Kolbin & Sons v Kinnear & Co. S.S. "Altai." Kolbin & Sons v. United Shipping Co. S.S. "Eduard Woermann."

The House of Lords held that a person who assumes control of goods for another must take the reasonable care of a prudent business person in the circumstances. Wrongful delivery by a bailee or custodian to a third party who dissipates the proceeds renders the custodian liable for the loss. Delay in asserting the owner's rights did not bar recovery on the facts. Interest was not awarded as general damages where no quantified price had been received or was payable until a tribunal fixed compensation.

The appeals concerned two related actions by foreign merchants for the wrongful delivery of flax and tow by shipbrokers and forwarding agents. The goods were shipped from Archangel during the First World War and came into the hands of agents who, without authority, handed them to third parties who dealt with the War Office or sold them. The Court of Session had decreed for the pursuers; the defenders appealed. The central issues were whether delivery was authorised by the War Office or by agency or ratification, the standard of care owed by persons assuming control of goods, whether delay (mora) barred the action, and whether interest should be awarded on the value recovered.

1. Disposition. The House allowed the appeals in part and varied the interlocutors of the Court of Session. The defenders remained liable for the principal sums representing the value of the goods, but the awards of interest were removed.
2. Authority and possession. Per Lord Atkin, the bills of lading and the War Office's regulatory powers did not establish any effective authority permitting the defenders to deliver the goods to the third parties. There was no evidence that the War Office received the bill of lading or authorised delivery to the third parties. The regulations relied upon (Regulations 2B and 2E) did not give the Army Council power to require a person in possession to deliver goods to a third person so that the Council might then take them from that third person. (See discussion under facts and paras cited within the speech.)
3. Standard of care when assuming possession. Per Lord Atkin (also adopted by other Lords), a person who assumes control of another's goods in mercantile transactions must take reasonable care as a reasonably careful business person in the circumstances. The duty varies with context; it is not necessary to classify degrees of culpa. If the custodian abandons care and hands the goods to a third party without verified authority, that constitutes a breach making the custodian liable for resulting loss (supported in both appeals).
4. Liability for dissipation of proceeds. Where wrongful delivery results in the dispersal of the price so that the true owner cannot recover from the third party or the public body, the bailee who wrongfully delivered is liable for the full loss. The defenders could not rely on the indemnity of a bank or on the possibility of later recovery from the War Office to avoid liability to the owners.
5. Delay (mora). The majority rejected the defenders' plea that delay barred the claim on these facts. The House agreed with the Court of Session that the pursuers had not unreasonably lain by to the prejudice of the defenders.
6. Interest. The House held that interest should not be awarded as damages in these proceedings because no definite sum having been received by the defenders could fairly be treated as a wrongfully withheld principal subject to interest. The decrees were varied to remove awards of interest, while preserving the pursuers' separate claims to interest against the trust-estate of the intermediary.
7. Practical outcome and costs. The interlocutors were varied as set out in the speeches. There were no costs in the House. The opinions of Lords Atkin, Warrington, Thankerton and Macmillan concurred in these conclusions.

• Court of Session, Lord Ordinary (trial): Found for the pursuers in respect of principal sums but limited on interest (Lord Ordinary's interlocutor).
• Second Division, Court of Session: By majority reversed the Lord Ordinary and granted decree to the pursuers (interlocutor dated 20 March 1930).
• House of Lords: Allowed the appeals in part, varied the interlocutors to remove awards of interest and limited assignments against the defenders to principal sums; otherwise affirmed.