Scottish Court of Session Decisions

This was an appeal from the Sheriff-court of Lanarkshire in an action at the instance of Alexander & George Miller & Company, merchants in Glasgow, against Potter, Wilson, & Company, merchants and shipowners there. The summons concluded for payment to the pursuers of “the sum of £250 sterling, being the contents of a bill drawn by William Graham, master of the steamer ‘Pareora’ of Glasgow, then at Paramaribo, upon the said Potter, Wilson, & Co. in favour of Messrs Miller, Bros., & Co. of Paramaribo, and endorsed by them to the pursuers, dated 17th July 1867, and payable thirty days after sight, and which bill was duly protested for non-payment and non-acceptance—which bill the said Potter, Wilson, & Co. were bound to have accepted and paid, in respect that it was drawn by the said master in security or payment of necessary furnishings or advances made to or on account of the said vessel, which had put into Paramaribo aforesaid in distress, and which advances and furnishings could not otherwise be obtained, the defenders being at the time of the drawing, and when the said bill was presented for acceptance, the employers of the said master, and the real owners or parties beneficially interested in the property of the said steamship, and lucrati by the advances and furnishings foresaid, and having ultimately sold and received the full price thereof, notwithstanding a bottomry bond granted by the said master to Mr Duncan Cameron Munro, now deceased, British Consul at Paramaribo aforesaid, dated 19th July 1867, which bottomry bond was held by the said Duncan Cameron Munro in trust for the pursuers to the extent of the amount of the bill founded on in the present action, and the sale of the said vessel was allowed by the said Duncan Cameron Munro on the faith of the representation made by the defenders' attorney or mandatory at Bahia, where the sale took place, that the said debt, and, all other debts secured by the said bottomry bond, would be duly paid.”

The defenders in their defences stated that the steamer “Pareora” had been supplied, and the master, Captain Graham, engaged by them on the instructions of Messrs George G. Russell & Co., merchants, Dunedin, acting on behalf of the ‘Southern Steam Navigation Company (Limited)” in New Zealand, who required the ship for their trade between Dunedin and Lyttleton. New Zealand. They alleged that Captain Graham, when engaged, was specially informed that he was to look for further instructions to Messrs G. G. Russell & Co., and that the real owners of said steamer, and the parties beneficially interested therein, were the said Southern Steam Navigation Company (Limited) and George G. Russell & Co., their agents. They were the employers of the master, and they alone were liable for furnishings or necessaries to the steamer or her crew. They denied that the master had any authority to pledge their credit, or that he had granted any valid bond, and called upon the pursuers to produce the alleged bottomry bond.

The defenders further stated, that as they had not received the last instalment of the price of the steamer from the Navigation Company, they had paid it, and drawn on the company therefor, negotiating their drafts with the Bank of New Zealand, London. Before the bank would discount these drafts they required that the steamer, which at first was registered in the name of the defenders only, should be registered in the name of one of the bank's directors, which was done, the director being Mr William Johnston Steel. As the bills drawn upon the company were not honoured, they were retired by the defenders, and a bill of sale or transfer having been obtained from the bank, the steamer was sold, and the proceeds remitted to the defenders. They denied, however, that at the sale their attorney had made any such representation as that set forth in the summons. At the date of the action the Navigation Company had become insolvent.

The pursuers pleaded—“The bill in question having been drawn by the master for necessaries not otherwise obtainable upon the defenders, his employers, and the real owners of the ship, they were bound to have accepted and paid the same.

The defenders having sold the ship and received the proceeds, are bound to pay the bill in question, in respect that the said bill was secured by the bottomry bond referred to, which fell to be ranked first on the price. The defenders are bound to pay the said bill and bond in respect that they are bound by the representations and statements of their said attorney or mandatory.”

The defenders pleaded—“The defenders are not liable for the sum sued for, in respect—(1) They did not authorise the master to pledge their credit therefor; (2) Said steamer ‘Pareora’ was not in any way pledged for said debt. The defenders are not liable for the alleged representations of their attorney, in respect said representations were not made, and if made, were not authorised. The defenders, not being lucrati, are not liable as concluded against.”

A proof was led in the case on 18th December 1872, the evidence being chiefly documentary.

The following was the alleged bond of bottomry granted by Captain Graham:—“Know all men by these presents that I, William Graham, master of the screw-steamer ‘Pareora’ of Glasgow, belonging to William Johnstone Steele, of No. 50 Old Broad Street, London, banker, am held firmly bound unto Duncan Cameron Munro, Her Britannic Majesty's Consul and Lloyd's agent at Surinam, in the sum of Six hundred and seventy-five pounds sterling of British lawful money, to be paid to the said Duncan Cameron Munro, or to his certain attorney, executors, administrators, or assigns, for which payment well and truly to be made I bind myself, my heirs, executors, and administrators, and also the said screw-steamer ‘Pareora’ of Glasgow, with her tackle, apparel, machinery, and furniture, and the freight to be earned by her on her voyage aftermentioned, by these presents, sealed with my seal on this the nineteenth day of July One thousand eight hundred and sixty-seven. William Graham.

Witnessed by A. Hepburn.

Sam. T. Samson. (Seal.)

The said screw steamer arrived at Paramaribo

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Surinam, on the first day of April One thousand eight hundred and sixty-seven from Greenock, Scotland, she being unable to proceed to her port of destination, viz., Dunedin, New Zealand, from the want of proper sails and rigging, and the hindrance caused by two large iron elbows under the quarter for supports to the shafts of the screw propellers, rendering said steamer quite unmanageable, and obliging her to put into this port in distress for want of provisions, and to have that done to the steamer that was necessary to enable her to prosecute her voyage to the port of destination, such as to procure coals or fuel, as also engineers, with all other necessaries, to enable her to prosecute the voyage successfully to Dunedin, New Zealand, aforesaid; and the said William Graham, in order to be enabled to pay for the necessary and lawful disbursement and expenses to enable him to proceed to sea with her on the said intended voyage, hath requested the said Duncan Cameron Munro to lend and advance the sum of Six hundred and seventy-five pounds sterling, for which amount the said William Graham has given off three setts of bills of exchange, all dated the seventeenth day of July Eighteen hundred and sixty-seven, at thirty day's sight, on Messrs Potter, Wilson, & Co., Glasgow, one sett in favour of Messrs Miller, Brothers, & Co. for the sum of Two hundred and fifty pounds sterling, one sett in favour of D. C. Munro, Her Britannic Majesty's Consul, endorsed to Thomas Green, Esq., for the sum of Two hundred and fifty pounds sterling, and the other sett for the sum of One hundred and seventy-five pounds sterling, in favour of D. C. Munro, Her Britannic Majesty's Consul, and endorsed over to Alexander Denoon, Esq., 34 Old Broad Street, London. On the acceptance and due payment of the aforesaid bills of exchange, amounting in all to Six hundred and seventy-five pounds sterling, this bond, given on vessel, machinery, furniture, and freights as well so far as in my power binding self, owner, and agents of said vessel, viz., Messrs Potter, Wilson, & Co. of Glasgow, for the due and proper fulfilment of this my engagement, which, when duly fulfilled and implemented, this bond shall be thereby nullified and cancelled. William Graham.

“Witnessed by A. Hepburn.

Sam. T. Samson. (L.S.)

Signed, sealed, and delivered in the presence of Duncan Cameron Munro, Her Britannic Majesty's Consul at Surinam, on this the nineteenth day of July in the year of our Lord, One thousand eight hundred and sixty-seven.

(L.S.) D. C Munro,

Her Britannic Majesty's Consul at Surinam.”

By a joint-minute of admission it was agreed to admit that “(1) the bills and alleged bottomry bond founded on in the summons were granted by the master for sums advanced to him as master, required by him to pay, and expended in payment of accounts for necessary repairs of or supplies to the ‘Pareora’ at Paramaribo, at a time and place, and under circumstances, which entitled the master to grant bottomry bond for said sums; (2) With reference to the sale of the ‘Pareora’ at Bahia, referred to in the proof and productions, the parties agree and admit that said sale was without prejudice to the rights of parties, and that the proceeds of the sale received by the defenders are to be dealt with as a surrogatum for said ship.”

In the following interlocutor of the Sheriff-Substitute ( Alex. Erskine Murray) all the facts in the case are clearly stated:—

“ Glasgow, 13 th July 1874.—Having heard parties' procurators and made avizandum,Finds (1) that the defenders Potter, Wilson, & Co., merchants, Glasgow, as agents for the Southern Steam Navigation Company in New Zealand, ordered on commission in Britain the steamship ‘Pareora,’ and advanced considerable sums for her outfit, and put in command of her a Captain Graham, with instructions to take her out to New Zealand, and thereafter to take instructions from the Southern Steam Navigation Company: Finds (2) that she was originally registered in name of defenders, but transferred to that of Mr Steele, manager of the New Zealand Bank (in whose office three bills drawn by defenders on the Local Steamship Co. were to be paid by the latter company) in security for his having cashed the same to the defenders: Finds (3) that the ‘Pareora,’ on her voyage out, suffered damage, and put into Paramaribo to refit: Finds (4) that Captain Graham granted to Mr D. C. Munro, British Consul at Surinam, for sums advanced to him as master, required by him to pay, and expended in payment of, accounts for necessary repairs of or supplies to the ‘Pareora’ at Paramaribo, the bond 12/2 of process, for £675: Finds (5) that the bond was granted at a time and place and in circumstances which entitled the master to grant a bottomry bond for said sums: Finds (6) that at the same time Graham granted bills on defenders for the like amount: Finds (7) that after leaving Paramaribo the ‘Pareora’ got into more difficulties, and had to stop at Bahia, before reaching which the captain died, it is said, out of vexation at not being able to succeed in taking the vessel out: Finds (8) that after the steamer had lain some time at Bahia the crew were paid off, the defenders having sent out a gentleman to take possession of her; and she, having been retransferred from Steele's name to that of defenders', was sold there without prejudice to the rights of parties, and the proceeds of the sale, £4720 were received and held by defenders, who paid all expenses at Bahia, and fall to be dealt with as a surrogatum for the ship: Finds (9) that the Southern Steam Navigation Company became insolvent, and took nothing more to do with the ‘Pareora:’ Finds (10) that the bills drawn by Captain Graham aforesaid were in favour of Messrs Miller, Bros. & Co. of Paramaribo, who endorsed them to pursuers, A. & G Miller & Co., merchants, Glasgow: Finds (11) that pursuers now sue on the bills, pleading that the defenders are liable because they received the price as a surrogatum for the ‘Pareora,’ which was liable for the amount of the bond 12/2 of process, that document being a bottomry bond; and secondly, that the defenders are liable, because the master was their agent to do what was necessary for the ship, and they were lucrati by his so acting, and took advantage of it, receiving the price of the ship, which contained fittings, &c., bought with money received under the bond; while defenders deny that 12/2 of process is a bottomry bond, or that they were lucrati by it, the repairs not having been done for their behoof, but to enable the steamer to proceed out to New Zealand: Finds on

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the whole case and in law (I) that the bond 12/2 of process is substantially a bottomry bond, although not corresponding in every particular with the usual form of that document; (II) that the defenders retained all along an interest in the ‘Pareora,’ as the Southern Steam Navigation Company could not claim her until they paid into the Bank of New Zealand the balance of defenders' advances, up to which time the defenders were entitled, on their retiring themselves the bill they had cashed into the bank, to redemand a transfer, as they ultimately did; (III) that Graham, the captain, appointed by defenders, was no doubt bound, after the vessel should have been transferred to the Southern Steam Navigation Company, to act under their orders, but up to that time his powers over the vessel were subordinate, not to the Southern Steam Navigation Company, but to the defenders; (IV) that thus Graham, in granting the bond and bills, was, to a certain though limited extent, acting on behalf of defenders; (V) that as the advances received under the bond 12/2 of process refitted the ‘Pareora,’ and enabled her to proceed to Bahia, where she was sold, and defenders received the proceeds, defenders were undoubtedly lucrati by the advances in question; (VI) that therefore on both grounds the defenders must be held liable in repayment of these advances: Therefore repels the defences, and decerns against the defenders as libelled,” &c.

On appeal, the Sheriff ( Dickson), upon 7th April 1875 pronounced the following judgment: —“Having heard parties' procurators on the defenders' appeal, and considered the record and proof, Adheres to the findings under heads (1) one to eleven (11) inclusive, and to the finding under head I., ‘On the whole case and in law,’ in the interlocutor appealed against. For the reason stated in the note hereto, recals the remaining findings therein: Finds that the master of the ‘Pareora’ had not power to bind the defenders by bills for the repairs or furnishings to the vessel, and finds that the defenders are not liable for the said repairs and furnishings on the ground that they have been lucrati thereby: Finds that the defenders are liable therefor, in respect of having become owners of the vessel while the same was hypothecated under the said bottomry bond. Therefor adheres to the interlocutor in so far as it repels the defences, and decerns against the defenders as libelled: Adheres also thereto as regards expenses, and decerns.

Note.—The Sheriff has experienced great difficulty in this case. Upon the main ground of action, viz., that No. 12/2 of process is a bottomry bond, he concurs, but with considerable hesitation, with the Sheriff-Substitute.

The principles on which it has to be decided whether the document is a bottomry bond or not are thus stated in the most recent treatise on the law of merchant shipping—‘It is an essential part of the contract of hypothecation that the repayment of the money should be dependent upon the ship's arrival at her destination. If the deed makes the loan repayable at all events, the contract is invalid as an hypothecation. But as these instruments are the creatures of necessity and distress, and usually contain the language of commercial men, and not of lawyers, they receive a liberal construction. It is not, therefore, necessary that the risk should be mentioned in express terms; it is sufficient if it can be fairly and reasonably inferred from the whole document that it was the intention of the parties to make the repayment of the money dependent on this contingency. (See Mande and Pollock on Merchant Shipping, 2d ed. 391.)

The chief circumstances against the view that the document in question is a bottomry bond are—(1) That it does not bear to be so in express terms; (2) That it does not bear a rate of interest indicative of a maritime risk; (3) That it contains a clause in these terms—‘on the acceptance and due payment of the aforesaid bills of exchange, amounting in all to £675 sterling, this bond, given on vessel, machinery, furniture, and freights, as well so far as in my power binding self, owner, and agents of said vessel, viz., Messrs Potter, Wilson, & Co. of Glasgow, for the due and proper fulfilment of this my engagement, which when duly fulfilled and implemented, this bond shall be thereby nullified and cancelled.’

Of these considerations, the first is of little or no moment. The second is important, because it may be assumed in general that a merchant will not make advances on a security subject to the risks of the sea without such an extra rate of interest as will cover the extra risk. The absence of such a rate has been held in several cases to shew that the document is not a bottomry bond. (See The ‘Emancipation,’ 1840, 1 Robertson's Appeal Cases, 124). But it is settled law that while it is an element, and an important one for consideration, it is not conclusive. (See MacLauchlan on Merchant Shipping, p. 49, ‘Royal Arch,’ 1810, 1 Swab. Admiralty Reports, 269.)

In the present case the bond seems to have been taken, not so much as a direct and primary obligation in favour of the party making the advances, but as an additional security on account of it being doubtful whether the master could bind the defender by the bills of lading.

The defenders' argument that the existence of these bills shews that the lender dealt with the case as an ordinary trade risk might be good, if they admitted their liability under the bills. But it will hardly do for them to deny that the master had power to secure the advances by these bills, and at the same time contend that the granting of the bills proves that the advances were made on the security which they were supposed, but erroneously, to afford. It is more reasonable to hold that the lenders took the same view as the defenders do of the master's authority to grant the bills; while knowing that he had authority to give security on the vessel by a bottomry bond, and to hold that accordingly the lenders trusted to the bond rather than to the bills for repayment.

Besides, it is settled that a bottomry bond is not rendered ineffectual by the existence of bills as collateral securities. (See the ‘Emancipation,’ cited above, and other cases in Mande and Pollock, page 390).

The Sheriff cannot adopt the defenders' argument that the idea of a maritime risk is excluded by the master having pledged his personal credit to the lenders, from having used the words ‘I bind myself, my heirs, &c.’ These words, being followed immediately by those which give security on the ship, would seem not to infer personal liability by the master for the advances. (See

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Simons v. Hodgson, 3 Barnwell and Adolphus, p. 50.)

Looking to the scope of the document as a whole, and taking into view the doubts which it indicates, and which the defenders' pleas shew to have been well founded as to the sufficiency of the bills; looking especially to the strong terms in which the security is taken on the vessel and her freight ‘for her voyage;’ looking to the narrative of the objects for which the advance was required, and to the absence of any other security or obligation for its repayment—the Sheriff considers that the parties must be held to have intended the document to be a bottomry bond.

As to the other grounds of action, it is thought that the defenders are not liable under the bills drawn on them by the master, because they were not the registered owners of the vessel at the time; because they put in the master not on their own account, but with the view of carrying out the directions of the shipping company on whose orders the ship was commissioned by them, and because they did not give the master authority to incur obligation on their credit.

Nor again is it sufficient to infer liability that the defenders had an interest in the ship, or were afterwards lucrati by the transaction; as witness the case of mortgage creditors or owners under a time charter, all of whom may profit eventually by repairs and furnishings to a ship in which they are interested, but who are not liable for debts incurred for these purposes by the master.

Besides, it is not proved that the defenders have been lucrati; for there is nothing to shew that they would have been in any worse position if the vessel had been sold at Surinam, unincumbered by the debt there incurred, than now held, in consequence of her having been sold at Bahia.”

The defenders appealed to the Court of Session.

Argued for them—The master had no authority and no power to hypothecate the ship upon an ordinary bond, but only on the peculiar contract of hazard called a bottomry bond. The bond which he granted was not a valid bottomry bond. Further, the captain could not bind them, as they were not the owners of the ship.

Argued for the respondents (pursuers)—The bond in question is in every essential respect a good bottomry bond. Even if it were not, the defenders are liable under the bills drawn on them by the master.

Authorities—1 Bell's Com. 588; Stainbank v. Shepard, June 15, 1853, 22 L.J. E.C. 341; “The Emancipation,” Jan. 31, 1840, 1 Rob. Admin. Rep. 134; “The Atlas,” Feb. 27, 1827, 2 Hag. Admin. Rep. 48; Nelson, July 2, 1823, 1 Hag. 169; Juridical Styles, “Moveable Rights,” 775–810.

At advising—