[HIGH COURT OF JUSTICE.]

[PROBATE, DIVORCE AND ADMIRALTY DIVISION.]

[ADMIRALTY.]

[IN PRIZE.]

THE ODESSA.

[1914 No. 103.]

THE CAPE CORSO.

[1914 No. 155.]

Prize Court - Cargo - Enemy Property - Claim by Pledgees.

The Prize Court does not recognize the claim of a pledgee of cargo captured at sea, the legal property in which was at the time of capture in an enemy subject.

THE ODESSA.

CLAIM by Schröder & Co., bankers, of London, to the cargo of the Odessa, a German barque, G. Gabler, master, which vessel had been captured at sea by H.M.S. Caronia on August 19, 1914, and was subsequently condemned as lawful prize.

The following statement of the facts is taken from the judgment of the President:-

"The subject-matter of the claim in the first case is a large quantity (51,043 bags) of nitrate of soda laden on board the German vessel Odessa, which I have condemned. The cargo was captured in the vessel at sea on August 19 last.

"The claimants are J. Henry Schröder & Co., of Leadenhall Street, London, a firm of which Baron von Schröder, a naturalized subject of this kingdom, and Frank C. Tiarks, a British subject, are the partners.

"The cargo was purchased from Weber & Co. (a firm of Chilean merchants) at Valparaiso by the Rhederei-Aktien-Gesellschaft von 1896, a German company carrying on business at Hamburg.

"By a business arrangement between this German company and Schröder & Co., the latter accepted bills of exchange in favour of the sellers against the cargo, and received bills of lading as security for the acceptances and the moneys payable under them. The bill of lading in this instance was dated May 8, 1914, and was made out in favour of J. Henry Schröder & Co., London, or their assigns. The vessel was stated therein to be 'bound for Channel for orders.'

"Fifteen bills of exchange for various amounts were accepted by Schröder & Co. on June 4, 1914, and twenty-one others on June 9. The due dates of these sets of bills were September 5 and 10, 1914, respectively; but the time of payment having been extended by proclamation, the actual dates for payment were October 19 and 24. Therefore when Schröder & Co.'s claim was made the bills had not been met. They have since been paid, and the total sum amounts to 41,153l.

"The claimants claim the cargo 'as being the property of British subjects, and/or as holders for full value of the bills of lading therefor,' and 'as the persons beneficially interested in the cargo.'"

1914. Dec. 7, 14. Maurice Hill, K.C. (Sir J. A. Simon, A.-G.,and T. Mathew with him), for the Crown. In order to determine whether the cargo of the Odessa is liable to be condemned, it is necessary to ascertain in whom was the property in the

goods at the time of the capture: The Miramichi.(1) The facts show that the property in the goods passed from the seller to the buyers, the German company, as soon as the seller received from the claimants their acceptances of the seller's drafts, and that the position of the claimants was merely that of pledgees: Sewell v. Burdick.(2) Therefore at the time of the capture of the vessel the cargo was enemy's property. The fact that in the bills of lading the claimants were named as the consignees is immaterial, for, as Lord Bramwell pointed out in Sewell v. Burdick(3), the property in goods does not pass by the indorsement of the bill of lading, but by the contract in pursuance of which the indorsement was made. See also The Abo(4) and The Packet de Bilbao.(5) A pledgee of enemy's goods has, in the event of their being captured, no right to them as against the Crown. The Prize Court only considers the legal ownership of captured property, and does not recognize the claim of a pledgee or a mortgagee, or the holders of a lien, whether the property be ship or cargo: The Ida(6); The Marie Glaeser.(7) [Shepherd v. Harrison(8) and Mirabita v. Imperial Ottoman Bank(9) were also referred to.]

MacKinnon, K.C., and C. R. Dunlop, for the claimants. The question involved in this case is one of the utmost importance to the commercial community of this country, for practically the whole ocean trade of the world is now transacted by means of bankers' bills drawn on London. It cannot be denied that there are decisions in the books which prima facie would justify the condemnation of this cargo, but in the Prize Court precedents and authorities are less binding than in the ordinary Courts, and necessarily so, because the principles to be applied must be modified or developed as international practice and the methods and usages of trade undergo modification and development. For example, a person who has the right of stoppage in transitu has

(1) Nov. 23, 1914.

(2) (1884) 10 App. Cas. 74.

(3) 10 App. Cas. at p. 105.

(4) (1854) Spinks, 42; 2 Eng. P. C. 285.

(5) (1799) 2 C. Rob. 133; 1 Eng. P. C. 209.

(6) (1854) Spinks, 26; 2 Eng. P. C. 268.

(7) [1914] P. 218.

(8) (1871) L. R. 4 Q. B. 493; 5 H. L. 116.

(9) (1878) 3 Ex. D. 164.

the right under the Declaration of London to have the cargo released, and that right has in consequence been recognized by this Court. Further, at the date when The Ida(1) was decided, the suggestion that the law of the Prize Court as to ownership or property was the same as the common law was scouted, for in that case Dr. Lushington said(2): "If you can establish that the common law and the law of the Prize Court as to property and ownership are identical, you will prove wonders"; whereas in The Miramichi(3) it was held that the law applicable in the Prize Court to questions of ownership was the ordinary law applicable in times of peace. Therefore the present case cannot be treated as being conclusively settled in favour of the Crown by reason of the decision in The Ida(1), which was decided at a time when the methods of business were entirely different from those of the present day. Another consideration which must not be left out of sight is that this Court has always shown a more favourable leaning towards the claims of British subjects than to those of neutrals: The Belvidere.(4)

It may be conceded that the decision of the House of Lords in Sewell v. Burdick(5) shows that the claimants were pledgees of this cargo, though the view of Lord Esher as expressed in Sewell v. Burdick(6) in the Court of Appeal, and also in Glyn v. East and West India Dock Co.(7), had previously been to the contrary effect. There is, however, a distinction between this case and Sewell v. Burdick(5) in that the claimants are the consignees named in the bill of lading, and, therefore, as against the shipowner they would have been entitled on the arrival of the ship and on presentation of the bills of lading to possession of the goods. They could also have maintained conversion or trover against a third person who took possession of the goods: Bristol and West of England Bank Co. v. Midland Ry. Co.(8); The Winkfield.(9) The claimants have also paid the full value of the goods, and therefore no question of taking an account between them and the buyers can arise.

(1) Spinks, 26; 2 Eng. P. C. 268.

(2) Spinks, at p. 29.

(3) Nov. 23, 1914.

(4) (1813) 1 Dods. 353; 2 Eng. P. C. 183.

(5) 10 App. Cas. 74.

(6) (1884) 13 Q. B. D. 159.

(7) (1880) 6 Q. B. D. 475.

(8) [1891] 2 Q. B. 653.

(9) [1902] P. 42.

The chief objection to the recognition by this Court of liens or charges or claims of pledgees has been the practical difficulty that the Court has not the necessary machinery for ascertaining the facts and the exact position of the parties, and there is, therefore, a danger that the Court may be misled by the existence of some secret arrangements: The Marie Glaeser(1); The Tobago.(2) The position here is exactly the reverse, for on the face of the bills of lading the name of the claimants appears as the owners of the goods, and it is only by inquiring into the facts and applying to those facts a somewhat difficult branch of the law that it becomes apparent that the claimants' position is that of pledgees. There is also a distinction between the ownership of a ship and of a cargo. It was held in The Marie Glaeser(1) that in the case of a ship the ship's register is conclusive as to ownership, and that you cannot go behind the register to inquire whether there is a mortgage, but in the case of cargo there is no analogous document of title, and there must always be some inquiry in order to find out who is the real owner of the cargo. Decisions as to ships cannot, therefore, be regarded as applicable to cases of the seizure of cargoes. Again, a distinction has always been made in the case of the lien for freight; the captor's right is subject to that lien: The Tobago.(2) The whole purpose of the capture of property at sea in war time is to destroy the property of the enemy. That object will not be achieved in this case, because the loss will fall on the claimants, at any rate until the conclusion of the war. The interest of a pledgee, who is not an enemy, ought to be protected and not confiscated, and a fortiori if the pledgee is a subject of the State which makes the capture. With regard to the American authorities the case of The Carlos F. Roses(3) is most in point. The facts there were similar to those of this case, with this important difference, that the claimants were neutrals and not American citizens. The decision in The Amy Warwick(4) supports the claimants' contention.

The principle to be derived from the authorities, both English

(1) [1914] P. 218.

(2) (1804) 5 C. Rob. 218; 1 Eng. P. C. 456.

(3) (1900) 177 U. S. 655.

(4) (1862) 2 Sprague, 150.

and American, is that the Prize Court will not give effect to the claim of a creditor who has only a jus in rem and not a jus in re. Where claimants have asserted liens, they have failed if the lien does not give them any proprietary or possessory interest in the ship, but merely a right of action against the ship if the ship continues in existence. That was the ground of the decisions in The Tobago(1), The Rossia(2), The Nigretia(3) a nd The Hampton(4), and one of the grounds of the decision in The Marie Glaeser.(5) But it appears from the judgment in The Tobago(1), and also from The Frances(6), that where, as in this case, the claimant has a jus in re, he has that kind of property in the goods which the Prize Court ought to, and does, give effect to.

[THE PRESIDENT. What is to be done if the advance of the pledgee is not as here of the whole value of the goods, but only of a portion, say 49 per cent.?]

The goods ought to be condemned subject to the lien or charge being satisfied out of the proceeds.

Sir J. A. Simon, A.-G., in reply. It is admitted by the claimants that the goods are enemy's goods, and that the claimants are only pledgees. That being so, the facts are identical with those in The Ida(7), and this case can only be decided in favour of the claimants by differing from The Ida.(7) The claimants' contention is contrary to the principle and reasoning on which The Miramichi(8) and The Marie Glaeser(5) were decided. The interests of the holder of a bottomry bond are of a higher quality than and take precedence of the interest of a pledgee. It could not be contended that those interests would be recognized in the Prize Court, and yet the Court is invited by the claimants in this case to recognize a claim of an inferior order. The principle to be applied to the case of a pledgee must be the same in all cases, whether the amount advanced represents the whole or only part of the value of the goods, but in the latter case the taking of the account would place the Court in a position

(1) 5 C. Rob. 218; 1 Eng. P. C. 456.

(2) (1905) 2 Russ. & Jap. P. C. 39.

(3) (1905) 2 Russ. & Jap. P. C. 208.

(4) (1866) 5 Wall. 372.

(5) [1914] P. 218.

(6) (1814) 8 Cranch, 418.

(7) Spinks, 26; 2 Eng. P. C. 268.

(8) Nov. 23, 1914.

of great difficulty, and there would be opportunities for putting forward dishonest claims which could not be properly tested. Lastly, there is the great authority of the American decision in The Carlos F. Roses(1), in which all the authorities, American and English, were considered, and in which the precise point involved in this case was decided against the contention put forward by the claimants. The duty of the Prize Court is to inquire whose is the property, and if it is enemy property to condemn it. The Prize Court recognizes British, allied, or neutral claims over property if they arise by the general law independently of contract, for example, in the case of freight. On the other hand, if the claim to enemy property does not arise under the general law, but is the result of contractual relations between a vendor and purchaser and a third party, then in the case of cargo, as well as in the case of a ship, the claim is not one which the Prize Court recognizes. The great repute and authority of the prize law of this country are due to the fact that the judges of this Court have refrained from dealing with each case without regard to principle in order to avoid hardship to individuals. The Court has always endeavoured to ascertain the true principle applicable to the facts of the case before it, and having ascertained the principle has applied it, although in particular cases the result may have involved some hardship.(2)

THE CAPE CORSO.

Claim by a firm of British subjects, William Brandts, Sons & Co., of Fenchurch Avenue, London, to the cargo of timber of the British steamship Cape Corso (R. J. Hey, master), which vessel was detained for some days at Suez on and after August 7, and the cargo was seized on the arrival of the vessel at Brixham on August 26, 1914.

(1) 177 U. S. 655.

(2) In the course of the arguments the Attorney-General stated that he had authority for saying that a committee had been constituted, called the Prize Claims Committee, for the purpose of considering claims made by third parties against ships or cargoes which had been condemned, in order that the decisions of the Prize Court might not cause unfair suffering to those who had charges in respect of ships or cargoes.

The following statement of facts is taken from the judgment of the President:-

"The subject-matter of the claim in the second case is a large quantity of valuable wood laden on board the steamship Cape Corso, a British vessel.

The cargo was purchased from one Schütze of Otaru in Japan by one Leo Küpper of Hamburg, a German subject. The vessel was chartered to KÜpper. The goods were shipped in Japan, and the vessel was bound for Rotterdam, or, at the option of the charterer, for Hamburg.

By a business arrangement between Küpper and the claimants William Brandts, Sons & Co., the latter gave to Mitsui & Co., in London, on behalf of their house at Otaru, letters of credit authorizing them to negotiate drafts of Schütze on the claimants for the cargo purchased from him by Küpper.

A certain number of bills of exchange were accepted by the claimants before the war, which fell due after the war, but which have now been paid.

The bills of lading were made out to Schütze's order or assigns, and were indorsed generally by Schütze. They were in due course received by the claimants as security against their acceptances. The claimants then forwarded them to their agent at Hamburg to deliver up to Küpper against payment, and some of them were presented before the war. Certain collateral securities were given to the claimants by KÜpper, in part by a guarantee of the Rheinische Creditbank Filiale Karlsruhe, and in part by a deposit with the claimants' agent in Hamburg. The transactions were not quite so simple as in the first case. Their effect has been stated and no further details need be given.

The balance of account stated by the claimants to remain due from Küpper is 6104l.

The claim was formulated by the claimants as follows:-

A (1.) A declaration that the goods are their property.

(2.) Release to them of the said goods.

Alternatively -

B (1.) A declaration that they are entitled to possession of the goods.

(2.) Release of the goods to the claimants for the purpose of

sale and retention by them out of the proceeds of sale of the amount paid by them for the bills of lading and of the amount of costs, losses, and expenses (if any).

(3.) Alternatively for payment to them out of the proceeds of sale of the goods of the amounts referred to in (2.).

In reference to the transactions between them, these claimants in writing to their German customer, Küpper, said: 'We shall be pleased to finance the wood shipments from Mr. Carl Schütze for your account on the basis as sketched by you.'

Just as Brandts & Co. financed the wood shipments for their customer, so did Schröder & Co. finance the nitrate shipments for their customers, the Rhederei-Aktien-Gesellschaft von 1896."

1914. Dec. 17. Maurice Hill, K.C., and R. H. Balloch, for the Crown.

Stuart Bevan, for the claimants.

Darby, for the shipowners.

The arguments of counsel were the same as in The Odessa (supra), except that the contention was raised by counsel for the claimants, William Brandts, Sons & Co., that a difference existed between the two cases owing to Küpper, the purchaser of the cargo of the Cape Corso, and his guarantors having, before the outbreak of hostilities and capture, refused to take up the bills of lading in respect of part of the cargo, with the result that the pledgees could have sold; but (as appears from the judgment) the fact of the refusal did not, in the opinion of the President, alter the property in the goods, and, therefore, in respect of the cargoes on the two vessels, the principles applicable were the same in both cases.

1914. Dec. 21. SIR SAMUEL EVANS, PRESIDENT, read the following judgment:-

The claims to the cargoes in these two cases are of a like nature. There is no difference between them in any matters essential for my judgment, and the principles applicable must be the same in both. I will therefore deal with them together. [The President stated the facts as set out above, and continued:]

It was admitted for the claimants in each case (1.) that in law the property in the cargoes had been transferred to and become vested in the German purchasers, and that the latter were at all material times the legal "owners" of the cargoes; and (2.) that the claimants were merely pledgees of the bills of lading representing the cargoes as security for moneys advanced or agreed to be advanced.

The important questions of law now raised are whether the Prize Court should nevertheless regard the claimants as the real owners of the goods, and should therefore release the goods captured on the ground that they were not "enemy property"; or whether the Court should in some way take cognizance of their claims, and direct the captors or the marshal to pay them out of the proceeds.

The argument was presented ably and persuasively by Mr. MacKinnon, and the Court is indebted to him for his assistance. He admitted that no decisions of this or any other Court of Prize had given effect or even lent countenance to such a claim; but he urged that, side by side with the development of commercial dealings on the lines of those now presented, there should be such an extension of the law of prize as would protect people who, like the claimants, lent money on the security of cargoes or their bills of lading.

At the outset, two things must be remembered - first, that this is a Court of law, and, secondly, that the law to be administered here is the law of nations, i.e., the law which is generally understood and acknowledged to be the existing law applicable between nations by the general body of enlightened international legal opinion.

The decisions of a Court of law should proceed upon defined principles. Those principles have to be applied to ever varying sets of facts. But the Court has the function and duty not merely of deciding individual cases, but of determining them upon principles which shall be a guide to others as to what their positions and rights are in the eye of the law.

In the domain of international law, in particular, there is room for the extension of old doctrines or the development of new principles, where there is, or is even likely to be, a general

acceptance of such by civilized nations. Precedents handed down from earlier days should be treated as guides to lead, and not as shackles to bind. But the guides must not be lightly deserted or cast aside.

Already, in the course of the present war, I have had to deal with questions not remote from those raised in these proceedings; and in dealing with them I have striven after careful consideration to decide them in this spirit, with the guidance of the past and in the light of later experience.

In The Marie Glaeser(1) the positions of owners of enemy vessels, and of other persons, neutral and British subjects, claiming liens or charges upon the vessels, fell to be decided.

In The Miramichi(2) rules for determining the "ownership" of cargoes laden on an innocent ship had to be laid down.

In The Marie Glaeser(1) the decision was that in cases of capture no mortgages, liens, or charges upon an enemy ship could be set up in this Court against the captors.

In The Miramichi(2) it was held that in cases of seizure the "ownership" of or "property" in a cargo shipped during peace depends upon the municipal law governing contracts for the sale and purchase of goods. I must adhere to those decisions, unless and until they are corrected by a higher tribunal; and must apply the principles on which they were founded consistently to the facts of the present claims, unless there is good reason in reference to these cargoes for adopting different tests or doctrines.

As to the charges, or liens, no doubt a distinct line could be drawn between ships, and cargoes laden in them, if it were deemed right to make such a distinction. But it has never yet been made, I think, in any authority by the Prize Court of any nation. The reasons for not allowing any charges or liens against ships are set out in The Marie Glaeser(1) and the many authorities therein cited. Some of these authorities related to cargoes, and the same reasons were applied. I will not go over the same ground again. But I will just refer to three instances as examples where cargoes were dealt with upon the same footing covering the century from the time of Lord Stowell in 1805,

(1) [1914] P. 218.

(2) Nov. 23, 1914.

through the period of the Crimean War in 1854, up to the Spanish-American War in 1900. They are The Marianna(1), The Ida(2), and The Carlos F. Roses.(3)

It appears to me that it is impossible to distinguish the two last-named cases from those with which I am now dealing. Nor do I see any reason for running counter to them.

In the first case now before the Court (The Odessa) the vessel and the cargo are both "properties" belonging to enemy subjects. What reason of any validity, or even plausibility, can there be for barring the claims of British or neutral subjects having liens or charges upon the vessel, and at the same time allowing similar claims against the cargoes? I can see none.

Accordingly, upon authority and principle, inasmuch as the claims of Schröder & Co. and Brandts & Co. are founded upon their positions as pledgees and not legal owners, they cannot, in my judgment, be allowed.

But it was further urged that although the claimants were not the legal owners of the cargoes, they had such a beneficial interest therein that their claims should be allowed. To accede to this proposition would be to open a door for all sorts of inquiries and calculations which has been consistently and firmly closed by my predecessors and by Courts of Prize. A consideration of the circumstances in the case of Brandts & Co.'s claim will at once show the difficulties. In the initial stage, how would a captor, who may have had good reason to believe that the cargo seized was enemy property, know how to act if he had to consider before seizure, or knew he might be confronted after seizure with, claims from pledgees or moneylenders in various parts of the world, whose advances might be either 5 per cent. or 95 per cent. or any other proportion of the value of the goods? Or if he might be subject to the taking of a general account as between banker and customer, or guarantor of customer, in order to ascertain the extent of the alleged charge or lien? When a later stage is approached, what would the captors, or the marshal, have to do? Are they to be parties to

(1) (1805) 6 C. Rob. 24; 1 Eng. P. C. 518.

(2) Spinks, 26; 2 Eng. P. C. 268.

(3) 177 U. S. 655.

the taking of an account between the pledgors and pledgees, or persons possibly claiming under them; an account which ex hypothesi would during the war have to be taken in the absence of some of the parties? Such proceedings would be wholly foreign to the jurisdiction and working of this Court.

That persons may be losers during war time in pecuniary or commercial transactions with enemy traders is only too obvious. Loss is no test of legal rights. The claimants have rights of action against their customers for their full claims, which they can set in motion either during the war or after it. How far they might be fruitful is no concern of this Court.

In my judgment, the only safe guiding principle is to ascertain who are the legal owners of the cargoes; and if the goods are found to be the property in law of an enemy, to condemn them; or if they are the property of neutrals or British subjects, to release them, as was done in The Miramichi.(1)

There is one other matter to mention relating to the second case, lest it may be thought that it has been overlooked. Counsel for Brandts & Co. contended that in regard to part of the cargo claimed (namely, 2834 logs) both Küpper and his guarantors, the Rheinische Creditbank Filiale Karlsruhe, had before the outbreak of hostilities and capture refused to take up the bills of lading, and that thereupon the pledgees could have sold. Even if the fact of refusal were established, it is clear that, until the pledgees did sell, the general property in the goods remained in the owners, who had at any time the right to redeem.

I may further note that the facts upon this head were precisely similar in The Carlos F. Roses(2); the statement of them to be found at p. 679 of the report is as follows:- "The purchase of the goods, the drawing and cashing of the drafts, the endorsement and delivery of the bills of lading, all took place before the sailing of the vessel, and long before the declaration of the war, and before there was any reason to anticipate hostilities. The drafts were accepted before the war and were paid before the seizure of the vessel." Nevertheless, it was held that the claimants had no right to the goods as against the captors.

(1) Nov. 23, 1914.

(2) 177 U. S. 655.

My judgment, therefore, is that in none of the forms suggested can the claims in either case be allowed; and I must condemn the cargoes in both cases as lawful prize.

Solicitor for the Crown: The Treasury Solicitor.

Solicitors for claimants: Stibbard, Gibson & Co.; Coward & Hawksley, Sons & Chance.

F. O. R.

T. L. M.