Scottish Court of Session Decisions

In 1878 there was built for Joseph Augustus Shepherd, merchant in London, an iron screw-steamer called the “Krishna.” Her net register tonnage was 198·65 tons, and she was taken to Bombay to ply the passage between Goa and Bombay. On the 23d September 1878 Messrs Gray, Dawes, & Co., the owner's agents, effected an insurance in Glasgow on his behalf through William Euing & Co., insurance brokers there, over the hull and machinery of the vessel for £8000, “for and during the space of twelve calendar months, commencing with the 23d day of September 1878, and ending with the 22d day of September 1879, both days inclusive, as employment may offer at port and at sea, in docks and on ways, at all times and in all places, and on all services whatsoever and wheresoever, under steam or sail.” Early on the morning of 23d May 1879 the “Krishna” started from Goa for Bombay properly manned and found, but she had not been long at sea when she was overtaken by a storm, which increased so much in violence that the master, not knowing at what time the ship might founder, and for the safety of the lives of all on board, ran her on a small sandy bank to the northward of Raree Fort, on the west coast of India. On this beach the surf broke heavily, the south-west monsoon having now begun to blow. For a week no attempt was made in consequence of the state of the weather to extricate the ship, but during the succeeding fortnight all was done that could be done, by the use of chains, hawsers, and anchors on board, aided by the steamer's engine, to get her afloat. All attempts however failed, and on the 5th June the master intimated to the owner by telegram, and afterwards by letter, in the following words:—“Though I have virtually given up the ship as lost, I think the crew had better remain until I hear from you about the stores. In the meanwhile I have given the engineers orders to carefully coat with white lead and tallow all bright portions of machinery, and cover the cylinders over with the remnants of old awnings. The funnel will also be covered over to protect the tubes from rain water. All portable gear about the decks, such as binnacle-tops, lamps, boats, oars, masts, sails, buckets, cooking-house, doors, &c., will be put below, and all the ventilating cowls taken off and put below, and the wood plugs placed in

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and secured from below. When all the work is finished the crew, I suppose, had better go to Vingorla, there to await shipment to Bombay, as you may advise me hereafter.” At this time the “Krishna” had been forced up the beach, through the soft sand, and a bank of sand had formed between her and the sea. The hull also, as far as could be ascertained, was entire, and the precautions which had been taken to protect the machinery and the portions of the ship's furniture which could be stored below suggested that no further disaster was anticipated. On the 7th June the owner, on receipt of the master's telegram, gave notice to the underwriters of abandonment and claim for total loss, which, however, was not accepted by the latter. The parties corresponded for four months with a view to compromise, but on the let of October the owner raised this action in the Sheriff Court of Lanarkshire against John Henderson, one of the underwriters, suing him (1) for the sum of £50, the sum underwritten by the defender, with interest; (2) the sum of £6, 5s. with interest, said to be the proportion of the charges and disbursements incurred under the suing and labouring clause of the policy after the shipwreck. About the middle of October, and after the south-west monsoon had come to an end, and as soon as the weather permitted, the underwriters, in the character of salvors, employed Captain Burns, who set to work and ultimately succeeded in extricating and floating the vessel. She was then taken to Bombay and docked there for purposes of survey and repair, and early in December she was taken into the harbour of Bombay, where she remained.

The pursuer pleaded—“(1) The said vessel having become a total loss by the perils insured against, and having been timeously abandoned by the pursuer, he is entitled to decree against the defender, as one of the underwriters on the said policy of insurance, for the sum underwritten by him, and for his proportion of the charges incurred under the ‘sue and labour clause’ therein. (2) The underwriters upon the said policy having accepted the pursuer's abandonment, decree should be granted as craved.”

The defender, on the other hand, averred that when Captain Burns was engaged in extricating the vessel from the beach he was acting on behalf of the underwriters as a salvor, and in accordance with the usual practice under all policies of this kind. The pursuer was aware of all that was being done, and he never suggested that he would in consequence hold them as accepting abandonment. The ship was anchored at Bombay about 13th December 1879, and it was again intimated to the pursuer that she was lying there at his risk. The defender further averred that he and the underwriters had suffered loss by the pursuer's failure to raise this plea of acceptance of abandonment now as the ship had deteriorated in value and had not been used since December.

He pleaded—“(2) The pursuer's statements, so far as material, being unfounded in fact, the pursuer is not entitled to decree as concluded for. (3) The defender having always been and being willing to settle with the pursuer, so far as he has any claim under the policy founded on, the present action is unnecessary, and ought to be dismissed, with expenses.” Additional plea—“(3) The defender has not accepted abandonment in respect of Captain Burns’ actings in salving the ship, because—1st, He acted in conjunction with underwriters who had special powers so to act; 2d, he acted only as a salvor, and the pursuer knew this; 3d, he acted in accordance with the usual practice in such cases.”

The Sheriff-Substitute ( Guthrie) found … “that in August and September, and at the date when this action was raised, the ‘Krishna’ was not in any risk of sustaining further injury where she lay, and that regard being had to the usual course of the monsoon, there was then a reasonable prospect of her being got off the sandy shore where she lay without greater expense than a prudent uninsured owner would reasonably incur: Finds, therefore, that there was not at that date a constructive total loss of the ship such as to entitle the pursuer to abandon her to the underwriters: Therefore assoilzies the defender from the first craving of the petition, and decerns: Finds with regard to the claim made under the suing and labouring clause of the policy by the pursuer for disbursements made in regard to the ‘Krishna,’ that the charge for the employment of the ‘Gunga’ is excessive, and that the pursuer is entitled to be paid therefor at the rate only of 500 rupees per day: Finds that the other charges have been duly incurred, and ought to be allowed; and therefore decerns against the defender for £4, 6s. 5d., being his proportion of the said charges: Finds the defender entitled to expenses, including a debate fee of £5.”

He appended the following note:—“The pursuer's steamer was driven ashore while on a voyage from Panjim to Bombay on the 23d May 1879, and after some attempts by the master and crew to get her afloat, the pursuer on 7th June, acting on the information he then had, gave notice of abandonment to the underwriters. The south-west monsoon was beginning, and the knowledge that all efforts to get the vessel afloat must consequently cease for some months, during which, moreover, the vessel, if exposed to the action of the sea, must run a great risk of being further damaged and possibly broken up, was doubtless one of the principal elements in determining the pursuer to take this course. If the legal effect of the abandonment were to be judged of according to the facts as they stood at the 7th of June, when notice was given, it would be difficult to say that the vessel, though then existing in fact, was not lost so far as any beneficial use to the owner was concerned. The validity of abandonment as at the date of notice is not, however, a point which must be decided here; because I think that by the law of this country it is necessary to the pursuer's success that the circumstances should have continued to be such as to involve a constructive total loss down till the raising of the action. There was an attempt by the pursuer to show that it is an open point in the law of Scotland whether the validity of an abandonment is to be determined by the state of matters existing at the date of the notice, or by that existing at the time when action is brought; and the doubts expressed by Lord Eldon in the Scotch case of Robertson v. Stewart and Smith, 10th Feb. 1809, F.C., rev. 2 Dow 474, were referred to in support of this view. But there is no authority in our law except the doubts of Lord Eldon, and the judgment of the Court of Session

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in that case, in support of the American and French doctrine on this subject as distinguished from the English; and there is no sufficient ground for holding that our law and practice is not, as Professor Bell indicates in his Commentaries, vol. i., p. 655, the same as that which obtains in England, and which has been settled by a series of English cases subsequent to Robertson v. Stewart and Smith, and all confirming the rule of Bainbridge v. Nelson, which Lord Eldon doubted. The principle to be extracted from the decisions is that abandonment is a quasi offer which grows into a contract or transaction fixing the rights of parties only (1) by the insurer's acceptance, or (2) by a judicial determination of its validity, which, like other judicial decisions, deals with the state of facts at the inception of the action in which it is given. ‘Notice of abandonment,’ says Bayley, J., in Brotherston v. Barbour, 5 M. and S. 418, ‘is no more than a proposal on the part of the assured which the underwriters may accept, and then there will be a new agreement binding on both parties. But while the transaction rests on abandonment only on one side the underwriter's responsibility may vary, and cannot amount to a total loss, if by subsequent events it has become otherwise at the time of action brought.’

“This point being fixed, the determination of the principal question of fact under adjudication becomes comparatively simple, for it seems to me that however hopeless the recovery of the ‘Krishna’ may have been at the beginning of June 1879, the prospect was very different at 1st October. The monsoon was then over, the ship was uninjured, or at least as little injured as it was possible for her to be after lying for four months on the beach, and there was no reasonable doubt to those acquainted with the position of the vessel, as indeed the event proved, that she could be got off without undue expense. The vessel was got off and repaired for a total cost of about £1400, and the pursuer's own witness Captain Cooper places her value when offered to the owner at £6000, or about two-thirds of her original cost. We have not in this country adopted the American rule that a loss is total wherever the insured subject is deteriorated to the extent of half its value, or the cost of its restoration would exceed half its value. But even if that were our law the evidence does not lead to such a result. It would be useless to analyse the evidence on the subject, the mass of which irresistibly leads to the conclusion that at the 1st of October, when the claim for indemnity was judicially made, and the right to indemnity under the contract of insurance falls to be ascertained, there was no constructive total loss upon which the pursuer could rest his demand.

But even if there were not a constructive total loss, it might be that a notice of abandonment having been given at an earlier date, the insurers had so acted as to be barred from repudiating that abandonment, and the pursuer, somewhat late in the day, was allowed to add to the record a plea to this effect. It does not appear to me that there is even a plausible ground for this contention. The insurers at once declined to accept the abandonment when it was made; a distinct notification to the same effect was made on their behalf early in August; and it is impossible to refer to any words or acts of theirs suggesting that they proceeded to float the ‘Krishna’ on any other footing than as salvors. I find nothing in the authorities to suggest that where insurers salve an abandoned vessel, all the time protesting that they do not accept the abandonment, they are to be taken as accepting the abandonment. The judgment in Provincial Assurance Company of Canada v. Leduc ( 43 L.J., P.C. 49, L.R. 6 P.C. 224) certainly does not support any such view, which would simply mean that where an owner abandons, and the insurers repudiate the abandonment, the subject insured must be left to perish utterly, because neither party can interfere for its protection or recovery without forfeiting his legal rights.

If we look only to the established principles which for nearly two generations have governed British mercantile practice under insurance contracts, and disregard speculative views borrowed from alien systems of jurisprudence, which in this department widely deviate from our own, it can only be a subject of regret that the pursuer should have expended so much pains and expense in a litigation which might possibly have had a different result if it had been begun four months earlier. This last remark may suggest a rational ground for giving a different judgment; but the rule referred to is so firmly fixed in the maritime law of Great Britain that even if it be objectionable in principle or in its practical results, I think it cannot be unsettled by anything short of a judgment of the House of Lords.

With regard to the claim under the suing and labouring clause there is not very ample proof of the disbursements of which repayment is claimed. But the claim was not strongly disputed, except in the charge for the employment of the ‘Gunga.’ It may be a question whether the despatch of that vessel at the beginning of the monsoon was a reasonable step for which the shipowners are entitled to charge. But I am inclined to think that they were bound, or at least fairly entitled, to try if by any chance the ‘Gunga’ could get near enough to aid the ‘Krishna.’ They cannot, however, make a profit out of the voyage, and I think only half their claim for this ought to be allowed. Giving effect to this deduction, the claim falls to be reduced to 7906 rupees, which at 1s. 9d. the rupee amounts to £691, 15s. 5d., the defender's proportion thereof being the amount decerned for.”

The pursuer reclaimed, and argued—On the 7th of June, when notice of abandonment was given, there was constructive total loss, and in point of law the rights and obligations of parties fell to be considered with reference to the circumstances existing at this date. The law was to this effect in France, Germany, and America— vide cases of Copelin v. The Phœnix Insurance Co., 2 Grant Thomson, 504; Snow v. Union Mutual Marine Insurance Co., 20 Grant Thomson, 349; Bradlie v. The Maryland Insurance Co., 12 Curtis' U.S. 745; Marshall v. The Delaware Insurance Co., Hare and Wallace's Leading Cases, vol. ii. 665; Peele v. The Merchants Insurance Co., Hare and Wallace's Leading Cases, vol. ii. 676–701;—and in Scotland— vide case of Robertson v. Stewart & Smith, 10th Feb. 1809, F.C., rev. 2 Dow's App. 474; Buchanan's Remarkable Cases, 73. The law of England, which looks to the circumstances existing at the date of

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raising the action, did not apply, and the English cases cited were all cases of capture.

Argued for defender—(1) In point of fact the state of matters existing at 7th June, when notice of abandonment was given, was not such as would have justified a prudent man uninsured for declining any further expense or effort to float the vessel—vide cases of Roux v. Salvador, 3 Bingham's New Cases, 266, Tudor's Mercantile Cases, 139; Kemp v. Halliday, 10th May 1866, 6 Best and Smith's Reps. 723; Rankin v. Potter, 6 L.R., Eng. and Irish Apps. 83—and therefore a fortiori, in accordance with these cases, there could be no constructive total loss at that date as far as concerned the pursuer, who was insured. Moreover, the notice of abandonment had not been accepted, and the underwriters merely floated the vessel as salvors. (2) But assuming that there was, as the Sheriff found, such constructive total loss at 7th June, in point of law the rights and obligations of parties are to be considered with reference to the circumstances existing at the date of raising the action, at which time unquestionably there was no such loss as is contended, there being every prospect of the vessel being floated off eventually, as indeed the event proved. The solitary Scotch case of Robertson v. Stewart & Smith had been followed by many English cases— Brotherston v. Barber, 5 Maul and Selwyn, 418; Bainbridge v. Neilson, 10 East. 329; Patterson v. Ritchie, 4 Maul and Selwyn, 393; Hamilton v. Mendes, 2 Burro's Reps. 310; Naylor v. Taylor, 9 Barnewall and Cresswell, 718; 1 Bell's Com. 654; Arnold's Mercantile Insurance, 14–15; Crump on General Average, 22; Kaltenbach v. Mackenzie, June 4, 1878, L.R., 3 C.P.D. 467.