A DM i Th e Be n w e i i To w e b. [ Ad m.
in te rvie w . I m ust tliex-efox-e decide th a t tlie M erchant B a n kin g Com pany had notice o f Messrs. Tweedie’s registered m ortgage before th e y advanced the sum o f 30001 The case o f Hophinson v. B o lt (ubi sup.) establishes the general p rin c ip le th a t a firs t m ortgagee, whose m ortgage is taken to cover fu tu re advances, cannot claim , in p rio rity over a second mortgagee, the benefit o f advances made a fte r he had notice of the second m ortgage. B u t i t was contended th a t th is p rin c ip le d id n o t apply to the registered m ortgages o f ships. The 69th section o f the M erchant S hipping A c t 1854, w hich was in force a t the tim e o f the transactions in question, enacts th a t, “ I f there is more th a n one m ortgage registered o f th e same ship o r share the re in , the mortgagees shall, n o tw ith sta n d in g any express, im p lie d o r constructive notice, be e n title d in p rio rity , one over th e other, according to the date a t w hich each in stru m e n t is recorded in the re g iste r books, and n o t according to the date o f each in stru m e n t its e lf.” I t was contended on behalf o f the M erchant B a n kin g Com pany th a t the doctrine o f Hophinson v. B o lt (ubi sup.), depending upon notice, could have no operation as between the firs t and second registered m o rt
gagees o f a ship. In support o f th is argum ent the case o f B lack v. W illiam s (1895) 1 Ch. 408) was cite d . B u t i t seems to me th a t the 69th section o f th e M erchant S hipping A c t 1854 relates o n ly to p rio ritie s a risin g fro m the dates o f th e instrum ents. I t provides, in effect, th a t as regards the p rio rity o f in strum ents, and the rig h ts o f the parties a risin g therefrom , the dates o f the re g is tra tio n , and n o t the dates o f the instrum ents, sh a ll be th e governing dates, n o tw ith sta n d in g any express, o r im p lie d , o r constructive notice o f an unregistered in stru m e n t. W here p rio ritie s depend, n o t upon the dates o f the instrum ents, b u t upon a state o f fa cts w h o lly independent o f th e dates o f the instrum ents, I th in k th a t the section in question does n o t apply. T h is, I th in k , is made clear b y the 3rd section o f th e M erchant S hipping A c t 1862, and i t appears to me th a t I am n o t deciding a n yth in g co n tra ry to the p ro visions o f the 69th section o f the M erchant S hip
p in g A c t 1854, o r co n tra ry to the decision o f W illia m s , J. in the case x-efexred to, in ho ld in g th a t the advance o f 3000?. cannot be paid o u t of the proceeds o f the ship u n til a fte r th e claim o f the second mortgagees has been satisfied.
U p to th is p o in t I have considered o n ly the claim s o f the parties to th e pi'oceeds o f the ship, b u t a question was x-aised d u rin g th e argum ent w hether th e fre ig h t o f th e Benwell Tower collected a t D u n k irk should be taken in to account in th is action. The re g is tra r has, in ta k in g the account, disregarded the fi'e ig h t on the ground th a t the second mortgagees had no intex-est in it. T his raises th e question w hether the fre ig h t, o r any p a rt o f it, was held by the M erchant B a n kin g Com pany on behalf o f th e second mortgagees.
The m ortgagee o f a ship does n o t ob ta in by the m ortgage alone a rig h t to fr e ig h t; when he takes possession he becomes the owner o f the ship, and fro m th a t tim e e verything x-epresenting the earn
ings, w hich have n o t been already paid before, he m ay claim as an in c id e n t o f his possession : (K e ith v. Burrows, 3 Asp. M ar. Law Cas. 481; 37 L . T . Rep. 291; 1 C. P. D iv . 733; 2 C. P. D iv.
163 ; 2 A pp. Cas. 636.) I f a mox-tgagee does take possession o f the ship and obtains paym ent o f
the fre ig h t w hich was unpaid a t th e tim e when he takes possession, the proceeds o f the ship and th e fre ig h t are lia b le to s a tis fy h is se cu rity ; and i f there is a sux-plus a fte r h is se cu rity is satisfied he w ould, i f there were subsequent mortgagees o f th e ship, h o ld the surp] us fo r the benefit o f such mortgagees accox-ding to th e ir priox-ities : (Banner v. Berridge, 4 A sp. M ar. Law Cas. 420; 4 4 L . T.
Rep. 680 ; 18 Ch. D iv . 254 ; per L in d le y , J ., K e ith v. Burrows, 1 C. R. D iv . 736.) I f , thex-efox-e, th e M erchant B a n kin g Company, the firs t m o rt
gagees o f the ship, took possession o f the ship befox-e the fx-eight was paid, I th in k th a t th e proceeds o f th e ship and fre ig h t w ould fo rm a common fu n d fo r the sa tisfa ctio n o f the firs t and second m ortgages according to the p rio ritie s of the respective pax-ties. T h is leads me to the con
sideration o f the question o f fa c t, w hether the M erchant B a n kin g Company d id take possession o f the ship a t D xxnkirk before the fre ig h t was paid. T h is is one o f the most d iffic u lt questions in the case, because the Mex-chant B a n kin g Com
pany, appax-ently w ith the o bject o f p ro te ctin g themselves in evex-y possible way, acted w ith studied a m b ig u ity, le st by assex-ting one x-ight they should abandon another. In p o in t o f fa c t they d id n o t take a ctual possession. Theix- s o lic ito r w ent to take possession, b u t he d id n o t do so u n til a fte r th e d e live ry o f the cargo, and the pay
m ent o f the fre ig h t to Dxxchateau, because the French law d id n o t allow h im to take possession.
The M erchant B a n kin g Company took proceed
ings to enfox-ce the m ortgage, and the ship seems to have been arrested in the sense th a t ox-ders were given to the harbour authox-ities to prevent the ship leaving. B u t i t does n o t appear th a t th is a rre st o f the ship was an assertion on the p a rt o f th e M erchant B a n kin g Company o f th e ir rig h t to become mortgagees in possession o f th e ship.
The ship was arrested a t th e ir instance ju s t as the ship m ig h t have been arrested, and was in fa c t arrested, a t the s u it o f oth e r persons who had claim s against the ownex-s. There ax-e cases w hich seem to establish th a t a firs t m ortgagee who cannot take actual possession o f a ship may, b y ta k in g constx-uctive possession, e n title him self to exercise a ll th e rig h ts o f an owner in posses
sion. B u t in ordex* to co n stitu te constx-uctive possession acts m ust be done on his b e h a lf w hich cleax-ly in d ica te an in te n tio n on his p a rt to assume the rig h ts o f ownex-ship. In Busden v. Pope (3 Max-.
Law Cas. O. S. 91 ; (18 L . T . Rep. 651 ; L . Rep. 3 E x. 269) there was no doubt about the in te n tio n o f the m ortgagee. H e claim ed th e fre ig h t as m o rt
gagee, and did, as the c o u rt found, e verything w hich i t was p h ysica lly possible fo r h im to do to enfox-ce his claim , and as I understand th e facts he d id take possession o f the ship befox-e the balance o f the fx-eight was paid, although befox-e he took possession the b a n kru p tcy o f the shipowner had intex-vened. In Beynon v. Godden (4 Asp. M ar.
Law Cas. 10 ; 3 E x. D iv . 263) the m ortgagee of ce rta in shares in a ship jo in e d w ith th e other owners in a p p o in tin g a new ship’s husband, and so e ffe ctu a lly in te rfe re d by assex-ting his rig h ts as owner. The case of Wilson v. Wilson (1 Asp. M ar.
La w Cas. 265; 26 L . T. Rep. 346 ; L . Rep. 14 E q. 32) contains d icta w hich are n o t, I th in k , w h o lly con
siste n t w ith th e p rin cip le s la id down b y the House o f L o rd s in K e ith v. Burrows ; b u t th e decision in W ilson v. Wilson m ay be supported indepexrdently o f these dicta , because the m ortgagee’s agent
M A R IT IM E L A W CASES. 17
Ad m.] Th e Be n w e l l To w e r. [ Ad m.
a c tu a lly took possession o f the ship before she came in to p o rt. In the present case I th in k there is no sufficie n t evidence o f acts done by the m o rt
gagees p rio r to the delivery o f the cargo, in d i
ca tin g an in te n tio n to take possession o f the ship as mortgagees in possession, and to claim the fre ig h t as in c id e n t to such possession. No doubt the M erchant B a n kin g Com pany d id in te n d to cla im the fre ig h t, b u t as fa r as I can gather fro m the facts e verything th e y d id a t D u n k irk was as consistent w ith th e ir claim to the fre ig h t as assignees under the assignm ent o f the 27th Sept., as w ith a claim to the fre ig h t as mortgagees o f the ship. The ta k in g possession o f the ship a fte r she had le ft D u n k irk and the fre ig h t had been paid, was, I th in k , an act done too la te to affect th e question o f the rig h ts o f th e parties to the fre ig h t. I m ust n o t o m it to notice the le tte rs th a t passed between Messrs. Deacons and Messrs.
F lu x on the 5th and 6th Feb. 1894 before referred to , respecting th e arrangem ents fo r b rin g in g over to th is co u n try the moneys representing the fre ig h t w hich were in the hands o f Duchateau.
The statem ent in the le tte r o f Messrs. Deacons o f the 5th Feb. is th a t th e y understand th a t “ on the w ith d ra w a l o f the arrests a t D u n k irk against the fre ig h t, the fre ig h t w ill, w ith the consent o f our clients, be handed to yo u r clie n ts, the M erchant B a n kin g Company, as firs t mortgagees o f the Benwell Tower." Messrs. F lu x , in answer, s a y :
“ W hatever moneys m ay be obtainable w ill be collected o f course on the usual fo o tin g o f a m ortgagee’s collection, and w ill be held by our clie n ts as mortgagees, and n o t otherw ise.” I f I th o u g h t th a t th is answer o f Messrs. F lu x was an adm ission o f the existence o f an understanding between the parties th a t the M erchant B a n kin g Company should tre a t the fre ig h t as i f i t had come in to th e ir hands as firs t mortgagees o f the ship, i t w ould, I th in k , n o t o n ly give a new com
plexion to the tra n sa ctio n a t D u n k irk , b u t i t w ould a ffo rd evidence o f an agreem ent b y w hich, in consideration o f Messrs. Deacons’ clie n ts w ith draw ing th e ir attachm ent on the money a t D un
k irk , and consenting to the same being paid over to the M erchant B a n kin g Company, the M er
chant B a n kin g Company undertook th a t the money, when i t came in to th e ir hands, should be treated fo r the purpose o f d is trib u tio n , as i f i t had come in to th e ir hands in th e ir capacity as firs t mortgagees in possession. B u t, although I th in k there is some a m b ig u ity in the le tte r o f Messrs.
F lu x , I do n o t th in k I can reasonably hold th a t the phrase “ w ill be held by o u r clie n ts as mortgagees and n o t otherwise ” ought to be construed as mean
in g as mortgagees o f the ship. The assignm ent o f fre ig h t o f the 27th Sept, is a m ortgage, and no doubt Messrs F lu x m eant th a t they w ould hold th e money under one o r oth e r o f th e ir securities.
Messrs. F lu x avoid assenting in term s to the la n guage o f Messrs. Deacons’ le tte rs, and, although Messrs Deacons may n o t have noticed a t th e tim e the significance o f the difference between the words used by them and the words used by Messrs. F lu x , ye t I th in k I o u g h t n o t to fix the M erchant B a n kin g Company w ith a lia b ility , beyond the m eaning o f th e a ctual words used- fey th e ir so licito rs. I am confirm ed in th is view-fey the circum stance th a t lo n g before th is , viz-.-; on the 19th O ct. 1893, as appears by a le tte r o f th a t date fro m Messrs. F lu x to Messrs. Honey' and M ellersh, the so licito rs fo r Messrs. Tweedie, Udder
VOL. V I I I . , N . S. X » , :
whom the p la in tiff, M r. S uart, claim s, Messrs.
H oney and M ellersh knew th a t the M erchant B a n kin g Company claim ed the fre ig h t n o t o n ly as mortgagees b u t also as assignees o f fre ig h t. I have, therefore, come to the conclusion th a t the M erchant B a n kin g Com pany cannot be charged w ith lia b ility to account fo r th e fre ig h t as i f they had received i t as mortgagees in possession. I m ust consider another p o in t w hich was raised by counsel fo r the p la in tiff. I t was contended th a t even i f the M erchant B a n kin g Company had received the fre ig h t as assignees o f fre ig h t only, yet, as they had obtained the assignm ent as se cu rity fo r an advance made a fte r th e y had notice o f the second m ortgage, they could n o t enforce the se cu rity as against the sec.ond m o rt
gagees. B u t i f th is rig h t o f the m ortgagee o f a ship to the fre ig h t depends n o t upon the in s tru m ent o f m ortgage, b u t upon the possession o f the mortgagee as owner in possession, as explained by L o rd C airns in K e ith v. Burrows (ubi sup.), I fa il to see how a second mortgagee can, by v irtu e o f his m ortgage, claim any in te re s t in the fre ig h t. N otice o f a second m ortgage is n o t notice o f a charge on fre ig h t. I t was said by James, L J. in the case o f Liverpool M arine C redit Company v. Wilson (1 Asp. M ar. Law Cas. 325; 26 L . T. Hep. 717; L . Rep. 7 Ch. 512):
“ I f there be a legal m ortgage o f a ship, then a charge on the fre ig h t, then a second m ortgage o f the ship, the second mortgagee o f the ship cannot by any act o f his oust the incum brance on the fre ig h t.” The question o f notice, w hich was dis
cussed in the last-m entioned case, arose because there the second mortgagees were n o t o n ly second mortgagees o f the ship, b u t had advanced money on the security o f an express charge on the fre ig h t. In th e present case the second mortgagees o f the ship had no charge on the fre ig h t, a t least no charge w hich on any p rin c ip le could take prece
dence o f the assignm ent o f the 27th Sept, to the M erchant B a n kin g Company, and they had n o t done a n yth in g to e n title them to any in te re s t in the fre ig h t.
The learned re g is tra r has disallow ed a com m is
sion o f 2J per cent, charged by the M erchant B a n kin g Company as p a rt o f the expense o f the sale o f the Bemvell Tower under th e ir power o f sale. T h is com m ission was charged in a d d itio n to the b roker’s charge o f 1 per cent, fo r conducting the sale. I th in k th a t the learned re g is tra r was rig h t in disallow ing the com m ission o f 21 per cent. The le tte r o f the 28th O ct., before re fe rre d to , c o lla te ra l to the m ortgage, provides fo r the paym ent o f th is com
m ission, but, n o tw ith sta n d in g , I th in k i t cannot be allowed. T h is com m ission ought n o t to be trea te d as an ite m in the account cu rre n t, because i t o n ly became due a fte r the account c u rre n t was closed. I t is a p rin c ip le w e ll established th a t a mortgagee conducting a sale under h is power o f sale, is so fa r in the positio n o f a trustee th a t he can make no charge fo r h is tro u b le in connection w ith th e sale (see Matheson v. Clarice, 3 D rew , 3 ; A rnold v. Garner, 2 P h il. 231), and an agreem ent between the parties cannot, I th in k , render a charge o f th is nature v a lid There are other com m issions charged in the account. One ite m o f 360/. is charged in respect o f the Benwell Tower, and represents a com m ission o f 2 per cent, in respect o f cash advances w hich is stip u la te d fo r in the le tte r before m entioned. T h is commis-
€ > ' D
18
M A R IT IM E LA W CASES.
Th e Be n w e l l To w e r. [ Ad m.
Ad m.]
sion the learned re g is tra r has disallowed. He says, w ith reference to th is com m ission, a fte r re fe rrin g to some cases in th e books, the same decisions are also, I th in k , inconsistent, in the circum stances o f the case, w ith the allowance o f the com m ission o f 2 per cent, on any cash advance rem aining unpaid fo r fo u r m onths o r less. In fa c t, h a rd ly any advance in cash was made by the B a n kin g Company u n til very s h o rtly before the sale o f the three ships. A ll th a t th e y had done was to accept and renew th e ir acceptances o f S tum ore’s d ra fts fo r six m onths as they fe ll due, a t a com m ission o f 1 per cent., under th e ir agree
m ent. I t was o n ly in O ct. 1893 th a t th e y m et the h ills hy paym ents am ounting a ltogether to 54,000/,, and h y the end o f Novem ber a ll three ships had been sold, and the m ortgagees had in th e ir hands the whole o f the purchase money, am ounting to 63,508/. 10s., so th a t fo r advances, if such th e y can be called, fo r less th a n tw o m onths, they received in te re s t a t 2 per cent., o r a t the ra te o f m ore th a n 12 per cent, per annum, in a d d itio n to in te re s t a t 5 per cent, per annum. I t is cle a rly directed in th e m a rg in a l note o f the s ta tu to ry fo rm o f m ortgage to secure an account c u rre n t th a t such a m ortgage is to show the n ature o f the tra n sa ctio n , and how the am ount o f p rin c ip a l and in te re s t due a t any tim e is to be ascertained. B u t th e m ortgages in question gave no such in fo rm a tio n , n o t even the rate o f th e m ortgage in te re s t being stated, n o r any reference being made to the co lla te ra l agreem ent, w hich in fa c t contained the term s o f the m ortgages. W h e th e r or n o t the m ortgagor h im se lf w ould have been e n title d to dispute th e stip u la tio n s to w hich he had agreed, i t appears to us th a t th e p la in tiff, as second m o rt
gagee, was n o t bound hy exceptional stip u la tio n s contained o n ly in an undisclosed agreem ent” I cannot agree th a t the second m ortgagee can be in any b e tte r p o sitio n th a n the m ortgagor. I t appears cle a rly enough fro m the ju d g m e n t o f K a y , J ., in M a in la n d v. Upjohn (60 L . T . Rep.
614; 41 Ch. D iv. 126), th a t the e q u ity o f a second m ortgagee cannot be h ig h er than th a t o f the m ortgagor. The observations o f the learned re g is tra r w ith respect to the c o lla te ra l agreem ent and the note in th e s ta tu to ry fo rm o f m ortgage raise an im p o rta n t question. A registered m o rt
gage m ust, according to the provisions o f the M e r
chant S hipping A cts, he in a p a rtic u la r fo rm pre
scribed h y th e B oard o f Trade, o r as near thereto as circum stances p e rm it, and i f any m ortgage o f any ship is made in any fo rm , o r contains any p a rtic u la rs oth e r th a n th e fo rm and p a rticu la rs prescribed, no re g is tra r shall he required to record the same w ith o u t the express d irections o f the Com m issioners o f Customs (see M erchant S hipping A c t 1854, sub-sects. 66, 96. The form s presented by th e B oard o f Trade do n o t a d m it o f such m odifications as are necessary to meet the varied exigencies o f business. I t has consequently been the practice fo r a long series o f years, in cases where ships have been m ortgaged, fo r th e detailed stip u la tio n s o f the m ortgage to be contained in a separate in stru m e n t. Indeed, the Comm issioners o f Customs, in th e ir in s tru c tio n s to the R egistrars o f S hipping (Maude & P ollo ck, 4 th e d it., vo l. 1., p. 43), state: “ The re g istra rs w ill advise parties interested th a t so fa r as relates to th e dealings w ith and th e title to the ship, no advantage w hatever can be gained by the use o f longer o r more cum brous instru m e n ts. I f tiie re are
c o lla te ra l arrangem ents between the parties, th e y should be carried in to effect by separate in s tru m ents.” In several o f th e reported cases respecting m ortgages o f ships there have been c o lla te ra l agreem ents (see Brown v. Tanner, 3 M ar.
c o lla te ra l arrangem ents between the parties, th e y should be carried in to effect by separate in s tru m ents.” In several o f th e reported cases respecting m ortgages o f ships there have been c o lla te ra l agreem ents (see Brown v. Tanner, 3 M ar.