United Kingdom House of Lords Decisions

This was an appeal from a decision of the First Division of the Court of Session, assisted by three Judges of the Second Division. An action was raised in the Sheriff-court of Renfrew by the appellants, the charterers of a ship, for £596 for advances made to the respondents, the owners. The ship “Janet Cowan,” of Greenock, belonged to Mr Shankland and others. When it was at Bombay a charter-party was made between the master and Messrs Ralli, who afterwards transferred it to the appellants and pursuers. By this contract the ship was to proceed to Calcutta and there load and carry the cargo to a port in the United Kingdom. The clause regulating the payment of freight was as follows:—“The freight to be paid on unloading and right delivery of the cargo, in cash two months from the ship's report inwards at the Custom-house, or under discount at the rate of 5 per cent.—at freighter's option.” And it was also stipulated—‘Sufficient cash for ship's ordinary disbursements to be advanced the master against freight, subject to interest, insurance, and 2 1 2 per cent. commission, and the master to endorse the amount so advanced upon his bills of lading.” While the ship was preparing for her voyage from Calcutta, the charterers made advances to the master for ship's disbursements, which, with commission and interest, amounted to £596. The ship was lost in the course of the voyage. The charterers sought to recover back the above sum, and the defence was that the cash advanced was not intended as a loan, but was a prepayment of freight, and could not be recovered back. The Sheriff of Renfrew, reversing the Sheriff-Substitute's decision, held that the pursuers were entitled to recover the advance and commission. The First Division, by a majority, reversed the Sheriff's judgment, and held that the plaintiff's were not entitled to repetition, on the ground that they had contracted to secure themselves by insurance, which they had failed to do. The charterers now appealed against that decision.

Mr Butt, Q.C., and Mr White, for the appellants, contended that the Court below was wrong, for the advances were made, not as freight, but as security of or against freight, which was by the charter-party equitably assigned to the appellants in security; and, even assuming that the advances were made in prepayment of freight, such advances were by the law of Scotland repayable in the event of freight not being earned, unless the parties agreed to the contrary, and no such agreement to the contrary was come to.