referred to places the matter,I think, beyond all doubt. The Bank of Bengal, therefore, aspledgee of the bill of lading, had a right to the possession of therice, and a right to sell it if the bill of exchange, drawn againstthe advance to Govindasamy, were dishonoured by Niles. I amunable to hold that, even if the rights of the Bank of Bengal underthe bill of lading passed by endorsement to the Bank of Madras,the former would be precluded by anything in Chapter XLVTI.from bringing an independent action for the recovery of damagescaused by a wrongful sequestration. Section 659 contains nomachinery for the trial of actions for damages. The intention ofthe Legislature clearly is that claims in sequestration proceedingsshould be summarily disposed of. Such a demand for damagesas the Bank of Bengal seeks to enforce in the present case could notbe adequately investigated without the! filing of pleadings, theframing of issues, and the examination of witnesses. Can it beseriously argued that the Legislature intended that this should bedone in the course of summary proceedings with a view, to theremoval of a sequestration of property?* Moreover, Chapter XLVII.of the Code contemplates arrest of the person as well as of theproperty. If the appellant's contention in regard to the scope ofthat chapter is correct, I see no reason why a defendant, who hasbeen unlawfully arrested, should not be forced to prefer his claim todamages under Chapter XLVII. on pain of finding himself debarredfrom his remedy altogether. This view of the scope of section 659is confirmed to some extent by the decision of Sundara Aiyar J.and Phillips J. in Manjappar Chettia v. Canapathi Gounden,1 towhich Mr. Hector Jayewardene kindly called our attention asamicuB curia. It was there held that section 95 of the new IndianCode of Civil Procedure, which corresponds to section 659 of ourown Code, is no bar to a regular suit for damages for wrongfulattachment before judgment.
I a™ of opinion, however, both bn the evidence and on the law,that the rights of the Bank of Bengal, as pledgee of the bill of lading,did not pass to the Bank of Madras, in view of the facts that theendorsement by the former bank in favour of tEe latter was made
i 21 Mad. L. J. 1952.
1913.
Wood
Bentos
A.C.J.
The'Bank ofBengal u.Thd JaffnaTradingCompany
( 424 )
IMS.without consideration, and that the Bank of Madras received the
Woodbill of lading, and the bill of exchange accompanying it, merely as
Bbntokagent for collection. On this point I would refer to the case of
'Bvxgo8 v. Naacimento ,1
The iBank ojIt remains to consider the argument as to estoppel. The appel-
Thffiaftnalant’s contention on this point is that the Bank of Bengal held out
Tradingthe Bank of Madras as its plenary agent in the claim proceedings,
Companyan(j that the appellant's sequestration was withdrawn on the footing
that no claim for damages would be preferred. It iB suggested thatthe appellant’s proctor was misled by the inaccurate statement,admittedly made in perfect good faith by the proctors for theBank of Bengal in their letter D 5, dated December 6, 1910, thatthe Bank of Madras was holder for value of the bill of exchange,coupled with the statement in the claim proceedings that the claimwas made by the Bank of Madras as “ holder of the bill of ladingand the bill of exchange drawn against the rice.” There is noevidence in the record showing that the sequestration was with-drawn on the ground that no claim for damages was put forward.In the letter D 5 the proctors for the Bank of Bengal expressly statedthat the property in the goods had passed to the Bank of Bengal,and that, therefore, their seizure as the property of the defendantwas illegal. In his reply to letter D 5 the appellant’s proctor sayB:
“ I am advised that the mere endorsement of the bill of lading doesnot pass the property in the goods to the Bank of Bengal, and theproperty therefore being still the property of the defendant hasbeen rightly sequestered.” In view of the statements in thesetwo letters, and of the fact that Niles was manager of the JaffnaTrading Company, and must have known the whole circumstancesof the transaction, this plea of estoppel fails. I should perhapsadd that I am unable to interpret the statements, made in cross-examination, by Mr. Stevenson, the Accountant of the Eangoonbranch of the Bank of Bengal, that “ the Bank of Madras musthave kept their bank informed of the sequestration,” and that they" had the sanction of the Bank of Bengal for all that they did,” assufficient to create any estoppel.
I would dismiss the appeal with costs.
Ennis J.—I entirely agree.
Appeal dismissed.
—+ •
• (2908)' Weekly Notes 2908, 237.