Mogul Steamship Co. Ltd. v. McGregor, Gow & Co.

A group of shipowners agreed to cut freight rates, offer a rebate to loyal shippers and send extra ships to Hankow. Their aim was to keep the China tea-carrying trade for themselves and shut out a rival. The House of Lords held that this was not an actionable conspiracy (an agreement by two or more people to injure another).

Quick Revision

Parties

Mogul Steamship Company, Limited — plaintiffs and appellants. A shipping company that sent ships to Hankow for the tea season.

McGregor, Gow & Co., T. Skinner & Co., D. J. Jenkins & Co., Peninsular and Oriental Steam Navigation Company, Ocean Steamship Company, William Thompson & Co. — defendants and respondents. Shipowners in the association (the conference).

Thomas Sutherland, F. D. Barnes, Alfred Holt and John Samuel Swire — defendants and respondents. The statement of claim describes them as interested in the steamers of the Peninsular and Oriental Steam Navigation Company and the Ocean Steamship Company.

Gellatly & Co. — not parties. Principal owners and managers of the appellant company, and London outward loading brokers of the Ocean Steamship Company.

Procedural History

1. The appellants sued the respondents for damages and an injunction (a court order to stop a wrongful act). They alleged a conspiracy to prevent the appellants from obtaining cargoes for their steamers.
2. The statement of claim had three paragraphs. Paragraph 1 alleged a conspiracy to prevent the plaintiffs from obtaining cargoes from shippers, to be carried from ports on the Yangtsekiang River to London.
3. Paragraph 2 alleged a combination that gave control of the homeward shipping trade. Under it, shippers were bribed, coerced and induced to refrain from shipping by the plaintiffs' steamers.
4. Paragraph 3 alleged, in the alternative, a combination with intent to injure the plaintiffs. The defendants refused cargoes unless shippers agreed not to ship by the plaintiffs' steamers, and they threatened to stop homeward shipments altogether.
5. Lord Coleridge C.J. and Fry L.J. refused an application for an interim injunction (a temporary order until trial) (15 Q. B. D. 476).
6. The action was tried by Lord Coleridge C.J. without a jury. The action was brought on 29 May 1885. The parties agreed that damages, if any, would be fixed by a reference.
7. Lord Coleridge C.J. made an order entering judgment for the defendants with costs (21 Q. B. D. 544).
8. The Court of Appeal affirmed that order. Bowen and Fry L.JJ. formed the majority, and Lord Esher M.R. dissented (23 Q. B. D. 598).
9. The appeal to the House of Lords was heard on April 14, 16, 17, 20 and 21 and May 11. The House took time for consideration.
10. The Lords delivered their opinions on 18 December 1891.

Facts

1. The appellant company was incorporated in 1883. It took over the steamers of Gellatly & Co., among them the SS. Pathan, Afghan and Ghazee. These were in China in the tea seasons of 1884 and 1885.
2. The respondents owned, or managed, steamers in the trade between China and England and elsewhere. Some of them ran regular services all year, and some ran on the Great River between Hankow and Shanghai.
3. The tea season lasts about five to six weeks from the latter part of May. Tea for England is shipped direct from Hankow (600 miles up the river Yangtsze), or sent to Shanghai and re-shipped.
4. Most shippers prefer direct shipment from Hankow. It suits the respondents better to bring the tea down to Shanghai by their river service. They sent ocean steamers up to Hankow only to intercept cargoes that might go in other vessels.
5. The appellants ran no regular service. They sent vessels to Hankow in the tea season to share the profits of the tea-carrying trade, which were ordinarily considerable.
6. The defendants wanted to secure this trade and keep freights at paying rates. In earlier years, they agreed among themselves to regulate the tonnage sent to Hankow and the freights demanded.
7. Lord Field records that rates fell so low in the years 1879, 1883 and 1885 that conference combinations were formed. Their object was to limit tonnage sent up the river and secure regular rates.
8. Gellatly & Co. were parties to the 1879 conference. The appellants, whose managers Gellatly & Co. were, were parties in 1884.
9. In spring 1884 the defendants held a conference. On 10 May 1884 they issued a circular from Shanghai. It offered a 5 per cent rebate on freights to exporters who shipped tea and general cargo to Europe only by the named lines.
10. Exporters claiming the rebate had to sign a declaration that they had made no other shipments. Shipment by an "outside" steamer at any China port or Hong Kong excluded the firm from the rebate for the whole six-monthly period.
11. The circular's agreement was to run from its date to 30 April 1886. The rebate was payable half-yearly from 30 October.
12. The plaintiffs were not members. They were admitted to the arrangement for their vessels the Pathan and Ghazee for the homeward voyage of that season only.
13. Late in 1884 the appellants wanted to keep that position. They asked Mr. Holt, a respondent and a friend of Mr. Gellatly, to raise it with the conference.
14. Meanwhile, unrestricted competition had produced what was called a collapse of freights.
15. On 7 April 1885 the defendants signed a written agreement. It regulated the tea trade with China and Japan, divided cargoes, set freight rates and continued the 5 per cent rebate.
16. If no outside ships went, no more than six conference ships would go up to Hankow. If outsiders started, conference steamers had to meet them there. The number was to be limited as much as consistent with effective opposition.
17. If no conference steamer was in port or named for despatch within a week, shipments by an outsider in that week would not lose the rebate.
18. Agents of conference steamers in China and Japan could not be interested, directly or indirectly, in opposing steamers or in loading outsiders' sailing vessels.
19. The agreement could be ended at any time on notice by principals at home, but not by agents abroad. Copies went to the defendants' agents at Shanghai.
20. Mr. Gellatly and Mr. Thompson, a shipowner with large tonnage, asked to join. The conference owners refused, saying vessels that entered only when other trades were slack took cargo that they needed to fill their own outward space.
21. Mr. Gellatly and Mr. Thompson said their vessels would go to Hankow whatever the rates. They thought, correctly as it turned out, that the conference would lose more than they would.
22. In May 1885 the plaintiffs sent the Pathan and Afghan to Hankow to seek homeward cargoes. Mr. Thompson also sent a ship, the Aberdeen.
23. On 11 May 1885 the defendants' agents at Shanghai sent shippers a private circular. It warned that shipments by the Pathan, Afghan, Aberdeen or other non-conference steamers would exclude the firm from the rebate for the six-monthly period.
24. The defendants sent conference steamers to Hankow to oppose the Pathan and Afghan and secure the freights if possible. To that end they underbid the plaintiffs and caused a general reduction of freights at Hankow.
25. The competition lasted the whole tea season. The three opposing ships loaded full cargoes home at very low rates. Many conference ships went away empty. The Pathan and Afghan earned freights at very low and unremunerative rates.
26. On 1 May the chairman of the P. & O. Company wrote to their Shanghai agent. If a firm at Hankow that acted for both that company and the plaintiffs loaded the plaintiffs' vessels, the P. & O. Company would have to close its relations with it.
27. On 28 May Gellatly & Co. were dismissed from the agency of the Ocean Steamship Company.
28. The action was brought on 29 May 1885. The plaintiffs claimed the difference between their actual earnings and the freights their vessels might have earned.

Issues Raised

The judgment does not list issues. The questions below come from the pleadings, the arguments and the Lords' opinions.

1. Was the agreement among the shipowners unlawful, as an agreement in restraint of trade, so that acts done under it gave the appellants a cause of action?
2. Could an agreement that is void for restraint of trade be an indictable (criminal) conspiracy, and could an outsider sue on it?
3. Were the means used lawful? These were the 5 per cent rebate, the extra ships, the low freights and the dismissal of agents.
4. Does an act that is lawful when one trader does it become unlawful when several trade in combination?
5. Does an intention to drive a rival out of the trade make competition actionable?

Arguments Contended

For the appellants (Sir Henry James Q.C. and Gorell Barnes Q.C., with Sims Williams)

1. The combination and its agreements were in restraint of trade, and so void and illegal. They relied on Hilton v. Eckersley and Hornby v. Close.
2. The agreements were carried out by wrongful means. The defendants offered an undue advantage (a rebate) to those who accepted their terms and imposed a penalty on those who refused.
3. Seeking to increase one's own trade is legitimate. Seeking to deprive a rival of trade, or to stop him carrying it on, is not. The case is stronger where wrongful means are used, à fortiori (all the more so).
4. The rebate, the special steamers sent to Hankow, the ruinous freights, and the threats to dismiss and the dismissal of agents were all wrongful means. They aimed to drive the plaintiffs out of the trade.
5. Crompton J. said in Hilton v. Eckersley that such combinations are illegal and indictable (open to criminal prosecution) at common law. His view was not supported by the other Queen's Bench judges. The Exchequer Chamber left open whether an indictment would lie.
6. If an indictment would lie, an action lies at the suit of anyone who suffers special damage.
7. Such agreements are against public policy (the general interest of the community). They cited the cases in the notes to Mitchel v. Reynolds, Bier's Case, the Ipswich Tailors' Case and the case of a blacksmith.
8. In Cousins v. Smith, Lord Eldon treated a combination of wholesale grocers to buy up imported fruit as a conspiracy against the world at large.
9. Sir W. Erle on Trade Unions says a combination to violate a private right in which the public has a sufficient interest is a crime. Such a violation is an actionable wrong.
10. The combination interfered with the plaintiffs' and all shippers' right to a free course of trade. The aim was to drive away competitors and then keep freights high, which is a public mischief, since shippers and consumers benefit from low freights.
11. Driving away a man's customers is like firing guns to scare ducks from another's decoy. They cited Keeble v. Hickeringill, Hannam v. Mockett and the early cases in Bacon's Abridgment.
12. The case is like maliciously procuring a breach of contract to injure a rival, as in Lumley v. Gye. It is equally actionable whether the aim is to injure the plaintiffs or to benefit the defendants at their expense, as in Bowen v. Hall.
13. The defendants could not gain the exclusive trade without taking it from the plaintiffs. To constitute malice (in law, a wrongful act done on purpose without just cause) it is enough that the act is wrongful and intentional. They relied on Bayley J. in Bromage v. Prosser.
14. The action would lie against one defendant. It is stronger against several acting in conspiracy. Many things done by one person are not actionable, but are when done in combination.
15. They relied on Hawk. P.C., Russell on Crimes, R. v. Starling, Clifford v. Brandon, Gregory v. Duke of Brunswick and Vertue v. Lord Clive.
16. They also cited Rex v. Eccles (Lord Mansfield) for the rule that a combination not to sell or work under certain prices is indictable.
17. Reg. v. Warburton (Cockburn C.J.) shows that acts agreed on need only amount to a civil wrong. A conspiracy is an agreement to do an unlawful thing, or a lawful thing by unlawful means.
18. A combination of servants to leave work in breach of contract is indictable, despite 34 & 35 Vict. c. 31, s. 2. That section says a trade union's purposes are not unlawful merely because they restrain trade. They cited Reg. v. Bunn, Reg. v. Duffield and Reg. v. Parnell.
19. American courts have laid the law down clearly. In Stanton v. Allen, the Supreme Court of New York held in 1848 that a boat-owners' combination to regulate freights was void as against public policy.
20. They also cited State v. Glidden, Morris Run Coal Company v. Barclay Coal Company, Hooker v. Vandewater and Salt Company v. Guthrie. A combination that oppresses individuals gives a right of action to anyone injured.
21. A trading corporation that hands its business to an association to prevent competition and raise prices may be dissolved (People of the State of New York v. North River Sugar Refining Company).
22. In reply, Sir H. James said a conspiracy to do an unlawful act, though not itself indictable, is an indictable offence. An action lies for anyone it injures. He referred to conspiracy cases such as Reg. v. Lord Grey, Reg. v. Mears and Reg. v. Howell.

For the respondents (Sir Charles Russell Q.C. and Sir Horace Davey Q.C., with Finlay Q.C., Pollard and Box)

1. The plaintiffs must show that some legal right of theirs was infringed. None was.
2. The combination was formed only to protect and further the defendants' own trade. There is no evidence of intent to injure the plaintiffs beyond the way every trader tries to win business, which may hurt rivals.
3. No legal right was infringed by the rebate, the extra steamers, the reduced freights or the dismissal of persons helping their rivals. These acts are common in every trade with keen competition.
4. A common carrier must charge reasonably, not equally (Branley v. South Eastern Railway Company). Offering a rebate violates no right.
5. A motive to injure a neighbour does not make an act actionable if it is done in exercise of a right, such as setting up a shop near a rival. They cited Lord Penzance's illustrations in Capital and Counties Bank v. Henty.
6. The right to shoot guns or drive on the highway is qualified. The right of free competition in trade is an absolute right.
7. Even if the combination were void as in restraint of trade, the plaintiffs would have no cause of action. Such agreements are illegal only in the sense that the law will not enforce them.
8. They are not immoral. Apart from Crompton J.'s dictum, from which Lord Campbell C.J. and Erle J. differed, no authority says an indictment lies.
9. This agreement was valid in any case. The restriction was partial and for a limited time. It was reasonable, rested on good consideration, and any party could retire on notice (Collins v. Locke).
10. On public policy they cited Burrough J. in Richardson v. Mellish, who called it a very unruly horse. They also cited Egerton v. Earl Brownlow.
11. Whether such combinations benefit the public is a question of political economy, not of law.
12. The plaintiffs did not bring the case within their own definition of conspiracy. No unlawful act or means was shown. There was no fraud, misrepresentation, violent interference, intimidation, molestation or obstruction, as in Green v. London General Omnibus Company.
13. The principles are explained in the judgments of Bowen and Fry L.JJ. in the Court of Appeal.

Court's Reasoning

The judgment has no numbered paragraphs. Each opinion is cited by its own blocks, counted in order from the start of that opinion. Lord Bramwell's opinion was read by Lord Macnaghten.

Lord Halsbury L.C.

1. Noted: The facts can be stated briefly, and the law on them is not open to doubt. (block 1)
2. Noted: An associated body of traders tried to get the whole of a limited trade. They offered exceptional terms to customers who dealt only with them. For a time they would trade at a loss, hoping to keep rivals out and take all the profits. (block 2)
3. Noted: He had omitted no fact on which the appellants relied to show that this course was unlawful and an indictable conspiracy. (block 3)
4. Noted: It cannot be denied or argued that a trader in a free country may regulate his own mode of carrying on trade, in all matters not contrary to law. This was Alderson B.'s language in Hilton v. Eckersley. (block 4)
5. Held: The appellants had to show that the traders' course was contrary to law. (block 4)
6. Held: On the evidence, the traders did nothing except offer reduced freights to persons who dealt only with them. If that is unlawful, most commercial dealing between rivals is unlawful too. (block 5)
7. Noted: Some phrases in the evidence might suggest a wish to inflict malicious injury on rivals. Analysed, they mean only that rival trading would be made unprofitable by better terms to exclusive customers. (block 6)
8. Held: Apart from that, no malicious intention to injure rivals can be suggested, except that taking trade to yourself injures those who would have had it. (block 6)
9. Why: If that injury and motive were malicious in law, all competition would be malicious and unlawful. This is a reductio ad absurdum (an argument shown false by its absurd result). (block 6)
10. Noted: Counsel could point to no act of obstruction, violence, molestation or interference. The only wrong they found was the competition itself. (block 7)
11. Held: Intimidation, violence, molestation or procuring people to break their contracts are unlawful. A combination to procure such acts is an unlawful conspiracy. (block 7)
12. Noted: The sending of ships to Hankow, which the traders knew would be unprofitable, was the one fact said to be out of the ordinary course of trade. (block 8)
13. Held: It is very commonly within the ordinary course of trade to compete for a time so as to make trade unprofitable for a rival, then take all the profits when he is gone. (block 8)
14. Noted: He adopted Bowen L.J.'s words below. Commercial men know the expedient of "sowing one year a crop of apparently unfruitful prices" to reap fuller profit later. Courts have no right to say to them Thus far shalt thou go, and no further. (block 9)
15. Noted: Apart from what he had excluded, the wrong done is hard to state. He asked what legal right was interfered with and what coercion of mind, will or person was effected. All are free to trade on what terms they will. (block 10)
16. Held: The first question is what injury, if any, was done and what legal right was interfered with. If none, it is vain to say a combination cannot do what an individual can. (block 11)
17. Noted: Many things lawful for one person become unlawful when done by several. He disagreed with the Lord Chief Justice's criticism of Lord Bramwell in Reg. v. Druitt. A combination to insult and annoy a person would be an indictable misdemeanour. (block 11)
18. Held: The trading here was no more a combined operation than trading by one person. Merchants, agents, captains and sailors who help a single trader also act in combination. If combination made this unlawful, they too would be criminals. (block 12)
19. Noted: A separate ground was introduced: that the thing is unlawful because it is in restraint of trade. Unlawful is used loosely in two senses. (block 13)
20. Noted: Some contracts are void as immoral or contrary to public policy, such as contracts in restraint of trade. The law will not enforce them and treats them as if not made. (block 13)
21. Held: The more accurate meaning of unlawful is contrary to law, from the Exchequer Chamber's passage. It does not apply to contracts in restraint of trade. (block 13)
22. Held: A contract in restraint of trade has never been held contrary to law in that sense. Crompton J. said, obiter (in passing, not needed for the decision), that parties to such a contract are indictable. Lord Halsbury did not assent to that dictum. (block 14)
23. Why: The dictum is against the whole current of authority. Lord Campbell and Erle C.J. dissented from it, it found no support in the Exchequer Chamber, and it is contrary to principle. (block 14)
24. Held: No case of a conspiracy such as the appellants tried to establish was made out. The statement of claim's own allegations show this. (block 15)
25. Noted: Paragraph 1 alleges a conspiracy to prevent the plaintiffs from obtaining cargoes. The word covers lawful and unlawful means. The proof showed only competition. (block 15)
26. Noted: Paragraph 2 alleges people were bribed, coerced, and induced. If "bribed" means offering lower freights and larger discounts, that is proved, but the word then has no legal significance. "Coerced" has no evidence. "Induced" is neutral, and no unlawful inducement was proved. (block 15)
27. Noted: Paragraph 3 uses language of intent to injure and threats of stopping homeward cargoes. An indictment setting out the facts without that ambiguous language would not disclose an indictable offence. (block 15)
28. Held: The whole matter comes back to one question. It is whether a combination to offer, in prices, discounts and other facilities, terms that win so much custom that rivals cannot profitably trade is unlawful. It is not. (block 16)
29. Held: The appeal should be dismissed with costs. (block 17)

Lord Watson

1. Noted: Much of the legal argument had a distant relation to the simple circumstances. The evidence had much figurative language, but no conflict on the facts. (block 1)
2. Noted: The respondents own steam vessels on the Great River between Hankow and Shanghai, and between Shanghai and European ports. In the tea season, most shippers prefer direct shipment from Hankow. The respondents prefer to bring tea down to Shanghai and tranship it. They send ocean steamers up the river only to intercept cargoes. (block 2)
3. Noted: The appellants keep no regular service. They send vessels to Hankow in the tea season with the legitimate object of sharing the tea-carrying profits. (block 3)
4. Noted: The respondents' agreement aimed to secure for themselves practically all the tea and keep out the appellants and other outsiders. The appellants claim the difference between their earnings and the freights they might have earned. (block 4)
5. Held: The appellants must show that the object of the agreement was unlawful, or that illegal methods were used. If neither the end nor the means was contrary to law, their loss was damnum sine injuria. (block 4)
6. Held: The agreement left the parties free to leave it at will. It is not open to the rule of public policy recognised in Hilton v. Eckersley. (block 5)
7. Noted: Hilton v. Eckersley rests on opinions that are not fully reconcilable. It decides only that an agreement by traders to combine for a lawful purpose and time does not bind one who withdraws. It cannot be enforced in invitum (against an unwilling party). (block 5)
8. Held: Hilton v. Eckersley is not authority that an outsider can plead the illegality of such a contract while the parties are willing to act on it. The appeal depends on more tangible considerations than public policy. (block 5)
9. Noted: The evidence suggests only the object of defending the carrying-trade in the tea season against the appellants and other competitors. Merchants pursue that object in every branch of commerce. (block 6)
10. Held: That object is perfectly legitimate in the eye of the law. A different question would arise only if the combination had a main or ulterior design of an unlawful object. No such case was shown. (block 6)
11. Noted: The appellants said the competition was unfair, meaning it was tainted by illegality. They relied on the 5 per cent discount, the underbidding ships and the withdrawal of agencies from persons who also acted for the appellants. (block 7)
12. Held: It is not the function of English courts to fix the lowest prices at which traders may sell or hire. The legality of competition cannot be judged by the price a trader accepts. (block 8)
13. Held: The withdrawal of agency was not an illegal act. No honest man could impartially find freights for parties in the hostile position of the appellants and respondents. The agents also had the option of acting for one side or the other. (block 8)
14. Held: No misrepresentation or compulsion was proved or suggested. The only means used was the inducement of cheaper freights than the appellants would accept. (block 9)
15. Held: The judgment appealed from should be affirmed. He was satisfied with the reasons of Bowen and Fry L.JJ. and added only to show that no question of fact or law was attended with doubt. (block 9)

Lord Bramwell (opinion read by Lord Macnaghten)

1. Noted: Lord Macnaghten said he was reading Lord Bramwell's judgment for him because Lord Bramwell could not attend. (opening block)
2. Noted: The plaintiffs do not complain of trespass, violence, force, fraud, breach of contract, or a direct tort (a civil wrong). They also do not complain of an act done from malice or ill-will. They admit they were free to do their best without hindrance. (block 1)
3. Noted: They say the defendants entered into an agreement in restraint of trade. They say it was therefore unlawful and indictable, and that acting on it damaged them. (block 1)
4. Noted: The plaintiffs proved an agreement to keep other shipowners from trading to Shanghai and Hankow. The means were benefits to exclusive shippers, ships sent to compete and lower freights. Other matters alleged were accessory. (block 2)
5. Noted: The plaintiffs also say that some of these things, if done by an individual, would be actionable. He did not need to decide that directly. (block 3)
6. Noted: It is said to be strange that a thing is unlawful if done by several but not by one. He gave two answers. A man may meet a single person's acts but not be matched against several. (block 3)
7. Noted: The other answer is de minimis non curat lex (the law does not concern itself with trifles). An act by one may be wrong but not punishable. If done by several, it may be important enough to be a crime. (block 3)
8. Why: The law avoids the multiplicity of crimes. (block 3)
9. Held: Even so, it is no answer that an individual would have no cause of action. The question is whether there is a cause of action when acts are done by several. (block 3)
10. Noted: The plaintiffs' first position is that the agreement is illegal as being in restraint of trade and so against public policy. Burrough J. said public policy "is an unruly horse, and dangerous to ride". Cave J. said judges are more to be trusted as interpreters of the law than as expounders of public policy. (block 4)
11. Noted: No evidence is given in public policy cases. A judge must say as a matter of law that a thing is against public policy, without evidence of its effect. (block 4)
12. Noted: If the shipping was enough for the trade, more would have been a waste. He was not sure the conference did not prevent waste and benefit the public. Lord Coleridge thought it did. (block 4)
13. Noted: He could not say the Chinese did not profit from lowered freights. As a rule the cost of transit on an exported article with a market price is borne by the importer and so by the consumer. Low freights therefore benefit him. (block 5)
14. Held: Assume each member tied his hands in restraint of trade. On Hilton v. Eckersley and other cases the agreement would be illegal, meaning not enforceable by law. He was not quite sure of that. (block 5)
15. Held: That is not enough for the plaintiffs. To maintain their action on this ground they must show it was an offence, a crime or misdemeanour. He was clearly of opinion it was not. Save Crompton J.'s opinion, not assented to by Lord Campbell or the Exchequer Chamber, English law has no authority for it. (block 5)
16. Held: An agreement may be void, yet its parties not punishable. He gave the example of a man and woman agreeing to live together as husband and wife without marrying. That agreement could not be enforced, but the parties would not be indictable. (block 6)
17. Why: That no case records a conviction for the offence alleged against the defendants is conclusive. (block 6)
18. Noted: The plaintiffs must make out that the defendants committed an indictable offence. The defendants need not disprove it. (block 7)
19. Noted: Fair competition is admitted. He asked what fair competition means, and what is unfair that is neither forcible nor fraudulent. It is strange that the law should punish those who make an honest agreement believing it needed for their protection. (block 7)
20. Held: One thing was decisive. A combination of workmen to stop work except for higher wages, and a strike, were lawful at common law. They were perhaps not enforceable inter se (among themselves), but not indictable. (block 8)
21. Why: The Legislature has now declared that agreements among workmen are binding, whether or not they would have been unlawful as in restraint of trade. It could not have done so if a workmen's combination was a punishable misdemeanour. (block 8)
22. Held: Agreements that restrict the parties' freedom of action may be unenforceable but are not indictable. He referred to Fry L.J.'s judgment on this point. (block 8)
23. Noted: He put a case. In a small town two shops are threatened by a third. They agree to warn the newcomer that they will lower prices and can afford it longer than he. Have they committed an indictable offence? Would he have a cause of action if he stayed away? (block 8)
24. Noted: Lord Esher held that the plaintiffs might recover damages at large for future years. A shipowner who wanted to send a ship but was deterred by the defendants' agreement would have the same claim. So would every shipowner with a ship fit for the trade. (block 8)
25. Noted: The Master of the Rolls cited Sir William Erle. A combination to violate a private right in which the public has sufficient interest is a crime. (block 9)
26. Held: In this case no private right was violated. Sir William Erle spoke of acts actionable in an individual, and there was no such act here. (block 9)
27. Noted: He found the Master of the Rolls' remarks on course of trade and "molest" not very plain. The Master of the Rolls also said the lowering of freight far beyond any trade purpose was wrongful. He could not agree. (block 9)
28. Held: If one shopkeeper in a village sold an article at cost price to attract customers or make a rival stop selling it, he would not be liable in an action. The defendants did no more than they had a legal right to do. (block 9)
29. Noted: He adopted Fry L.J.'s view that "To draw a line between fair and unfair competition, between what is reasonable and unreasonable, passes the power of the courts". It is a strong thing for the plaintiffs to complain of practices they wished to share in and once took part in. (block 9)
30. Held: The judgment should be affirmed. (block 10)

Lord Macnaghten

1. Held: He agreed entirely in the motion proposed and the reasons in the opinions delivered and yet to be delivered. He could not usefully add anything. (block 1)

Lord Morris

1. Noted: The defendants' object was to appropriate the plaintiffs' trade. The means were five. These were a rebate to exclusive dealers, sending ships to compete, lowering freights, covering the losses of other competing vessels and dismissing agents who acted for both sides. (block 1)
2. Held: The object was lawful. "It is not illegal for a trader to aim at driving a competitor out of trade", provided the motive is his own gain by taking the trade and the means are lawful. (block 2)
3. Noted: The rebate and the lowering of freights are the same in principle. Each is a bonus to customers to deal exclusively with the defendants. The sending of ships and the covering of other ships' losses was the competition the defendants entered on. (block 2)
4. Noted: The dismissal of agents might be questionable according to the circumstances. Here the agents held an irreconcilable position as agents of both rivals. Dismissal was perhaps a necessary incident of trade warfare. (block 2)
5. Held: All the acts and means were acts of competition for the trade. Nothing disturbed any existing contract of the plaintiffs or induced anyone to break one. (block 3)
6. Why: The defendants aimed to make it unlikely that anyone would contract with the plaintiffs, offering competitive inducements. The rhetorical phrases in the correspondence cannot change its real substance. (block 3)
7. Held: What one trader may do in competition, a body of traders can lawfully do. Otherwise a large capitalist could do what small capitalists combining could not. This would strike at co-operation and joint-stock enterprise. (block 4)
8. Held: A body of traders whose motive is to promote their own trade can combine to acquire trade and so injure competitors. They must do no more than is incident to that object and use no unlawful means. The defendants' case comes within this principle. (block 4)
9. Noted: On restraint of trade, he asked first whether the combination was in restraint of trade at all. It was voluntary and for no fixed period. No penalty attached to breach. (block 5)
10. Noted: Excluding others from the trade might be, and was, beneficial to freighters. Whenever a monopoly was likely to arise, with a consequent rise of rates, competition would naturally arise. (block 5)
11. Noted: He saw no reason why judges should be specially gifted with foresight of what may hamper or increase trade, or what adequate remuneration is. In these days of instant communication, "competition is the life of trade". (block 6)
12. Held: He knew of no stage of competition called "fair" between lawful and unlawful. Fairness would be left to each judge's idiosyncrasies. He saw no limit to competition except that you must not invade another's rights. (block 6)
13. Held: Suppose the combination was in restraint of trade. It could not be enforced, and none of the parties could sue each other. It might be void, but that does not make it, per se, illegal. Many agreements the law will not enforce are not illegal. (block 7)
14. Held: He adopted the principles laid down by Bowen L.J. and agreed that the Court of Appeal's judgment should be affirmed. (block 8)

Lord Field

1. Noted: The appeal can be decided on the principles laid down by Holt C.J. in Keeble v. Hickeringill, which was cited for the appellants. There the plaintiff complained that the defendant fired guns near his decoy and drove off the wild fowl, intending to injure his trade. The plaintiff won at trial. (block 1)
2. Noted: Holt C.J. held that the action lay, although new in instance. He said a person who hinders another in his trade or livelihood is liable if the injury is caused by a violent or malicious act. Shooting on purpose to damage the plaintiff is a wrong. (block 1)
3. Noted: Holt C.J. added that if the defendant, using the same employment, set up another decoy so near as to spoil the plaintiff's custom, no action would lie. He had as much liberty to use a decoy. Setting up a new school to the damage of an old one, by attracting scholars, also gave no action. It would be otherwise if scholars were driven away by violence or threats. (block 1)
4. Held: It is undoubted law that not every act damaging another in trade is actionable, nor every intentional act of damage. Acts done in the lawful way of business are not actionable, though effective competition injuriously affects another's trade. (block 2)
5. Held: It is otherwise if the acts, though done under the guise of competition, are in themselves violent or purely malicious. The same applies where the ultimate object is injury from ill-will, not the pursuit of lawful rights. (block 3)
6. Noted: Some agreements to injure others have been held indictable conspiracies though an individual would not be punished. In all such cases there was either an ultimate object of malice or wrong, or wrongful means involving injury to the public, or at least negativing a lawful object. (block 3)
7. Noted: Applying these principles, both sides are shipowners in the eastern carrying trade, sometimes allied and sometimes competing. The appellants complain of the respondents' conduct in the 1885 tea season. They allege no fraud, violence, physical obstruction or personal malice. They say the respondents deliberately meant to drive them out. (block 4)
8. Noted: Tonnage was of two classes. The first was regular lines that ran all year. The second was tonnage that entered Hankow only when freights were high. The respondents and the Messageries Maritimes of France are the first class. The appellants and their allies are the second. (block 5)
9. Noted: Competition between Hankow and Shanghai was severe. Excess tonnage made rates unremunerative. In 1879, 1883 and 1885 a conference of the first-class owners was formed to limit tonnage sent up the river and secure regular rates. (block 6)
10. Noted: Gellatly & Co. and the appellants had been parties to conferences in 1879 and 1884. This shows the parties did not think they were doing anything violent, malicious or conspiratorial. The appellants sued only because they were refused entry in 1885. (block 7)
11. Noted: The respondents refused on commercial, not personal, grounds. Regular-trade owners supplied tonnage in and out of season. They found it hard that cargo needed to fill their outward space was taken by vessels that came only when other trade was slack. (block 8)
12. Noted: It is unnecessary to decide whether these grounds were morally or commercially justifiable. They were not unlawful and could legitimately be taken into account. The real question then was where the line should be drawn. (block 9)
13. Noted: Under the 1884 conference agreement, the appellants were to load two Australian outward-going ships homewards from Hankow on conference terms. In late 1884 they wanted to keep that position and asked Mr. Holt to raise it. Unrestricted competition then produced a collapse of freights. Negotiations ended in the 7 April 1885 agreement, similar to 1884. (block 10)
14. Noted: That agreement first limited the number of ships. If only conference ships went, no more than six would go to Hankow. If outsiders started, additional steamers would meet them, limited as much as was consistent with effective opposition. It set freight rates and cargo distribution, and gave returns to exporters who shipped only with conference ships. (block 11)
15. Noted: While negotiations were pending, Mr. Gellatly and Mr. Thompson, a shipowner with large tonnage, asked to join. The conference owners persistently objected on the ground he had stated. Both then declared their vessels would go to Hankow whatever the rates. (block 12)
16. Noted: The appellants and Mr. Thompson placed ships on the Hankow berth. The respondents sent up the additional ships the agreement provided for. They aimed to compete with those ships and to deter others from following. (block 13)
17. Noted: On 11 May the respondents circulated to shippers a reminder that shipments by the Pathan, Afghan, Aberdeen or other non-conference steamers would exclude the shipper from the returns. (block 14)
18. Noted: Competition lasted the whole first tea season. The Pathan, Afghan and Aberdeen loaded full cargoes home at very low rates. Many conference ships went away empty. (block 15)
19. Noted: The appellants complained of the 5 per cent return to shippers and the circular about it. They complained of the extra ships and of the reduction of freights to an unremunerative level. (block 16)
20. Held: None of these supports the action. Everything the respondents did was done in the exercise of their right to carry on their own trade, and was done bona fide (in good faith). There was no malice or indirect object. (block 16)
21. Why: The right to a lawful employment negatives the presumption of malice that arises when a purposed infliction of loss has no legitimate cause. All the acts were lawful in themselves. If they caused loss, that was a necessary result of competition. (block 16)
22. Held: The further contention fails that the acts, though lawful if done by an individual, became illegal because done under a conference agreement that was a conspiracy in restraint of trade. On the evidence, the agreement was not shown to have that result. (block 17)
23. Held: Even if it did, no authority has been cited that such an agreement, though void, is illegal, or that an individual may sue on it. The one exception, Crompton J.'s view, is entitled to great weight but has not met with general approval. (block 17)
24. Held: For these reasons and those of Bowen and Fry L.JJ., the appeal fails and should be dismissed. (block 18)

Lord Hannen

1. Noted: The charge is that the defendants conspired to prevent the plaintiffs from getting cargoes by bribing, coercing and inducing shippers. It is also that they refused cargoes unless shippers agreed not to use the plaintiffs' steamers. (block 1)
2. Noted: The means alleged were three. The first was a 5 per cent rebate to shippers who shipped only by the defendants' steamers during a fixed period. The second was sending steamers to Hankow to compete with non-members. The third was removing from the defendants' agency those who acted for non-conference steamers. (block 2)
3. Held: The agreement was illegal as in restraint of trade only in the sense that it was void and could not be enforced against a defendant who broke it (Hilton v. Eckersley). It does not follow that the parties are indictable for conspiracy. Crompton J.'s contrary opinion in that case is erroneous. (block 3)
4. Noted: The question is whether one who has suffered loss in business by the joint action of those who made such an agreement can recover damages. That depends on the object of the agreement and the means used. (block 4)
5. Held: The object was to secure to the defendants the benefit of the carrying trade from certain ports. It cannot reasonably be said to be unlawful. Every trader tries to get as large a share of trade as he can. (block 4)
6. Held: The means were not open to objection. Offering a rebate to shippers who dealt only with the defendants is nothing more than ordinary competition by offering goods or services at a cheaper rate. (block 4)
7. Held: The ships sent to Hankow let the defendants' customers ship without losing their rebate. They offered no obstruction to non-conference ships. Shippers were left to decide where their pecuniary interest lay. (block 5)
8. Held: Removing from the defendants' agency those who acted for non-conference steamers was a legitimate way to secure agents devoted to the defendants' trade. (block 5)
9. Held: The objects and means did not exceed the limits of allowable trade competition. He knew of no restriction imposed by law on competition by one trader with another, with the sole object of benefiting himself. (block 6)
10. Noted: A different case would arise if the defendants' object was malicious, namely to injure the plaintiffs whether or not the defendants benefited. It was unnecessary to express an opinion, as the defendants had no malicious or sinister intent. Their sole motive was to secure advantages for themselves. (block 7)
11. Noted: On the argument that an act lawful for one becomes criminal or actionable if done by several, the law is accurately stated by Sir William Erle. He said each person may choose whether to labour and on what terms. Many, after consultation, may exercise that choice jointly and act on it. (block 8)
12. Noted: Sir William Erle added that they cannot create a mutual legal obligation binding each other not to work or employ except on the combination's terms. Lord Hannen said this principle applies to combinations other than trade unions. (block 8)
13. Noted: On motive, the fact that several agree on a common course may be important. Some injuries can be effected only by many combining. If several agree not to deal at all with one person, that could not ordinarily benefit them, so it might show a real object to injure him. (block 9)
14. Held: Here nothing showed an intention to injure the plaintiffs, except the injury that came from the defendants winning the carrying trade by giving better terms than the plaintiffs would offer. (block 9)
15. Held: The judgment of the Court of Appeal should be affirmed. (block 10)

Authorities

• Hilton v. Eckersley (6 E. & B. 47, 53, 74, 75): the Exchequer Chamber (Alderson B.) said a trader may regulate his own trade in all matters not contrary to law. Halsbury, Watson, Bramwell, Field and Hannen used it. An agreement in restraint of trade is void and unenforceable, but not indictable. Crompton J.'s contrary dictum was rejected. (Halsbury, blocks 4, 13-14; Watson, block 5; Bramwell, block 5; Field, block 17; Hannen, block 3)
• Bowen L.J.'s judgment in the Court of Appeal (23 Q. B. D. 611, 620): adopted by Halsbury, Watson, Field and Morris. Halsbury quoted its passage on sowing one year a crop of apparently unfruitful prices. (Halsbury, block 9; Watson, block 9; Morris, block 8; Field, block 18)
• Fry L.J.'s judgment in the Court of Appeal (23 Q. B. D. 625, 626): Bramwell adopted its view that drawing a line between fair and unfair competition is beyond the courts. Watson and Field agreed with its reasons. (Bramwell, blocks 8-9; Watson, block 9; Field, block 18)
• Lord Esher M.R.'s judgment in the Court of Appeal (23 Q. B. D. 607): Bramwell disagreed with it on private right and the course of trade and quoted its damages at large for future years. (Bramwell, blocks 8-9)
• Lord Coleridge C.J.'s judgment at trial (21 Q. B. D. 544, 551): Bramwell noted Lord Coleridge thought the conference beneficial to the public. Halsbury disagreed with his criticism of Lord Bramwell in Reg. v. Druitt. (Bramwell, block 4; Halsbury, block 11)
• Reg. v. Druitt (10 Cox C.C. 592): Lord Bramwell's observations there, on a combination to insult and annoy, were supported by Halsbury. (Halsbury, block 11)
• Richardson v. Mellish (2 Bing. at 252): Burrough J. said public policy is an unruly horse. Bramwell quoted it. (Bramwell, block 4)
• Cave J.'s remark ([1891] 1 Q. B. 595): contracts void on grounds of public policy are a branch of law that should not be extended. Bramwell quoted it. (Bramwell, block 4)
• Keeble v. Hickeringill (11 Mod. 74, 131; note to Carrington v. Taylor, 11 East 574): Holt C.J. held that a person who violently or maliciously hinders another's decoy trade is liable. Setting up a competing decoy is not actionable. Field decided the appeal on its principles. (Field, blocks 1-3)
• Sir William Erle on Trade Unions (page 23 and page 32): Bramwell distinguished the passage the Master of the Rolls cited. Hannen adopted the passage on joint exercise of a choice as accurate. (Bramwell, block 9; Hannen, block 8)
• Statute on workmen's agreements: the Legislature has declared agreements among workmen binding, whether or not unlawful as in restraint of trade. Bramwell relied on it, without citing its title. (Bramwell, block 8)
• Cases cited by the appellants' counsel: Hornby v. Close (L.R. 2 Q. B. 153); Mitchel v. Reynolds (1 Sm. L.C. 9th ed. 444); Bier's Case (2 Hen. 5, fol. 5, pl. 26); Ipswich Tailors' Case (11 Rep. 101); a blacksmith's case (2 Leon. 210); Cousins v. Smith (13 Ves. 542); Hannam v. Mockett (2 B. & C. 934); Lumley v. Gye (2 E. & B. 216); Bowen v. Hall (6 Q. B. D. 333, 338); Bromage v. Prosser (4 B. & C. 247, 255); R. v. Starling (1 Keb. 650); Clifford v. Brandon (2 Camp. 372 n.); Gregory v. Duke of Brunswick (6 Man. & G. 953); Vertue v. Lord Clive (4 Burr. 2476); Rex v. Eccles (1 Lea. C.C. 274, 276); Reg. v. Warburton (L.R. 1 C.C. 274, 276); Reg. v. Bunn (12 Cox C.C. 316); Reg. v. Duffield (5 Cox C.C. 404, 429); Reg. v. Parnell (14 Cox C.C. 508, 513). The Lords did not discuss them. (Counsel, appellants)
• American cases cited by the appellants: Stanton v. Allen (5 Denio N.Y. 434); State v. Glidden (cited in State v. Stewart, 59 Amer. R. 721, 724); Morris Run Coal Company v. Barclay Coal Company (68 Penn. 173, 186); Hooker v. Vandewater (4 Denio N.Y. 349); Salt Company v. Guthrie (35 Ohio St. 666, 672); People of the State of New York v. North River Sugar Refining Company (54 Hun 354). (Counsel, appellants)
• Reply cases: Reg. v. Lord Grey (9 St. Trials 127); Reg. v. Mears (20 L.J. (M.C.) 59); Reg. v. Howell (4 F. & F. 160). (Counsel, appellants)
• Cases cited by the respondents' counsel: Branley v. South Eastern Railway Company (31 L.J. (C.P.) 286); Capital and Counties Bank v. Henty (7 App. Cas. at 766); Collins v. Locke (4 App. Cas. 674); Egerton v. Earl Brownlow (4 H.L.C. 1); Green v. London General Omnibus Company (7 C.B. (N.S.) 290); Richardson v. Mellish (2 Bing. 252). (Counsel, respondents)
• Also cited in footnotes: 15 Q. B. D. 476 (refusal of interim injunction); 23 Q. B. D. 598 (Court of Appeal); 2 Hawk. P.C. c. 72, s. 2 and 3 Russell on Crimes, 5th ed., p. 109; 1 Bac. Abr., Action on the case, p. 101.

Judgement

1. The appeal was dismissed with costs.
2. The order of Lord Coleridge C.J. and the order of the Court of Appeal were affirmed.
3. The order is recorded in the Lords Journals of 18 December 1891.

Legal Principle / Ratio

Traders may combine to win trade by lawful competition, even if that ruins a rival, if their object is their own gain and they use no unlawful means. An agreement in restraint of trade may be unenforceable, but it does not by that fact give an outsider a cause of action. The Court of Appeal's order was affirmed on the ground that "the plaintiffs had no cause of action". Lord Morris put the point this way: it is not illegal for a trader to aim at driving a competitor out of trade.

Critical Analysis

Analysis based on the judgment text.

• The judgment has no numbered paragraphs, and each Lord gives separate reasons. Halsbury, Watson, Bramwell, Morris, Field and Hannen all reach the same result by slightly different routes.
• Lord Hannen expressly leaves open a case where the defendants' object was to injure the plaintiffs, whether or not they gained. He says it was unnecessary to decide that question.
• Lord Bramwell says no evidence is given in public policy cases. He also says the courts cannot draw a line between "fair" and "unfair" competition. Lord Morris makes the same point about fairness.
• Lord Halsbury analyses the pleaded words "bribed", "coerced" and "induced" and finds them unsupported on the evidence. Lord Field says the conduct was not malicious, because the right to trade negatives the presumption of malice.
• The Lords also differ in emphasis. Lord Watson decides on the lawful object and lawful means. Lord Field relies on Holt C.J.'s test of violence or malice.

Significance

• The Lords confirmed the Court of Appeal's view that competing traders are free to use ruinous but lawful pricing against a rival.
• They treated a combination as no more unlawful than the same acts done by one trader, where the object is the traders' own gain and the means are lawful.
• They separated agreements that the law will not enforce from acts that are crimes or torts. Void for restraint of trade does not mean indictable.
• They kept open a conspiracy claim where the object is malicious injury, or where unlawful means such as intimidation, violence or inducing breach of contract are used.

Exam-Important Points

• Rule: lawful competition by a combination of traders, for their own gain, is not an actionable conspiracy, even if it ruins a rival.
• Trap: a void agreement in restraint of trade is not automatically criminal, and does not give an outsider a right to sue.
• Facts to remember: the Hankow tea trade, the 5 per cent rebate, the 1885 agreement of 7 April, and the Pathan and Afghan.
• Limits stated: intimidation, violence, molestation, procuring breach of contract, or an object of malice would change the answer.
• Outcome: the House of Lords affirmed the Court of Appeal and dismissed the appeal with costs on 18 December 1891.
• Bench: Lords Halsbury, Watson, Bramwell, Macnaghten, Morris, Field and Hannen, with Lord Bramwell's opinion read by Lord Macnaghten.

Prepared from the full text of the judgment. The judgment text has no numbered paragraphs, so opinions are cited by their own blocks. The citation is not in the judgment text beyond the report header.