Charles Edward Pollock Frederic Philip Maude.

Compendium of the law of merchant shipping online

. (page 48 of 101)
Online LibraryCharles Edward Pollock Frederic Philip MaudeCompendium of the law of merchant shipping → online text (page 48 of 101)
Font size
QR-code for this ebook


the risk is entire, and has once commenced, there can be no
apportionment or return of the premium; although it be esti-
mated, and the risk depend upon, the nature and length of the
voyage (y). Thus, where a ship was insured " at and from Lon-
don to any port or ports for twelve months, at £9 per cent.,
warranted free from capture," and the ship was taken within
two months from her sailing, the Court held that the assured
were not entitled to a return of any part of the premium (r).
So, if the insurance is ''at and from" a port, and the ship is
seaworthy for lying in harbour, but when she sails on the voyage
is unseaworthy/or the voyage, the assured is not entitled to a
return of the premium, for the risk has attached (s). For the
same reason the premium is not returnable where a deviation
takes place after the commencement of the voyage (0, even
where the insurance is on freight as well as ship, and the devia-
tion occurs before the goods are taken on board (u).

Where the assured has no interest in the property insured. Where there ia
and effects the insurance without fraud, the premium is return- ghort^fntere^t
able, for the underwriters could not have been called upon to
pay in case a loss had happened. Thus, where captors acting
bond fide insured a prize in which, as it afterwards appeared,
the Crown alone was interested, it was held that the premium
must be returned (x). Where, however, the risk has been run,
and the ship has arrived in safety, the premium cannot be
recovered back by reason of a mere defect in the title of the

(p) Stevenson v. Snow, 8 Burr. 1237. reckoned at so much per month, hut

See alio Meyer v. Gregson, 2 Park on that circumstance was held to make no

Ins. 588 ; Rothwell v. Cooket 1 B. & P. difference. See also Bermon y. Wood^

172. hridget 2 Doug. 781.

(q) See the judgment of Lord Mans- («) Atmen y. Woodman, 8 Taunt. 299.

field in Tyrie v. Fletcher, 2 Cowp. 668, See also Motes v. Pratt, 4 Camp. 297.
and Boehm ▼. BeU, 8 T. R. 154. (/) Tait ▼. Levi, 14 East, 481.

(r) Tyriey.Fleicher,2Co9m,666, See (i») Moses v. Pratt, ubi supra. The

also Loraine v. Thomlinson, 2 Doug. 585. policy was a valued one.
In the latter case the premium was (x) Routh y. Thompson, 11 Eaat, 428.



Digitized by



Google



382 INSURANCE.

assured. Thus where, on an insurance of a ship and freight^
the vessel, after her safe return and the earning of the frdght,
was seized under an Admiralty warrant issued at the suit of a
person who claimed her and the freight, as the registered owner
in this country, it was held that no return of the premium could
be claimed (y).

It follows, from an application of the same principle, that in
cases of short interesty or of over insurance or double insurance^
the underwriters are bound, to the extent of the over insurance,
to return the premium ; for no risk is incurred by them beyond
the value of the property which is actually hazarded. Thus,
where part only of the goods insured is shipped, the interest is
said to be short, and a proportionate part of the premium is
returnable (z). So, if profits on a certain amount of goods are
insured, and only a part of them is shipped, a proportionate
part of the premium must be restored for short profits (a).

Five policies of insurance were effected on the 12th of April
on a cargo of cotton then at sea, and on the 13th six policies more
were bond fide effected at a lower premium. The amount in-
sured by the two sets of policies together exceeded the value of
the cotton, but the amount of the first five did not. It was
held, that the assured were entitled to a return of the premium
to the extent of the over insurance, but that it must be made
rateably on the policies effected on the 13th, and on these only,
since the underwriters of those effected on the 12th had in-
curred, although only for a short time, a risk to the extent of
the whole amount insured by them (J).

Where the insurance, however, is by a valued policy, the
underwriters are not bound, if the goods intended to be covered
by the policy are shipped, to return any part of the premium on
the ground that the specified value exceeds the real value of the
cargo (c).

In cases of double insurance (rf), a rateable return of the pre-
mium must be made (e).

Where there is The premium is not returnable, even although the risk never

fraud or ille-

e^'^^^^y* (y) AfCuUoch v. The Royal Exchange P. C. 450 ; 2 Amould od Idb. 1225 (2nd

Assurance Company, S Camp. 406. edit).

(s) Stevens on Average, 203. (d) See ante, p. 302.

{a) Eyre v. Glovery 16 East, 218. {e) Stevens on Avenge, 204; 2 Ar-

lb) Fish v. Masterman, 8 M. & W. nould on Ins. 1226 (2nd edit). See also

166. Morgan v. StockdaU, 4 Ex. 615.
(c) Maenair v. Coulter , 4 Brown's



Digitized by



Google



INSURANCE. 383

commences^ where the assured is guilty of fraud ; as where, at
the time of efiecting the insurance, he knows, or the agent
whom he employs to effect it knows, that the property insured
16 lost(y*). If, however, the underwriter is guilty of fraud, as
if, for instance, he knows when he underwrites the policy that
the ship has performed safely the voyage insured, he is bound
to return the premium' (^).

When the contract of insurance is illegal, and the voyage has
been performed, there is no return of the premium ; for in these
cases the rule applies in pari delicto melior est conditio possi-
dentis (h\ Mere ignorance of the law will not prevent the
operation of this rule (i) ; but it is otherwise if the facts which
constitute the illegality are not known to the parties at the time
when the premium is paid, so that they contemplate a legal, not
an illegal, voyage (A).

Where the risk has not commenced, and the contract is
still open, so that the assured, by withdrawing from it, may
restore the underwriter to his originial position, the premium
may, it seems, be recovered back, even although the contract
is illegal (/). It appears clear, however, that to enable the
assured to recover the premium in this case, he must give notice
to the underwriter before bringing the action of his intention to
abandon the policy, and withdraw formally from the illegal con-
tract whilst a hcus penitentice remains (m).

In most of the cases noticed above, the policies were silent where there is
as to the return of premium ; it not unfrequently occurs, how- express stipu-
ever, that the parties expressly stipulate that the premium shall
be returned if a particular event happens ; in these cases the

(/) Tyler ▼. Hornet 1 Park on Ins. (/) See the judginent of Buller, J.,

329 ; Chapman ▼. Fraser, ib. See also in Lowry y. Bourdieu, ubi supra ; Tap-

Wilton V. Duckety 3 Burr. 1361. penden v. Randall, 2 B. & P. 467.

ig) See the judgment of Lord Mans- (m) Paly art v. Leckie, 6 M. & S. 290.

field in Carter v. Boehm, 3 Burr. 1909. The decisions as to the right to recover

(A) See Lowry v. BourdieUf 2 Doug. the deposit on illegal wagers will be

468 ; 2 Park on Ins. 569, 675 ; Andree found to illustrate the principles men-

▼. FUtcher, 3 T. R. 266 ; Cowie v. Bar- tioned above. See Aubert v. Walshy 8

fter, 4 M. & S. 16 ; WiUon v. The Royal Taunt 277 ; Lancassade v. White, 7

Exchange Aiturance Company, 2 Camp. T. R. 535, a case which must be con-

626 ; Vandyck ▼. Hewitt, 1 East, 96, and sidered to be overruled by the later au-

the cases cited below. thorities, (see Howson v. Hancock, 8

(t) Morckv. Abel, 3 B.& P. 35 ; and T. R. 575; Aubert v. Walsh, and the

the judgment of Buller, J., in Lowry v. judgment of Bayley, J., in Hastelow v.

Bourdieu, 2 Doug. 471. Jackson, 8 B. & C. 225) ; Gatly v. Field,

(k) Oom Y.Bruce, 12 East, 225 ; Hen- 9 Q. B. 431, and Vamey v. Hickman, 5

tig ▼. Stantforth, 5 M. & S. 122. C. B. 271.



Digitized by



Google



384 INSURANCE.

right of the assured to a return of the premium depends upon
the terms of the particular contract («). In other cases^ where
the policy has contained no such stipulation, but an established
usage on the subject has been proved, the assured have been
held entitled to recover back the premium in accordance with
ii{o).



(n) Where the premium was to be
returned if the ship was ** sold or laid
up," it was held that there must be
such a permanent laying up as put an
end to the policy. Hunter v. Wright, 10
E, & C. 714. See as to the effect of a
stipulation that the premium is to be
returned if the ship sails with convoy,
Audley v. D^ff, 2 B. & B. HI ; Simond
V. Boydell, 1 Doug. 268. In the latter
case the policy was on goods, and the
premium was returnable if the ship
** sails with convoy and arrives ;" it was
held that the ship was bound to sail
with convoy, but not to arrive with con-
voy ; and that it was sufficient that the
goods arrived, although they did not
arrive safely, there being no warranty
as to their condition. " Arrived "
means at the ultimate port of destina-



tion. Kellner v. Le Meturier, 4 East,
896 ; see also Dalgleish v. Brooke, IS
East, 295 ; Leevin v. Cormac, 4 Taunt.
483. If the ship arrives, the premium
must be returned, although she has
been captured and re-captured, and the
assured have been obliged to pay sal-
vage. Aguilar v. Rodger*, 7 T. R. 421.
Where the insurance is on goods, and
the plaintiff recovers for a total loss, he
cannot also recover for a return of pre-
mium for convoy, for the premium b
added to the invoice price of the goods
in calculating the total loss. Langkorm
V. ^//nii//, 4 Taunt. 511.

(o) Long V. Allan, 4 Doug. 276 ; Sit-
venson v. Snow, 8 Burr. 1237. See also
Bainet v. Woo^fall, 28 L. J., C. P. 388,
which was the case of a fire policy on a
ship.



Digitized by



Google



( 385 )



CHAPTER VIII.



HYPOTHECATION.



PAGE

Htpothboation 886

By and to whom Bottomry

Bond* may be given . . . 886
When Master may hypothec

cote Shipy CargOf and

Freight 387

Indemnity to Owner of Cargo

on Hypothecation . . . 889
How Master must hypothec

cate 300

Interest that may he reserved 392



PAOB

Bond given under Duress . . 392
Effect of the Contract . . 892

Remedies on the Contract 892
Jurisdiction of Court of Ad'

miralty 393

Of Court of Chancery . . 394

Sale 395

When Master may sell Ship , 396
When Master may sell Cargo 396
Indemnify to Oumer of Cargo
on Sale 397



Hypothecation is a contract of pledge, whereby, in considera- Hypothbca-
tion of money advanced for the necessities of the ship, the vessel, ^^^^'
freight, or cargo is made liable for its repayment, provided the
ship arrives in safety.

It is usually eflfected by a deed called a bottomry bond (a),
by which the master binds himself in a penalty to repay the
sum borrowed, and also professes to assign the ship and freight,
or cargo, as the case may be ; with a condition that the bond
shall be void if the money secured be repaid within a certain
time after the safe arrival of the ship at her port of destina-
tion (J). When the cargo alone was hypothecated, the instru-
ment used to be called a respondentia bond ; but that term is
now rarely used ; the expression bottomry bond being now
generally employed whether the vessel or her cargo be the
security (c). This species of contract was unknown to the com-



(a) It is so called because the keel
or bottom of the ship, part pro toiOt is
pledged. See Scarborough v. Lyrus,
Latch. 252 ; Noy, 95 ; and The Atlas, 2
Hagg. 53.

(6) Sometimes the hypothecation is
effected by a deed poll, not in the form
of a bond, which is caUed a bottomry
bill.

(c) Sec 2 Park on Ins. 615. The term
bottomry bond is commonly made use
of whether the instrument in question
pledges the ship, or cargo, or both of
them. It is used, therefore, throughout
this Chapter in this general sense.
Hjrpothecation af the cargo only is now



of rare occurrence. See the judgments
in The Atlas, 2 Hagg. 58, and in The
Cognac, ib. 386 ; and Edward's Treatise
on the High Court of Admiralty, 91.
By the French law, money may be ad-
vanced at maritime interest either on
the body, tackle, apparel, ordnance,
munition, or stores of the ship, «r on
the cargo, or on all of these. See the
Code de Comra. Art. 815. Where the
money is advanced on goods, the bor*
rower is not discharged by the loss of
the ship and cargo, unless he proves
that he had goods on board to the ex.
tent of the money borrowed, lb. Art,
329.

C C



Digitized by



Google



386



HYPOTHECATION.



men law of this country, since by it no pledge of a chattel was
valid, unless the article pledged was Actually transferred to the
possession of the pawnee (rf). The right to hypothecate was,
however, recognized by the civil law, and has been long adopted
in the maritime law of E^land (e).



Byandtowhom The Owner is, as is obvious, entitled to hypothecate his ship ;

^^^^gi^en!" ^d ^^ ^^y ^^ s^ without the concurrence of the master (/).
The master, also, may, under certain circumstances which will
be stated shortly (g), hypothecate the vessel, ifreight, or cargo.
For this purpose it is not necessary that he should be the rois-
tered master (A) ; he possesses this power if he is the ostensible
and acting master (i). Nor is it indispensable that the master
should have been appointed by the owners ; the Court of Ad-
miralty has supported bonds effected by masters who have, in
cases of necessity, been substituted by an agent of the owner (i),
or by the consignee of the cargo (Z), or even by the British
consul at a foreign port (m).

In the absence of fraud or collusion a bottomry bond may be
executed to the person by whom the master was appointed (n),
or to the consignee of the cargo (o), or even, under strong cir-
cumstances of necessity, to the agent of the shipowner (p).



(d) BridgemanU Case, Hob. 11 ; Cor-
Mtt ▼. Husley, Comb. 135 ; Ryal v. Rolle,
1 Atk. 175; Reeves v. Capper, 5 Bing.,
N. C. 186.

(e) Justin v. Ballam, 1 Salk. S4. See
also the judgments of Lord Hardwicke
in Burton v. Snee, 1 Yes. sen. 155, and
of Lord Stowell in The Gratitudme, 3
Rob. 256, and in The Hero, 2 Dods. 140.
By the 7 Geo. 1, stat. 1, c. 21, s. 2, con-
tracts made by English subjects upon
loans by way of bottomry on ships in
the service of foreigners designed to
trade within the limits of the East India
Company's charter, were made void.
By the 19 Geo. 2, c. 37, s. 5, loans on bot-
tomry upon ships belonging to English
subjects bound to or from the East
Indies, were required to be made only
on the ship or cargo, and to be so ex-
pressed in the botid.

(/) The Duke of Bedford, 2 Hagg.
294. See also The Draco, 2 Sumner
(American) Rep. 157; The Mary, 1
Paine (American) Rep. 671, in which
it was held that the ri^ht of the owner
to hypothecate is not limited, as that of
the master \b, to cases of necessity. A
matter, who ii also part owner, has not



on that account any greater power to
bind his part owners. The Orelia, $
Hagg. 75.

(g) PM^p.387.

(A) Seethe judgment of Sir J. NichoU
in The Orelia, 3 Hagg. 81.

(0 See the judgment of Sir W. Scott
in The Jane, 1 Dods. 464. In this case
the master had not been actually dis-
missed when the money was advanced.

(k) The Kennersley Castle, 3 Hagg. 1.

(/) The Alexander, 1 Dods. 278 ; The
Rubicon, 3 Hagg. 9.

{m) The Zodiac, 1 Hagg. 320 ; wtt
also The Cynthia, 16 Jur. 748, in which
a bond given, under circumstances of
necessity, by the consul himself, was
supported.

(n) The Alexander and The Rmbiem,
ubi supra,

(o) The Alexander, uhi supra ; The Nel-
son, 1 Hagg. 169. In America it has
been held that there can be no hypothe-
cation to a consignee. Liebart v. The
Ship Emperor, Bee's (American) Rep.
339.

{p) See the judgment of Sir W.
Scott in The Hero, 2 Dods. 144, and 7^
Oriental, 3 W. Rob. 243. The decitioa



Digitized by



Google



HYPOTHECATION. 387

But a bottomry bond caimot be given to a person who, at the
time, is indebted to the shipowner in respect of the ship (q).

The master has power, in cases of necessity, and in such When master
cases only, to hypothecate the ship, freight, or even the cargo. Mteshm^caigo,
Necessity is the very foundation of this right. If the master, ^^ freight
when in a foreign country, or when placed in any other position
in which it is impossible to communicate with his owners, is
in want of money to repair or victual the vessel, or for other
necessaries, he is bound, in the first instance, to endeavour to
raise it on the credit of his owners; if he can do so he must;
but if he cannot otherwise obtain the money he may hypothe-
cate (r).

Thus, where a British ship was carried into a foreign port, in
the possession and under the control of a mutinous crew, and
expenses were incurred by a person employed by the British
rice-consul to investigate into the mutiny and restore the master
to his command, the Court of Admiralty supported a bottomry
bond given by the master to cover these expenses («). The
right of the master to hypothecate is not confined to cases of
necessity arising in a country other than that of the owner's
residence. He may hypothecate even although the ship is in a
port of the country in which the owners reside, provided he
have no means of communicating with them, and there is no
other mode of escaping from the pressure of the necessity (t).
The master is not in all cases bound, before hypothecating the
cargo, to communicate with the owners of it, although where
this is practicable it is his duty to do so, or at least to make the
attempt. Where a master executed a bottonuy bond at New

m The OrUntal was reversed by the 119.

PriTy Council in Wallace v. Fielden, 7 (s) The Gauntlet, 8 W. Rob. 82.

Moo. P. C. C. 398, but not on this ground. {t) See La Ysabel, 1 Dods. 273 ; The

In The Royal Arch, 1 Swab. Adm. Rep. Trident, 1 W. Rob. 29. These cases

269, Dr. Lushington said, *' It is settled appear to establish the principle that

law that an agent may legally take a the locality of the owner's residence is

bottomry bond, and more especially he only one ingredient (generally, however,

■My do to with the sanction of the a very material one) in inquiring into

owner." the necessity of the Act. See also

{q) The Hebe, 2 W. Rob. 146. The Khadamanthe, 1 Dods. 201 ; The

(r) See the judgments of Lord Sto- ZooAte/, 2 W. Rob. 34 ; and The Oriental,

well in The Gratitudine, 3 Rob. 256, and 3 ib. 243. In Arthur v. Barton, 6 M. fir

in The Nelson, 1 Hagg. 175; .S^Mir^f v. W. 138, Johns v. Simons, 2 Q. B. 425,

Bahn, 3 Moo. P. C. C 1 ; Gore v. Gardiner, and Beldon v. Campbell, 6 Ex. 886, the

ib. 79 ; Stainbank v. Penning, 1 1 C. B. same principle was acted upon where

88 ; Wallace v. Fielding, ubi supra. See the owner's credit had been pledged

also Story on Agency, ss. 116, 118, and without any hypothecation.

cc2



Digitized by



Google



388



HYPOTHECATION.

York without communicating with the owner, who resided at
St. John's, New Brunswick, (as he might have done by tele-
graph,) the bond was declared to be void(M). So, where upon
the evidence before the Court it appeared that a bottomry bond
on ship and cargo had been granted by the master in Sweden,
where the shipowners resided, and with their consent, but that
the master had not, although under the circumstances it was
practicable, communicated with the owners of the cargo, who
resided at Hull, the Court was of opinion that the bond was
not valid, so far as the cargo was concerned (x). It appeared,
however, in the same case, upon further evidence being brought
before the Court, that the master had, in fact, informed the
cargo owners of the injured state of the ship, and that they had
sent no reply to his letter, and the Court thereupon sustained
the bond against them, although it was not shown that the
master had stated to them that he was unprovided with funds
for the repairs of the ship, or that he intended to have resort
to an hypothecation (y). It is not essential to the validity of a
bottomry bond that it should be given in order to enable the
ship to conclude a voyage for which she has been chartered ; a
bond may be granted upon a British ship in a foreign port for
the expenses of repairs and the outfit for a new voyage {z).

The money must be needed for the ship. The master cannot
hypothecate for a debt of his own (a); nor for a debt incurred
for the ship on a previous voyage (J). It is not, however, essen-
tial that there should have been an actual advance of money
before the bond is given. If the obligee has pledged his credit
for the repairs of the ship the bond is good (c).

The necessity for the money must arise in the course of the
master's acting within the scope of his authority ; if it be caused
by his acting or carrying out schemes contrary to the orders
of his owners, he has no power to hypothecate {d).

The cargo may be hypothecated not only for its own imme-

(a) Wallace ▼. Fielding, 7 Moo. P. C. C. Rep. 269.

S98. (a) King v. Perry, 3 Salk. 23 ; 6 Vin.

(x) See the judgrment of the Privy Ab. Admiral Law (C), pi 2; Dob$an t.

Council in Wilkinson v. Wilson, 8 Moo. Lyall, 8 Jur. 969.

P. C. C. 459, in which that Court dif- (6) See the judgment of Dr. Lush-

fered in this respect from the judgment ington in Tlie Lochlel, 2 W. Rob. 45 ;

below in The Bonaparte, 3 W. Rob. 298. The Osmanli, 3 W. Rob. 198.

See also the judgment of Lord Stowell (c) The Royal Arch, ubi smprtu

in La Ysabel, 1 Dods. 278. (d) The Reliance, 3 Hagg. 66. See

(y) WilkinsoH v. Wilson, ubi supra. also the judgment in The Mary Jnm, 4

(s) The Royal Arch, 1 Swab. Adm. Notes of Cases, 381.



Digitized by



Google



HYPOTHBCATION. 389

diate benefit, but also for the reparation of the ship ; since the
repairs of the ship are indirectly necessary for the preservation
and conveyance of the cargo (e). But as the contract of hypo-
thecation is a mere pledge and not a contract of transfer, the
master has no right to undertake that the cargo shall be placed
for sale in the hands of an agent of the person from whom the
money is borrowed, and thus to deprive the merchant of all op- ^

portunity of redeeming the pledge (/).

Where the freight is hypothecated, the bond does not attach
upon advances of freight made bond fide, under a stipulation in
the charter-party, before the time when the bond was given (g).

As a bottomry bond is altogether void if executed under cir-
cumstances not warranting the hypothecation, the lender must,
at his peril, ascertain that a necessity for the loan exists, that is,
that without an advance of money the ship cannot proceed (A),
and that such advance cannot be obtained on personal credit (t).
But he is not bound to inquire into the expediency of the
intended repairs ; unless they are so flagrantly inexpedient as to
raise a presumption of fraud (k) ; nor is he bound to see to the
proper application of the money when borrowed (/).

In raising money upon bottomry the master acts exclusively indemnity to
as agent of the shipowner, although the sum requisite for the ^"^^^^ ofcargo
repairs may exceed the value of the ship when repaired, and the tion.
master may be therefore obliged to hypothecate the cargo as
well as the ship. The owner of the cargo cannot insist on the
repairs being done, for the shipowner is absolved from his con-
tract to carry if prevented by the perils of the seas ; but, on the
other hand, it is the duty of the master, as the agent of the ship-
owner, to repair the ship, if there be a reasonable prospect of
doing so at an expense not ruinous, and to bring home the

(e) Seethe judgment of Lord Stowell The Jacobs 4 Rob. 245, and The Dow-

in The Gratitudine, 3 Rob. 260. The thorpe, 2 W. Rob. 73.

power of the master over the cargo is (h) See the judgment of Sir J. NichoU

the result of the necessity of the case ; in The Orelia, 3 Hagg. 84 ; Heathorn v.

for, in the ordinary course of things, he Darlings 1 Moo. P. C. C. 5.

is a mere stranger to the cargo, except (i) Soares v. Rahnt 3 Moo. P. C. C. 1.

for the purposes of safe custody and con- (A) See the judgment of Dr. Lush-

veyance. lb. See also Story on Agency, ington in The Vib'Uia^ 1 W. Rob. 10, and

8. 118. the judgment in Duncan v. Benson, 1

(/) Johnson v. Greaves, 2 Taunt. 344. Ex. 555.

In this case the cargo was pledged by (0 Scarborough ▼. Lyrus^ Latch. 252 ;

bills of lading ; there was, properly Noy, 95 ; 14 Yin. Ab. Hypothecation

speaking, no hypothecation. (A.), pi. 2 ; and the judgment of Sir W.

Or) The John,Z W. Rob. 170. See Scott m The Jane, 1 Dod8.465.
further as to the hypothecation of freight,



Digitized by



Google



390 HYPOTHECATION.

cargo and earn the freight if possible (m). The shipowner,



Online LibraryCharles Edward Pollock Frederic Philip MaudeCompendium of the law of merchant shipping → online text (page 48 of 101)