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

The House of Lords holds that a person who voluntarily assumes control of goods (a negotiorum gestor or bailee) owes a duty to take reasonable care in the circumstances to protect the owner's interest. An emergency or commercial pressure does not permit abandonment of responsibility by handing the goods to a third party without reasonable verification. Where a bailee deals with the goods contrary to mandate and causes loss, the bailee is liable for that loss even if a public authority might ultimately have taken possession. The Defence of the Realm Regulations did not authorise delivery to a third party so as to excuse a wrongful delivery.

The appeals arose from two related actions by a foreign merchant firm claiming damages for wrongful delivery of their flax and tow by shipbrokers/forwarding agents. The contested deliveries occurred in 1918 and 1919 when communications with the owners were disrupted. Lower courts differed on liability and on whether interest should be awarded. The House of Lords considered whether (a) the shipbrokers were justified in delivering to a third party who purported to act for the owner, (b) any rights of the War Office under bills of lading or the Defence of the Realm Regulations authorised the deliveries, and (c) the pursuers were entitled to interest. The central issue was the standard of care and liability of a person who assumes control of another’s goods and then parts with them to a third party.

1. Disposition: The appeals were allowed and the interlocutors of the Court of Session were varied as described by the leading speech. The House permitted recovery of the principal values but refused the awards of interest ordered by the Second Division.
2. Leading reasoning (Per Lord Atkin): A person who voluntarily assumes custody of goods in a mercantile context owes a duty to take reasonable care to protect the owner's interest. The duty is measured by what a reasonably careful business person would do in the circumstances. That duty cannot be discharged by simply handing absolute control to an unverified third party who then deals with the goods inconsistently with the owner's rights. The defenders abandoned their responsibility by delivering to Renny without sufficient verification and are therefore liable for the loss consequent on the wrongful dealing.
3. War Office rights and Defence of the Realm Regulations: The House found no evidence the War Office received the bill of lading or took possession. Regulations relied upon (2B and 2E) empowered the Army Council to take possession and to regulate delivery, but did not authorise a person in possession to deliver the goods to a third party so that the Army Council might thereafter take them from that third party. Accordingly the Regulations did not excuse the defenders' delivery to Renny.
4. On damages and interest: The wrongful delivery caused loss of the value of the goods and the defenders are liable for that loss. However, the court would not allow the awards of interest ordered below. The House limited the sums recoverable to the principal values decreed and omitted the interest directions imposed by the Second Division.
5. Judicial attribution and agreement: Lord Atkin delivered the leading speech. Lords Warrington of Clyffe, Thankerton and Macmillan concurred in the result and reasoning as reported.
6. Practical outcome: The decrees below were varied to allow recovery of the principal sums stated, but the orders awarding interest were omitted. Each appeal resulted in no costs to either party in this House.

• Second Division, Court of Session: Decree in favour of pursuers (majority) (interlocutor dated 20 March 1930).
• Lord Ordinary (First instance): Found for defenders in the "Altai" matter (referred to in the speeches).
• House of Lords: Allowed appeals and varied the interlocutors (06 July 1931).