Mogul Steamship Co Ltd v McGregor, Gow & Co

Mogul Steamship Co Ltd v McGregor, Gow & Co
Court	House of Lords
Citation(s)	[1892] AC 25
Judge(s) sitting	Lord Halsbury LC, Lord Watson, Lord Macnaghten, Lord Bramwell, Lord Morris, Lord Field, Lord Hannen
Case history
Prior action(s)	(1889) 23 QBD 598, (1888) LR 21 QBD 544
Keywords
Conspiracy to injure, economic tort

Mogul Steamship Co Ltd v McGregor, Gow & Co [1892] AC 25 is an English tort law case concerning the economic tort of conspiracy to injure. A product of its time, the courts adhered to a laissez faire doctrine allowing firms to form a cartel, which would now be seen as contrary to the Competition Act 1998.

Facts

A group of ship owners formed an association to raise their profits. The association agreed to limit the number of ships sent by the association to different ports, to give a 5% rebate on freights to all shippers of stock who dealt only with members, and that agents of members would be prohibited from dealing with anyone in the association if they did not deal exclusively with people in the association. If any member wished to withdraw, they would have to give notice. Mogul Steamship Co Ltd had been excluded. When it sent ships to the loading port to pick up cargo, the association sent more ships and underbid Mogul Steamship Co Ltd. The association also threatened to dismiss agents or withdraw rebates from anyone who dealt with Mogul Steamship Co Ltd. Mogul Steamship Co Ltd alleged there was a conspiracy to injure its economic interests and sued for compensation.

Judgment

The House of Lords, affirming the Court of Appeal's decision,^[1] held that the acts were done with a lawful object of protecting and increasing the associations profits. Because no unlawful means had been employed, Mogul Steamship Co Ltd had no cause of action.

Lord Bramwell's judgment read as follows.^[2]

“

My Lords, the plaintiffs in this case do not complain of any trespass, violence, force, fraud, or breach of contract, nor of any direct tort or violation of any right of the plaintiffs, like the case of firing to frighten birds from a decoy; nor of any act, the ultimate object of which was to injure the plaintiffs, having its origin in malice or ill-will to them. The plaintiffs admit that materially and morally they have been at liberty to do their best for themselves without any impediment by the defendants. But they say that the defendants have entered into an agreement in restraint of trade; an agreement, therefore, unlawful; an agreement, therefore, indictable, punishable; that the defendants have acted in conformity with that unlawful agreement, and thereby caused damage to the plaintiffs in respect of which they are entitled to bring, and bring this action... There is one thing that is to me decisive. I have always said that a combination of workmen, an agreement among them to cease work except for higher wages, and a strike in consequence, was lawful at common law; perhaps not enforceable inter se, but not indictable. The Legislature has now so declared. The enactment is express, that agreements among workmen shall be binding, whether they would or would not, but for the Acts, have been deemed unlawful, as in restraint of trade. Is it supposable that it would have done so in the way it has, had the workmen's combination been a punishable misdemeanour? Impossible. This seems to me conclusive, that though agreements which fetter the freedom of action in the parties to it may not be enforceable, they are not indictable. See also the judgment of Fry L.J. on this point. Where is such a contention to stop? Suppose the case put in the argument: In a small town there are two shops, sufficient for the wants of the neighbourhood, making only a reasonable profit. They are threatened with a third. The two shopkeepers agree to warn the intending shopkeeper that if he comes they will lower prices, and can afford it longer than he. Have they committed an indictable offence? Remember the conspiracy is the offence, and they have conspired. If he, being warned, does not set up his shop, has he a cause of action? He might prove damages. He might shew that from his skill he would have beaten one or both of the others. See in this case the judgment of Lord Esher, that the plaintiffs might recover for “damages at large for future years.” Would a shipowner who had intended to send his ship to Shanghai, but desisted owing to the defendants' agreement, and on being told by them they would deal with him as they had with the plaintiffs, be entitled to maintain an action against the defendants? Why not? If yes, why not every shipowner who could say he had a ship fit for the trade, but was deterred from using it? The Master of the Rolls cites Sir William Erle, that “a combination to violate a private right in which the public has a sufficient interest is a crime, such violation being an actionable wrong.” True. Sir William Erle means that where the violation of a private right is an actionable wrong, a combination to violate it, if the public has a sufficient interest, is a crime. But in this case, I hold that there is no private right violated. His Lordship further says: “If one goes beyond the exercise of the course of trade, and does an act beyond what is the course of trade, in order—that is to say, with intent—to molest the other's free course of trade, he is not exercising his own freedom of a course of trade, he is not acting in but beyond the course of trade, and then it follows that his act is an unlawful obstruction of the other's right to a free course of trade, and if such obstruction causes damage to the other he is entitled to maintain an action for the wrong”.[3] I may be permitted to say that this is not very plain. I think it means that it is not in the course of trade for one trader to do acts the motive of which is to damage the trade of another. Whether I should agree depends on the meaning to be put on “course of trade” and “molest.” But it is clear that the Master of the Rolls means conduct which would give a cause of action against an individual. He cites Sir William Erle in support of his proposition, who clearly is speaking of acts which would be actionable in an individual, and there is no such act here. The Master of the Rolls says the lowering of the freight far beyond a lowering for any purpose of trade was not an act done in the exercise of their own free right of trade, but for the purpose of interfering with the plaintiffs' right to a free course of trade; therefore a wrongful act as against the plaintiffs' right; and as injury to the plaintiffs followed, they had a right of action. I cannot agree. If there were two shopkeepers in a village and one sold an article at cost price, not for profit therefore, but to attract customers or cause his rival to leave off selling the article only, it could not be said he was liable to an action. I cannot think that the defendants did more than they had a legal right to do. I adopt the vigorous language and opinion of Fry L.J.: “To draw a line between fair and unfair competition, between what is reasonable and unreasonable, passes the power of the courts”.[4] It is a strong thing for the plaintiffs to complain of the very practices they wished to share in, and once did.

”

See also

• English tort law
• Vegelahn v. Guntner, 167 Mass. 92 (1896)
• Loewe v. Lawlor, 208 U.S. 274 (1908)
• Clayton Act 1914
• Judgment of the European Court of Justice 21 September 1999. Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie. Reference for a preliminary ruling: Kantongerecht Arnhem - Netherlands. Compulsory affiliation to a sectoral pension scheme - Compatibility with competition rules - Classification of a sectoral pension fund as an undertaking. Case C-67/96.

Notes

1. ^ (1889) 23 QBD 598, Lord Esher MR (dissenting), Bowen LJ and Fry LJ; this affirmed (1888) LR 21 QBD 544, Lord Coleridge CJ
2. ^ [1892] AC 25, 44-49
3. ^ 23 QBD 607
4. ^ 23 QBD 625, 626