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OWNERS OF DREDGER LiESBOSCH ' VERSUS OWNERS OF S.S. EDiSON - Court Judgment

LegalCrystal Citation
CourtHouse of Lords
Decided On
Case Number[1933] UKHL 2
Judge
Excerpt:
.....refused in respect of a fishing vessel any compensation save on the basis of the smack's market value with interest; he gave as an illustration of the same principle the case of an east indiaman with a valuable freight on board sunk in collision by a wrongdoing vessel; in that case, as in the case of the humble fishing vessel, the compensation would in his opinion be thus limited. he said that " the true rule of law in such a case "would, i conceive, be this, viz., to calculate the value of the " property destroyed at the time of the loss and to pay it to the " owners as full indemnity to them for all that may have happened " without entering for a moment into any other consideration. if " the principle contended for by the owners of the smack were once " admitted i see no.....
Judgment:

Lord Wright.

MY LORDS,

On the 26th November, 1928, the Respondents' steamship " Edison " in proceeding to sea from the port of Patras fouled the moorings of the Appellants' dredger " Liesbosch " and did not free them until she had carried the " Liesbosch " into the open sea, where the " Liesbosch ", being without crew on board, filled with water in the heavy sea which was running, sank and became a total loss. The Appellants issued a writ in the Admiralty Division, and when the Respondents admitted sole liability for the collision and loss (which they did not do until the 7th May, 1930) the claim was referred to the Registrar and Merchants to assess the damages. The Appellants, who are civil engineers, had entered into a contract dated the 4th March, 1927, with the Harbour Board of Patras for the construction under heavy penalties of piers and quay walls at Patras; the work involved among other things a considerable amount of dredging; for this work at the date of the accident the Appellants were using the " Liesbosch ", which they had purchased in October, 1927, in Holland for £4,000, to which must be added as part of the cost the sum of £2,000, expended in fitting her out and transporting her to Patras. She was insured for £5,520. There was evidence that in Holland there were available for purchase by the Appellants in and about December, 1928, one or more dredgers by which the " Liesbosch " might have been replaced, but the Appellants did not then take steps to purchase a dredger in substitution for the " Liesbosch "; all their liquid resources were engaged in the contract undertaking and in the deposit which under the contract they had made. In January, 1929, the Patras Harbour Authorities threatened to cancel the contract and forfeit the deposit unless the ' Liesbosch " were replaced within a certain time. The Appellants, owing to their financial embarrassments being unable to buy a dredger, decided to hire one in the Mediterranean, and on the 11th May, 1929, hired from Ancona in Italy a dredger called the ' Adria ", at a high rate of hire; the " Adria " was somewhat larger than the " Liesbosch ", but more expensive to work and in order to obtain her the Appellants were compelled along with her also to take on hire a tug and two hopper barges. On 17th June, 1929, the Adria " and her attendant fleet arrived at Patras and commenced to work on the contract; until then work had been suspended since the date the Liesbosch " was lost, as the Harbour Board would not let the Appellants do other work until dredging was resumed. The monthly rate of hire of the " Adria " proved so burdensome to the Appellants that the Harbour Board, in order to help them, purchased the " Adria ", under a contract dated the 30th June, 1929 from the Italian owners, for a sum in cash and resold her to the Appellants for the same sum, payable in 48 monthly instalments at 6 per cent, interest. The amended claim of the Appellants before the Registrar and Merchants was filed on the 14th November, 1930. It was presented in five parts which were as follows:—Part 1 was for the price paid for the substituted " Adria ", viz., £9,177 3s. 4d. and £882 7s. 2d. for expenses connected with the purchase. Part 2 was for £2,922 1s. 2d. for overhead charges and interest on capital invested, as being thrown away during the period when work was stopped, that is from the date the " Liesbosch " was lost until the " Adria " commenced work. Part 3 was for £6,836 9s. 8d., being for hire paid for the " Adria " and her satellites from 4th May, 1929, to 3rd July, 1930. Part 4 was for £1,078 16s. 1d., being for the extra expense in working the " Adria " while on hire over what would have been the cost of working the " Liesbosch ". Part 5 was for £2,353 10s. 3d. for profit alleged to have been lost owing to the stoppage of work under the contract between the date of the loss of the " Liesbosch " and the date when the "Adria " recommenced work. On this claim the Registrar made his Report on the 7th May, 1931. In substance he admitted the Appellants' claim, though he reduced it from £23,514 to £19,820; he reduced certain items, and in particular under Part 5, he held that as the Appellants were able after the " Adria " arrived to resume the contract there was no loss of profit during the period of delay, but merely a loss of interest, which he put at rather over £700. The claim was put forward in drachmas, but I have taken the agreed rate of exchange. He made no finding as to the value of the " Liesbosch " at the date of the collision, but held in effect that: " having regard to " all the existing circumstances, such as the severe terms of their " contract in regard to penalties and their want of liquid " resources " they had acted reasonably and that the hiring of the " Adria " to complete an important contract with a public body was a direct and natural result of the collision. He did not in terms find that but for financial reasons the " Liesbosch " could have been replaced by purchasing an equivalent dredger, say in Holland, at a reasonable price and with little delay, but his finding that it was admitted by the Appellants that they had not then the means to purchase a dredger does not contradict the evidence led by the Respondents that there were in Holland at the date of the collision suitable dredgers for sale. On objections being taken to the Registrar's Report, Langton, J., before whom the matter came, disallowed the Respondents' objections that the damages claimed were too remote and confirmed the Report, with a trifling variation. On Appeal, the Court of Appeal, allowed the Appeal with costs, holding that the Registrar had proceeded on a wrong basis in allowing damages which were too remote in law, and ordered Judgment to be entered for £9,177 3s. 4d. with interest from the 26th November, 1928, to the date of their order at 5 per cent. From this order the matter comes before your Lordships' House.

The substantial issue is what in such a case as the present is the true measure of damage. It is not questioned that when a vessel is lost by collision due to the sole negligence of the wrongdoing vessel the owners of the former vessel are entitled to what is called restitutio in integrum, which means that they should recover such a sum as will replace them so far as can be done by compensation in money, in the same position as if the loss had not been inflicted on them, subject to the rules of law as to remoteness of damage. The Respondents contend that all that is recoverable as damages is the true value to the owners of the lost vessel, as at the time and place of loss. Before considering what is involved in this contention, I think it desirable to examine the claim made by the Appellants, which found favour with the Registrar and Langton, J., and which in effect is that all their circumstances, in particular their want of means, must be taken into account and hence the damages must be based on their actual loss, provided only that, as the Registrar and the Judge have found, they acted reasonably in the unfortunate predicament in which they were placed, even though but for their financial embarrassment they could have replaced the "Liesbosch" at a moderate price and with comparatively short delay. In my judgment the Appellants are not entitled to recover damages on this basis. The Respondents' tortious act involved the physical loss of the dredger; that loss must somehow be reduced to terms of money. But the Appellants' actual loss in so far as it was due to their impecuniosity arose from that impecuniosity as a separate and concurrent cause, extraneous to and distinct in character from the tort; the impecuniosity was not traceable to the Respondents' acts, and in my opinion was outside the legal purview of the consequences of these acts. The law cannot takeaccount of everything that follows a wrongful act; it regards some subsequent matters as outside the scope of its selection, because " it were infinite to trace the " cause of causes ", or consequences of consequences. Thus the loss of a ship by collision due to the other vessel's sole fault, may force the ship-owner into bankruptcy and that again may involve his family in suffering, loss of education or opportunities in life, but no such loss could be recovered from the wrongdoer. In the varied web of affairs, the law must abstract some consequences as relevant, not perhaps on grounds of pure logic but simply for practical reasons. In the present case if the Appellants' financial embarrassment is to be regarded as a consequence of the Respondents' tort, I think it is too remote, but I prefer to regard it as an independent cause, though its operative effect was conditioned by the loss of the dredger. The question of remoteness of damage has been considered in many authorities and from many aspects, but no case has been cited to your Lordships which would justify the Appellants' claim. A dictum was quoted by Mr. Raeburn from the speech of Lord Collins in Cliffern Oil- Coy. v. Edinburgh and District Water Trustees, 1907, A.C. 291, at p. 303. " It was contended ' that this implied that the defenders were entitled to measure ' the damages on the footing that it was the duty of the Company ' to do all that was reasonably possible to mitigate the loss and ' that if through lack of funds they were unable to incur the ' necessary expense of such remedial measures the defenders ought ' not to suffer for it. If this were the true construction to put upon ' the passage cited I think there would be force in the observation, ' for in my opinion the wrongdoer must take his victim talem qualem, 'and if the position of the latter is aggravated because he is with' out the means of mitigating it so much the worse for the wrongdoer ' who has got to be answerable for the consequences flowing from ' his tortious act ". But as I think it is clear that Lord Collins is here dealing not with measure of damage but with the victim's duty to minimise damage, which is quite a different matter, the dictum is not in point.

The case in re Polemis v. Furness Withy and Co., 1921, 3 K.B. 560 a case in tort of negligence was cited as illustrating the wide scope possible in damages for tort; that case, however, was concerned with the immediate physical consequences of the negligent act, and not with the co-operation of an extraneous matter such as the Plaintiffs want of means. I think, therefore, that it is not material further to consider that case here. Nor is the Appellants financial disability to be compared with that physical delicacy or weakness which may aggravate the damage in the case of personal injuries, or with the possibility that the injured man in such a case may be either a poor labourer or a highly paid professional man. The former class of circumstances goes to the extent of actual physical damage and the latter consideration goes to interference with profit earning capacity; whereas the Appellants' want of means was, as already stated, extrinsic.

I agree with the conclusion of the Court of Appeal that the Registrar and Langton, J., proceeded on a wrong basis and that the damages must be assessed as if the Appellants had been able to go into the market and buy a dredger to replace the " Liesbosch ".

On that basis it is necessary to decide between the conflicting views put forward, on the one hand by the Respondents, that all that is recoverable is the market price of the dredger, together with cost of transport to Patras and interest, and on the other hand by the Appellants that they are also entitled to damages in addition for loss during the period of inevitable delay before the substituted dredger could arrive and start work at Patras. The Respondents in support of their contention relied on the Columbus, 3 W. Rob. 158, in which Dr. Lushington refused in respect of a fishing vessel any compensation save on the basis of the smack's market value with interest; he gave as an illustration of the same principle the case of an East Indiaman with a valuable freight on board sunk in collision by a wrongdoing vessel; in that case, as in the case of the humble fishing vessel, the compensation would in his opinion be thus limited. He said that " The true rule of law in such a case "would, I conceive, be this, viz., to calculate the value of the " property destroyed at the time of the loss and to pay it to the " owners as full indemnity to them for all that may have happened " without entering for a moment into any other consideration. If " the principle contended for by the owners of the smack were once " admitted I see no limit in its application to the difficulties which " would be imposed upon the Court. It would extend to almost " endless ramifications and in every case I might be called upon to " determine, not only the value of the ship but the profits " to be derived on the voyage in which she might be engaged, " and indeed even to those of the return voyage which might be " said to have been defeated by the collision ".

But, for all the eminence of Dr. Lushington, the simple but arbitrary rule he thus enunciated has not prevailed at least as regards ships under profitable freight engagement. Perhaps it was felt that, in the words afterwards used by Lord Sumner in the Chekiang, 1926, A.C. 637, at p. 643, " The measure of damage ought not to " be governed by mere rules of practice nor can such rules override " the principles of law on this subject." Lord Sumner also distinguishes " a rule of thumb " from what is binding law. In these cases the dominant rule of law is the principle of restitution in integrum, and subsidiary rules can only be justified if they give effect to that rule. A view of the practice of the Admiralty Court differing from that of Dr. Lushington was stated by Sir Robert Phillimore in the Northumbria, L.R. 3, Admiralty and Ecclesiastical C, and in the Kate, 1899, P.165, it was expressly held that in the case of a vessel being totally lost by collision, while on her way in ballast to load under a charter, the proper measure of damages against the vessel solely liable for the collision was the value of the vessel at the end of her voyage, plus the profits lost under the charter party. The same principle was extended in the Racine, 1908, P. 273, to a vessel sunk while on her voyage under charter from her home port to a foreign port, from which port she was chartered to proceed to another port, from which again she was chartered back to her home port; it was held that the owner was entitled to recover the presumed net loss of freight on all three charters less 10 per cent, for contingencies and her value on her return to the home port at the end of the three charters. But in the Philadelphia, 1917, P. 101, it was decided that the value must be determined as at the time of the loss (the market had in that case risen between the date of the loss and the presumed date of her arrival at the end of the voyage) together with the proper net sum in respect of her existing charters, subject to allowance for contingencies. It is now clear, accordingly, that the arbitrary rule suggested by Dr. Lushington is not law, though the decisions just cited, however just in the result, cannot be regarded as logical or complete. The true rule seems to be that the measure of damages in such cases is the value of the ship to her owner as a going concern at the time and place of the loss. In assessing that value regard must naturally be had to her pending engagements, either profitable or the reverse. The rule, however, obviously requires some care in its application; the figure of damage is to represent the capitalised value of the vessel as a profit earning machine not in the abstract but in. view of the actual circumstances. The value of prospective freights cannot simply be added to the market value but ought to be taken into account in order to ascertain the total value for purpose of the damage, since if it is merely added to the market value of a free ship, the owner will be getting pro tanto his damages twice over. The vessel cannot be earning in the open market, while fulfilling the pending charter or charters. Again, the present valuation of a future charter becomes a matter of difficulty in the case even of successive charters, still more in the case of long charters, such for instance as that in the Lord Strathcona s.s. Co. v. Dominion Coal Co., 1926, A.C. 108. which was for ten St. Lawrence seasons, with extension at the charterers option for further eight seasons. The assessment of the value of such a vessel at the time of loss, with her engagements, may seem to present an extremely complicated and speculative problem. But different considerations apply to the simple case of a ship sunk by collision when free of all engagements, either being laid up in port or being a seeking ship in ballast, though intended for employment, if it can be obtained, under charter or otherwise. In such a case the fair measure of damage will be simply the market value, on which will be calculated interest, at and from the date of loss, to compensate for delay in paying for the loss. But the contrasted cases of a tramp under charter or a seeking tramp do not exhaust all the possible problems in which must be sought an answer to the question what is involved in the principle restitutio in- integrum. I have only here mentioned such cases as the step to considering the problem in the present case. Many, varied and complex are the types of vessels and the modes of employment in which their owners may use them. Hence the difficulties constantly felt in defining rules as to the measure of damages. I think it impossible to lay down any universal formula. A ship of war, a supply ship, a lightship, a dredger employed by a public authority, a passenger liner, a trawler, a cable ship, a tug boat (to take a few instances), all may raise quite different questions before their true value can be ascertained.

The question here under consideration is again different; the ' Liesbosch " was not under charter nor intended to be chartered, but in fact was being employed by the owners in the normal course of their business as civil engineers, as an essential part of the plant they were using in performance of their contract at Patras. Just as, in the other cases considered, what must be ascertained is the real value to the owner as part of his working plant and ignoring remote considerations at the time of loss; if it were possible without delay to replace a comparable dredger exactly as and where the " Liesbosch ' was at the market price, the Appellants would have suffered no damage save the cost of doing so, that is in such an assumed case the market price, the position being analogous to that of the loss of goods for which there is a presently available market. But that is in this case a merely fanciful idea. Apart from any consideration of the Appellants lack of means, some substantial period was necessary to procure at Patras a substituted dredger; hence, I think, the Appellants cannot be restored to their position before the accident unless they are compensated (if I may apply the words of Lord Herschell in the Greta Holme, 1897, A.C. 596, at p. 605) " in respect " of the delay and prejudice caused to them in carrying out '' the works entrusted to them ". He adds : " It is true these " damages cannot be measured by any scale." Lord Herschell was there dealing with damages in the case of a dredger which was out of use during repairs, but in the present case I do not think the Court are any the more entitled to refuse, on the ground that there is difficulty in calculation, to consider as an element in the value to the Appellants of the dredger the delay and prejudice in which its loss involved them; nor is it enough to take the market value, that is, the purchase price (say in Holland) even increased by the cost of transport, and add to that 5 per cent, interest as an arbitrary measure. It is true that the dredger was not named in the contract with the Patras Harbour authority, nor appropriated to it; but it was actually being used, and was intended to be used, by the Appellants for the contract work. I am not clear if that view is what is meant by Scrutton, L.J., in his Judgment in this case when he quotes the word of Barnes, J., in the Harmonides, 1903, P. 1, '' The real test is : what is the value of the vessel to the owners " as a going concern at the time the vessel was sunk ", and continues : "I should add at that place, for if the vessel had " to be replaced at Patras expense and time might have been " added to the cost of the vessel replaced." In the Harmonides (supra) Barnes J., had to consider in the case of an Atlantic passenger liner, not her mere value in the general market, but her actual value to her owner in a business sense; he refused to confirm the Registrar's Report putting her value in the market at £18,000, but heard fresh evidence and fixed the value at £31,000 as being the real value to the owners. The problem there was in principle the same as the problem in this case. A nearer parallel is afforded by Clyde Navigation Trustees v. Bowring, 32 LI. L.R, p. 35, and 33 LI. L.R. p. 319, in which the Court of Session in Scotland, affirming Lord Morison, held that the Plaintiffs, whose dredger had been rendered a total loss by the negligent navigation of the Defendants' vessel, were entitled, if they were to be placed in the same position as if the injury had not been done them, to have a value placed on their dredger as the value to them, based on three elements : (1) The cost of procuring a comparable dredger; (2) cost of adapting it to their requirements; (3) compensation for loss of user. The Court rejected the contention that there was any absolute rule fixing the compensation at the market value with interest from the date of the collision. The late Mr. Registrar Roscoe in his valuable work on " Damages in Maritime Collision " cites at p. 42 of the 3rd Edition the case of the Pacaure, a lightship which was sunk in collision; the owners, the Mersey Docks and Harbour Board, were allowed in addition to the value of the sunken vessel the cost of a substituted vessel for 366 days. I should prefer to state that such extra cost was an element in assessing the loss of value to the owners of the lightship, though it may be no different result would follow from the difference in statement.

In my judgment similar principles are applicable to the present case; the difficulty in applying them is that the evidence called before, and the findings made by, the Registrar and Merchants were directed, as explained above, to a different measure of damage.Scrutton, L.J., thus sums up the position : " But what the owners " have lost is their dredger. If the Court gives them their dredger "at the time and place of loss as a profit-earning dredger, and gives " them interest on that value from the time of the loss to the " judgment, I do not see any room for a further award of profits ", and he goes on to describe the indirect losses which they claim in expense thrown away over the whole period they were without a dredger and the heavy outlay incurred in hiring and working the "Adria", and for loss of profits. What Scrutton, L.J., in fact awards as the value of the dredger to the Appellants at the time and place of loss is £9,177, which was what was paid for the " Adria " inSeptember, 1930, but, as the Lord Justice points out, that fact is not evidence of the market value of the " Liesbosch " in November, 1928, when the " Liesbosch' was lost, any more than is the cost to them of the " Liesbosch ' when they bought her or the amount for which she was insured. It might seem to follow that Scrutton, L.J., is intending to give some compensation, beyond the actual cost of replacing the " Liesbosch ", for delay and prejudice in the contract work; if not, I do not see how he is giving the value of the dredger to the owner at Patras as a factor in his business as a going concern. It is on the true value so ascertained that the interest at 5 per cent, from the date of the collision will run, as further damages, on the principles of the Court of Admiralty stated by Sir Charles Butt in the Kong Magnus, 1891, P. 223, that is, damages for the loss of the use of the money representing the lost vessel as from the date of the loss until payment. Mr. Raeburn has pressed that the matter should be sent back to the Registrar and Merchants for the amount of damages to be assessed on the principles accepted by this House. I have felt grave doubt about this as I am not quite sure on what principle the Court of Appeal have arrived at the sum they have awarded. But the best opinion I can form is that they intended" to give simply the replacement cost, without including in the value any allowance for disturbance and prejudice during the necessary period of delay. If that is so, though I agree with their disallowance of the claim as put forward, I do not agree with the disallowance, in ascertaining the value, of anything beyond the cost of replacement. I do not think in a case like this, interest is a compensation for that factor, because I think that factor must be something to be taken into account in arriving at the figure of value on which interest must run. On the whole I think Mr. Raeburn is right in urging that the matter should be referred back to the Registrar and Merchants to ascertain the true value on the principles I have stated. From these it follows that the value of the " Liesbosch " to the Appellants, capitalised as at the date of the loss, must be assessed by taking into account (1) the market price of a comparable dredger in substitution, (2) costs of adaptation, transport, insurance, etc., to Patras, (3) compensation for disturbance and loss in carrying out their contract over the period of delay between the loss of the " Liesbosch " and the time at which the substituted dredger could reasonably have been avail- able for use in Patras, including in that loss such items as overhead charges, expenses of staff and equipment, and so forth thrown away, but neglecting any special loss due to the Appellants' financial position. On the capitalised sum so assessed, interest will run from the date of the loss. The result is that the Appellants have substantially failed in the Appeal because they have failed in their claim that the judgment of Langton, J., should be restored, and accordingly they should pay to the Respondents three-quarters of their costs of this Appeal. The order of the Court of Appeal will be varied by substituting for the judgment for £9,177 3s. 4d. a judgment for such sum as the Registrar and Merchants may find on reference back to them. Save as so varied the order of the Court of Appeal will stand. I cannot help expressing a hope that the parties may now compose this remaining difference without further proceeding in the Registry.


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