Scottish Court of Session Decisions

In November 1882 A. M. Gillespie & Co., merchants in London, and James Howden & Co., engineers and steamship contractors, Glasgow, entered into a contract set forth in a minute of agreement, whereby the latter undertook to build for the former an iron screw-steamer of certain dimensions therein specified, all as described in specification signed in connection therewith and approved by Gillespie & Co., at the price of £27,000, to be paid by four instalments at certain specified stages of progress.

The specification relative to the above minute of agreement contained the following stipulation—“To carry 1800 tons dead weight, including coals, on 14 1 2 feet draught.” Nothing was said in the contract as to the ship's rate of speed.

In terms of this contract. Howden & Co., after having submitted to Gillespie & Co. a model which was approved of by them, built and delivered to Gillespie & Co. an iron screw-steamer known as the “Nanshan” of which they took delivery under reservation of all claims at their instance.

Thereafter Gillespie & Co. complained that the ship was short in carrying capacity and of less value than if she had been of contract carrying capacity. In January 1884 they raised this action in the Sheriff Court at Glasgow against Howden & Co. for payment of £7000 as damages, averring that the “Nanshan,” did not carry 1800 tons dead weight, including coal, on a draught of 14 1 2 feet, but only 1530 or thereabout on that draught.

The defenders averred in defence that the vessel had been constructed strictly in terms of the contract between the parties, and was as full in the lines, and had as large a cargo capacity, as was consistent with safety or efficiency. Had she been made fuller in the lines, or with a greater cargo capacity, she would have been unseaworthy and too expensive to propel.

The pursuers pleaded—“The pursuers having sustained loss to the amount sued for by the defenders' breach of contract founded on, are entitled to decree as craved, with interest and expenses.”

The defenders pleaded—“The pursuers having suffered no loss through the fault of the defenders, the latter should be assoilzied.”

Messrs Howden & Co. raised a counter action for £750 as the balance of the last instalment of the price of the “Nanshan” remaining unpaid to them, which they pleaded was resting-owing to them by Gillespie & Co. under the agreement.

Gillespie & Co. pleaded—“The said vessel being disconform to contract, and the defenders having thereby sustained loss and damage to a greater amount than the sum sued for, decree of absolvitor falls to be granted, with expenses.”

The Sheriff-Substitute ( Guthrie) conjoined the actions and appointed a proof.

It was proved that the “Nanshan” could not carry 1800 tons dead weight including coals on a draught of 14 1 2 feet, but had a shortage of carrying capacity more or less as estimated by the Sheriff-Substitute in his note quoted below. It was also proved by the evidence of engineers and shipbuilders that she was built as what is known as a “full boat,” and that had she been made to carry the stipulated amount on the stipulated draught she would require to have been made much fuller in the lines than she was, so as, in the words of one witness, an engineer, to “approach more nearly to the boss type.” It was also proved that in that case her speed would have been materially diminished, or that if it were to be kept as high as the speed she could steam at as actually built she would require to carry a greater quantity of coal, thus leaving less dead weight capacity for cargo, besides causing more expense for coal. If not, she would have required more powerful engines to drive her. The filling out of the lines would also have involved a greater weight of hull.

Howden & Co. led the evidence of shipbuilders to the effect that a vessel built as specified would not have been so good a seagoing ship as the one delivered, and that as built she was commercially more valuable than if she had been built according to the specification. One shipbuilder stated that he did not know of any proper seagoing ship of the specified capacity and draught.

The Sheriff-Substitute pronounced this interlocutor, finding in terms of the contract, and further as follows — [ After narrating the contract and the building of the ship] — “Finds that the screw-steamer so built and delivered does not carry 1800 tons dead weight on 14 1 2 feet draught in terms of the contract, and that the parties James Howden & Company are liable in damages to the parties A. M.

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Gillespie & Company: Assesses the damages at two thousand two hundred and fifty pounds sterling (£2250): In respect of the foregoing findings decerns against the parties James Howden & Company for one thousand five hundred pounds sterling (£1500) in the action against them, with interest, as craved; and in the action at their instance against the parties A. M. Gillespie & Company, assoilzies the defenders and decerns.”

“ Note.—There has been no controversy here as to certain questions which were raised and settled in Spencer & Company v. Dobie & Company, 1879, 7 R. 396; and the sole issues are (1) whether Messrs Howden & Company have failed to fulfil their contract; and if so (2) in what amount of damages they are liable.

I think that Messrs Howden & Company cannot successfully contend that the bargain to supply a steamer of the carrying capacity agreed for has been fulfilled. Nor was it very strenuously maintained that the alleged impossibility of building a steamer of the specified dimensions and with the carrying capacity required was such as to discharge or annul their obligation. It would indeed have been difficult to urge such a plea in the face of various authoritative decisions.

Holding it to be established that there is a deficiency of carrying capacity, the amount of loss to the shipowner is a question of degree. Taking the weight of the ship and engines at 1200 tons, there appears to be a short capacity of at least 250 tons. The purchasers in course of the proof have agreed to allow 50 tons for various increases of structural weight above the contract claimed by the contractors in their defences, and it seems to me probable that a jury would not fix the real deficiency at any figure far off 200 tons. I proposed, however, to take 180 tons as the shortage for the purposes of this case, in order to leave no doubt upon my mind as to the justice of my assessment. A good deal of evidence was adduced on the part of the purchasers to show how much they have lost by this breach of contract, and they have even attempted to claim an annuity on the ship's life to the amount of the earnings which they have lost. This, it humbly seems to me, though the evidence is not without its use in confirming the estimate of the damages, which may be otherwise reached, is not only a somewhat unreasonable but an inconvenient and hazardous way of assessing the loss. I prefer—and it is more according to the analogy of other kinds of claims of damages—to take as the measure of damages the depreciation of the steamer's saleable value by reason of the short carrying capacity, viz., £15 per ton on 180 tons, or £2700.

It is right, however, to allow the seller's deduction for the loss of speed which they would have suffered if the vessel had been built according to contract. Upon the pursuers' own evidence ( e.g. Mr Lawrie's) it appears that she would have lost considerably—the defenders seem to hold so much as to make her really not a seagoing ship. I take it that the loss of speed would have been very material, and that the earning power of the ship would thereby have been materially diminished, not only by loss of time but by having to carry coals for consumption during the longer voyage, displacing an equal weight of cargo. I take 30 tons as the quantity of coals so added, and of cargo so displaced; and, deducting £450 from £2700, assess the damages at £2250.”

Howden & Co. appealed, and argued — They admitted that the carrying capacity was not according to the contract, but the purchasers had suffered no damage thereby, but the reverse, for they had got a better article than they would have got had the contract been fulfilled. It was not disputed that the ship delivered was according to the model of which they had approved, and they could not now challenge it because the approval of the model was a subsequent condition superinduced on the original contract, and must rule if inconsistent with the original contract. Damage for breach of contract meant only that the party damnified must be kept indemnis; he was not entitled to make money out of it.

Replied for A. M. Gillespie & Co.—The builders undertook to make a ship on the lines given them which would fulfil the stipulations as to carrying capacity, and in doing anything else they were in breach of contract. The case was not altered by the submission and approval of the model. If they submitted a model which was incompatible with the contract they must themselves bear the prejudice arising therefrom. The contract and not the model must rule. If they undertook an impossible contract, it was at their own risk if damage were thereby caused to the opposite party. It was no answer to an action for breach of contract to say that the defender had made a contract which he found it impossible to execute— James v. St John's College, Oxford, November 18, 1870, L.R., 6 Q.B. 115; Thom v. Mayor and Corporation of London, February 17, 1876, L.R. App. Ca. 120.

At advising—