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Decisions of the Superior Courts of New South Wales, 1788-1899

Hirst v. Dunlop (1843) NSW Sel Cas (Dowling) 951; [1843] NSWSupC 10

shipping, charter party

Supreme Court of New South Wales

Dowling C.J., Burton and Stephen JJ, 16 October 1843

Source: Dowling, Select Cases, Vol. 7, S.R.N.S.W. 2/3465, p. 150

Where the defendants entered into an agreement to purchase the plaintiff's interest in a half share in the cargo of a ship; held that the defendants were liable also to pay the plaintiff's share of the costs of the charterparty.*

Dowling C.J. This was an action of assumpsit to recover the sum of £864.7.8 as money paid by the plaintiffs to the defendant's use. Plea non assumpsit. At the trial before Burton J. and a special jury at the sittings after the second term, the case in proof was this:

On the 20th April 1840, the plaintiffs and defendants, merchants of Sydney, severally entered into a charterparty of affreightment on joint account, with John Wilkinson, master of the ship Renown to go to the port of Manila and there load a full cargo, and if a full cargo could not be there obtained to go to Macao and fill up and return direct to Sydney, all port charges of the ship at Manila and Macao to be paid by the charterers, or allowed to the master if paid by him; and the plaintiffs and defendants bound themselves to pay the master £1,600 should the ship be wholly laden at Manila, and £1,800 should she proceed to Macao to fill up. The vessel proceeded on her intended voyage, but before arrival at Sydney, the defendant wrote the following note to the plaintiffs:

I hereby agree to give Messrs. W. Hirst & Co. the sum of four thousand pounds for their interest in the renown cargo expected from Manila and I also further agree to pay all the expenses of insurance. Terms of payment £500 cash, and the remainder on 3 and 6 months promissory notes. If money can be conveniently raised I will then give £1,000 cash. Bills to be dated from this day.

Sydney 10th Sept. 1840

R. G. Dunlop

To this note the plaintiff's sent the following answer:

 

16 September 1840.

To Messrs Dunlop & Co.

We hereby agree to sell you one half of the Renown's cargo for the sum of £4,000, four thousand pounds. £500 to be paid in cash and the remainder by Bills at three and six months date. You to pay the expense of insuring the cargo, the bills to be dated from the 15th September.

Messrs Hirst & Co.

The plaintiffs and the defendants were jointly interested in the cargo expected to be brought by the Renown , and on the footing of this agreement between them, the transaction was closed. On the ship's arrival from Manila at the port of Sydney, the master of the Renown brought an action on the charterparty against both the plaintiffs and defendants and recovered a verdict. The plaintiffs paid the master one half the amount of the verdict, which together with the costs amounted to £864.7.8 and for this sum the plaintiffs brought the present action against the defendants as for money paid to their use on the ground, that as they were both jointly interested in the charterparty and the goods, and as the plaintiffs had sold all their interest in the venture, to the defendants, they took it clogged with liability for the freight, and consequently though the plaintiffs might have been primarily liable with the defendants to the master on the charterparty, yet the plaintiffs must now be regarded only as sureties, and as between them and the defendants, the latter were liable for the whole of the freight together with the costs to which the plaintiffs had been put in defending the action.

On the part of the defendants it was contended first, that the sale of the plaintiffs' interest or half shares in the cargo, did not import that it was to be clogged with the freight, when the freight was to be paid under a charter to which both plaintiffs and defendants were parties, unless it was matter of express agreement; and a distinction was taken between freight payable under a charterparty, and under a bill of lading, it being urged that, as respected this transaction, the defendants must be regarded as a third party or stranger, who had merely purchased the plaintiffs' net interest in the cargo, in which case he would not be liable for freight. Secondly, it was argued that supposing the defendants liable, they could not be sued in this form of action and could only be on an agreement declared upon specially.

In reply it was contended that as between these parties there was no distinction between freight payable under a charterparty and under a bill of lading as it respected the master's lien, for the plaintiffs and defendants being jointly interested both in the charterparty and the cargo, the defendants took the plaintiffs' share with all the liabilities for the freight of the whole cargo, and it was insisted that the plaintiffs being only sureties for the defendants to the master after they had sold their interest, the suit was for money paid to the defendant's use upon being compelled by the master to pay that portion of the freight, which in equity and good conscience ought to have been paid by the defendants.

The learned Judge said he would reserve liberty for the defendants to move for a nonsuit, if the Court should be of opinion that the sale of the plaintiffs' interest in the cargo could not be taken to mean interest, clogged with the payment of freight under the charterparty. His Honor then directed the jury in point of law: 1. that as between the joint charterers of a vessel, who are also jointly interested in the cargo to be procured, the sum to be paid by them to the owner for the employment of the ship must be considered as freight for the goods; 2. that joint charterers who are also joint owners of a cargo, the amount stipulated by the charterparty for the hire of the vessel was chargeable as between themselves against the proceeds of the venture, in the first instance as freight before the interest of either party in the goods could be ascertained; 3. that if the jury found that the plaintiffs and the defendants were joint charterers of the vessel and also joint owners of the cargo, and that the plaintiffs had for valuable consideration sold and transferred all their interest in the goods to the defendants, they later had thereby become solely interested in and were to have all the benefit of the cargo and the plaintiffs had become liable on the charterparty for one half the freight, and had paid it for the defendant's benefit, they were entitled to recover it as for money paid to the defendant's use.

The jury found their verdict for the plaintiffs. Damages £864.7.8 including the plaintiffs' costs of the action at the suit of the master and upon being asked by the learned Judge as to the usage in such cases, they answered "that by the custom of merchants the share of each person in a cargo is liable, ratably in the first instance, for freight charged under a charterparty, the same as freight chargeable on goods consigned under a bill of lading, and is first deducted in settling accounts proceeds". They added that when the defendants said in their note of the 10th September, that they had agreed to give £4,000 for the plaintiffs "interest in the cargo", they understood that to mean "interest subject to all charges, for which the goods were liable, when brought to Sydney".

During the last term a motion was made. First to reduce the damages by the amount of the costs of the action against the plaintiffs, for which it was contended the defendants were clearly not liable. Secondly, that the verdict for the plaintiffs be set aside and a nonsuit entered. Third, that a verdict be entered for the defendants; and fourth, that a new trial be granted on the point reserved by the learned Judge.

There appears to have been no point made at the trial that the plaintiffs could not recover the costs of the action, as well as the amount of the verdict. Indeed it seems to us that if such a point had been made, it could not have been sustained, for if the action was at all maintainable, we do not see how the costs could be distinguishable from the amount recovered against the plaintiffs in the action at the suit of the master. The costs would follow as an incident to the plaintiffs' primary liability as one of the joint charterers and if the defendant were bound to pay, the whole freight as between them and the plaintiffs, the latter were entitled to be fully indemnified. Assuming that the plaintiffs were mere sureties for the defendants under the charterparty, after they had purchased the whole of their interest in the cargo, the plaintiffs as sureties, were bound to defend the action before they could recover over against the defendants, and the costs of such defence became part of the measure of the plaintiffs' damage.

The true question in the case is whether the agreement on the part of the defendants to purchase one half the Renown cargo or the plaintiffs' interest therein for the sum of £4,000, can be taken to include one half the cargo, clogged with half the freight payable under the charterparty, and if it does, whether the plaintiffs can recover it in this form of action. It was contended for the defendants that the agreement to purchase one half the cargo, could not be construed to import into it all the different stipulations contained in the charterparty, and must be taken to be a purchase only of the plaintiffs' net interest, after the stipulation in that instrument had been complied with on their part. The agreement to purchase the plaintiffs' share was quite irrespective of the stipulations in the charterparty and the defendants were not bound to indemnify the plaintiffs from liability on that instrument, unless plaintiffs specially agreed to do so. There was no evidence of any contract on the part of the defendants with the defendants to pay the freight arising and becoming due under the charterparty. In the present case the defendants as purchasers of the cargo must be looked upon as mere strangers, and the circumstances of their being jointly interested under the charterparty be left out of the question. If it had been intended that the defendants were to purchase the plaintiffs' interest in the charterparty, the agreement should have so expressed it, and ought not be left to mere conjecture.

No usage or custom of merchants could control the contracts of parties. The purchase of a cargo does not necessarily imply a liability for freight under a charterparty; Moorsom v. Kymer (1814) [ Moorsom v. Kymer (1814) 2 M. & S. 303, 105 E.R. 395 ], Paul v. Birch (1743) [ Paul v. Birch (1743) 2 Atk. 622, 26 E.R. 771 ], Philips v. Rodie (1812) [ Philips v. Rodie (1812) 11 East. 548, 104 E.R. 950 ], Birley v. Gladstone (1814) [ Birley v. Galdstone (1814) 3 M. & S. 205, 105 E.R. 587 ]. At all events the money paid by the plaintiffs to the master under the charterparty could not be said to be paid to the defendants' use, and consequently this form of action could not be maintained. It could not be said that the defendants were primarily liable to the charter for the whole freight. The plaintiffs had paid to the amount of his own liability, he being himself a contracting party, it was his own debt - not a debt which the defendants had to agree to pay - he had therefore paid to his own use and not that of the defendants. The defendants could only be liable to the plaintiffs by special agreement and not by usage: Spencer v. Parry (1835) [ Spencer v. Parry (1835) 3. Ad. & E. 331, 111 E.R. 439 ], Exall v. Partridge (1799) [ Exall v. Partridge (1799) 8 T.R. 309, 26 E.R. 771 ]. Here there was no special agreement, and it would be breaking down the boundaries of actions if the plaintiffs could maintain such an action.

We have fully considered this case and are of opinion that the action is maintainable and that the verdict ought not to be disturbed. In determining this case it must be borne in mind, that the chartering of the Renown for the purpose of bringing a cargo from Manila to Sydney was one entire joint transaction in which both parties were equally interested and both cognizant of their mutual obligations. The interests of strangers or third parties were in no way involved, or calculated to be affected by their dealings inter se. The ship was jointly chartered for a specific voyage upon a joint mercantile entire adventure. By the terms of the charter it was not a letting of the vessel to the charterers so as to take the control of the vessel out of the power of the master. He was a mere carrier retaining the dominion of the vessel and notwithstanding the charter, it cannot be disputed that on the authorities cited he had a lien on the goods until the freight was paid. The freight, it must be observed was not payable until the ship's arrival in Sydney.

Being thus jointly interested in the charterparty and also in the cargo, with knowledge of all the circumstances, and before the freight is earned, the defendants propose by their note, to purchase the plaintiffs' interest in the cargo at the price of £4,000, they paying all the expenses of the insurance. The plaintiffs accept the offer, but in their note instead of using the word "interest" they call it their one half of the cargo. What is this, but buying the plaintiffs out of the joint adventure with full knowledge of all the obligations connected with it and taking upon themselves the whole risk of the adventure whether profitable or otherwise. It is true that no reference is in terms made to the charterparty, but being one entire transaction - and as the liability under it for freight was inseparable from the object with which it was entered into, namely bring a cargo from Manila in which both parties were jointly interested - it must be taken that the defendants had bound themselves to step into the plaintiffs' shoes, and intended to treat them as if they never executed the charter or had any share in the cargo.

There were no stipulations in the charterparty, beside paying the freight, but what are incident to every charterparty, such as regulating the time of sailing - the number of lay days to be allowed at the shipping ports - the allowance for demurrage and the number of days for discharging the cargo in the home port. The only special stipulation is, that the charterers shall pay the port charges at Manila and Macao or be allowed to the master if paid by him. Until the end of the voyage the freight would not be earned, the charges for demurrage, and dues paid at the shipping ports, and other incidental expenses would not be ascertained at the time therefore of the purchaser of the plaintiffs' interest in the cargo, the defendants must be taken to have contemplated sole liability as between themselves, under the charterparty, for the freight and other expenses incurred in conveying the cargo to Sydney. It is true that the writings between the parties do not advert to the charterparty, but the agreement of the defendants that they will pay "all the expenses of insurance" is in our judgment, conclusive of the intention of the defendants to release the plaintiffs of all liabilities in respect of his share in the cargo in consideration of being paid the net sum of £4,000. From the language of the charterparty, it is clear that the goods could not have been obtained by the defendants without paying the freight stipulated. They therefore took the plaintiffs' interest in them clogged with liability for the freight, and being themselves parties to the charter they must be held to have known of that liability.

It is not necessary to determine what would be the liability of a third party, not privy to the charter, but here the defendants - after the charter is entered into, and after the ship is despatched - and after the insurance is affected, purchase the plaintiffs' chance of profits from the adventure with all his liabilities for a stipulated sum. It is clear that if the plaintiffs had not parted with their interest, the profit or loss of the adventure could only be divided between them and defendants after paying the freight and expenses of bringing the cargo to market. The plaintiffs however are bought out and leave the defendants solely responsible. These circumstances shew that the real intention of the parties was that the defendants should stand in the plaintiffs' shoes and take upon themselves all the risk of the transaction.

The only remaining question then is whether the plaintiffs having been by process of law compelled to pay half the freight, after he had parted with his interest, he can now recover it back as money paid to the use of the defendants? Upon the purchase of the plaintiffs' share, the whole liability for freight, was as between them cast upon the defendants alone. The master of the vessel might have had his remedy for the whole freight against both or either of the charterers, but having elected to sue both, the plaintiffs then became sureties for the defendants as between themselves. The defendants were bound to have relieved the plaintiffs and taken upon themselves the whole liability. The liability of the plaintiffs after the sale of their share, then became a liability incurred for the benefit of the defendants, and payment of the freight under such circumstances raised an implication of that it was paid at the request of the defendants. The plaintiffs had become sureties for the defendants, and the latter were bound in equity and good conscience to save the plaintiffs harmless. It appears to us therefore that the action for money paid to the defendants' use was well maintainable.

We have already intimated that if the action be maintainable there can be no distinction taken between the costs and the principal sum, for if the plaintiffs were only sureties as we hold them to have been after the defendants had purchased their interest in the cargo, the costs of the action were a necessary incident of liability as sureties, for which they ought to be indemnified by the defendants. This point was not however made at the trial, and even if tenable ought not now to be successful. On the whole we are of opinion that the verdict must stand.

Rule discharged.

Published by the Division of Law, Macquarie University