charter to load a cargo made certain general average sacrifices before reaching the loading port. The average adjuster in dealing with these sacrifices had charged the entire cost of them to the ship. The ship underwriters contended that contribution was due from the chartered freight; and Lord Justice Collins, in adopting this view, referred to the case of the Progress as authority on the point. He said, after pointing out the analogy between salvage and general average as regards the interests to contribute :

It seems to me that Lord Stowell in the Progress had practically the same question as the average adjuster has in this case, and it (i.e. the Progress case) is clear authority in principle that in the case of a round voyage under such conditions as these (i.e. the vessel in ballast under charter) where the freight is only payable on the ultimate arrival of the ship with its cargo on board, that freight is a contributory factor.'

In the Orpheus1 case the vessel was proceeding from Liverpool to Viborg to load deals for Grimsby under a charter-party. She had liberty to take an outward cargo and did so. In the course of the outward voyage she collided with and damaged the Emilia. To secure their claim against the Orpheus the owners of the Emilia arrested her on her return to Grimsby, and also arrested the cargo of deals for the chartered freight. These deals, it will be remembered, were not on board at the time of the collision. On a motion to have this freight released, on the ground that freight is only liable when it is being earned in respect of cargo on board at the time of the collision, Sir R. J. Phillimore, rejecting the motion, said:

'As I read the charter-party which relates to the deals, I am of opinion that freight was growing due on their account although they were not on board at the time of the collision.'

In the case of the Norma2 the vessel was proceeding from Honduras to England with a cargo. Salvage services were rendered to her when in distress, and she was carried into Bermuda. The master declined to give the bond asked for by the salvors, and the matter being referred to England, security was given there; the vessel was released, and after repair proceeded on her voyage. In the salvage action it was contended that no salvage was due on the freight on the ground that, at the time of the salvage service, no freight had been earned, freight being payable only on the delivery of the cargo in England. The learned judge, after pointing out that the proper value on which to assess the salvage award is the

1 The Orpheus (1871) 3 Asp. O.S. 531; 40 L. J. Adm. 24.

2 The Norma (1860) Lush. 124.

value at the place where the service of the salvor terminates, proceeded :

'Now it is certainly quite true that at Bermuda, as between the owner of the ship and the shipper of goods, no freight was earned. But I do not think that is at all conclusive against the salvor.. . . In salvage we have to decide on purely equitable principles, and the question here is not so much what freight was earned at Bermuda but what services in respect of the contract of freight the salvors had then rendered.'

These cases seem to the present writer to establish the following propositions :

(a) The freight-earning voyage of a vessel chartered to proceed in ballast to a loading port and thence to carry cargo commences as soon as the vessel breaks ground to proceed in ballast to her loading port. (The Progress and Carisbrook cases.)

(b) Chartered freight payable only on right delivery of the cargo is, while the vessel is proceeding to her loading port, though not yet earned, an element of value to the shipowner which the Courts will recognize and deal with. (The Orpheus.) (c) Salvage is granted by the Courts on freight not yet earned, based on its value to the shipowner at the moment when the salvage service terminates, without reference to the question whether the freight is or is not subsequently earned. (The Norma.)

If these three propositions are correct, the proper answer to the salvor, it is submitted, would be that chartered freight under the circumstances named is a subject of maritime salvage. From this point of view it is unnecessary to deal with the many other very interesting and very debatable questions raised in the article in the April number; but to two of them a short reference may be permitted.

1. On p. 208 Mr. Birch Sharpe speaks of the freight in question as 'freight admittedly being earned though as yet non-existent', with the natural inference that a salvage award cannot be asked for on a thing which does not exist. But is the freight 'nonexistent'? Either it is 'existent' to the shipowner, in the case put, from the moment the ship commences her voyage in ballast, or it is 'non-existent' up to the moment preceding the delivery of the cargo to the consignee, with this result that, in the latter alternative, salvage is awarded every year in scores of cases on nonexistent' freights; for between these two points of time the nature of the shipowner's right to freight remains the same. It is a right to earn an agreed sum by carrying and delivering an agreed cargo.

Taking the cargo on board does not alter the nature of this right or make the freight 'existent' when before it was 'non-existent,' though possession of the cargo may give the shipowner, under the terms of the charter-party, greater security for the payment of his freight.

2. On the same page the writer asks, What is the value of a ship?' The following does not profess to be an exhaustive definition of what the value of a ship represents, but is rather an attempt to show the main considerations on which the market value of a ship, when used for the ordinary purposes of shipowning, must be based.

A ship is an investment of capital. The owner buys her to secure from the freights she will earn, first, a fair return on the sum he has invested in buying and working her, and, secondly, a further amount to replace the loss of capital arising from the regular and natural decay of his vessel. From the moment when he converts his capital into ship, he begins by means of freights to reconvert his ship into capital, until, the time arriving when his ship is worn out, he has once more his capital in hand and has in the meantime received a fair return on the capital invested. Thus the market value of a ship at any moment represents the sum of all the net freights she may reasonably be expected to earn, plus her value at the end for old material, but less a reasonable interest on the capital invested in buying and working her; and the freight which, at the commencement of any adventure, she is proceeding to earn is just as much a part of her value at that moment as any of the reasonably contemplated subsequent freights. But for purposes of insurance the law directs that. a distinction shall be drawn between a freight in course of being earned and the many subsequent average freights which go to make her market value, and the former must be separately insured.

There is nothing original in the view of a ship's value here presented. It is substantially the view held by many writers on shipping and insurance subjects, and amongst them by Lowndes, whose definition is criticized, but hardly seriously shaken, by Mr. Birch Sharpe. For all that Lowndes has omitted to take account of in his definition is the fact that the shipowner will not use his capital or his labour for nothing, but will expect the freights to recoup him, not only the capital sum invested, but also a reasonable return on the labour and capital involved. This omission does not seem to touch the central principle that the value of the machine is dependent on the money it will earn. The Sea Insurance Co. v. Hadden1 and Hickie v. Rodocanachi 2 do not conflict with this view. They deal with questions of Marine Insurance law, and the doctrine of

1 The Sea Insurance Co. v. Hadden (1884) 5 Asp. 230, 53 L. J. Q. B. 252.

2 Hickie v. Rodocanachi (1859) 28 L. J. Ex. 273.

that law with regard to the insurance of freight in course of being earned has been already referred to.

But it is probable that the question of chartered freight's liability for salvage seldom arises in the simple form we have been hitherto discussing. It is more commonly in connexion with the shipowner's attempt to recover from his insurers the amount he has paid to the salvors that differences of opinion present themselves.

We will assume that, in the case put, the shipowner has insured both his vessel and his chartered freight. If the salvor has asked for and obtained from the Court a definite award in respect of the freight no difficulty, of course, arises. But suppose that the question of the freight's liability, as distinct from the ship's, has not been before the Court at all, or even that the entire settlement has been amicably arranged out of Court between salvor and shipowner. Let us assume that the value of the salved vessel at Plymouth in a sound condition has been agreed at say £18,000, and the amount to be paid to the salvor also agreed at say £1,800. If now the shipowner asks his ship underwriters to pay the whole of the £1,800, he will probably be told that his chartered freight must pay a portion of it; in other words, that the salvage payment £1,800 must be apportioned between the ship and the chartered freight, and thus recovered on the ship and freight policies. Is this right? It is certainly the present practice of average adjusters so to treat the

matter.

Let us assume that at Plymouth, at the time when the ship in the supposed case (we will call her ship 4) was carried in by the salvors, there was lying a sister ship B, similar in age, build, upkeep-in every respect. Further, that the £18,000 agreed on with the salvors as the value of ship 4 is the value at which the owner would be willing to sell each ship, A and B. Let us also assume that there is a purchaser in the market of two ships such as these, who is willing to give the £18,000 for each for immediate delivery.

Now ship will not be back from Mexico with her cargo for four months. The purchaser will give £18,000 for her if he can have her at once, or if he can have her at the end of four months together with the net freight she is earning. Otherwise, for possession only after four months, he will give, and the shipowner will take, £17,000.

Is it not clear that the difference between what he gives for B the free ship now, and what he gives for A at the end of the four months, represents the net value of the freight ship A is in course of earning?

Thus then the £1,800 paid to the salvors represents the value of

their services to what by law we must regard as two separate interests, the ship and the freight she is earning; and since the law of Marine Insurance does not allow the shipowner to recover a loss of freight, nor presumably money paid to avert a loss of freight, on his policy on ship, a portion of the salvage award must be charged to the policy on chartered freight, and The Sea Insurance Co. v. Hadden is strong authority on this point if authority were

needed.

It is submitted then that, even where the chartered freight is not definitely considered in the salvage settlement, it must, under the circumstances of the supposed case, contribute to the award.

As to the proper method of calculating the values on which this contribution should be made nothing is said here. The present method appears to work satisfactorily, though it would probably be possible to bring it more closely into line with the doctrines of Salvage Law. However that may be, the necessity and justice of some contribution between the two interests seems to the present writer to be clear.

M. A. RUNDell.