Scottish Court of Session Decisions

This was an action brought in the Sheriff Court at Greenock by W. S. Sibson and Peter Kerr, merchants, Portland, Oregon, in the United States of America, trading under the firm of Sibson & Kerr, and Dewar & Webb, commission agents, London, their mandatories, against the Ship “Barcraig” Company, Limited, Glasgow, and Thomas Wylie Hamilton, shipowner, Port-Glasgow, the liquidator of the said company. The pursuers craved decree for £239, 1s. 1d. as commission alleged to be due to them in terms of a charter-party dated 14th May 1895 entered into between Messrs Sibson & Kerr and the owners of the “Barcraig.” The following were the material clauses of the charter-party:—“This charter-party this day made and concluded upon between Messrs Hamilton, Harvey & Co., owners of the ‘Barcraig,’ steel, of Glasgow,of the measurement of 2061 tons register, or thereabouts, now on passage New York to Shanghai, and with liberty to take not exceeding 1500 tons cargo thence to loading port for owners' benefit, of the first part, and Messrs Sibson & Kerr, of Portland, Oregon, of the second part. The party of the first part agrees on the chartering to arrive of the whole of the said vessel (with the exception of the deck, cabin, and the necessary room for the crew, and the stowage of provisions, sails, and cables), or sufficient room for the cargo hereinafter mentioned, unto the said parties of the second part, for a voyage as follows:—The said vessel being tight, staunch, strong, and in every way fitted and provided for said voyage, shall, after discharge of inward cargo or ballast, be made ready, and shall receive on board at Portland, Oregon, and/or other loading-places as hereinafter provided, a full and complete cargo of wheat in sacks.… which the said parties of the second part bind themselves to ship, and being so loaded shall, upon receiving orders from the charterers, therewith proceed to Queenstown or Falmouth for orders, to discharge at a safe port (as instructed by charterers' agents) in the United Kingdom or on the Continent between Havre and Hamburg, both included, and there deliver the same as hereinafter provided, on being paid freight. If discharged at a port in the United Kingdom, as above, or at Havre, Antwerp, or Dunkirk, at the rate of 35s., say thirty-five shillings sterling. If discharged at a port on the Continent, as above, other than Havre, Antwerp, or Dunkirk, at the rate of 40s., say forty shillings sterling. If discharged at Hamburg at the rate of 37s., say thirty-seven shillings. Freight payable in cash without discount, on true and faithful delivery of cargo at port of discharge (if on the Continent, at current rates of exchange on London) per ton of 2240 lbs. English gross weight, delivered. Charterers to have the option of ordering vessel from port of loading direct to any safe port in the United Kingdom or on the Continent as above, in which case freight to be one shilling and threepence less per like ton.… Vessel to be properly stowed and dunnaged; and certificate thereof, and of good general condition, draft of water and ventilation, to be furnished to charterers from charterers' competent surveyor. If the captain or charterers be dissatified with the certificate given, the matter in dispute shall at once be submitted to two other regular port marine surveyors, one chosen by the captain and one by the charterers, who, if they cannot agree, shall call upon a third surveyor; a majority decision and certificate shall determine the matter in dispute, and the cost of said special survey shall be borne by the party against whom said decision may be rendered. Should the vessel fail to pass a satisfactory preliminary survey, or in case of submission to arbitration should the decision be against the vessel, or should she be detained more than ten days for repairs, this charter to be void at charterers' option, such option to be declared at

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the expiry of said ten days.… After discharge of inward cargo and/or ballast has been finally completed, vessel to proceed to such usual loading-place as may be ordered by charterers at Portland and/or Astoria and/or loading—places in the Columbia and/or Williamette rivers, and there receive the cargo in manner customary alongside afloat and/or from wharf. Charterers to have the privilege of additional moves, they paying towage.… Charterers' liability to cease on completion of loading; owners to have a lien on the cargo for all freight, dead freight, and demurrage under this charter-party.… Loading days not to commence before 1 st December 1895 except at charterers' option. Should the vessel fail to arrive at Portland, Oregon, on or before six o'clock p.m. on or before 31st January 1896, charterers to have the option of cancelling or maintaining this charter on arrival of vessel.… A commission of three and three-quarters per cent. shall be paid to charterers on the estimated gross freight in U.S. gold coin (at the exchange of 48 pence) on the completion of loading, or should vessel be lost.”

The pursuers narrated the clause as to commission last quoted, and further averred (Cond. 3)—“The vessel was lost before reaching the port of loading, and a commission accordingly became due to pursuers under the above-narrated provisions of the charter-party.” The defenders answered (Ans. 3:—“Admitted that the ‘Barcraig’ was lost on the passage from New York to Shanghai, never having been heard of after leaving New York. Quoad ultra denied, and explained that the vessel having been lost as aforesaid, the said commission sued for is not due.”

The pursuers pleaded—“Defenders being due and owing to pursuers the sum sued for as commission in terms of charter-party, as condescended on, pursuers are entitled to decree as craved.”

The defenders pleaded, inter alia—“(1) The loss of the vessel having rendered fulfilment of the charter-party by either of the parties thereto impossible, its whole provisions were cancelled, and no commission is due to the pursuers. (2) The ‘Barcraig’ having been lost before arrival at the loading port, no commission is in any case due to the pursuers under said charter-party.”

On 19th June 1896 the Sheriff-Substitute ( Henderson Begg) issued the following interlocutor—“Finds in fact (1) that by the said charter-party the defenders’ company agreed ‘on the chartering to arrive’ of their vessel, the ‘Barcraig,’ therein described as then ‘on passage New York to Shanghai’ to the pursuers, for a voyage as follows, viz., that the said vessel should, after discharge of inward cargo or ballast, be made ready and receive on board at Portland, Oregon, or other loading-place in the United States as therein provided, a cargo of wheat, and therewith proceed to Queenstown or Falmouth for orders to discharge at a safe port in the United Kingdom, or otherwise as therein expressed, and then deliver the said cargo on being paid freight, and, inter alia, to pay a commission of three and three-quarters per cent. to the pursuers on the estimated gross freight in U.S. gold coin (at the exchange of 48 pence) ‘on the completion of loading, or should vessel be lost’; and (2) that the said vessel never reached her port of loading, having been lost on her said passage from New York to Shanghai: Finds in law that, on a sound construction of the said charter-party, the defenders are not in these circumstances bound to pay the said commission to the pursuers: Therefore assoilzies the defenders from the prayer of the petition: Finds them entitled to the expenses of process,” &c.

Note.—“The preliminary words ‘on the chartering to arrive’ seem to me to constitute a condition-precedent to the whole obligations contained in the charter-party. The chartering which the parties thus referred to had not arrived at the execution of the document, but was ‘to arrive’ at some future time. At the date of execution the vessel was on a voyage from New York to Shanghai, so that necessarily a considerable time must elapse before she could be placed in any way at the disposal of the charterers at Portland or other loading-place in the United States. It thus seems clear enough that the chartering was not ‘to arrive’ till the vessel should be so placed at the disposal of the charterers, and in point of fact it never did arrive on account of the loss of the vessel on her voyage from New York to Shanghai. In these circumstances it is indisputable that the ordinary obligations contained in the charter-party are inoperative. The pursuers, however, maintain that an exception must be made of the clause on which they found their present claim, seeing that it specially provides for the case of the vessel being lost. Now, I quite agree that effect must be given to the words ‘or should ‘vessel be lost,’ and that, having regard to the collocation in which they occur, they must refer to the loss of the vessel in some period of time before the completion of loading. But the clause is silent as to the length backwards of such period of time, so that the question comes to be which of two possible constructions is to be adopted, viz., the pursuers’ construction that the period referred to runs from the date of the execution of the contract, or the defenders’ construction that it runs from the date when the vessel should be placed at the charterers’ disposal. Now, after giving this question careful consideration, I prefer the defenders’ construction as most consonant with the meaning of the contract as a whole, while giving sufficient meaning and effect to the words ‘or should vessel be lost.’ Besides, if the clause is ambiguous it should be read contra proferentem.

“Further, I fail to see why the parties should have intended this single clause to be operative in the circumstances which have actually occurred. The commission referred to is not a brokerage payable to an intermediary for introducing the parties to each other, or for procuring the contract, nor is it liquidate damages for failure to

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supply a vessel to the charterers. Prom the mode in which the amount falls to be calculated, the commission seems to be of the nature of a discount or deduction from freight, though not contingent on the freight being payable. But in whatever light it may be regarded, I do not see that, in the circumstances which have occurred, the pursuers have done anything to earn it.

There seem to be no decisions directly in point, but some light is thrown on the construction to be put on the words ‘on chartering to arrive,’ by the cases with reference to the sale of goods ‘on arrival,’ mentioned in Benjamin on Sale, 4th edition, pp. 565 and 566, Bell's Com. (N. E.) i. 470, and Bell's Prin. sec. 108.”

The pursuers appealed to the Sheriff ( Cheyne), who on 11th July issued the following interlocutor:—“The Sheriff having advised the process, recals the interlocutor of the Sheriff-Substitute of date 19th June last: Finds that on a sound construction of the charter-party founded on, and the vessel therein mentioned having admittedly been lost after the date of the execution thereof, the defenders are bound to pay to the pursuers a commission of three and three-quarters per cent. on the estimated gross freight that would have been payable had the contract been performed, and parties being at issue as to the amount of said commission, remits the cause to the Sheriff-Substitute with a view to this being ascertained, and for such further procedure as may be necessary.”

Note.—“The construction of the clause in question which the Sheriff-Substitute has adopted, though unquestionably a possible one, strikes me as being a forced and unnatural one. It is no doubt true that under the terms of the charter-party the nonarrival of the vessel at Portland by a certain date relieved the charterers (in their option) from the obligation to supply a cargo, but it does not follow that her arrival at Portland was a condition-precedent of the whole stipulations of the charter-party, and in my opinion the particular stipulation on which the pursuers found is an independent and separable covenant. The commission there referred to is plainly in lieu of brokerage; the consideration for it was the execution of the contract; and this being its nature, I find it more natural and reasonable to suppose that, while the parties saw fit to stipulate that except in the case of an earlier loss of the vessel it should not be payable till the completion of loading, they contemplated and meant to provide for its payment in any event, than to suppose that they meant the defenders' liability for it to depend on the arrival of the vessel at Portland, and intended by the adjection of the words ‘or should vessel be lost’ to provide for the contingency—which is hardly likely to have been in their view—of the vessel's loss in port between the time she was ready to receive cargo and the time when the loading was finished.

The agents stated at the discussion that, in the event of my arriving at a conclusion adverse to the defenders upon the construction of the charter-party, they expected to be able to adjust between themselves the amount to be decerned for, and suggested that in that event the case should be simply remitted to the Sheriff-Substitute.”

Thereafter a proof was allowed, but the parties ultimately lodged a joint-minute of admissions by which they agreed to admit “… ( Second) That if the pursuers were entitled to commission under the charter the amount of said commission was reasonably estimated at £225, 16s., and had the vessel been loaded under said charter-party in ordinary course the loading would have been completed by 13th February 1896. ( Third) That the ship “Barcraig” was at the time of making said charter-party on a passage from New York to Shanghai (from which latter port she was to proceed to the loading-place as provided in said charter-party), and that she was lost during said passage, never having been heard of after leaving New York on or about 25th April 1895. The ship's voyage would in ordinary course be via the Cape of Good Hope, and she would in ordinary course have arrived at Shanghai in or about September 1895. In respect of which admissions they further agreed to renounce probation.”

By interlocutor dated 23rd September the Sheriff-Substitute “allowed the joint-minute to be received, and in respect thereof discharged the order for proof; and further, in respect thereof, and of the interlocutor of the Sheriff dated 11th July 1896, ordained the defenders to pay to the pursuers the sum of £225, 16s. sterling, with interest thereon as prayed for.”

The defenders appealed to the Second Division of the Court of Session, and argued—The charter-party must be construed as one contract. All its clauses must be considered together, and the interpretation most consistent with the document as a whole must be preferred. (1) The ship was lost on the voyage from NewYork to Shanghai, the exact date being unknown. The subject-matter of the contract was the ship, and it lay upon the pursuers to show that the subject-matter of the contract was in existence at the date of the charter. If it was not, then both parties were under a mistake in fact as to the existence of the subject-matter of the contract when the contract was entered into, and the contract was consequently void—Pollock on Contracts, 6th ed. 470; Couturier v. Hastie, June 27, 1856, 5 H.L.C. 673; Emerson's Case, June 30, 1866, L.R., 1 Ch. 433, as explained in Paine v. Hutchinson, March 17, 1868, L.R., 3 Ch. 388, per Page Wood, L.-J., at page 391. (2) The expression “chartering to arrive of the whole of the said vessel” showed that the arrival of the ship at the port of loading was a condition-precedent to the contract coming into operation at all —Johnson v. Macdonald, February 10, 1840, 9 M. & W. 600. (3) The expression “or should vessel be lost” referred to the contingency of the vessel being lost after she reached Portland but before the completion of loading. This was not a remote or unlikely contingency,

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as the vessel might have been ordered under the charter from one port of loading to another, and in that case would have been exposed to the dangers of river navigation. (4) The amount of commission due could not be estimated till the port of destination was declared, as the rate of freight differed for different ports of destination.

Argued for pursuers—The clause of the charter-party founded on was a separate and separable contract for commission or brokerage. The other clauses referred to by the defenders could not affect the interpretation of this clause. It made no difference that the brokers were also charterers. The existence of the ship was not a condition-precedent to the performance of the contract of brokerage. The cases quoted by the defenders on this point were all cases of sale and had no bearing upon the present. [Lord Young—How can this be a contract for payment of commission when the percentage is payable to the charterers themselves? Is it not just a stipulation for a reduction on the nominal amount of freight due?] What was agreed upon was that the charterers were to get a commission, which was not to be payable till the ship was loaded, but on the other hand, that the payment was not to be contingent on sea risks, and that therefore it was to be payable if the vessel was lost before completion of loading. It was the same as the expression “lost or not lost” in a policy of marine insurance. As to the difficulty about the amount due it was settled that a shipbroker was entitled to his commission calculated on the freight, without waiting till the value of the freight, if contingent, was determined, and the amount due to him was a jury question—Maclachlan on Shipping, 4th ed. 198; Hill v. Kitching, June 8, 1846, 3C.B. 299. Moreover, here the question of amount was set at rest by the minute of admissions. The interpretation of the expression “or should vessel be lost” proposed by the defenders was strained and unnatural. The clauses as to arrival before 31st January and the ship failing to pass survey could not be founded on to curtail the rights of the charterers. The former could have no relation to the commission clause, for if the vessel had arrived late, and the charterers had refused to load, no commission would have been due, the loading not being completed and the vessel not being lost, and if the vessel were lost, then there was no need to cancel the charter under that clause.