Scottish Court of Session Decisions

The London and Edinburgh Shipping Company, Limited, Leith, registered owners of the steamship “Fiona” of Leith, pursuers, brought an action against the Commissioners for Executing the Office of Lord High Admiral of the United Kingdom of Great Britain and Ireland, defenders, for payment of the sum of £2147, 4s. 11d., with interest from 25th October 1917 for hire of the steamship “Fiona,” which while in the defenders' service under a contract of hire stranded on 6th September 1917.

The defenders pleaded—“(1) The ‘Fiona’ not having been in His Majesty's employ since said date, September 7th, the defenders are entitled to absolvitor. (2) No hire being due or resting-owing by the defenders, they should be assoilzied from the conclusions hereof, with expenses. (3) The ‘Fiona,’ the subject of hire, having ceased to exist on September 7th, 1917, no hire was payable thereafter.”

On 12th March 1919 the Lord Ordinary ( Blackburn) allowed a proof; but in place thereof, on 14th May 1919 a joint minute of admissions for the parties was lodged.

The joint minute stated that the parties “admitted and hereby admit—1. That the letters produced in process, or the originals where copies only are produced, were written and dispatched by the parties by whom they bear to be written and dispatched of the date they respectively bear, and Were received by the parties to whom they bear to be addressed in ordinary course of post. 2. That No. 8 of process is the form of charter-party B referred to on record, upon the terms of which the s.s. ‘Fiona’ was chartered by the defenders. No form of charter-party was ever filled up and signed by the parties as applicable to the ‘Fiona.’ 3. That the date at which the ‘Fiona’ was placed at the disposal of the Admiralty was 27th October 1914. That during the currency of the said charter-party the officers and crew of the ‘Fiona’ were the servants and under sole control of the defenders. 4. That during the currency of the charter-party the ‘Fiona’ stranded on Louther Skerry Rocks on 6th September 1917, owing to a miscalculation of the navigating officer in regard to the tides. That no notice was given by the defenders to the pursuers of the said stranding other than that contained in the letter of 20th September and 25th October referred to on record. 5. That on 6th September an effort was made to put a salvage pump on board, but the heavy sea running prevented this being done. On the same day an attempt was made to tow the ‘Fiona’ off the rocks by the tugs ‘Alliance’ and ‘Labour,’ but this attempt was unsuccessful. 6. That on 7th September the ‘Fiona’ had canted over considerably to port, and appeared lower in the water than on the preceding day. She was more broadside to the reef, and was moving with the swell. No attempt at salvage or boarding was practicable owing to the heavy sea and the rush of water over the reef. 7. That on 8th September the scene of the wreck was visited by a party of officers and men, who, after waiting some hours, at 9·15 a.m. when the tide was slack succeeded in boarding her. It was found that the ship was flooded fore and aft, that it was impossible to place the salvage pumps or gear on board, and that under the conditions of wind and swell no steps could be taken to proceed with operations for the salvage of the ship although a number of tugs were on the spot and available. The boarding party succeeded in salving a certain amount of gear, such as gun sights, gun fittings, chronometers, and other effects. They were able to remain aboard one hour, when the state of the weather forced them to leave. On that day the tugs returned to Longhope, and all attempts to salve the vessel were abandoned. 8. That on 9th September a heavy sea was running and a strong wind blowing. The ship was again visited by a party of officers and men, who were only able to remain a quarter of an hour, as heavy seas were beginning to break right over her. 9. That it is uncertain whether the ‘Fiona’ could have been salved if the weather conditions had been favourable, but after 8th September salvage of the vessel was impossible, and no further attempt was made to salve her. The vessel was a total loss as at 9th September 1917. 10. That as and from that date the salvage operations were restricted to the armament on board of her belonging to the defenders. On 10th September no salvage work was done; on 11th September the ship was visited and boarded and a twelve-pounder gun salved; on 12th September the ship was visited but owing to bad weather no boarding was practicable; on 13th September the ship was visited, and a four-inch gun was salved with much difficulty; on 14th September the ship was visited, boarded, and some books salved; on 18th September the ship was visited, but owing to bad weather no boarding was practicable; on 29th September the ship was visited, and two shackles of cable, two lavatories, and two cowls were salved. On 30th October it was ascertained that the ‘Fiona’ had broken up during the previous night, leaving only one of her masts visible. 11. That no notice was given by the defenders to the pursuers that the salvage

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operations on the ‘Fiona’ had been abandoned until 25th October 1917, and that no notice was at any time given by the defenders to the pursuers that the ‘Fiona’ had been discharged from His Majesty's service or had ceased to be in His Majesty's employ. 12. That hire was paid by the defenders to the amount of £49,905, 11s. 10d., less a sum of £879, 5s. 6d. deducted by the defenders, as mentioned in the succeeding article. 13. That by warrant dated 9th May 1918 the defenders paid £40,470, 14s. 6d. under clause 7 of the charter-party in settlement of the loss of the vessel, but under deduction of said sum of £879, 5s. 6d., being the amount by which the payments made exceeded hire to 7th September 1917. No interest was paid upon the compensation moneys. 14, And further, that both parties hereby renounce probation.”

The form of charter-party B referred to in the joint minute contained, inter alia, the following clause—“1. The owners have let and the Admiralty have hired and taken to freight the good ship under mentioned, viz. … for service and employment on monthly hire from the day of 19 for the space of calendar months certain, and thenceforward, until the Admiralty shall cause notice to be given to the owners that she is discharged from His Majesty's Service, such notice to be given when the said ship is in port in.

The letters produced in process contained, inter alia, the following:—

Letter, Ministry of Shipping to pursuers.

“20th September 1917.

Gentlemen,—With reference to your letter dated 11th September respecting the present position of H.M.S. ‘Fiona,’ I have to acquaint you that this vessel is ashore, but efforts are now being made to salve her. A further communication will be made as soon as fuller details as to the possibility of her salvage are received.—I am, gentlemen, your obedient servant,—H. Griffin,

p. Director of Naval Sea Transport.

The London and Edinburgh Shipping Company, Limited, 8 and 9 Commercial Street, Leith.”

Letter, Ministry of Shipping to pursuers.

25th October 1917.

Gentlemen,—With further reference to your letter dated 11th September and my letter of the 20th September in answer thereto respecting the present position of H.M.S. ‘Fiona,’ I regret to inform you that all efforts to salve this vessel have proved fruitless and salvage operations accordingly have been suspended. As this vessel was abandoned on the 7th September, it is proposed to regard this date as her last day on hire. I have to request that you will forward your claim for compensation to the Accountant General, Ministry of Shipping (Room 24).—I am, gentlemen, your obedient servant,— B. A. Kemball-Cook,

Director of Naval Sea Transport.

The London and Edinburgh Shipping Company, Limited, 8 and 9 Commercial Street, Leith.”

On 31st May 1919 the Lord Ordinary decerned against the defenders in terms of the conclusions of the summons.

Opinion.—“In my previous note, after the discussion in procedure roll, I stated that the pursuers' right to freight, for which they sue, must depend upon the date when the contract between them and the defenders was terminated, and I indicated an opinion that the contract might only terminate upon the date when the ship was actually destroyed, and not upon the date when she became a ‘total loss’ within the meaning of a contract of marine insurance. I did not consider it necessary to say more until the facts had been ascertained as to the position of matters from and after the 6th of September, when the ship stranded. Instead of going to proof, the parties have adjusted a minute of admissions, which I do not regard as entirely satisfactory in enabling me to decide the case; but as they have renounced further probation I must dispose of it upon such admissions as they have made.

In order to ascertain when the contract between the parties terminated it is necessary in the first place to consider its terms. At the discussion in procedure roll it was stated that the form of charter-party B was an unfilled-up form of the charter-party under which the ‘Fiona’ was requisitioned, and that the filled-up form would be produced. It now appears from the minute of admissions that this form of charter-party was neither filled up nor signed, but it is admitted in the minute that No. 8 of process as it stands ‘is the form of charter-party upon the terms of which the s.s. “Fiona” was chartered by the defenders.’ It is not stated in the minute, but was admitted at the bar, that the rate of hire left blank in clause 5 of the charter-party was fixed by a board of arbitration in terms of the Admiralty letter of 27th October 1914, which contained the intimation to the pursuers that their vessel was to be requisitioned. The above letter refers to an ‘accompanying tender form’ to be filled up and returned to the Director of Transports. This tender form has not been produced, and the case is presented by both parties on the footing that [the form of charter-party] constitutes the terms of the contract between the parties and must be construed as it stands.

The nature of the contract is disclosed by the first four and the seventh clauses of the charter-party, from which it appears that the defenders hired the ship for ‘service and employment’ until they shall cause notice to be given to the owners that she is discharged from service. It is provided that such notice is to be given when the ship is in a port the name of which is left blank. It is not necessary to consider the questions which might have arisen from this failure to name the port. I think the proviso sufficiently indicates the intention of parties that termination of the contract by delivery of the ship could only be accomplished at a port where the defenders could reasonably be expected to accept delivery. It is also agreed that the defenders ‘may at any time while the ship … is … on hire … upon giving notice to the owners of their intention' purchase the vessel at a price which again is left blank. I do not think that the

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omission of the price has the effect of cancelling the power to purchase, and I construe clause 2 of the charter-party as entitling the defenders to terminate the contract at any moment by giving notice of their intention to purchase, at a price to be afterwards fixed. The same ‘exigencies of the case’ referred to in the defenders' letter of 27th October 1914 as precluding prior arrangement as to the rate of hire would apply to the fixing of the price in the event of purchase. The uses to which the defenders might put the vessel are unrestricted. She was to be at their absolute disposal and control, and they had power to alter her outfit and machinery in any way they might think fit, provided only that she should be restored to the owners in the same condition as she was at the date of requisition. Finally the defenders undertook all risk and expense of the ship during the continuance of her service under the charter-party.

Although the form of contract is a charter-party, and although the hire paid is designated as freight and was to be calculated at a rate per ton on the ship's tonnage, the nature of the contract differs toto ccelo from the ordinary commercial contract of carriage which one usually finds embodied in a charter-party. In my judgment the contract, to quote from Carver on Carriage by Sea, section 112, ‘is really one of letting the ship, and, subject to express terms of the charter-party, the liabilities of the ship owner and the charterer to one another are to be determined by the law which relates to the hiring of chattels and not by reference to the liabilities of carriers and shippers.’

Now a contract of hiring of a chattel or specific subject gives to the lessee the use and enjoyment of the subject hired while the property remains with the owner, and where the contract has been entered into between free agents it may readily be construed as importing an implied condition that the lessee is only to be bound by its terms so long as the subject hired is capable of such use and enjoyment as was in contemplation of the parties when the contract was entered into. In a contract between free agents for the hire of a ship, whether for commercial or pleasure purposes, I think it might readily be implied that if through no fault of the lessee the ship became unavailable for such further use and enjoyment as a ship is ordinarily capable of, the contract of hiring would be thereby terminated. An illustration of the application of such an implied condition is to be found in the case of Scottish Navigation Company v. Souter & Company ( 1917, 1 K.B. 222), and I refer to the opinion of L.J. Swinton Eady at pp. 236–7. I do not, however, think it is possible to imply any such condition in connection with the charter-party now under consideration. The pursuers were not free agents in entering into the contract, but were acting under a letter of requisition. The defenders, although under the charter-party nominally lessees of the ship, acquired rights over and obligations towards her which in many respects are more akin to those of an owner than those of a lessee. They could alter her structure and make unrestricted use of her, and they took all risk of the vessel upon themselves. That the freight bore no direct relation to the beneficial use and enjoyment of the ship appears to follow from the fact that the lessees would be bound to pay freight throughout the periods during which the ship might be undergoing alterations or repairs, when she would be incapable of beneficial use or enjoyment. If at any time the lessees considered the payment of freight inconsistent with the use being made by them of the ship, they had their own remedy in their power to purchase, which would at once terminate the contract and constitute them owners in title as well as in substance. The mere fact that the lessees took upon themselves the risk of the vessel would, in my opinion, be enough to deprive them of their right at common law to abatement of hire if the ship had been partially destroyed by accident ( 1 Bell's Com., 482). Accordingly I cannot read into the contract any such implied condition as I have referred to, and in my judgment it must be construed as binding upon the lessees so long as the ship remained in form and substance a ship and the contract itself had not otherwise been terminated.

But even if I thought any such implied condition could be read into this contract, I should have held that its application was excluded under the circumstances of the present case. It is admitted that the ‘Fiona’ stranded on the Skerry Rocks on 6th September 1917 owing to a miscalculation of the navigating officer in regard to the tides. I hold this to be an admission of fault on the part of the defenders, and in my opinion a contract of hiring cannot be held to be terminated because the lessee has temporarily lost the use of the subject, where the loss of use is due to his own fault and the subject still answers to the description of what was originally hired out. There can be no doubt that total destruction of the subject hired will terminate the contract of hire although it may create other liabilities between the parties, and in my opinion the question upon which the decision in this case depends is the punctum temporis at which the ‘Fiona’ was destroyed and ceased to be a ship. On this question the decision in the case of Barr v. Gibson ( 1838, 3 Meeson & Welsby, 390) appears to me to be much in point, although the contract in that case related to the sale and not to the hire of a ship. At the date when the contract was completed, 21st October, the ship was on a voyage. It subsequently transpired that on the 13th October she had gone aground in a storm on the coast of the Prince of Wales Island, and had been abandoned by the crew, who, however, subsequently had access to her. Had the weather been favourable she might have been got off, but this proved impossible, and the captain, after calling a survey, had sold her on the 24th October for £10. The price paid under the contract of sale was £4200, and the Court held that the purchaser was bound by the

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bargain, as at the date of the contract the ship was capable of being transferred. In giving judgment Baron Parke said—‘We are of opinion that upon the evidence given on the trial the ship did continue to be capable of being transferred as such at the date of the conveyance, though she might be totally lost within the meaning of a contract of insurance, which proceeds upon a different principle and may take place with less of damage to the ship itself than occurred in this case. It proceeds upon the loss of the subject insured for beneficial purposes. Here the subject of the transfer had the form and structure of a ship, although on shore with the possibility though not the probability of being got off. She was still a ship though at the time incapable of being, from the want of local conveniences and facilities, beneficially employed as such.’

It may be conceded that the above decision would have no application to an ordinary contract of hiring of a ship under which delivery of the ship had not been given to the lessees before she stranded. In such a case the owner would in my opinion be bound to deliver a ship capable of beneficial use and enjoyment, and under the circumstances would be unable to do so. But if I am right in the construction which I have placed on the present contract the considerations are entirely different, and the only question is whether the ship after she stranded was still a ship though at the time incapable of being beneficially employed as such. On this question the dicta of Baron Parke are directly in point, and the decision in the case establishes that a ship may continue to be a ship after she has become a total loss within the meaning of a contract of insurance. In allowing a proof I directed attention to the distinction between ‘total loss’ under a policy and the total destruction of the ship, as there were no averments on record to indicate when the latter event occurred. The minute of admissions is not much more specific on the subject. The ship stranded on 6th September 1917, and it is admitted (article 9) that ‘it is uncertain whether the “Fiona” could have been salved if the weather conditions had been favourable, but after 8th September salvage of the vessel was impossible and no further attempt was made to salve her. The vessel was a total loss as at 9th September 1917.’ It is right to say that when the proof was called the minute had not been finally adjusted, and the Dean of Faculty for the pursuers stated that his difficulty in agreeing to the minute lay in this article and in the use of the expression ‘total loss,’ which he considered cryptic when read along with the statements in the following article of the minute of admissions. The Solicitor-General, however, for the defenders, refused to alter the terms of article 9, and the Dean finally accepted the minute, reserving his right to construe the meaning of ‘total loss’ by reference to article 10 of the minute. Now I think the admissions in article 10 make it clear that the ship continued to be a ship for some time after the 9th September. She was ‘visited and boarded’ on the 11th, and a twelve-pounder gun was salved. She was visited again on the 11th and 12th, and on the latter date a four-inch gun was salved. On the 14th she was visited, boarded, and some books salved, and on the 18th and 29th she was visited and two shackles of cable, two lavatories, and two couls were salved. The minute is silent as to her condition between 29th September and 30th October, but it is stated that on the latter date ‘it was ascertained that the “Fiona” had broken up during the previous night.’ These admissions appear to me to be quite inconsistent with what is requisite, according to the decision in Barr v. Gibson, to establish the total destruction of the ship on the 9th September. Accordingly the first conclusion I reach is that the words ‘total loss’ in article 9 of the minute are used in the same sense as in reference to a contract of insurance. I rather think that the defenders present their case on the footing that what would amount to total loss under a contract of indemnity is sufficient to terminate the contract of hire, and that this is the meaning of their third plea-in-law. They did not maintain in argument that the ship had ceased to be a ship on the 9th September, but only that in the event of its proving thereafter impossible to salve her the contract was terminated as from that date. I have already indicated that in my opinion the termination of the contract depends upon the destruction of the ship, and I have now to consider whether it is possible to ascertain with any certainty from the established facts at what date this took place. In addition to the admissions in articles 9 and 10 of the minute already referred to there are the two letters addressed to the pursuers dated 20th September and 25th October, and narrated in the condescendence, which throw some light on the matter. That of 20th September announces that the ‘“Fiona” is ashore but efforts are now being made to salve her.’ In their answers the defenders state that this letter was written under a misapprehension, but there is no admission of this averment in the minute unless it be in article 9, which, however, does not amount to more than this, that it was the weather conditions alone which rendered salvage of the vessel impossible after 8th September. The letter of 25th October narrates ‘that all efforts to salve this vessel have proved fruitless, and salvage operations accordingly have been suspended.’ It further appears from articles 12 and 13 of the minute that the defenders had actually paid £879, 5s. 6d. of hire for the ship for an undisclosed period subsequent to 7th September, and that this sum was deducted from the amount due for the loss of the vessel under clause 7 of the charter-party. As the hire was, in terms of clause 6 of the charter-party, paid monthly on the 25th of each month, I think it may be assumed that the defenders did in fact pay the hire up to the 25th of September, and that it was only an afterthought that they maintained that the contract had been terminated by the stranding of the vessel, and that they were entitled to repetition

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of the hire paid subsequent to 7th September.

Under these circumstances I do not think one can reach any more definite conclusion than that the ship still existed as a ship on 29th September, but had ceased to do so on 30th October. But the onus of proving that the contract had been terminated and that they were no longer liable for hire rests upon the defenders, and as they have produced no evidence that the ship was not still a ship on 25th October I see no alternative to finding that the pursuers are entitled to freight down to that date, which is what they sue for. I reach this conclusion with some reluctance, as it is obvious that the pursuers have already been handsomely paid for [the use and loss of their vessel, and have received a very much larger sum than they would have done had she been purchased at the first instead of. being chartered for freight. But I can only give effect to what I think is the legal meaning of the contract that was made with them.

There is only one other matter I need refer to. In my former note I expressed the opinion that the charter-party provided for the pro rata payment of freight after the expiry of three months, which I was informed would prove to be the number of months inserted in the first clause of the charter-party as limiting the period of payment of freight by the month. Pursuers' counsel argued that I should reconsider this opinion, and maintained that the failure to fill in the blank in the first clause left the defenders bound to pay a full month's freight for the use of the vessel for any part of a month so long as the contract subsisted. I still adhere to my former opinion and think that the provisions of clause 6 of the charter-party which provide that sums should be paid to account of the freight at the completion of each month's service, and that on the termination of the contract ‘the balance of hire’ should be paid, indicate the understanding of the parties that on the termination of the contract there might be a balance due of less than a full month's freight. This question only arises if the contract be held to terminate at any date other than the 25th September or 25th October. Accordingly, had I been able to hold that the contract of hire was terminated when the ship became a ‘total loss’ within what I take to be the meaning of article 9 of the minute of admissions, I should have found the pursuers only entitled to freight for the two days between 7th and 9th September and not for the whole of that month.”

The defenders reclaimed, and argued—Hire was not due if there was either actual physical or constructive total loss. Hire was only due as long as the ship was in existence, and having ceased to exist it was no longer a subject of hire. The Lord Ordinary had held that it was enough if the subject of hire was in form and substance a ship, but she must be capable of hire before she could be subject to payment of hire. Barr v. Gibson, 1838, 3 M. & W. 390, founded on by the Lord Ordinary, was a case of warranty between buyer and seller, and had no application to the present circumstances. There was no peculiarity in the meaning of total loss in a contract of insurance. The provision as to notice only applied where the ship was discharged and had reached port. The date of loss and not the date of notice determined the liability to pay.

Argued for the pursuers and respondents—The destruction of an article without the fault of the lessee would terminate the hire, but the onus was on the hirer to show that it had perished without his fault—Stair, i, 15, 2; Taylor v. Caldwell, 1863, 3 B. & S. 826. When the subject of hire was destroyed through the fault of the lessee, then notice was necessary to terminate the contract—Ersk. Inst. iii, 3, 14–15; Bell's Prins., secs. 141, 142, and 145; Story on Bailments, secs, 414 and 418: Pothier, Contrat de Louage, secs. 308 and 309. In the present case such fault was made matter of admission, and notice was therefore necessary, but no such notice was given till 29th October. There was no undertaking on the part of the lessors that the vessel should be seaworthy, and she might have been used by the Admiralty for any purpose. The contract in the present case was one of demise, and not merely for the purpose of navigation. Barr v. Gibson, cit. sup., was in point. The question was whether the vessel was an entity called a ship, capable of beneficial enjoyment, and not whether there was total loss in the sense of a contract of marine insurance. When the subject perished through the fault of the lessee, the lessee was liable for the hire and for the value of the subject at the date of intimation of conclusion of his contract of hire. When the lessee refused to pay, the contract was terminated by the breach, and gave rise to (1) damages for refusal to pay the hire, and (2) damages for failure to re-deliver the subject of hire. Reference was also made to Arnould on Marine Insurance (9th ed.), sec. 1045, and to Carver on Carriage by Sea (6th ed.), sec. 112.

At advising—