Questions as to Bills of Lading.

53

contract or of his duty as a carrier, and the point would generally merely resolve itself into an enquiry as to the proper form of action, and as to the party in whose name the action ought to be brought.

5. The fifth paragraph, which refers to the two preceding questions, is as follows:-If no liability is incurred in cases 3 and 4, a banker should never become absolute transferee of a bill of lading," as it is most undesirable for him to be in such a position that under certain circumstances he may find a cargo of merchandise on his hands with various conditions attaching thereto.

This seems to be rather in the nature of an observation than of a question, but if the writer intends to ask whether there is any means whereby the pledgee of a bill of lading can obtain the advantages of an indorsee without rendering himself subject to his liabilities, I should answer: No. As already pointed out, the pledgee cannot compel delivery of the goods until he has paid the charges due, and even if he has obtained delivery, a contract to pay the charges will usually be implied.*

6. The next question comes from another source, and is as follows:-Has a seller a lien on goods when he has parted with the bill of lading not indorsed to the buyer but only to order?

If the bill of lading is made to the seller's order, and has been indorsed by him in blank, and not in full-i.e. not specially to the buyer-the seller on parting with the bill has in this case also lost his lien; for there is no distinction in this respect between these two kinds of indorsement.†

7. Another question, which was put to me verbally was this: Supposing that while goods are still on board ship, the freight is paid; does this put an end to the bill of lading, so that it becomes exhausted?

The answer is: No. The master's contract under the bill of lading is not fulfilled until he delivers the goods. It is conceivable, though very improbable, that he might make a special agreement to hold them for a time in his ship as in a warehouse,‡ but in the absence of such an agreement, the bill of lading remains unexhausted not only until the freight is paid, but until the goods are duly delivered either to the holder of the bill of lading or to a wharfinger or warehouseman.

8. The next question asked has reference to the illustration which I gave in my first Lecture of the want of strict negotiability

* See Lecture I, ante, p. 11.

† Lickbarrow v. Mason (1793), 1 Smith's Leading Cases, 7th ed. 756; 10th ed. 674.

The possibility of such an agreement is discussed by Lord Blackburn in Kemp v. Falk (1882), 7 A. C., at 584.

in the case of bills of lading. I gave the instance of an indorser, as in Meyerstein v. Barber,* having already indorsed for value one bill of a set, indorsing a second to another indorsee, when the title of the latter would be subject to the indorser's defect of title; and I was asked: Would not the same rule apply to a bill of exchange drawn in a set? And if so, how did my illustration show that a bill of lading was in any degree less negotiable than a bill of exchange? The illustration I gave was perhaps not a very happy one, but I do not think that a bill of exchange drawn in a set is governed by the same rules. The rules applicable to such a bill of exchange are laid down in section 71 of the Bills of Exchange Act, 1882. It would take me too far afield to examine those rules in detail, but although there may be some resemblance between such a bill of exchange and a bill of lading, inasmuch as, where two or more parts of a bill of exchange drawn in a set “ are negotiated to "different holders in due course, the holder whose title first "" accrues is as between such holders deemed the true owner of "the bill";† yet there is this broad distinction:-that each bill of lading of a set is as a matter of course signed by the master or person primarily liable, whereas where a bill of exchange is drawn in a set, the drawee, who by accepting becomes the person primarily liable, should write his acceptance on one part only, and "if the drawee accepts more than one part, and such accepted parts get into the hands of different holders in due course, he "is liable on every such part as if it were a separate bill";‡ and if a holder "indorses two or more parts to different persons, he is "liable on every such part."§ The master or shipowner, on the other hand, is of course not liable to each of the different holders of bills of lading of the same set, but only to one of them-generally to that holder who was first in having one of the set transferred to him for value and in good faith on his part.

Warrants of Warehousemen and Wharfingers.

I have also been asked the following set of questions|| as to the negotiability of such warehousemen and wharfingers' warrants as have not been made subject to Private Acts of Parliament.

9. Whether warrants for goods, issued by London warehousekeepers and wharfingers, and duly indorsed, may be considered negotiable in the sense that the property in the goods they represent passes to the banker or other holder?

My answer is: In the case of such a warrant, as in that of a bill † S. 71 (3). ‡ S. 71 (4). § S. 71 (2). Numbered 9, 10 and 12.

* (1870) L.R. 4 H.L. 317.

*

of lading, the property in the goods-i.e. the whole propertywill not in any case pass where the warrant is merely pledged to the banker as a security, but only a special property, the general property remaining in the pledgor.

Moreover, if the pledgor has pledged them fraudulently and is neither the owner of the goods, nor an agent having authority, actual or ostensible, from the owner to pledge them, nor a seller or buyer acting in such a manner as to come within sections 8 to 10 of the Factors Act, no property whatever will pass to the banker, and he will be made to restore the goods or their value to the owner. Whether an agent has ostensible authority or not will depend mainly upon the Factors Act, but not entirely; for if the owner has by his conduct enabled another person to hold himself out as the owner, or as entitled to dispose of the goods, and the latter has sold or pledged them to an innocent party, the owner who has enabled the transaction to be carried out is estopped from disputing the ostensible authority of that person to sell or pledge, and must himself bear the loss.†

Warrants and Delivery Orders in Relation to Bankruptcy. The next question is this:—

10. Whether, in the event of the bankruptcy of the party in whose name the warrant was originally issued, and in whose name the goods presumably stand in the books of the warehouse-keeper, the possession of the warrant by a banker or other pledgee would be good as against the trustee in bankruptcy, and would have the effect of taking the goods out of the order and disposition of the bankrupt?

Before giving an answer to this question, I will mention one coming from another source, raising a similar point, and will then deal with both questions togther. It is as follows:

11. Supposing A., a factor, is given possession of the documents of title to goods with the consent of B., the owner, in order that he may sell them, and A. pledges these documents with his banker to secure an advance; what is the result if either A. or B. becomes bankrupt? Does such bankruptcy affect the rights of the banker?

These questions raise for our consideration points of serious importance which do not appear to be very satisfactorily or adequately treated in the text books, nor are the decisions on these points always easy to reconcile. The questions do not admit of

* As to which, see Burdick v. Sewell (1884), 10 A.C. 74, set out in Lecture I, ante, pp. 13-14.

† See e.g. Farquharson v. King (1901), 2 K.B. 697, C.A.; and cf. Henderson v. Williams (1895) 1 Q B. 521, C.A.

short answers, and having regard to their great importance, I propose to deal with them at some length.

The solution of these questions mainly turns upon the reputed ownership clause, now contained in section 44 of the Bankruptcy Act, 1883.* That section provides that the property of the bankrupt divisible amongst his creditors (which by section 54 vests in the trustee) shall not comprise:

(1) Property held by the bankrupt on trust for any other person.

And it goes on to enact that it shall comprise (among other things) the following:

(iii) All goods being, at the commencement of the bankruptcy, in the possession, order or disposition of the bankrupt, in his trade or business, by the consent and permission of the true owner, under such circumstances that he is the reputed owner thereof; provided that things in action other than debts due or growing due to the bankrupt in the course of his trade or business, shall not be deemed goods within the meaning of this section.

Goods in the hands of a factor are held on trust within the meaning of this section, and therefore in the event of his bankruptcy they are not divisible amongst his creditors.† It is true that if the factor is, with the consent of his principals, held out to the public as the owner of the goods-as, for instance, if they are really carrying on their trade in his name they will not be allowed to set up that he was merely a factor; but, otherwise, if the fact of the relation of principal and factor is clearly established, there is no doubt that the order and disposition clause does not apply.§

Even where goods consigned to a factor have been sold by him and the proceeds paid into his bank, and he becomes bankrupt,

* The reputed ownership clause was originally contained in the Act 21 James I, c. 19, s. 11, passed in 1623, the terms being very similar in that and later Bankruptcy Acts to those of the present enactment. The Act of James, however, spoke of "possession, order and disposition," and that Act was repealed by George IV, c. 98, s. 1, s. 70 of which changed the phrase into "possession, order or disposition "-the phrase which was repeated in 6 George IV, c. 16, s. 72, and in later Acts down to the present Act of 1883.

† Godfrey v. Furzo (1733), 3 Peere Williams' Rep. 185; Ex parte Dumas (1754), 1 Atkyns' Rep. 234; 2 Vesey, Senior's, Rep. 582; and see Robson on Bankruptcy, 7th ed. 537.

Ex parte Buck. Re Fawcus (1876), 3 Ch. D. 795; cf. Ex parte Bright. Re Smith (1879), 10 Ch. D. 566, C. A.

§ Per Bacon, C. J. in Bankruptcy, in Ex parte Buck (1876), 3 Ch. D. at 800; cf. per Dallas, J., in Gibson v. Bray (1817), 8 Taunton's Rẹp. at 80.

those proceeds can be followed, and will not pass to his trustee,* except to the extent of any lien which the factor may have had,† unless the principal has agreed to treat the factor as a mere debtor, and not as acting in a fiduciary relation towards him.‡

Having, then, disposed of the ordinary case of goods in the hands of a factor, which do not fall within the reputed ownership clause on the ground that they are held by him on trust, let us see what other questions have to be considered in order to decide whether goods were in "the possession, order or disposition of the "bankrupt" by the consent of the true owner.'

One of the first questions to determine is:-Who is to be deemed the true owner? If the original owner becomes bankrupt and the goods are in his own possession, order and disposition, the case does not fall within the reputed ownership clause at all, for that has always been construed to apply only to the possession of the goods of another with the consent of the true owner.§ The goods in such a case would be divisible amongst his creditors like any other property belonging to him.

But if, as in the cases put in the above questions 10 and 11, the goods are in a warehouse, and the warrant for them has been lodged as security with a banker, or other pledgee, the authorities show that it is the banker, or other pledgee or mortgagee, and not either the pledgor, or (where pledged by a factor) his principal, who is deemed to be the true owner within the meaning of the reputed ownership clause.¶

Let us suppose, then, that a warrant for goods has been pledged to a banker, either by B., the original owner of the goods, or by A., the factor to whom B. has intrusted the goods or the warrant. If A. becomes bankrupt, it is, as has been seen, immaterial whether the goods are deemed to be in his possession or not, for ex hypothesi they can only be in his possession as factor, and therefore on trust. But if B. becomes bankrupt, the question for decision is whether in the circumstances of each particular case the

*Ex parte Cooke. In re Strachan (1876), 4 Ch. D. 123, C.A.; In re Hallett's Estate (1879), 13 Ch. D. 696, C. A ; Hancock v. Smith (1889), 41 Ch. D. 456, C. A. † See Drinkwater v. Goodwin (1775), 1 Cowper's Rep. 251, at 255, 256; and Ex parte Buck. Re Fawcus (1876), L. R. 3 Ch. D. 795.

See Ex parte White. Re Nevill (1871), L. R. 6 Ch. Ap. 397.

§ Joy v. Campbell (1804), 1 Schoales & Lefroy's Rep. 328, at 336; and see the long list of cases cited in Griffith & Holmes on Bankruptcy (1867), Vol. 1, p. 450, note (h).

Under s. 44 (i) of the Bankruptcy Act, 1883.

Ryall v. Rowles (1750), White & Tudor's Leading Cases in Equity, 4th ed. Vol. 2, 734; 7th ed. Vol. 1, 96; Lucas v. Dorrien (1817), 7 Taunton's Rep., at 292-293; Burn v. Carvalho (1839), 4 Mylne & Craig's Rep. 690, at 704.