Scottish Court of Session Decisions

In May 1879 the Screw-steamer “Krishna,” of Glasgow, was stranded on the coast of India, near Bombay. she was insured at a value of £9000, of which £500 was underwritten by Benjamin Whitworth & Brothers, of Manchester, and the remainder with an insurance company and Glasgow underwriters. On 7th June her owner, Joseph Augustus Shepherd, of Bombay, tendered total abandonment of her to the underwriters, and claimed as for a constructive total loss. Whitworth Brothers disputed this claim, and Shepherd raised an action against them in England, which was settled before trial on the footing of the defendants (Whitworth Brothers) paying the total sum sued for, viz., £500, as the sum contained in the policy, £75 under the suing and labouring clause, and £20 of interest thereon, in all £595, together with the costs of the action.

The Glasgow underwriters also disputed (in the Scottish Courts) liability for a constructive total loss, and in an action against them (reported February 25, 1881, 18 Scot. Law Rep. 349, and December 1, 1881, 19 Scot. Law Rep. 577, 9 R. (H. L.) 1) it was held by the House of Lords that the loss was partial, not total.

Thereafter average adjusters found the partial loss to be 20 per cent. of the value of the ship.

From the time when the vessel was salved, and taken to a port of safety, in November 1879, Shepherd used her as his own, and he did so at the date of the action, retaining her whole earnings and exclusive control over her.

On 20th September 1883 Whitworth Brothers, having used arrestments, raised an action in the Court of Session against Shepherd, concluding for decree for £700, with interest at 5 per cent. from 7th June 1879 (the date on which he had intimated total abandonment to them) till payment, and further, to have the defender ordained to exhibit an account of his intromissions with the vessel and with the freight, and other moneys derived therefrom, from 23d May 1879 till the date of his lodging such an account, whereby the true balance due by him to the pursuers might appear, and to pay them the sum of £700, or such other sum as should appear to be the true balance due by him to them, with interest, from 7th June 1879.

The pursuers stated that they had accepted the abandonment of the “Krishna.” “(Cond. 7) By the abandonment and acceptance thereof fore—said, and the payment made by the pursuers in respect of said policy undertaken by them, the pursuers acquired and had vested in them a right of property in said vessel to at least an extent proportionate to the amount insured by them by said policy, which was not less than one-eighteenth share of the whole vessel.” “(Cond. 9) The value of the share to which the pursuers acquired right by virtue of said abandonment, acceptance thereof, and payment, is not less than £700. The defender, however, refuses to pay this sum, or any sum, to the pursuers, or to give to the pursuers control of the said share, although he has appropriated and still retains as his own the said share of said vessel, and the whole freight and earnings thereof and effeiring thereto. On payment of said

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sum and interest thereon, the pursuers are willing, from and after the date of payment, to give up their right to said share to the defender, their claims to the byegone earnings and freight of the ship being also satisfied. Moreover, although the defender has been called upon by the pursuers to render an account of his intromissions with said vessel and the freight and earnings thereof since 23d May 1879, and to make pay ment to them of the balance due to them thereon, he has failed to do so. The amount of the nett balance of said freight and earnings effeiring to the share or interest in said ship acquired by the pursuers as aforesaid, for the period down to the raising of this action, is not less than £700. If the said nett balance effeiring as aforesaid is less than £700, then the deficiency is due to the fault and negligence of the defender, and he is liable therefor. In these circumstances the present action has been rendered necessary.”

The defender referred to the proceedings in the English action, and denied that there had been any acceptance of the abandonment. He refused to recognise the pursuers' right to payment of the sum sued for, and to give them control of the vessel, and to render an account of his intromissions. He stated that the vessel was mortgaged for a sum of £13,168, by mortgage dated 11th October 1881.”

The pursuers pleaded—“(1) The pursuers having accepted the abandonment by the defender of the said vessel, and in respect thereof paid him the amount insured by him under their policy, as also the sum payable by them under the sue and labour clause of said policy, they are entitled to one-eighteenth part of said vessel. (2) The share in said vessel belonging to the pursuers amounting in value at least to £700, and the defender having wrongfully taken possession of said share and dealt therewith as his own, and still insisting on his right to do so, the pursuers are entitled to decree for said sum, with interest and expenses as concluded for in the first conclusions of the summons. (3) The defender having taken possession of said vessel, and dealt with her and her freight and her earnings as his own, and the pursuers having an interest in her, and the said freights and earnings, for which the defender has failed to account, the pursuers are entitled to have an accounting made to them by the defender, and to payment of the balance due them as shown therein, with interest and expenses as concluded for in the conclusions of the summons to that effect. (4) In the event of the nett balance of freight and earnings effeiring to the pursuers' said share amounting to less than £700, the pursuers are entitled to decree for any deficiency, in respect the same is due to the defender's fault.”

The defender pleaded — “(3) The averments of the pursuers are irrelevant. (4) The pursuers' averments, so far as material, being unfounded in fact, the defender is entitled to absolvitor, with expenses. (5) In any event, the pursuers are not entitled to decree for more than the proportion of the sum sued for corresponding to their interest in the said policy.”

The Lord Ordinary ( M'Laren), after a proof, pronounced this interlocutor:—“Finds that by the abandonment of the ‘Krishna,’ the pursuers acquired an interest in that vessel to the extent of one-eighteenth of her value, being the proportion which the sum assured by them (£500) bears to the total value: Finds that the defender has mortgaged the ‘Krishna’ for a sum exceeding her value, and is unable to give the pursuer an unencumbered transfer: Finds that the value of the vessel has depreciated to the extent of 20 per cent. by stranding, and that the value of the pursuers’ interest was equal to the sum insured, less 20 per cent. or £400, and decerns against the defender for payment of that sum, with interest at five per cent. from 24th May 1880, being the date of the settlement of the policy: Finds the pursuers entitled to expenses, &c.

“ Opinion. — This is an action by underwriters, or the representative of underwriters, against the owners of the ‘Krishna,’ claiming, in respect of the abandonment of certain shares in the vessel to them, the value represented by those shares, and a sum representing the interest of the underwriters in the freight. The claim arises in this way, that the ‘Krishna’ in the summer of 1879 was stranded off the coast of India, near Bombay, while on her voyage to that port, and thereupon the owners intimated to the underwriters a claim for a settlement on the footing of a constructive total loss. That claim was ultimately disputed by the underwriters, and an action against the underwriters, who are the pursuers in the present action, was brought in the High Court of Justice in England. Another action, as I understand, was instituted against the Scotch underwriters, who were the largest insurers of the vessel, in the Sheriff Court of Lanarkshire, which, after being appealed to this Court, ultimately went to the House of Lords. The result of these two actions was different. In the action instituted in England, Messrs Benjamin Whitworth & Brothers, the present pursuers, ultimately withdrew their defences, and paid the full sum claimed, as the receipt bears, in settlement of the action. The sum paid was £595, and it consisted of £500, being the sum insured, £75 which was claimed under the suing and labouring clause, and £20 of interest. It appears to me to be indisputable that a payment in full in settlement of an action is a payment subject to all the conditions under which the plaintiff or pursuer makes his claim, and therefore, that when Messrs Whitworth, for themselves and the other underwriters whom they represent, made payment in full, they did so as for a constructive total loss, and with the result that the vessel was abandoned to them to the extent of the share of its value which they had insured. But in the action instituted in Scotland the underwriters pressed the case to a decision, and it was found, in accordance with what appears to be the truth of the case, that this was not a constructive total loss but only a partial loss. The Sheriff's judgment was affirmed in this Court, and I think that in the House of Lords it was held that as it was a judgment in fact they could not review it. Now, in pursuance of this decree, the question of partial loss was put into the hands of average staters, the one party representing that the partial loss was twenty-five per cent. of the value of the ship, while the other party stated it at fifteen per cent. The mean of these two valuations was taken, and the underwriters paid twenty per cent. upon the sum which they had insured,—that is, to cover the cost of repairing

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the vessel, or restoring her, and the depreciation, if there was any, in her value. The sum insured by the present pursuers is only £500, out of a total value of £9000, and I have to consider in the first instance what were the rights of the pursuers when they accepted the abandonment and paid the sum which they had undertaken to pay by their policy. Their right, I apprehend, was to require the owners to execute a transfer to them which would enable them to be registered as owners to the extent of the interest which they had acquired in the vessel by abandonment. But they do not appear to have been very active in the prosecution of their right. A correspondence took place, I think, nearly two years after, which led to no satisfactory result, and then this action was instituted. If at the present time the ship had been, as she was when the insurance was effected, unencumbered, I think that the right of Messrs Whitworth and the parties whom they represent would have been now just what it was at the date of the settlement—a right to a transfer, and along with that, probably, an accounting for the freight that had been earned by the ship since she was put into proper repair. But before this action was brought, the owners effected a mortgage on the vessel to the extent of £13,000—a circumstance which was stated to me in evidence, and is not in dispute. The vessel is therefore mortgaged to an extent exceeding its value, and a transfer to the pursuers would not be productive of any benefit to them unless the mortgage was at the same time cleared off. If I had been informed by the shipowner that he intended to clear away the mortgage, and was willing after doing so to transfer the vessel to the extent required, probably I might have felt compelled to dismiss this action, as having been brought upon the assumption that the owner was not going to give a transfer. But it is plain that it would not be for the interests of the owner to displace a mortgage of £13,000 in order to enable him to settle a claim of £500; and accordingly it was explained by counsel that this was not contemplated, and that I was not to assume there was any intention in the meantime of paying off the mortg age. Then it appears to me that the case is in the position in which it would have been if Messrs Whitworth had in the first instance sued for a transfer, and the defender being unable to give an unencumbered transfer, had refused or been unable to implement the decree. The remedy of the pursuers would then have been to bring a new action for payment of damages, being the value of the share of the vessel which had been withheld from them; and when I am informed that there is no intention of giving an unencumbered transfer, I think it would be in the highest degree inconsistent and prejudicial that I should dismiss this action merely that an action leading to no result should be brought for a transfer, and then that we should have this action revived again. I think, on the contrary, that it being ascertained that the defender is not in a position to give an unencumbered transfer, the right of the pursuers has arisen to a pecuniary payment or compensation equal to the net value of their interest in the ship, and the only question is, what is that value? Now, there is not very much evidence as to the actual value of the vessel, but there is nothing to suggest that she was insured in excess of her real value, and I may therefore assume as a basis that she was worth £9000 when the insurances were effected. She was damaged by stranding, as has been ascertained by decree of this Court, followed by payment to the extent of 20 per cent. of her worth, and therefore in adjusting this pecuniary claim on the part of the underwriters who paid in full, I must make a deduction of 20 per cent. from the value of their share of the vessel—I mean that just as the shares which remained to the owner were diminished by 20 per cent. through the stranding—that being the sum that was made up to them—so with respect to this £500, which is one-eighteenth of the total value of the vessel, I must hold that the vessel was injured to the extent of 20 per cent. of that £500, and that her value to the pursuers was lessened in proportion. Their share was therefore worth, when abandoned, to them £400; I mean the share which they received by abandonment was £400 instead of £500, the difference being the measure of the injury which the vessel had sustained by stranding. Without entering into any more elaborate calculation, I am prepared to give decree for the £400, with interest, as representing the loss which the pursuers have sustained in consequence of the defender having failed to transfer certain shares of the vessel to them, in proportion to the interest which they had acquired in her by abandonment. Interest on this sum will run only from the date when the insurance money was paid—24th May 1880—because up to that time interest was running on both sides of the account. I also find the pursuers entitled to expenses.”

The defender reclaimed, and stated that he now tendered the share in the “Krishna” as at the date of the abandonment, which, in accordance with the view of the Lord Ordinary, was a sufficient answer to the action.

The pursuers argued that this tender came too late. They were not bound to accept such a tender, the result of which would be that they would have to bear the losses which depression of trade had caused the “Krishna.”

At advising—