Scottish Court of Session Decisions

This was an action of damages for breach of contract at the instance of Robert Mackessack & Son, Waterford Mills, Forres, against James Alexander Molleson, C.A., trustee on the sequestrated estates of John Wilson Hope, merchant in Leith, the date of whose sequestration was 7th August 1883.

The circumstances out of which the action arose were thus stated by Lord Shand in his opinion—“By charter-party dated 27th October 1883, entered into between John Wilson Hope, merchant in Leith, therein described as ‘of the good ship or vessel called the “Jeanie Hope,”. .. now trading, of the one part’, and the pursuers of the other part, Mr Hope undertook that the vessel should proceed to Burghead, and there load a cargo of barley, and should therewith proceed to Islay or Carbost as ordered, and should deliver the same to the pursuers or their assigns in return for the freight therein stipulated. In pursuance of this charter-party the pursuers shipped a cargo of barley on board of the vessel at Burghead on or about 26th November following, and the master granted a bill of lading therefor, undertaking to deliver the same at Ardbeg, in Islay, in good order. This undertaking was not implemented. Neither the vessel nor cargo reached the port of destination. On her way through the Caledonian Canal the fluke of the anchor, which was hanging over the vessel's side, pierced the plating in consequence of the vessel or the anchor striking against the side of the Canal, with the result that the vessel was filled with water and afterwards settled down. The cargo was so seriously damaged that it had to be sold at Inverness, and the loss sustained was not less than £602, 19s. 2d.”

That sum of £602, 19s. 2d. was the sum concluded for in this action.

The action was founded upon the bill of lading, or the charter-party and the bill of lading. The pursuers maintained that at the date of the charter the vessel was under the defender's control as trustee upon the sequestrated estate of William Hope & Sons, or otherwise as trustee on the estate of John Wilson Hope; that the charter-party was entered into on behalf and for behoof of the defender; and that in signing the bill of lading the captain acted for him and with his authority.

A proof was allowed, from which, and from the admissions on record, the following facts were established:—At the date of the sequestration on 7th August 1883 the “Jeanie Hope” belonged to William Hope & Sons. To the extent of 6–64ths the title stood in name of John Wilson Hope, who Was, however, only trustee for the firm; to the extent of (il-G4ths the title stood in name of Walter Berry, merchant in Leith, who was, however, only a security-holder for an advance of £5000 which he had made. Mr Berry deponed—“At the date of the sequestration I was on the register of the ‘Jeanie Hope’ as part-owner. I was part-owner as regards an advance I had made.. .. Although I was upon the register under bill of sale given to me as part-owner, that bill of sale was in fact simply a mortgage giving me a security. Prior to the date when the accident in question occurred, in November 1883, I had never entered into possession. of the ship, and never taken any part in its management. I had drawn no part of the freights, and was not consulted about the employment of the vessel. Cross.—I had nothing whatever to do with the negotiation of this charter.”

Mr David Smith deponed—“I was clerk to William Hope & Sons before their sequestration. I had the management of the steamship ‘Jeanie Hope,’ under Mr John Wilson Hope. I was aware of Mr Berry's interest in that ship. I knew he was a security owner. I did not know that his name was on the register. I got no instruction from Mr Berry as to the management of the ‘Jeanie Hope’ before the accident—I got my instruction from Mr John Hope. Mr John Hope instructed me before the sequestration in regard to the vessel. After the sequestration I got instructions from Mr Molleson, the trustee. That continued until the accident. During the sequestration the earnings of the ship were collected by Mr Molleson. No part of her freight or earnings was paid to Mr Berry. Mr Berry first intervened at the time of the accident.. .. Before the accident Mr John Hope had the management; after that Mr Berry took the management out of Mr Hope's hands and gave it to me. (Q) Was that merely for the purpose of realisation?—(A) To manage the vessel. I was sent by Mr Berry to the scene of the accident to look after the vessel. Before the sequestration Mr Hope managed the vessel, but I was the actual manager; I looked after the chartering of the vessel, and sometimes I consulted him and sometimes I did not. Under Mr Molleson's administration I had no particular instructions—just general instructions to keep the ship working. I signed charter-parties both before and after the sequestration. I had no written authority to do so. I was in use to sign them as for John Hope. My action in signing was never challenged either by Mr Hope or Mr Molleson. It was in pursuance of my general instructions to keep the ship employed. I informed Mr Molleson's clerk, Mr Rainnie, who was in the office beside me, of what I did in regard to the ship. I knew Mr Rainnie was in daily communication with Mr Molleson. During the sequestration I regarded myself as being in Mr Molleson's employment. I received my salary from him.

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The captain of the vessel collected the freight, and after retaining sufficient to pay the wages of the crew, remitted the balance to Mr Molleson, along with a detailed statement. Cross.—.. . After the sequestration there were hopes of a composition arrangement being agreed to. The business was kept going for a while, and the staff were kept on. I continued with the rest of the staff to keep the concern going. I got no special instructions from Mr Molleson about the steamers. I never specially communicated with him about them. The correspondence with regard to them was carried on, not in Mr Molleson's name, but in Mr Hope's. I remember on one occasion using Mr Molleson's name in the correspondence, and he told me not to do so. I did not do so again. All the documents were signed by me for J. & W. Hope. The charter in question is in that position. The nett proceeds of the entire business were handed to Mr Molleson. The balance of the freights was slumped in the accounts with the rest. … I never had any communication with Mr Molleson about this particular charter. I negotiated the charter myself. I never signed any charter at all for Mr Molleson.” The charter-party in question was signed “ Pro John W. Hope, D. Smith.”

Mr Molleson deponed—“For some time after the sequestration the entire business was carried on as a going concern. It was a very extensive business. There was for some time a hope that an arrangement would be concluded, and the sequestration put an end to.. .. The arrangement finally broke down on 10th November. In the course of my management I took no charge of any of the ships belonging to the bankrupts. Mr Smith was in the employment of Messrs Hope when they became bankrupt, and he and the rest of the staff were continued keeping the concern going. I did not give Mr Smith any instructions about the ships. He was the man specially in charge of the goods, and I directed my attention to that. I knew Mr Berry was on the register as owner of 6–64ths of the ‘Jeanie Hope.’ I believed him to be part-owner. I knew his interest was very preponderating, but I gave no consideration to the question of management. … So far as I know, all the business with regard to the vessel after the sequestration was conducted in Mr J. W. Hope's name, and not in mine. … I never gave Mr J. W. Hope or Mr Smith any special instructions to act for me about the ship. There was no special account rendered for the ship. The question of the intromissions with the ships was one of accounting which had not been cleared up, I understood, for a considerable period before the date of the sequestration—I mean as to the amount of profit or loss to be attached to the owners. I was not aware of the charter in question being entered into at the time. I knew the ship was in existence, and sailing about somewhere, but I don't believe I knew anything special about this charter till the present proceedings arose. I never gave anyone authority to make such a charter for me. … I had no direct intromission with the earnings of the vessel. Mr Rainnie never communicated with me about the vessel. The sequestration being a very large and peculiar one, I thought it better to put a man in charge of the works as a care-taker, and also a clerk in the office at Leith, who was there to represent me, with instructions to communicate with me if anything of moment occurred. The letters were either signed by me or for me. Those as to the ship were not signed by me, and I do not believe they were signed for me; if they were, I certainly gave no authority for it. Cross.—I gave no authority to anybody to look after the ships. My understanding was that they were outside the sequestration, with an independent ship's husband, who had been there before, and who remained in the position in which he had been. I understood that the proportion of their value effeiring to the sequestrated estate would upon an accounting come to the sequestrated estate. I thought I had no title to intromit with them without consultation with the other owners. As regards the ‘Jeanie Hope,’ I mean Mr Berry. I knew he had sixty-one shares, and John Hope had three shares.. .. I knew she was under charter several times. I knew the sequestrated estate had some interest in her. I knew she was making voyages and earning freights, and that the crew and disbursements were paid before the freights came into my hands. No accounts were furnished to me by the captain. Mr Smith was under obligation to furnish me with accounts, and he furnished me with one large account.. .. Mr Smith was not in my employment in regard to these ships; he was in my employment in regard to the goods. He had no written appointment originally, but I think he was reappointed by writing. I recognised his right to remuneration in connection with the steamers.” Mr Molleson also stated that the ship was eventually sold for £1400 to £1500, and that for the 3–64ths which belonged to the bankrupt he got £75, while Mr Berry got the price for the shares he held.

From excerpts from the trustee's accounts of intromissions which were produced, it was shown that the “Jeanie Hope” had between the date of the sequestration and the date of the accident been carrying cargo and earning freight.

The Lord Ordinary ( M'Laren) on 3d June 1885 pronounced this interlocutor:—“Finds (1) that the cargo of the ‘Jeanie Hope’ was damaged in consequence of the plating of the ship being injured in manner described in the record, and the ship becoming filled with water, and that the damage claimed (the amount of which is not in dispute) is £558, 15s. 11d.: Finds (2) that the pursuers, by obtaining decree against John Wilson Hope, have not elected to discharge the present defender: Finds (3) that the defender, when he interfered in the management of the ‘Jeanie Hope,’ believed that the interest therein of the creditors whom he represented was limited to three one-sixty-fourth shares, and that the defender in fact only took up this asset to the extent of three shares: Therefore decerns against the defender for three sixty-fourths of the above-mentioned sum, being the sum of £26, 3s. 11d., and quoad ultra assoilzies.

“ Opinion.—[After holding that the accident was due to the fault of the master]—(2) Referring to the record for a statement of the ground of action against Mr Molleson, and the limiting circumstances upon which he as a trustee in bankruptcy relies, I will briefly indicate my opinion. This is the second action which the pursuer has brought for this injury. In a previous action he sued Mr Hope (on whose estate Mr Molleson is trustee), and Mr Berry, an ex facie part-owner, but who

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is now admitted to be only an equitable mortgagee of Hope to the extent of sixty-one shares. In that action the pursuer obtained decree in absence against Hope, but after seeing Berry's defences he withdrew the action against that gentleman and turned his attention to Mr Molleson. It is apparently the fact that after Hope's bankruptcy the ship was navigated on the joint order of Mr Molleson and Mr Berry, although Mr Hope continued in the management, and was supposed to be trading on his own account.

Mr Molleson contends that the pursuers have elected to take Hope as their debtor by obtaining decree against him, and that having elected to proceed against the agent, they have discharged their right to sue him, the principal. I am satisfied by the evidence of Mr Ross, the pursuer's agent, that Mr Molleson's relations with them, as principal contracting party, were unknown to the pursuers when they obtained decree, and I am of opinion that the obtaining decree in such circumstances does not amount to an irrevocable election to treat the agent as the debtor. If a pursuer or plaintiff obtains a judgment against a principal, that is an election between the principal and the agent, because every creditor has necessarily knowledge of the obligation of the agent with whom he directly contracts. But the case is otherwise where the proceedings are taken in the first instance against the agent, because election presupposes the disclosure of a principal, and if the principal is not disclosed I cannot see how the taking decree against the agent can put the disclosed debtor in either a better or a worse position in relation to his creditor. The decree against the agent certainly does not alter the principal's position for the worse, in the sense in which that expression is used. It only constitutes or declares the agent's obligation without varying the contract in any way. And therefore when the principal is discovered (and if no defence of compensation or the like intervenes), I think we ought not to allow him to profit by the non-disclosure of the obligation to the detriment of the creditor, to whom he might, and perhaps ought, to have disclosed himself.

(3) I am further of opinion that Mr Molleson is only responsible to the extent of three one-sixty-fourth shares of the damage, that is, in the ratio of the interest in the ships which the insolvent Mr Hope retained, and which Mr Molleson took up. Against this view it is argued that Mr Barry, who held an absolute transfer of sixty-one sixty-fourth shares of the vessel, held these shares really in security, and that Mr Molleson must be held to have taken up the bankrupts' reversionary interest in these shares. But the question we have to consider is, not the extent of Mr Berry's interest, but the extent of Mr Molleson's intervention as owner. Mr Molleson disclaims all knowledge of the fact that Mr Berry was a limited owner, and nobody has said anything different as to the trustee's state of mind and information on the subject. Mr Molleson and Mr Berry agreed that the ship should be exploited on their account by Mr Hope for their respective interests, that is, in the proportion of three shares to sixty-one. Mr Molleson never held himself out as a part-owner of more than three shares, because he never held himself out as owner at all. He is a latent owner (in trust for Mr Hope's creditors), and when discovered is liable as a contributory in any claim for maritime damage which may be preferred. But his liability, as I conceive, must be measured by the extent of the interest which he claimed in the ship, because in the ordinary course of business a part-owner is not responsible as a partner. Whether Mr Berry would be responsible for the remaining sixty-one sixty-fourths of the loss is a question with which we are not concerned. I have an opinion on the subject, but as the claim against him is abandoned it is not necessary that I should state it.”

The pursuers reclaimed, and when the case was heard in the Inner House this interlocutor was pronounced of consent—“Sist the defender as trustee on the sequestrated estates of William Hope & Sons, chemical manure manufacturers and merchants in Leith, and of John Wilson Hope, merchant in Leith, an individual partner of that firm, as a party defender in this cause.”

The pursuers argued—The register was not conclusive as to ownership—Merchant Shipping Act 1854, sec. 70; Hibbs v. Ross, L.R., 1 Q.B. 534. The question was, who was the exercitor of the vessel. Here it was the defender— Miller & Co., v. Potter, Wilson, & Co., November 9, 1875, 3 R. 105. The exercitor wasliable whether the action wason the contract or fordamages for breach of the contract. Further, the defender as part-owner of the vessel was liable in solidum for the damage, i.e., for £602, 19s. 2d., or at least to the full extent of the value of his shares in the ship, i.e., £75—Ersk. Inst. iii. 3, 56; More's Stair, i. 119; Carnegie v. Napier, M. 14,671; M'Givan v. Blackburn, M.14,671; Turnbull v. Black & Rankin, Hume 300; Maude & Pollock on Merchant Shipping, i. 95. The pursuers were entitled to sue as for breach of contract, and were not bound to put fault as the ground of action—Bell's Comm. ii, 545, 5th ed. 655.

The defender replied—It was a question of fact whether the trustee had put himself in the position of a contracting party. There was no authority for saying that the transference of title rendered the trustee liable—see Grant v. Eaglesham, July 15, 1875, 2 R. 960. The trustee must take possession, and there was no evidence that he had taken possession of the ship, or even of the 3–64ths. If liable as part-owner of 3–64ths, it was admitted the measure of his liability was £75, and not £26, 3s. 11d. as found by the Lord Ordinary— Detrick & Webster v. Laing's Patent Overhead Handstitch Sewing Machine Company, January 8, 1885, 12 R. 416; Lawson v. Leith and Newcastle Steam Packet Company, November 26, 1850, 13 D. 175. It had never been held that a part-owner was liable in solidum. He was only liable to the extent of his share— Learmonth v. Guthrie & Paterson, M. 14,671.