Lord Buckmaster:-

This is an appeal from an order of the full Court of His Britannic Majesty's Supreme Court for China siting at Shanghai, refusing the appellants' application for the new trial of an action heard by the Chief Judge, Sir Havilland de Sausmarez, on 7th July, 1916, and decided in favour of the respondents.

An appeal was originally instituted against the judgment itself, but this was abandoned in favour of the attempt to obtain a new trial. The appellants were well advised in the course they thus took. The difficulties that beset the hearing of the action were not of a nature that could be resolved better before their Lordships than they were before the learned Judge who tried the case. No question of law whatever was involved in the issue; the conclusion depended upon the determination of claims of contending witnesses and the balance of commercial probabilities, weighed with the knowledge of local habits and local manners.

The soundness of the judgment on the material originally before the learned Judge is therefore no longer in controversy; but, none-the-less, it is essential for the determination of this appeal that there should be some examination of the facts leading up to the dispute.

The appellants are a Chinese firm residing in Shanghai and dealing in opium. The respondents are a firm of British Indian opium merchants, with head offices in Calcutta and Bombay and a branch office in Shanghai. Between 10th August 1911, and 14th February 1912, contracts were entered into between the appellants and the respondents by which the respondents agreed to sell to the appellants 175 cases of opium in parcels deliverable four months after the date of the respective contracts.

In January, 1912, the importation of opium into several of the provinces of China was prohibited, and the position alike for the Chinese dealers and for the Indian merchants became hazardous in the extreme. Had the strict rights under all the existing contracts been relied upon and enforced, the Chinese dealers would, in all probability, have been unable to meet their obligations and the merchants would have found themselves unable to recover payment for their delivered goods. In order to relieve the position two combinations were formed - one known as the "Foreign Opium Merchants' Combine," and the other as the "Chinese Opium Guild" - with the object of regulating the flow and distribution of opium so as to enable the contracts to be slowly and effectually liquidated. For this purpose agreements were come to between the combine and the guild by which the combine should sell when opportunity offered and that, so far as Bengal opium was concerned, one half of the sale should be apportioned among the members of the guild and one-half among the foreign merchants, such latter half being divided pro rata between bargain stock, i.e., stock subject to contract and not delivered, and the unsold stock. This method of liquidation proceeded, and towards the end of 1914 the markets became more easy and private deliveries capable of being carried into effect.

These circumstances need to be borne in mind in considering the conduct of the appellants and respondents in relation to this matter. So far as the appellants were concerned, they took some small deliveries of the opium in 1912, but they failed to take any substantial delivery throughout the whole of that year; and claims for interest were consequently made against them by the respondents. On 17th February, 1913, the respondents made a return to the Opium Combine of their contracts, and included therein the whole of the balance of the appellants' contracts. In January, 1914, the appellants asked for delivery of twenty chests, the respondents only objecting upon the ground that the quality asked for was of the poor quality, and was not equally distributed among the various classes of opium.

Nothing further took place till May, 1915, when the appellants asked for delivery of the balance of opium and were met wit