Indian Oil
Indian Oil
Indian Oil
Application dismissed.
Order for costs in favour of univer-
sity, not to be enforced without
leave of court.
Legal aid taxation of applicant's
costs.
Solicitors: Wray Smith & Co. for Davis Walker & Co., Chalfont St.
Peter; Treasury Solicitor; Coward Chance.
C
[Reported by Miss GERALDINE FAINER, Barrister-at-Law]
A The grounds of the appeal were, inter alia, that (1) the arbitrators
had held that the mixing of cargo on board the Ypatianna took place by
reason of the owners' breaches of contract and conversion. (2) In the
light of those findings the arbitrators should have held that the property
in all the cargo so mixed became vested in the receivers. (3) Accordingly,
the arbitrators erred in law and/or in principle and/or misdirected
themselves in failing so to hold and/or to award damages for 1,300 tons
B of crude oil remaining on board the vessel which the owners refused to
discharge. (4) Further or alternatively, the arbitrators held that the
cargo remaining on board the vessel, which was not discharged, included
Russian crude oil, which was the property of the receivers. (5) In the
light of those findings, the arbitrators erred in law and/or in principle
and/or misdirected themselves in failing to hold that such Russian crude
Q oil should have been delivered to the receivers and they were entitled to
damages for failing to deliver it.
The facts are stated in the judgment.
Kenneth Rokison Q.C. and Peter Gross for the receivers. On the
question as to who was entitled to the oil on board the vessel before
PJ discharge at Madras, the arbitrators chose to follow Roman law principles
rather than English law as set out in obiter dicta of the House of Lords
in Sandeman & Sons v. Tyzack and Branfoot Steamship Co. Ltd. [1913]
A.C. 680. This is a short point and can be set out in the question, where
A wrongfully mixed the goods of B with goods of his own so that the
original goods, the property of B and A, cannot be identified or
separated from the whole, does the whole of the mixture become the
E property of B, or is he only entitled to a proportionate share of the
mixture? As a matter of English law the whole mixture becomes the
property of B. The principle is well-established, of considerable antiquity,
is stated and applied in a number of cases and is still recognised as good
law in modern times. In Blackstone's Commentaries, 17th ed. (1830),
vol. 2, pp. 404-405, the reason for the rule is said to be "to guard
F against fraud" but the principle does not depend on there being fraud in
the particular case. The starting point is Stock v. Stock (1594) Poph. 37.
In Warde v. Aeyre (1615) 2 Bulst. 323, the basis of the decision is that
since one cannot identify which part of the mixture is the innocent
party's, then he would be a trespasser against his will of his own
property. In Colwill v. Reeves (1811) 2 Camp. 575 it was possible to
identify whose property belonged to whom; although it is strictly obiter
G the principle is clear. Lupton v. White (1808) 15 Ves. Jun. 432 is an
example of a case where there is no misconduct or fraud. Reference is
made to Armory v. Delamirie (1722) 1 Str. 505, and approval of the
statement in Blackstone's Commentaries which is part of the judgment.
In Spence v. Union Marine Insurance Co. Ltd. (1868) L.R. 3 C.P.
427 the principle was not directly applicable but the judgment of Bovill
C.J. in the Court of Common Pleas was the judgment of the court. The
relevant obiter dicta are at pp. 437^38, where it is said that if the
mixture was caused by the wrongful act of one party English law holds
that that party was not entitled to recover. A distinction is made there
of the position where the mixture is accidental and where it is wilful.
348
Indian Oil Corpn. v. Greenstone Shipping S.A. [1988]
Cook v. Addison (1869) L.R. 7 Eq. 466 is again quite a long way from A
the facts of the present case, but the statement of Sir John Stuart V.-C,
at p. 470, is clear and supports the receivers' proposition. In Sandeman
& Sons v. Tyzack and Branfoot Steamship Co. Ltd. [1913] A.C. 680,
694-695, Lord Moulton went out of his way to set out the relevant
principles of English law, referring to cases of accidental mixture. At
p. 696, having dealt with proprietary interests, he deals with the
contractual position. ^
The receivers' case is also put on the basis of bailment, in that so far
as the oil remaining on board is concerned the owners were bailees of
the receivers' oil and the receivers are entitled to require them to deliver
it up; if they cannot do so without handing over their oil that is their
misfortune. Therefore, (1) all the oil on board, or its value, as a matter
of law belonged to the receivers, and the owners made a conversion of Q
it. (2) The receivers' oil was mixed with the owners' and could not be
separated. The receivers can require the owners to deliver the receivers'
oil on a basis of the contract, and it is their misfortune if their oil has to
be handed over as well. The receivers do not give credit to them of the
value of their oil mixed in. Thus, the ratio in the Sandeman case is also
relevant; it is quite clear that the receivers can claim from the carrier all
of the oil just as the claimant in that case could claim all his bales of D
jute.
For further examples of a statement of the principle, see Smith's
Leading Cases, 13th ed. (1929), vol. 1, p. 396; Holdsworth, A History of
English Law, 2nd ed., vol. VII, (1937) pp. 501-502; Goff and Jones,
The Law of Restitution, 3rd ed. (1986), pp. 65-66; Halsbury's Laws of
England, 4th ed., vol. 35 (1981), para. 1139; the substantial article with E
much citation of authority of Paul Matthews in Current Legal Problems ,
vol. 34 (1981), p. 159 and Jones v. De Marchant (1916) 28 D.L.R. 561.
The authorities clearly state the principle, and the only exception
referred to is where the innocent party's contribution is a very small
proportion of the mixture, which is quite the reverse of the present case
where 97 per cent, of the oil belonged to the receivers.
In the context of bailment, the principle is stated in Story on F
Bailments, 9th ed. (1878), pp. 41-44. In the present case there is no
question of negligent or inadvertent mixture; it was a deliberate and
wilful act which the arbitrators held to be a conversion. It was an
admixture of three different cargoes. In this context, see also Halsbury's
Laws of England, 4th ed., vol. 2 (1973), para. 1537 which also mentions
wilful admixture. The result is that the owners, as bailees, should deliver Q
up the whole mixture to the receivers, or they were liable under the
Torts (Interference with Goods) Act 1977; see sections 2 and 3.
Accordingly, either the mixture was not inadvertent and the receivers
are entitled to demand the whole from the owners as bailees, or else the
receivers are entitled to the value of all the oil on board the vessel
which was theirs, 97 per cent, of the cargo.
The arbitrators found that there was a breach of contract when the H
cargoes became mixed, and they acknowledge that there was a wrongful
act. The law draws a distinction between the act that was wrongful and
the act which was inadvertent. If the strict rule is applied it will
discourage potential fraud by carriers or shipowners. The bailee is
349
1 Q.B. Indian Oil Corpn. v. Greenstone Shipping S.A.
cannot say which part of the hay is his, because the one cannot be A
known from the other, and therefore the whole shall go to him who
hath the property in it with which it is intermixed."
In the present case the owners mixed crude oil loaded on their vessel
at Novorossisk in the Soviet Union with crude oil which was their own
property. At least for practical purposes the mixture could not be
separated, so it was a case of confusio. When the vessel came to B
discharge at Madras the owners claimed delivery of the whole. Hence
this dispute. Although the transfer of title to moveable things is in
general governed by the laws of the place where they are at the time
(Dicey & Morris, The Conflict of Laws, 10th ed. (1980), p. 555), which
in this case would be the Soviet Union, or a Greek ship on the high
seas, or the Union of India, it is agreed that I must decide this case in r
accordance with English law, having regard to the decisions of
Popham C.J. and of other judges since 1594.
On 29 November 1980 the owners chartered their vessel Ypatianna to
the Shipping Corporation of India Ltd. for the carriage of a part cargo
of 75,000 long tons of crude oil from Russia to India. The reason for the
restriction to 75,000 tons appears to have been the vessel's draft in the
Suez Canal. A bill of lading dated 26 December 1980 recorded that D
69,276 metric tons of Soviet export blend had been shipped by V/O
Sojuzneftexport at Novorossisk for carriage to one or more Indian ports.
The applicants, Indian Oil Corporation Ltd., were as the award finds the
receivers of the oil at Madras. Presumably the bill of lading was
endorsed to them and (subject to the issues in this case) the title to the
crude oil shipped then passed to them, if it was not their property
already (as may have been the case). I shall call them the "receivers."
On any view there was short delivery at Madras, compared with the
bill of lading quantity. For that the arbitrators have awarded the
receivers damages in the sum of U.S. $46,014.90. But the receivers'
contention is that they are entitled to a much greater sum as damages,
that is to say U.S. $388,000 or thereabouts, on the basis that all the
pumpable oil on board the vessel at Madras was their property and p
should have been delivered to them. They also complain that the
arbitrators applied a conventional tolerance in calculating the amount of
the shortage which was not supported by the facts found.
In point of form it was the owners who were claimants in the
arbitration. The remedy which they sought was U.S. $38,000 in respect
of over-delivery of crude oil. Even if that claim had been supported by
the facts, it is not clear to me how it would have been justified in law; G
but the point has not been argued, for the owners' claim failed and
there has been no appeal by them. This appeal is from the decision of
the arbitrators upon the receivers' counterclaims, pursuant to leave
granted by Leggatt J.
The figures H
The quantity loaded, as found in the award, was about 508,000
barrels. The bill of lading quantity is found to have been the equivalent
of 507,977 barrels. Crude oil on board before loading: (i) in the cargo
355
1 Q.B. Indian Oil Corpn. v. Greenstone Shipping S.A. Staughton J.
A tanks no more than 13,262 barrels. This may have included some ballast
water. Otherwise it comprised about 5,528 barrels of Iranian crude oil
from the immediately preceding voyage and the remainder was in part at
any rate Indonesian crude oil from the third previous voyage, (ii) In the
deep tanks 2,371 barrels.
The total quantity on board before loading was thus 15,633 barrels,
and the total after loading 523,610 barrels; each figure may have
" included some water.
Crude oil discharged was 503,896 barrels. Water discharged from the
cargo tanks was 6,229 barrels. Pumpable oil remaining on board after
discharge was 9,545 barrels. (There are two different figures in the
award for the quantity of crude oil remaining on board in terms of
weight but somewhat surprisingly they are both said to equal this
Q volume.)
The last three figures add up to 519,670. That is somewhat less than
the total quantity on board after loading. So far as I can tell the
difference can be explained only by evaporation, or because some
residues were unpumpable, or more probably in part by one of those
causes and in part by the other.
The receivers' smaller claim was for the shortage revealed by
D comparing the bill of lading quantity (507,977 barrels) with the quantity
of crude oil discharged (503,896 barrels). The arbitrators allowed that
claim in principle, but deducted a tolerance of 0.55 per cent, from the
bill of lading figure, or 2,793.87 barrels. Accordingly, they awarded
damages for a shortage of 1,287.13 barrels only. That deduction forms
the basis of one of the receivers' grounds of appeal.
£ The larger claim made by the receivers was based on the proposition
that all the pumpable oil remaining on board the vessel, 9,545 barrels,
had become their property and should have been delivered to them. I
assume, although the point was not discussed, that if this larger claim
succeeded the smaller claim would merge into it. However, the
arbitrators held that the larger claim failed; and that gives rise to the
receivers' other grounds of appeal.
F
Further facts
The bill of lading incorporated all the terms of the charterparty,
including the arbitration clause. The carriage was accordingly subject to
the Hague Rules for the carriage of goods by sea.
„ Four topics need further consideration. The first is the nature and
quality of the crude oil on board before loading. To the extent that it
comprised Iranian or Indonesian or other crude oils, I would infer that
its specification was not exactly the same as that of Soviet export blend.
But there is no finding that it was either better or worse. The furthest
that the award goes is this finding:
"There were no complaints at the time, neither have there been
" since, in respect of the quality of the crude oil discharged from the
vessel at Madras; therefore it has been assumed that the owners
discharged their primary obligation to deliver the bill of lading
cargo subject to a conventional shortage of 1,287.13 barrels."
356
Staughton J. Indian Oil Corpn. v. Greenstone Shipping S.A. [1988]
identity of the original material: see Blackstone, vol. ii, p. 405 and A
Lupton v. White (1808) 15 Ves. Jun. 432. But this rule is carried no
farther than necessity requires, and is applied only to cases where
the compound is such as to render it impossible to apportion the
respective shares of the parties. Thus, if the quality of the articles
that are mixed be uniform, and the original quantities known, as in
the case of so many pounds of trust money mixed with so many
pounds of the trustee's own money, the person by whose act the "
confusion took place is still entitled to claim his proper quantity,
but subject to the quantity of the other proprietor being first made
good out of the whole mass: 2 Stephen's Commentaries (13th ed.),
20. Trust money may be followed into land or any other property in
which it has been invested; and when a trustee has, in making any
purchase or investment, applied trust money together with his own, Q
the cestuis que trust are entitled to a charge on the property
purchased for the amount of the trust money laid out in the
purchase or investment."
That is support for Mr. Pollock's proposition, subject to the second part
of his qualification.
In Sandeman & Sons v. Tyzack and Branfoot Steamship Co. Ltd. D
[1913] A.C. 680 a consignee of bales of jute claimed that six of his bales
were missing. It was found that 14 bales, belonging either to that
consignee or to others, were missing; and that 11 bales were available
without any marks. It was held that the consignee was entitled to claim
for his six bales not delivered, and was not obliged to accept that any of
the unmarked bales belonged to him. The obiter dictum of Lord p
Moulton is directly in point, at pp. 694-695:
"My Lords, if we proceed upon the principles of English law, I do
not think it a matter of difficulty to define the legal consequences of
the goods of 'A' becoming indistinguishably and inseparably mixed
with the goods of 'B.' If the mixing has arisen from the fault of 'B,'
'A' can claim the goods. He is guilty of no wrongful act, and
therefore the possession by him of his own goods cannot be *
interfered with, and if by the wrongful act of 'B' that possession
necessarily implies the possession of the intruding goods of 'B,' he
is entitled to it (2 Kent's Commentaries, 10th ed., 465). But if the
mixing has taken place by accident or other cause, for which neither
of the owners is responsible, a different state of things arises.
Neither owner has done anything to forfeit his right to the possession Q
of his own property, and if neither party is willing to abandon that
right the only equitable solution of the difficulty, and the one
accepted by the law, is that 'A' and 'B' become owners in common
of the mixed property. Farther than this I do not think that it is safe
to go. That the whole matter is far from being within the domain of
settled law is shown by the divergence of opinions as to the relative
shares of the participating parties in the case of an accidental "
commixtio. Blackburn J. in Buckley v. Gross (1863) 3 B. & S. 566,
at p. 575 (following Kent's Commentaries) considers that they would
be tenants in common in equal shares. In Spence v. Union Marine
367
1 Q.B. Indian Oil Corpn. v. Greenstone Shipping S.A. Staughton J.
A Insurance Co. (1868) L.R. 3 C.P. 427 they were judged to possess
the mixed mass in proportion to the probable amounts of their
contributions to it. The fact is that the conclusions of the courts in
such cases, though influenced by certain fundamental principles,
have been little more than instances of cutting the Gordian knot—
reasonable adjustments of the rights of parties in cases where
complete justice was impracticable of attainment. I doubt whether
B even the fundamental principles enunciated above would be strictly
adhered to in extreme cases where they would lead to substantial
injustice. For instance, if a small portion of the goods of 'B' became
mixed with the goods of 'A' by a negligent act for which 'A' alone
was liable, I think it quite possible that the law would prefer to
view it as a conversion by 'A' of this small amount of 'B's' goods
Q rather than do the substantial injustice of treating 'B' as the owner
of the whole of the mixed mass."
Mr. Rokison relies on the first part of that passage, on the law as to
wrongful admixture. The difficulty that I feel is over the later observation,
that those principles might not be strictly adhered to if they would lead
to substantial injustice—for example, if the innocent party's contribution
D had been small. I have difficulty in understanding how a rule of law as
to rights of property can be subject to the qualification that it must not
cause substantial injustice. Rather than conclude that some rule of
equity prevails in such cases, I would suppose that Lord Moulton did
not intend to lay down rules of settled law, but instead to offer an
opinion as to what the law might turn out to be if such cases arose.
The last of the cases cited was Jones v. De Marchant (1916) 28
D.L.R. 561. The headnote in that case reads:
"Where beaver skins belonging to a wife have been wrongfully
taken from among her effects by her husband, who has them made
up into a fur coat which he makes a gift of to a third person, the
property in the coat is in the wife under the principle of 'accession,'
and the coat may be recovered by her in an action of replevin."
F
It seems that the coat was made up of 18 skins taken from the
plaintiff and another four provided by the husband. Nobody suggested
that the coat should be severed or dismantled. The case was one of
accessio. Apart from the fact that Richards J.A., at p. 563, cited
Blackstone's Commentaries, p. 405, with apparent approval, the decision
P is not of assistance in the present case.
Other authorities relied on were Smith's Leading Cases, 13th ed.
(1929), vol. 1, p. 396; Story on Bailments, 9th ed. (1878), pp. 41-44;
Holdsworth, A History of English Law, 2nd ed., vol. VII (1937),
pp. 501-502; Halsbury's Laws of England, 4th ed., vol. 35 (1981), para.
1139, and vol. 2 (1973), para. 1537. With the possible exception of
Holdsworth, those support Mr. Rokison's argument. In modern times
H there is Goff and Jones, The Law of Restitution, 3rd ed. (1986), pp. 65-
66:
"At law, as in equity, the plaintiff must be able to identify his
property in the hands of the defendant. Where the plaintiff is
368
Staughton J. Indian Oil Corpn. v. Greenstone Shipping S.A. [1988]
In the present case there is, as I have said, a hint that the owners A
were engaged in wrong doing, but on the award as a whole I do not
conclude that they mixed the cargo with their own oil for some
commercial motive. It would be a severe penalty to impose on them a
fine of U.S. $342,000 for their conduct (that being the difference
between the receivers' larger claim of U.S. $388,000 and the award in
respect of the shortage of some U.S. $46,000). The arbitrators, who
know a great deal about the business of carriage by sea, did not perceive "
justice in that; and neither do I. But in any event, the rule cannot,
unless Lord Moulton's qualification in the Sandeman & Sons case [1913]
A.C. 680, 695, represents the existing law, be altered to suit the
circumstances of each particular case. It must be one rule for all cases.
Those may vary between one where the shipowner deliberately mixes
property with a view to stealing it, to another where he does so purely Q
for convenience of carriage without any intention to harm anybody.
The other motive to be found in the cases is that of Coke C.J. in
Warde v. Aeyre, 2 Bulst. 323, 324, "otherwise, a man should be made to
be a trespasser, volens nolens, by the taking of his goods again . . . " In
theory there may still be cases where that reasoning is sound, for
example, if a farmer wished to retake his hay from a heap where it had
been wrongly mixed with that of somebody else. In practice, it is not D
likely to arise often and certainly not in the present case: the notion of
the Indian receivers boarding the owners' vessel after the conclusion of
discharge at Madras in order to retake their oil is implausible. I would
not regard that argument as justification for a rule which may work
substantial injustice.
In the days when corn and hay were to be found in heaps which g
could not be measured accurately, when such disputes were tried by jury
and witnesses might be illiterate or ignorant, a rough and ready rule
which Goff and Jones, p. 66, describe as punitive may have been the
best that the law could find. But a primitive rule is no longer appropriate
when modern and sophisticated methods of measurement are available.
The measurement of cargoes of oil is, as I learnt in Amoco Oil Co. v.
Parpada Shipping Co. Ltd. [1987] 2 Lloyd's Rep. 69, conducted with F
care and precision. It will not, of course, achieve absolute accuracy.
What method of measurement ever does? But for all practical purposes
the quantity of the innocent party's goods which have gone into the
mixture can often be ascertained with a sufficient degree of precision, as
it can be in this case. Similarly, there are methods of sampling and
analysis which should enable the quality of the innocent party's goods, Q
and of the mixture, to be assessed. If doubt remains as to either
quantity or quality, the principle of Armory v. Delamirie, 1 Str. 505
provides a solution.
Seeing that none of the authorities is binding on me, although many
are certainly persuasive, I consider that I am free to apply the rule
which justice requires. This is that, where B wrongfully mixes the goods
of A with goods of his own, which are substantially of the same nature ^
and quality, and they cannot in practice be separated, the mixture is
held in common and A is entitled to receive out of it a quantity equal to
that of his goods which went into the mixture, any doubt as to that
371
1 Q.B. Indian Oil Corpn. v. Greenstone Shipping S.A. Staughton J.
1
Legal Aid Act 1974, s. 13: "(1) Where any party receives legal aid in connection with
any proceedings . . . and those proceedings are finally determined in favour of the u
unassisted party, the court may . . . make an order for the payment to the unassisted
party out of the legal aid fund of the whole or any part of the costs incurred by him . . .
(2) An order may be made . . . only if the court is satisfied that it is just and equitable
. . . (3) . . . no order shall be made . . . unless ...(b) the court is satisfied that the
unassisted party will suffer severe financial hardship unless the order is made."