Shipowner and Charterer.

It must, however, be always alleged, and, if traversed, be proved, that the party on whose account and for whose benefit the policy was made, was interested in the subject of insurance whilst the risk was pending, and at the time of loss. So that where, after averment of interest in three as part-owners of a ship, it appeared that one of them had before the loss parted with his share to one of the other part-owners, it was held, that there was no right of action in the three plaintiffs jointly. If the transfer of interest had been after loss, the underwriter could not have resisted the claim.2

The loss, before which an interest must have commenced, according to this rule is a total loss. The rule, however, does not preclude from recovering for an average loss sustained in respect of the subject of insurance before the interest began, provided the loss in question falls in virtue of the terms of the transfer upon the person for whom the policy is put in suit. Accordingly it is decided in an action for an average loss on a policy on goods, "lost or not lost," that it is no bar to aver that the interest in the goods was not acquired till after the loss, it being at the same time admitted, that the plaintiff had an interest in such goods during the voyage to the amount insured.3

After these general observations respecting the nature of insurable interest, we turn now to consider it more in detail, as growing out of some of the usual relations sustained in respect of the more ordinary subjects of insurance.

The first of these in order is the shipowner and the charterer. The insurable interest of the owner in his ship still continues to the full amount, notwithstanding he has demised her under covenant to one who thereby makes himself responsible for her full value; for he is not bound to trust

exclusively to the credit of the charterer. In that case, the charterer also has an insurable interest in the ship to the full extent of his liability in respect of her. Thus, in the As to ship. United States, where the owner of one-half of a schooner hired the other half, under a covenant, that in case of her being lost within the terms of the charter-party, he would pay the other part-owner the value of his moiety, he was held to have an insurable interest to the full value of the ship.2

Two persons joined in the purchase of a ship, and they were registered each for one-half the vessel. One of them was unable to pay for his half, and yet continued to appear on the register as before; the other, who paid for the whole, but never had any assignment or mortgage executed of his coowner's share, or acquired any lien thereon for the money so paid, insured the whole vessel in his own name and for his own account, upon authority from his co-owner so to do, and he was held to have an insurable interest on the vessel to her full value.3

Generally speaking, the shipowner alone has an insurable As to freight. interest in freight, whether by that word be meant freight, properly so called, or the chartered hire of the vessel.

In some cases, however, the charterer may have an insurable interest in freight. If he either re-charters the ship or puts her up as a general ship for the transport of other people's goods on freight, he stands, pro hac vice, in the relation of shipowner, and has an insurable interest in the freight he expects to earn. Moreover, as in this country the

1 Hobbs v. Hannam, 3 Camp. 93. 2 Oliver v. Greene, 3 Mass. Rep. 133, cited 1 Phillips, Ins. no. 325.

3 Provincial Ins. Co. of Canada v.

Le Duc, L. R., 6 P. C. 224.

The case of Mellen v. National Ins. Co., 1 Hall Rep. 452, decided in the U. S. to the effect that only the excess of freight over the chartered hire is insurable by the charterer, seems to be justly challenged as inconsistent with principle by Parsons

(1 Ins. 173).

That they have an insurable interest, the owner to the full extent of the chartered hire, and the charterer to the whole amount of his expected freight, which may be covered in each case by a policy, cannot be doubted; but it is also quite clear that between them they can only recover to the full amount of the aggregate interest actually at risk. See post, p. 118.

Assignee of freight.

The charterer: as to

1

shipowner has an insurable interest in the benefit which he expects to derive, or the profit he expects to make, by carrying his goods in his own ship, there is no reason why the charterer, if he stands in such a position, may not protect his interest by a policy.

The vendor of a ship who reserves his right to the freight being earned at the time, is in the same situation as one who, for good consideration, is assignee of freight. Valid insurances are daily effected in the latter case in this country; and even in the United States, where the practice is to insure ship and freight in the same policy to prevent injustice in case of abandonment, a policy on such an interest has been held valid.2

A charterer who agrees to pay dead freight in case the dead freight. ship be prevented by political or other circumstances from discharging her outward or shipping her return cargo, has an insurable interest to the same extent which may be covered by a policy in the terms of the charter-party.3 In this case it was the contingent determination of the adventure by the foreign government at the port of discharge which was the risk insured, and it was insured for the charterer; the shipowner might at the same time have insured his interest in freight under a common policy against ordinary sea risks.

Advances on freight.

A charterer who advances money in part payment of the freight, purchases thereby an insurable interest in the cargo beyond its prime cost to the extent of the money advanced; for the money cannot, in case of the loss of the ship or cargo, be recovered back, so that the loss of ship or cargo involves the loss of the money advanced. The charterer, after such an advance, is like a shipowner conveying his goods in his

1 Flint v. Flemyng, 1 B. & Ad. 45; Devaux v. J'Anson, 5 Bing. N.C. 519.

2 Paradise v. Sun Mutual Ins. Co., 6 La. Rep., cited 1 Phillips, no. 477.

3 Puller v. Staniforth, 11 East, 232; see also Puller v. Glover, 12 East, 124; Puller v. Halliday, 12

East, 494.

Anonymous case, 2 Shower, 283; De Silvale v. Kendall, 4 M. & Sel. 37; observations of Bayley, J., in Manfield v. Maitland, 4 B. & Ald. 582, 585; Allison v. Bristol Mar. Ins. Co., 1 App. Cases, 209, and the cases referred to therein.

own ship; the value of the goods is enhanced to the extent of the freight, and that value in each case is insurable,— by the shipowner as freight,' and by the charterer as advances on account of freight.2 But for this purpose it must appear, by fair and reasonable inference from the words in the charter-party, that the money paid is an advance in part payment of the freight.3

Hence, where the covenant as to payment of freight was in the following terms:-"Such freight to be paid as follows, viz., 1207. British sterling for freight of the outward cargo to Maranham, and as much cash as may be found necessary for the ship's disbursements at Maranham, to be advanced by the charterer or his agents to the master when required, free from interest or commission, &c., and the residue of such freight to be paid on the delivery of the cargo in Liverpool," &c. : Lord Eilenborough and the Court of King's Bench held, that under these terms the money must have been advanced specifically on account of freight, and therefore could not, upon loss of the ship before freight earned, be recovered back as money had and received. So, where the stipulation was in these words:-"Cash for ship's disbursements to be advanced to the extent of 3007., free of interest, but subject to insurance, and 23 per cent. commission," Lord Campbell, C. J., said, that this mention of insurance stamped the transaction indelibly as a payment on account of freight, and not a mere loan; and the rest of the Court of Queen's Bench concurred with him in holding accordingly.5

Flint v. Flemyng, 1 B. & Ad. 45; Devaux v. J'Anson, 5 Bing. N. C. 519.

2 See cases supra, and Wilson v. Martin, 11 Exch. 684; 25 L. J. (Ex.) 217; and see Ralli v. Janson, 24 L. J. (Q. B.) 97; 4 E. & B. 500.

3 Abbott, C. J., in Manfield v. Maitland, 4 B. & Ald. 585; Williams v. North China Ins. Co., 35 L. T., N. S. 884; Maclachlan on Shipping, 519.

De Silvale v. Kendall, 4 M. &

Sel. 37. Lord Ellenborough and Dampier, J., lay some stress upon the words "free from interest and commission," as showing that the money advanced was not intended to have been a loan.

5 Hicks v. Shield, 7 E. & B. 633; 25 L. J. (Q. B.) 205, 208. Accord. Droege v. Suart (The Karnak), L. R., 2 P. C. 505, 514; Currie v. Bombay Native Ins. Co., L. R., 3 P. C. 72, 83. See Watson v. Shankland, L. R., 2 Ho. of Lds. Scot. 304.

1

In both these cases, as Lord Tenterden remarks of the former of them, "the instrument was studiously framed so as to make the freighter lose the money advanced by him, unless the owner reaped the benefit by the ship's coming home safe." Where, however, the charter-party does not, on the face of it, clearly and distinctly import that the sum advanced is to be a payment on account of freight, it is to be regarded as a mere loan, which the freighter has a right to recover, whatever be the issue of the adventure, and in which he has, therefore, no insurable interest. Hence, where the charter-party, after stipulating the amount of freight and mode of its payment, merely contained the words, "The captain to be supplied with cash for the ship's use," the Court held, that the charterer had no insurable interest in bills of exchange drawn on him by the master in respect of cash so supplied, it not appearing by the charter-party to be advanced as a part payment of freight.2

But where the freighters of a general ship paid her disbursements abroad, and by request of the owners took the captain's bill" drawn against freight" on the consignees of the cargo in this country, in discharge of such disbursements, it was held that, as the freighters had agreed to advance on "credit of the freight," which was distinctly pledged by the captain's bill, they had an insurable interest in freight, and might recover on a policy describing their interest as "an advance on account of freight."3 By a charter-party the freighters were to pay for the use of the ship "for the voyage 10,000 dollars, in manner following : viz., in China, all the sums that might be necessary for the payment of port charges and other incidental expenses (the latter not to exceed 2000 dollars), and the balance at thirty days after the ship's return to the port at Buenos Ayres:"

1 Per Abbott, C. J., in 4 B. & Ald. 585.

2 Manfield v. Maitland, 4 B. & Ald. 582; see also Saunders v. Drew, 3 B. & Ad. 445.

3 Wilson v. Martin, 11 Exch. 684;

S. C., 25 L. J. (Ex.) 217. This, by Willes, J., is designated an equitable assignment of freight; Seagrave v. Union Marine Ins. Co., L. R., 1 C. P. 305. See Ellis v. Lafone, 8 Exch. 546; 22 L. J. (Exch.) 124.