Case name & citation: Mogul Steamship Co. v McGregor Gow & Co. (1892) A.C. 25
Year of the case: 1892
Jurisdiction: The House of Lords
What is the case about?
Mogul Steamship Co v McGregor is a landmark case that throws light on the tort of conspiracy to injure. It discusses whether a tort of conspiracy occurs if two or more persons combine to do a lawful act and cause damage to the plaintiff. The case also deals with the maxim “damnum sine injuria”.
Facts of the case (Mogul Steamship Co v McGregor)
In this case, a number of steamship companies who had been engaged in tea-carrying trade between China and Europe collaborated together and offered reduced freight as compared to the plaintiff’s company. It was done in order to monopolize the trade and attract customers.
The steamship companies formed an association. In addition to offering low freight rates, they also offered the merchants and shippers in China a rebate of 5 percent if they shipped their tea exclusively in vessels belonging to the members of the association. Else, there would be a penalty of forfeiture of that rebate for the entire year.
This resulted in the plaintiff’s company going out of the trade. The plaintiff was a rival trader (rival ship owner) and his business suffered huge losses owing to the reduction of freight charges by the defendants and similar competitive strategies to offer incentives.
As a result, the plaintiff brought an action for conspiracy and requested damages.
Can the defendants’ actions be treated as unlawful?
Would it give rise to a tort of conspiracy?
Ratio Decidendi (The rule of law on which the decision was based)
The case of Mogul Steamship Co v McGregor rests on the legal maxim “damnum sine injuria”. It means that a plaintiff may suffer an actual or substantial loss when there is no infringement or violation of his legal right. Hence, no action lies in tort in such cases. Such a situation can generally occur when the exercise of legal right by one person results in consequential harm to another person, even though the injury is intentional. Such cases cannot be actionable.
The reason behind this principle is that it shall not be possible to carry out the common affairs of life without undertaking various acts that more or less will be likely to cause loss or inconvenience to others. This is in view of a conflict of interest. Hence, every possible form of harm or loss is not recognized by the law.
To understand this with the help of an example, suppose the plaintiff is running a computer consultancy business. Another competitor operating in the same business opened his office in the same vicinity in which the plaintiff’s office is located. Now if as a consequence, the plaintiff loses his clients and suffers a sharp fall in his income, he cannot succeed in claiming damages from the competitor. Because the competitor has worked in his own interest and has not infringed any legal right of the plaintiff.
Judgement of the Court in Mogul Steamship Co v McGregor
The Court opined that the group of steamship companies acted in furtherance of their legal right in order to induce customers to do business with them. If as a result of this, any other company (i.e., Mogul Steamship Co. in the given case) has suffered trade losses, there is no remedy in the law of torts since there has not been a violation of a legal right vested in the plaintiff’s company.
Thus, the plaintiff failed in his action and the defendants were not liable.
Moreover, a “matter contrary to law” must be demonstrated to have occurred in order to prove that a conspiracy comprising an indictable offense occurred. Lord Halsbury found it unlikely to believe that there had been any malicious intent to harm rival traders, except in the sense that they desired their competitors to withdraw from trade. As a result, the defendant’s activities were interpreted as actions performed to further their own economic interests. To fit the definition, unlawful conduct would also have to involve obstruction, violence, interference, or molestation. None of these things occurred.
Therefore, it was held that the plaintiff had no cause of action. The defendants had used only lawful means to protect and extend their business and to increase their profits. Hence, their object, i.e., to protect and promote their own interests was a lawful one and they had used no unlawful means for achieving the same.
In India, although, such kind of trade collaborations could come under the purview of the Monopolies and Restrictive Trade Practices Act.
From the above case, it emerges that a person can compete with his competitor without causing any hindrance to him. The essence of the maxim “damnum sine injuria” is:
“The mere fact that a man is injured by another’s act gives in itself no cause of action; if the act is deliberate, the party injured will have no claim in law even though the injury is intentional, so long as the other party is exercising a legal right.”
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