CHAPTER VII.

MORTGAGE.

diction of

THE Admiralty Division, which possessed no original The jurisjurisdiction over mortgages of ships,1 has now by statute the Court. jurisdiction in respect of any mortgage duly registered according to the provisions of the Merchant Shipping Act, 1854, whether or not the ship or proceeds are under the arrest of the Court.2 But, if any ship, such as a foreign one the mortgage of which is unregistered, is under the arrest of the Court, or the proceeds have been brought into the registry, then a jurisdiction is founded. By a mortgage the mortgagee acquires a right to the ownership of a vessel in a certain event, since it is a transfer of all the mortgagor's interest by way of security for the repayment of a loan, it having been enacted that meanwhile a mortgagee by reason of his mortgage shall not be deemed to be the owner of the ship, nor shall the mortgagor be deemed to have ceased to be the owner of such mortgaged ship, except so far as may be necessary for making it available as a security for the mortgage debt.5 The mortgagee

1 The Neptune, 3 Hagg. 129 (132).

2 A. C. A. 1861, s. 11. As to registration of mortgages, see M. S. A. 1854, ss. 66-75; and M. S. A. 1862, s. 3.

33 & 4 Vict. c. 65, s. 3. Such an arrest must be de jure as well as de facto: The Evangelistria, 35 L. T. N. S. 410; 46 L. J. Ad.; 1 L. R. 2 P. D. 241; Tayler v. Caryl, 20 Howard, 583 (599) (A.).

Keith v. Burrows, L. R. 1 C. P. D. 722; 45 L. J. C. P. 1876; L. R. 2 C. P. D. 163; 46 L. J. C. P. D. 452; 46 L. J. C. P. (H. L.) 801; L. R. 2 App. Cas. 636.

5 M. S. A. 1854, s. 70.

G

charterers.

becomes entitled to the freight due when he takes actual or constructive possession of his security; he cannot, therefore, recover back from the mortgagor any freight which he has allowed him to receive since the date of the loan, Rights of and before he takes possession. Nor can the charterers take from the freight payable by them any sum in respect of advances which the master has agreed shall be deducted from such freight, for the sum which it is agreed by the charter-party shall be advanced and taken from the freight is the only amount by which the freight may be reduced.2 Meanwhile the mortgagor retains all the rights and powers of ownership, and his contracts in relation to the ship are valid as against the mortgagee so long as they do not impair the value of his security; therefore, if a ship under charter is arrested at the suit of a mortgagee, the charterer on motion will obtain an order for its release. But, if his interests are likely to be prejudiced, the Court will exercise its equitable powers by permitting the fulfilment of such contracts only on certain terms: anything, however, which is at all an attempt by the mortgagee to get better terms from the mortgagor by invoking the aid of the Court will not be countenanced by it. The burden of satisfying the Court that the mortgagee's security will be impaired rests on him, and must be shown by very satisfying evidence. It follows, therefore, if a mortgagee arrests a vessel, and cannot then prove that his security will be lessened, that the Court on motion by the owners or charterers will order the release of the ship, generally with costs, it may be even with damages, against the mortgagee.1

1 Liverpool Marine Co. v. Wilson, L. R. 7 Ch. 507; 41 L. J. Ch. 798; Wilson v. Wilson, L. R. 14 Eq. 32; 41 L. J. Ch. 423.

2 Tanner v. Phillips, 42 L. J. Ch. 125; 27 L. T. 717.

Collins v. Lamport, 4 De G. J. & S. 500; 34 L. J. Ch. 196; The Innisfallen, L. R. 1 Ad. 72; 35 L. J. Ad. 110; The Fanchon, L. R. 5 P. D. 173; 42 L. T. 483.

4 The Maxima, 39 L. T. 112; 4 Asp. M. C. 21; The Cathcart, L. R. 1 Ad. 314.

of mort

gagees.

Although it has been enacted that a mortgagee of a The rights British ship only becomes the owner for the purposes of the mortgage, so that he may be protected from claims for which he would otherwise be liable as owner in possession,1 yet the mortgage gives him a right, as has been pointed out, to the actual possession of the ship at any time for the purposes of his security. Accordingly, though mortgages may be unregistered, or registered according to the provisions of the Merchant Shipping Act, 1854, yet an unregistered mortgage is good against all persons except registered transferees and mortgagees. Accordingly, as between two unregistered mortgagees, or an equitable mortgagee and the assignee of the freight, the first in time would have the first claim to the ship and freight; and, as between a mortgagee of the freight and an unregistered and subsequent mortgagee of the ship, the latter would have the first claim to the ship and freight. But, as between a registered and unregistered mortgagee, the former, though he may be last in point of time, is first in point of rank.2

But, since after a first mortgage the legal right to the ship has passed to the mortgagee, if there then comes an equitable mortgagee of the freight (though the first mortgage carries with it the legal right on taking possession to the freight); and, next, an equitable or second mortgagee of the ship, without notice of the mortgage of the freight, the last two incumbrancers would take according to the time of their securities, because the last equitable mortgagee takes subject to all equities which are prior to his own. Yet, if the first mortgagee of the ship is also the subsequent mortgagee of the freight without notice of any

1 Dickinson v. Kitchen, 8 E. & B. 789.

2 Keith v. Burrows, L. R. 1 C. P. D. 722; 45 L. J. C. P. D. 876; L. R. 2 C. P. D. 163; 46 L. J. C. P. D. 452; L. R. 2. App. Cas. 636; 46 L. J. C. P. D. (H. L.) 801. The judgment of the House of Lords in this case does not appear to conflict with the dicta of the Court below on the priority of mortgages, and turned solely upon whether a certain sum could be considered as freight see, too, Wilson v. Wilson, L. R. 14 Eq. 32; 41 L. J. Ch. 423.

The Court will use

intervening charge, his claim to the freight is a prior right to that of the second mortgagee of the ship.'

A mortgage of a British ship must be in the form preequitable scribed by the Merchant Shipping Act, 1854. An unremedies. finished ship, incapable of registration, can be equitably mortgaged by the deposit of the builder's certificate. The Court will act on equitable principles in adjudicating upon cases of mortgage; thus, it will look behind the register, so as to discover the real character of the transaction, so that what is on the face of it an absolute transfer may be treated, if such was the intention of the parties, as a mortgage.3

And on the same principle equities will be enforced between the parties to a mortgage, all transactions which have taken place, as well as the registered documents, being fully considered; and equally also the Court will correct mistakes, as, when a receipt for the mortgage money was indorsed on the mortgage by mistake, and the mortgagees had sold the ship, the Court made a decree that the purchaser was entitled to the possession of the ship.

A mortgagee, having no maritime lien on a ship, ranks after all claimants against her except those who have supplied necessaries to British ships, since a mortgage is a valid charge on a vessel from the day when it is given, whilst the ship is not chargeable with a debt for necessaries until the suit is actually instituted.

6.

The Liverpool Marine Credit Co. v. Wilson, L. R. 7 Ch. 507; 41 L. J. Ch. 798.

2 Ex parte Winter, L. R. 20 Eq. 746; 44 L. J. Bank. 107.

3

The Innisfallen, L. R. 1 Ad. 72; 35 L. J. Ad. 110.

The Cathcart, L. R. 1 Ad. 314; M. S. A. 1862, s. 6.

5 The Rose, L. R. 4 Ad. 6 ; 42 L. J. Ad. 11; and see also J. A. 1873, s. 25, sub-s. 11.

The Two Ellens, L. R. 4 P. C. 161; 41 L. J. Ad. 33.

CHAPTER VIII.

BOTTOMRY AND RESPONDENTIA.

BOTTOMRY is a contract in the nature of a mortgage by The conwhich money is borrowed to be applied to the necessities tract of bottomry. of a ship. The keel or bottom of the ship (a part signifying the whole) and the freight which it will earn and the cargo on board is the security thereby given for the repayment of the sum lent, together with interest. Both principal and interest are forfeited if the ship is lost on the voyage. But no property passes as by mortgage, and no possession is given as by a pledge.1

dentia.

Respondentia is a similar contract. The security here Of responis only the cargo laden on board,2 and the money is raised for the necessities of the cargo only.

Over questions relating to bottomry and respondentia bonds, the Admiralty Division has almost sole jurisdiction, but the power of the Court to enforce a bottomry bond (under which term we include a respondentia bond) depends of course on its validity. The elements of such The form validity are not numerous. But, firstly, the contract must

1 Stainbank v. Shepherd, 13 C. B. 418 (441). 2 The Cargo ex Sultan, Swa. 510.

Stainbank v. Shepherd, 13 C. B. 418 (444); Johnson v. Shippen, 1 Salk. 34; The Cargo ex Sultan, Swa. 510; 5 Jur. N. S. 1060. The Court of Chancery used sometimes to give relief on bottomry bonds, but it is becoming less and less frequent to invoke the aid of that Division; and as under the Judicature Act, 1873, s. 24, equitable remedies are to be administered in every Division, the Admiralty should be as efficient a tribunal as the Chancery Division.

of the

contract.