Necessary Assistance
Cases
Nicholson v.Chapman
(1793) 2 H Bl. 254, Court of Common Pleas
Eyre CJ : this is not a case of damage-feasance; the timber is found lying upon the banks of the river, and is taken into the possession, and under the care of the Defendant, without any extraordinary exertions, without the least personal risk, and in truth, with very little trouble. It is therefore a case of mere finding, and taking care of the thing found for the owner. This is a good office, and meritorious, at least in the moral sense of the word, and certainly intitles the party to some reasonable recompence from the bounty, if not from the justice of the owner; and of which, if it were refused, a court of justice would go as far as it could go, towards enforcing the payment. So it would if a horse had strayed, and was not taken as an estray by the lord under his manorial rights, but was taken up by some good-natured man and taken care ofby him, till at some trouble, and perhaps at some expence, he had found out the owner. So it would pe in every other case of finding that can be stated (the claim to the recompence differing in degree, but not in principle); which therefore reduces the merits of this case to this short question, whether every man who finds the property of another, which happens to have been lost or mislaid, and voluntarily puts himself to some trouble and expence to preserve the thing, and to find out the owner, has a lien upon it for the casual, fluc tuating and uncertain amount of the recompence which he may reasonably deserve? It is enough to say, that there is no instance of such a lien having been claimed and allowed; the case of the pointer-dog (2 Black. 1117), was a case in which it was claimed and disallowed, and it was thought too clear a case to bear an argument. Principles of public policy and commercial neces sity support the lien in the case of salvage. Not only public policy and commercial necessity do not require that it should be established in this case, but very great inconvenience may be appre hended from it, if it were to be established. The owners of this kind of property, and the own ers of craft upon the river which lie in many places moored together in large numbers, would not only have common accidents from the carelessness of their servants to guard against, but also the wilful attempts of ill-designing people to turn their floats and vessels adrift, in order that they might be paid for finding them. I mentioned in the course of the cause another great inconvenience, namely, the situation in which an owner seeking to recover his property in an action of trover will be placed, if he is at his peril to make a tender of a sufficient recompence, before he brings his action: such an owner must always pay too much, because he has no means of knowing exactly how much he ought to pay, and because he must tender enough. I know there are cases in which the owner of property must submit to this inconvenience; but the num ber of them ought not to be increased: perhaps it is better for the public that these voluntary acts of benevolence from one man to another, which are charities and moral duties, but not legal duties, should depend altogether for their reward upon the moral duty of gratitude. But at any rate, it is fitting that he who claims the reward in such case should take upon himself the bur then of proving the nature of the service which he has performed, and the quantum of the rec ompence which he demands, instead of throwing it upon the owner to estimate it for him, at the hazard of being nonsuited in an action of trover.
Judgment for the Plaintiff.
Falcke v. Scottish Imperial Insurance Co.
(1886) 34 Ch. D 234, Court of
A
Cotton LJ.: .. Now let us see what the general law is. It is not disputed that if a stnnger paysa premium ona policy that payment gives him no lien on the policy.A man by making a payment in respect of property belonging to another, if he does so without request, is not entitled to any lien or charge on that property for such payment. Ifhe does work upon a house without request he gets no lien on the house for the work done. If the money has been paid or the work done at the request of the person entitled to the property, the person paying the money or doing the work has a right of action against the owner for the money paid or for the work done at his request. If here there had been circumstances to lead to the conclusion that there was a request by Fa/eke that this premium should be paid by Emanuel, then there would be a claim against Fa/eke or his representative for the money, and I do not say that there might not be a lien on the policy. But in my opinion there is no evidence upon which we should be justi fied in coming to the conclusion that there was any request expressed or implied by Fa/eke to Emanuel to pay this money. An express request is not suggested. Was there an implied request? I think that in a case of this sort, when money is paid in order to keep alive property which belongs to another, a request to make that payment might be implied from slight circumstances, but in my opinion there is no circumstance here in evidence from which such a request can be implied.
What was the position of Emanuel at the time? He was, in my opinion, owner of the ulti mate equity of redemption. Does that give him a right to have this sum paid by him for pre mium repaid to him out of the moners arising from the policy? In my opinion it does not. It would be strange indeed if a mortgagor expending money on the mortgaged property could establish a charge in respect of that eig,enditure in priority to the mortgage. It is true that here the mortgagor, the ultimate owner of the equity of redemption, was no longer personally liable to pay the sums charged on the policy and was not bound by the covenant to pay the premium, but he pays it as the owner of the equity of redemption entitled to the ultimate interest in the property, although not personally bound to pay the debt or provide for the premium. It must be considered, in my opinion, that he,paid it not so as to get any claim in priority to the incum brancer, but in order to retain the benefit of the interest which would come to him if the prop erty proved sufficient to pay off the previous incumbrancers. In my opinion it would be utterly wrong to say that a mortgagor, the owner of the equity of redemption, can under those cir cumstances defeat the incumbrancers on the estate. Suppose the mortgaged property is a mine, and the owner of the equity of redemption were to spend large sums of money in order to pre vent the mine being flooded or otherwise destroyed, could he have in respect of that expendi ture a lien on the estate as against the persons having charges and mortgages on that estate? In my opinion, no….
Bowen, LJ: I am of the same opinion. The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if stand ing alone, create any obligation to repay the expenditure. Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will.
There is an exception to this proposition in the maritime law. I mention it because the word ‘salvage’ has been used from time to time throughout the argument, and some analogy is sought to be established between salvage and the right claimed by the Respondents. With regard to sal vage, general average, and contribution, the maritime law differs from the common law. That has been so from the time of the Roman law downwards. The maritime law, for the purposes of public policy and for the advantage of trade, imposes in these cases a liability upon the thing saved, a liability which is a special consequence arising out of the character of mercantile enter prises, the nature of sea perils, and the fact that the thing saved was saved under great stress and exceptional circumstances. No similar doctrine applies to things lost upon land, nor to any thing except ships or goods in peril at sea.
With regard to ordinary goods upon which labour or money is expended with a view of sav ing them or benefiting the owner, there can, as it seems to me, according to the common law be only one principle upon which a claim for repayment can be based, and that is where you can find facts from which the law will imply a contract to repay or to givea lien. It is perfectly true that the inference of an understanding between the parties-which you may translate into other language by calling it an implied contract-is an inference which will unhesitatingly be drawn in cases where the circumstances plainly lead to the conclusion that the owner of the saved property knew that the other party was laying out his money in the expectation ofbcins repaid. In other words, you must have circumstances from which the proper inference is that there wasa request to perform the service. It comes to the same thing, butI abstain the using
the word ‘request’ more than is necessary, for fear of plunging myself into all the archaic embar rassments connected with the cases about requests. But wherever you find that the owner of the property saved knew of the service being performed, you will have to ask yourself (and the question will become one of fact) whether under all the circumstances there was either what the law calls an implied contract for repayment or a contract which would give rise toa lien?
Now in the present case how can it be said that Mr. Fa/eke, whose representative is claiming the benefit of this policy, so conducted himself as to justify any inference of the kind on the part of Mr Emanuel? There is absolutely no fact from which any such inference, as it seems to me, can be drawn at common law.
What have we here to take this case out of the general rule? Mr Emanuel was the owner of the equity ofredemption. Does the mere fact that the owner of the equity of redemption paid premiums to keep alive the policy give him a right against the mortgagees to have the moneys which he so expended paid in priority to their debt? He paid in his own interest; he did not pay in the interest of themortgagees. There can be no question here ofacquiescence. The mort gagor does not pay undera mistake of fact or any mistake as to his own title. The mortgagee does not stand by and allow him to pay under such a mistake, and as regards any notion that he was allowed to pay under the expectation that he would be repaid again, or would havea lien for the money upon the policy,I have examined that already in the first part of the observations
I have been making. If there were any acquiescence of this last kind, it would be an acquies cence from which in common law you would draw the inference ofa contract; but, asI said before, there is no fact that leads tothat.
Then, whatequity is there that can be relied upon? is not evena case where the owner of the saved property requires the assistance of a Court of Equity, or the name of the person who has paid that money to get the property back. Here the simple question is whether there are any facts from which we can say that it is unjust or inequitable that Mr Faleke’s representatives should be allowed to have that which is their own? If you state the case in that way the answer is obvious, that one cannot see anything of thekind.
Jenkins v. Tucker
(1788) 1 H Bl. 90, Court of Common Pleas
LordLoughborough: … I think there was a sufficient consideration to support this action for the funeral expences, though there was neither request nor assent on the part of the defen dant, for the plaintiff acted in discharge of a duty which the defendant was undera strict legal necessity of himself performing, and which common decency required at his hands; the money therefore which the plaintiff paid on this account, was paid to the use of thedefendant.A father also seems to be the proper person to interfere in giving directions for his daughter’s funeral in the absence of herhusband. There are many cases of this sort, wherea person having paid money which another was under a legal obligation to pay, though without his knowledge or request, may maintain an action to recover back the money so paid: such as in the instance of
goods being distrained by the commissioners of the land-tax, if a neighbour should redeem the goods, and pay the tax for the owner, he might maintain an action for the money against the owner.
Gould, J: It appears from this demurrer, that the defendant was possessed ofa plantation in Jamaica, from the time he left his wife, till her death, which annually produced above 120 hogsheads of sugar, the value of which, at a moderate estimation, amounted to near 30001.a year. He was therefore bound to support her in a manner suitable to his degree; and the expenses were such as were suitable to his degree and situation in life. The law takes notice of things suitable to the degree of the husband in the paraphernalia of the wife, and in other respects. In the present case, the demurrer admits that the money was expended on account of
the wife, and being for things suitable to the degree of the husband, the law raisesa considera tion, and implies a promise to pay it.
Heath and WilsonJJ concurred.
Rogers v. Price
(1829) 3 Y &J 28,
Garrow, B.: ..I am of opinion that the plaintiff is entitled to recover, and that therefore this rule must be made absolute. The simple question is, notwithstanding many ingenious views of the case have been presented, who is answerable for the expenses of the funeral of this gentle man. In my opinion, the executor is liable. Suppose a person to be killed by accident ata dis tance from his home; what, in such a case, ought to be done? The common principles of decency
and humanity, the common impulses of our nature, would direct every one, asa preliminary step, to providea decent funeral, at the expense of the estate; and to do that which is immedi ately necessary upon the subject, in order to avoid what, if not provided against, may become an inconvenience to thepublic. Is it necessary in that or any other case to wait until it can be ascertained whether the deceased has left a will, or appointed an executor; or, even if the execu tor be known, can it, where the distanc is great, be necessary to have communication with that executor before any step is taken in the performance of those last offices which require imme diate attention? It is admitted here that the funeral was suitable to the degree of the deceased, and upon this record it must be taken that the defendant is executor with assets sufficient to defray this demand;I therefore think’that, if the case had gone to the jury, they would have found for the plaintiff, and that therefore this rule should be madeabsolute.
Hullock, B.: .. Ifthe executor had kept the body unburied, and the undertaker had come and said,I insist on burying it, he could n t have recovered. But there is no evidence here that the person by whom this body was interred knew whether there was or was not anexecutor. It is the duty of the executor to dispose of the testator in the usual manner, viz. by burying him. It is not that sort of duty which can be enforced by mandamus or other proceedings at law; but it isa duty which decency and the interest of society render incumbent upon the executor….
Bradshaw v Beard
(1862) 12 CNBS 344
Willes, J: … It seems to me not to be at all unreasonable, but on the contrary, quite reason able and proper, that the husband should be bound to provide Christian burial for his wife. According to our law, every person is entitled to a place where his bones may be at rest. Prim& facie, every person has a right to be buried in the churchyard of the parish in which he diel, In The Queen v. Stewart, 12 Ad. & E 773, 4 P & D 349, it was held by the court ofQpeen’1 Bench that every person dying in this country, and not within certain ecclesiastical prohibldona, II entitled to Christian burial; and, where no such prohibition attaches, it seems that every hou1 holder in whose house a dead body lies is bound by the common law to inter the body decently; and that, upon this principle, where a body lies in the house of a parish or union, the parish or union must provide for the interment. The law, therefore, has provided not only for the place where the burial is to take place, but also who shall be charged with the performance of the duty.
Where the deceased has a husband, the performance of that last act of piety and charity devolves upon him. The law makes that a legal duty which the laws of nature and society make a moral duty. And, upon his default, the law obliges him to recoup the reasonable expenses of the per son who performs it for him. I do not refer to the case of an executor, which stands upon a totally different footing. I am not, therefore, surprised to find that there are two authorities in this court, Jenkins v. Tucker, 1 H Bl. 91, and Ambrose v. Kerrison, 10 CB 776, which support this view; and I feel no alarm that this doctrine may induce a stranger to thrust himself in ‘!
between husband and wife for the mere purpose of preventing the husband from performing that duty himself. Generally speaking, parties are not allowed to claim in respect of moneys expended for others without request. If the plaintiff here had been shewn to have been guilty of any fraud, in concealing from the husband the fact of his wife’s death, and so preventing him from performing the last duty to her remains, the case would have presented a very different aspect. But I see no reason for imputing any such misconduct to the plaintiff. Therefore I think the plaintiff is entitled to recover the reasonable expense incurred by him in the performance of that duty which the defendant ought to have discharged, but has failed to discharge.
Byles and Keating JJ concurred. ‘
The Goring
[1988] AC 831, House of Lords
Lord Brandon of Oakbrook: My Lords, the question for decision in this appeal is whether there is under English lawa cause of action for salvage in respect of services rendered toa ship in danger ina navigable non-tidal part of an English river. The question does not appear to have arisen for decision before and its difficulty is shown by the fact that the four judges who have considered it in the two courts below have been divided equally in their opinions upon it.
The way in which the question has arisen is as follows. It is alleged by the appellants that I, shortly before midnight on 14 September 1984 the Goring, a passenger vessel owned by the respondents, broke free of her moorings:in the river Thames up-river of Reading Bridge. She was unmanned and her downward drift, if not checked, would have caused her to collide with a line of moored vessels and afterwards taken her on to Reading Bridge and the weirbeyond. The appellants werea group of five persons who were members or employees of the Bohemian Club, the premises of which are situated on De Montford island in the middle of the river. With the help of the club’s ferry boat they managed to put one of their number on board the Goring, thereby making it possible to get a line from her to the island, to check her drift and thereafter to haul her to a vacant mooring where she was made fast.
Two matters areagreed. The first matter is that the Thames above Reading Bridge is not tidal. The second matter is that, if services of the kind which the appellants allege that they ren dered to the Goring had been rendered further down the river where it is tidal, the appellants would havea cause of action against the respondents for salvage in respect ofthem. This second matter is agreed because the services as alleged contained, apart from the question of the place in which they were rendered, all four of the classic ingredients necessary to salvageservices. First, the appellants were volunteers; secondly, the Goring, beinga ship, wasa recognised sub
ject matter of salvageservices; thirdly, she was in danger; and, fourthly, the services were suc cessful in saving her from that danger.
On 22 July 1985 the appellants began in the Admiralty Court an action in rem against the Goring in which they claimed salvage remuneration for the services to her described abov.e… My Lords, the cause of action for salvage is an ancient one, derived from the maritime law and peculiar toit. [His Lordship then examined the historical development of the cause of action for
salvage, with particular reference to the various statutes which have been enacted by Parliament. The plaintiffs relied in particular upon section VI of the Admiralty Court Act 1840 and section1 of the
Administration of Justice Act 1956 but, after giving careful consideration to both provisions, Lord Brandon concluded that they did not give the plaintiffs the cause of action which theyasserted. ..
Counsel for the appellants, rightly in my view, did not contend thaat cause of action for sal vage in respect of services rendered to a ship in non-tidal inland waters of the United Kingdom existed prior to 1840. He did, however, contend, as I said earlier, that sucha cause of action was created either by section VI of the Admiralty Court Act 1840 or alternatively by section l of the Administration of Justice Act 1956. I have earlier given reasons whyI cannot interpret these provisions as having had the effect for which counsel for the appellantscontended. My view that they did not have such effect is strongly reinforced by the way in which the legislature has from time to time stipulated in what places in the United Kingdom services require to have for a ship, her cargo or apparel by section 458 of the Merchant Shipping Act 1854 was that the services should have been rendered on the shore of any sea or tidal water in the United Kingdom. The requirement laid down for services to a ship, her cargo or apparel by section 546 of the Merchant Shipping Act 1894 was that the services should have been rendered where any vessel was wrecked, stranded or in distress on or near the coasts of the United Kingdom or any tidal water within the limits of the United Kingdom. The requirement laid down for services to an aircraft by the Civil Aviation Act 1949 was that they should have been rendered ih, on or over the sea or any tidal water, or on or over the shores of the sea or any tidal water. That requirement was repeated in the Civil Aviation Act 1982, after the passing of the Administration of Justice Act 1956 and the Supreme Court Act 1981. It seems to me that the repeated stipulation of requirements of this kind by the legislature is wholly inconsistent with there having been in existence, at the time when such requirements were stipulated, a cause of action for salvage services rendered in non-tidal inland waters.
Counsel for the appellants relied strongly on the existence of a substantial number of reported cases, in which services to ships in an enclosed dock were treated as salvage services. He said that such cases showed that services could qualify as salvage services, although ren dered to ships lying in water which, because they were separated from tidal water by lock gates, were non-tidal. Counsel for the respondents did not argue that these cases were wrongly decided. It is difficult to be sure of the legal basis on which the services concerned were treated as salvage services, because the question whether they should be so treated or not does not ever appear to have been raised. The most likely explanation is that the waters in which the services were rendered, though not themselves tidal, were adjacent to and closely connected with waters which were, and formed part of the complex of a basically tidal port or harbour.
Bingham LJ, with whom Ralph Gibson LJ agreed, reached the conclusion that the appellants had no cause of action in this case on two grounds. The first ground was that the Goring, being a pleasurecraft, was not capable of being the subject matter of salvage services. The second ground was that the services on which the appellants’ claim was founded were rendered in non tidal inland waters. Counsel for the respondents did not seek to support the first ground, accepting that the Goring, being a vessel used in navigation, was capable of being the subject matter of salvage services if rendered at sea or in tidal waters. I think that he was right to make this concession. For the reasons which I have given earlier, however, I think that, in.so far as Bingham LJ based his decision on the second ground, he was right in law.
My Lords, counsel for the appellants submitted that, even if the cause of action for salvage had not up till now been extended to services rendered in navigable non-tidal waters, it should now be so extended, by way of analogy and for reasons of public policy, by the process of judi cial decision. In support of that submission reliance was placed on certain observations con tained in the judgments of Sheen J and Sir John Donaldson MR [1978] Q13 687. Sheen J said, at 693:
‘If a ship or her cargo is in danger in non-tidal waters it is highly desirable, as a matter of public policy, that other ships should be encouraged to go to her assistance without hesi tation.’
Sir John Donaldson MR said, at 706-7:
‘In the end I believe that I have to seek a rational basis of confining the cause of action to tidal waters and I can find none. It is, of course, a maritime remedy and the public policy considerations which support it are directed at commercial shipping and seagoing veuel1. But that said, I can see no sense in a cause of action which will remunerate the lllvon of an ocean-going vessel inward bound for Manchester up to the moment when the vessel enters the Manchester Ship Canal, but no further. Some of the perils facing the vessel in the canal may be different from those facing it at sea, but many, such u fire, will be th, same. The need to encourage assistance otherwise than under contract may be .,..ter It
sea, but the skills required of the salvors will be the same or at leastsimilar. The vessel is not intended to sailonly on tidal waters. The voyage over tidal and non-tidal waters isa single maritime adventure and should not attract wholly different rights and obligations by reference to the tidality of the water in which the vessel is for the time being sailing.’
These are forcefulpassages. The majority in the Court of Appeal,however, tooka different view, expressed with similar force. Their view was that, since salvage wasa cause of action peculiar to the maritime law, and unknown to the common law in respect of services voluntar ily rendered to property in danger on land, it would be wrong to extend its scope to non-tidal waters.They furtherconsidered that the need for such an extension for reasons of public pol icy had not been established.
Inmyview, since thescope of the cause of action for salvage has to be determined by refer ence to thestatutory provisions which I examined earlier, it is not open to your Lordships’ House, if it concludes that those provisions have the effect of limiting the scope of that cause of action toservices rendered at sea or in tidal waters, to extend that scope by the process of judicial decision. Ifany such extension is to be made, it must, in my opinion, be left to the legis lature to make it.
Lord Bridge, Lord Fraser, Lord Ackner and Lord Oliverconcurred.
Prager v. Blatspiel Stamp and Heacock Ltd
[1924] I KB 566,
McCardie J: …
Now the first question of law is this: Can the facts as I have outlined them afford a possible legal basis on which to rest an agency of necessity? The defendants say yes; the plaintiff says no. The doctrine of agency of necessity doubtless took. its rise from marine adventure. Hence the numerous decisions set out in Carver’s Carriage by Sea, 6th edn., s. 294, and following sec tions. The sub stance of the matter as stated in that book is that in cases of necessity the master of a ship has power and it is his duty to sell the goods in order to save their value or some pan of it: sees. 297. In Hawtayne v. Bourne1 Parke B expressed a view that agency of necessity could not arise save in the case of a master of a ship and of the acceptor of a bill of exchange for the honour of the drawer.2 He added3 that: ‘The authority of the master of a ship rests upon the peculiar character of his office.’ In Gwilliam v. Twis,4 Lord Esher said: ‘I am very much inclined to agree with the view taken by Eyre CJ in the case of Nicholson v. Chapman,5 and by Parke B
in the case of Hawtayne v. Bourne to the effect that this doctrine of authority by reason of necessity is confined to certain well-known exceptional cases, such as those of the masterof a ship or the acceptor of a bill of exchange for the honour of the drawer.’ If the dicta I have cited be cor rect then the defendants in the case now before me cannot justify their acts of sale. In my hum ble opinion, however, those dicta are not the law to-day. In Great Northern Ry. Co. v. Swaffield,6 more than twenty years before the dictum of Lord Esher, the Court of Exchequer (Kelly CB, Pigott, Pollock, and Amphlett BB) had applied the doctrine of agency of necessity to a land carrier. They applied to him the principle of the shipping cases. I think too that London and North Western Ry. v. Duerden1 is in substance an application of the same principle. In Sims (S Co. v. Midland Ry. Co.8-the sale of butter case–the Divisional Court (Ridley and Scrutton JJ) again recognized that the principle of the shipping cases might apply to land carriers. See also Macnamara on Ca”iers by Land, 2nd edn., art. 189 (n.). In Springer v. Great Western Ry. the Court of Appeal approved the principle stated in Sims’ Case.
The decisions I have already cited show that the dictum of Lord Esher in Gwilliam v. Twist is not the law of to-day. Agency of necessity is not confined to shipmaster cases and to bills of exchange….
Isee nothing which as a matter of strict law prevents the defendants here from seeking to rely on the doctrine of agency of necessity. In Tetley v. British Trade Corporation10 Bailhache J applied the doctrine of agency of necessity to the case of an agent who, whilst in Russian
Georgia, found himself, through violent,events, unable to deal with goods in accordance with his instructions and equally unable to cohimunicate with his principals. A like ruling has been given, on substantially similar facts, in other cases (unreported) in the King’s Bench Division. Upon the first point I rule in the defend.ants’ favour.
I must refer briefly to several other features of the doctrine of agency of necessity in a case where, as here, the agent has, without orders, sold the goods of his principal. In the first place, it is, of course, clear that agency of necessity does not arise if the agent can communicate with his principal. This is established by all ,the decisions: see Carver on Cam·age by Sea, 6th edn., arts. 295, 299; Scrutton on Charterparties, 11th edn., art. 98; and Springer v. Great Western Ry.11 The basis of this requirement is, I take it, that if the principal’s decision can be obtained the agent should seek it ere acting. In the present case it is admitted that the agents could not com
municate with the principal. In the next place it is essential for the agent to prove that the sale was necessary. What does this mean? In Cannan v. Meaburn12 Park J said: ‘The master cannot sell except in a case of inevitable necessity.’ In Australian Steam Navigation Co. v. Morse,13 however, Sir Montague Smith said: ‘The word “necessity,” when applied to mercantile affairs, where the judgment must, in the nature of things, be exercised, cannot of course mean an irre sistible compelling power-what is meant by it in such cases is, the force of circumstances which determine the course a man ought to take.’ Later on he refers to ‘commercial necessity.’
… Insubstance I may say that the agent must prove an actual and definite commercial neces sity for the sale. In the third place, I think that an alleged agent of necessity must satisfy the Court that he was acting bona fide in the interests of the parties concerned. In Ewbank v.
Nutting14 Coltman J said during the argument: ‘Does not the authority of the master extend to
acts such as he, in the exercise of an honest judgment, thinks the best for the interest of the owner of both ship and goods?’ … Bona fides, in my opinion, is an essential condition for the exercise of the power of sale.
I have now stated the principles of law which, in my view, apply to this case.
I can now state quite briefly my conclusions of fact after carefully weighing the whole of the evidence, the correspondence and arguments. I hold in the first place that there was no neces sity to sell the goods. They had been purchased by the plaintiff in time of war and not of peace. He bought them in order that he might be ready with a stock of goods when peace arrived. He had refused, by letters to the defendants, several profitable offers for some of them before the cessation of correspondence between the defendants and himself. The goods were not perish able like fruit or foo.d… Isee no adequate reason for the sale by the defendants, forI am sat isfied that there was nothing to prevent the defendants from putting them into cold storage, and certainly nothing to prevent them from keeping them with proper care in their own warehouse. The expense of cold or other storage would have been slight compared with the value of the the second placeI decide, without hesitation, that the defendants did not act bona fid.e… I hold that the defendants were not in fact agents of necessity, that the sales of the plaintiff’s goods were not justified, and that the defendants acted dishonestly. In the resultI give judg- ment for the plaintiff for 1822l. with costs.
China Pacific S.A. v. Food Corporation of lndia
[1982] AC 939, House of Lords
Lord Diplock My Lords, it is not suggested that there is any direct authority on the question of law that is posed in this appeal. In my opinion the answer is to be found by applying to the unusual circumstances of the instant case well known and basic principles of the common law of salvage, of bailment and of lien. My Lords, with modern methods of communication and the presence of professional salvors
within rapid reach of most parts of the principal maritime trade routes of the world, nearly all salvage of merchant ships and their cargoes nowadays is undertaken undera salvage contraet in Lloyd’s open form. The contract is one for the rendering of services; the services to be rendered are of the legal nature of salvage and this imports into the contractual relationship between the parties to the contract by necessary implication a number of mutual rights and obliptiona attaching to salvage of vessels and their cargo under common law, except in so far as such and obligations are inconsistent with express terms of the contract.
Lloyd’s open form is expressed by clause 16 to be signed by the master ‘as agent forthe sci her cargo and freight and the respective owners thereof and binds each (but not the one for the other or himself personally) to the due performance thereof.’ The legal nature of the rela tionship between the master and the owner of the cargo aboard the vessel in signing the agree ment on the latter’s behalf is often though not invariably an agency of necessity. .. Whwther one person is entitled to act as agent of necessity for another person is relevant to the question whether circumstances exist which in law have the effect of conferring on him authority to cre ate contractual rights and obligations between that other person and a third party that are directly enforceable by each against the other. It would, I think, be an aid to clarity of legal thinking if the use of the expression ‘agent of necessity’ were confined to contexts in which this was the question to be determined and not extended, as it often is, to cases where the only rel evant question is whether a person who without obtaining instructions from the owner of goods incurs expense in taking steps that are reasonably necessary for their preservation is in law enti tled to recover from the owner of the goods the reasonable expenses incurred by him in taking those steps. Its use in this wider sense may, I think, have led to some confusion in the instant case, since where reimbursement is the only relevant question all of those conditions that must be fulfilled in order to entitle one person to act on behalf of another in creating direct contrac tual relationships between that other person and a third party may not necessarily apply….
Upon the assumption, whether correct or not, to which I have already referred as being that upon which this case has been argued tfuoughout, that the salvage services which the salvors had contracted to render to the cargo owner came to an end as respects each parcel of salved wheat when it arrived at a place of safety.in Manila Harbour, the legal relationship ofbailor and bailee between cargo owner and salvors nevertheless continued to subsist until possession of the wheat was accepted by the cargo owner from the depositaries who had been the salvors’ sub bailees. Subject always to the question of the salvors’ right to the provision of security before removal of the salved wheat from Manila, with which I shall deal separately later, the bailment which up to the conclusion of the salvage services had been a bailment for valuable considera tion became a gratuitous bailment; and so long as that relationship of bailor and bailee contin ued to subsist the salvors, under the ordinary principles of the law of bailment too well known and too well-established to call for any citation of authority, owed a duty of care to the cargo owner to take such measures to preserve the salved wheat from deterioration by exposure to the elements as a man of ordinary prudence would ·take for the preservation of his own property. For any breach of such duty the bailee is liable to his bailor in damages for any diminution in value of the goods consequent upon his failure to take such measures; and ifhe fulfils that duty he has, in my view, a correlative right to charge the owner of the goods with the expenses rea sonably incurred in doing so.
My Lords, as I have already said, there is not any direct authority as to the existence of this
correlative right to reimbursement of expenses in the specific case of a salvor who retains pos session of cargo after the salvage services rendered by him to that cargo have ended; but Lloyd J discerned what he considered to be helpful analogous applications of the principle of the bailee’s ight to reimbursement in Cargo ex Argos (1873) LR 5 PC, 134, from which I have taken the expression ‘correlative right,’ and in Great Northern Railway Co. v. Swaffield (1874) LR 9 Ex. 132. Both these were cases of carriage of goods in which the carrier/bailee was left in possession of the goods after the carriage contracted for had terminated. Steps necessary for the preservation of the goods were taken by the bailee in default of any instructions from owner/bailor to do otherwise. To these authorities I would add Notara v. Henderson (1872)
LR 7 QB 225, in which the bailee was held liable in damages for breach of his duty to take
steps necessary for the preservation of the goods, and the Scots case of Garriock v. Walker (1873) 1 R. 100 in which the bailee recovered the expenses incurred by him in taking such steps. Although in both these cases, which involved carriage of goods by sea, the steps for the prevention of deterioration of the cargo needed to be taken before the contract voyage was completed, the significance of the Scots case is that the cargo owner was on the spot when the steps were taken by the carrier/bailee and did not acquiesce in them. Nevertheless, he tookthe benefit of them by taking delivery of the cargo thus preserved at the conclusion of the voyInagteh.e instant case the cargo owner was kept informed of the salvors’ intentions as to the stor age of the salved wheat upon its arrival in Manila; it made no alternative proposals; it made no request to the salvors for delivery of any of the wheat after its arrival at Manila, anda request made by the salvors to the cargo owner through their solicitors on February 25, 1975, after the arrival of the second of the six parcels, to take delivery of the parcels of salved wheat on arrival at Manila remained unanswered and uncomplied with until after notice of abandonment of the charter voyage had been received by the cargo owner from theshipowner.
The failure of the cargo owner as bailor to give any instructions to the salvors as its bailee although it was fully apprised of the need to store the salved wheat under cover on arrival at Manila if it was to be preserved from rapid deterioration was, in the view of Lloyd J, sufficient to attract the application of the principle to which I have referred above and to entitle the salvors to recover from the cargo owner their expenses in taking measures necessary for its preservation. For my part I think that in this he was right and the Court of Appeal, who took the contrary view, werewrong. It is, of course, true that in English lawa mere stranger cannot compel an owner of goods to pay for a benefit bestowed upon him against his will; but this lat ter principle does not apply where there is a pre-existing legal relationship between the owner of the goods and the bestower of the benefit, such as that of bailor and bailee, which imposes upon the bestower of the benefit a legal duty of care in respect of the preservation of the goods that is owed by him to their owner.
In the Court of Appeal Megaw LJ, as I understand his judgment, with which Bridge and
Cumming-BruceL JJ expressed agreement, was of opinion that, in order to entitle the salvors to reimbursement of the expenses incurred by them in storing the salvaged wheat at Manila up to April 24, 1975, they would have to show not only that, looked at objectively, the measures that they took were necessary to preserve it from rapid deterioration, but, in addition, that it was impossible for them to communicate with the cargo owner to obtain from him such instruc tions (if any) as he might want to give. My Lords, it may be that this would have been so if the question in the instant case had been whether the depositaries could have sued the cargo owner directly for their contractual storage charges on the ground that the cargo owner was party as principal to the contracts of storage made on its behalf by the salvors as its agents of necessity; for English law is economical in recognising situations that give rise to agency of necessity. In my view, inability to communicate with the owner of the goods is nota condition precedent to the bailee’s own right to reimbursement of his expenses. The bailor’s failure to give any instructions when apprised of the situation is sufficient.
So, on the cargo owner’s main propositions of law in this appeal,I think it fails and that on these points the Court of Appeal was wrong in reversing Lloyd.J…
Lord Simon ofGlaisdale: My Lords, I have had the privilege of reading in draft the speech delivered by my noble and learned friend on the Woolsack. SinceI am in general agreement with it, and particularly with its argument and conclusion that the salvor is entitled to succeed by reason of his bailment, what follows is by way of marginalcomment.
The Lloyd’s open form. I would myself, like Lloyd J, also come to the same conclusion by implication from the salvage contract, the argument running closely parallel to that on bailment. It was common ground that the contract is incomplete without implication ofa term stipulat ing to whom delivery should be tendered when cargo salved separately from its carrying vessel is brought toa place of safety. I agree with my noble and learned friend that, in the case of bulk cargo the owner of which is known to the salvor, the person entitled to delivery is the cargo owner. Theshipowner, by becoming party to and implementing the salvage contract, gives up his possessory lien; and I know of no principle entitling him to repossession merely torcuacrt a possessorylien: As for his option to on-carry, he can exercise it merely by communication with the cargo owner.
But there isa further matter requiring provision which is not covered by the express terms of the Lloyd’s open form: namely, what is the duty of a salvor in respect of the cargo after it, or part of it, has been brought to a place of safety but before delivery to whoever is entitled to receive it? In my view, if cargo, or part of it, is salved separately from the carrying vessel, it is the duty of the salvor, owed to the cargo owner, to take reasonable steps on its arrival at the place of safety to prevent its deterioration. It is also, in my view, anecessary implication that, if the salvor incurs expense in fulfilling that duty, he is entitled to be reimbursed by the cargo owner. WhatI venture to submit hereafter, under the heading of’Bailment,’ about the correlation of the performance of the duty to safeguard the goods on the one hand and the entitlement to reimbursement of expenses incurred thereby on the other, is relevanthere; but it would be particularly unreasonable not to imply such correlationship in the context of the commercial nexus constituted by the Lloyd’s open form.
Bailment. Counsel for the cargo owner contended that, even if the salvor as bailee oweda duty to the cargo owner as bailor to take reasonable steps to safeguard his goods, there was no correlative right to claim reimbursement of reasonable expenses in so acting: neithera bailee for reward nora gratuitous bailee has any such general right to indemnity. Counsel for the cargo owner adopted the view of the Court of Appeal that, apart from specific contractual obligation, a bailee’s right to reimbursement :
‘ … depends on there being something which can properly be called an element of neces sity that the bailee should so·act in order to preserve the goods.’ [1981] QB 4-03, 423.
I agree that there is no general’ right of a bailee to be reimbursed expenses incurred in ful filling his duty to safeguard bailed goods; and I agree that there was an element of necessity in the cases relied on by the salvor under this head. But I think that it puts it too narrowly tosay that such are the only circumstances in which the law will import an obligation to reimburse- unless, indeed, one is prepared to go further and argue that onlya bailee who is an agent of necessity is entitled to reimbursement. No authority so stipulates. The relevance of necessity
in the cases relied on by the salvor is, in my view, that justice calls for reimbursement in such circumstances: the emergency imposes obligations on the bailee beyond what will generally be contemplated on a bailment.
But such are not theonlycircumstances’in which justice demands indemnity. In my view the following circumstances in the instant appeal import a correlative obligation to reimburse expenses: (1) the contract of bailment was a commercial one; (2) it came to an end when the salved goods were brought to a place of safety, which, it has been the common assumption, was the entry into the port of Manila (though I must not be taken as necessarily endorsing this view); (3) the bailee then continued in possession as a gratuitous bailee; (4) he incurred reason able expenses in safeguarding and preserving the goods, to the benefit of the bailor; (5) the bailor stood by, knowing that the bailee was so acting to his (the bailor’s)benefit.
Agency ofNecessity. Lloyd J decided in favour of the salvor on the further ground that he was the cargo owner’s agent of necessity and as such entitled to reimbursement of the expenses inissue. The Court of Appeal held that there was no agency ofnecessity. One of theways in which an agency of necessity can arise is whereA is in possession of goods the property of B, and an emergency arises which places those goods in imminentjeopardy: If A cannot obtain instructions from B as to how he should act in such circumstances,A is bound to take without authority such action in relation to the goods as B, asa prudent owner, would himself have taken in thecircumstances. The relationship betweenA andB is then known as an ‘agency of necessity,’A being the agent and B the principal. This was the situation described by Lloyd J and denied by the Court of Appeal.
Issues as to agency of necessity generally arise forensically when A enters intoa contract with C in relation to the goods, the question being whether B is bound by thatcontract. The purely terminological suggestion that, in order to avoid confusion, ‘agent of necessity’ should be confined to such contractual situations does not involve that other relevant general incidents of agency are excluded from the relationship between A and B. In particular, if A incurs reason able expenses in safeguarding B’s goods in a situation of emergency, A is entitled to be reim bursed by B: see Bowstead on Agency, 14th edn. (1976), art. 67; Chitty on Contracts, 23rd edn. (1968), vol. 2, para. 119; Petrinovic cS Co. Ltd v. Mission Franfaise des Transports Maritimes (1941) 71 LI.L Rep. 208,220. To confine ‘agent of necessity’ terminologically to the contractual situations is justified by the fact that the law ofbailment will often resolve any issue between alleged principal and agent of necessity, as it has done here. But sometimes the law of agency will be more useful: for exam ple, if available here it would obviate any problem about the correlation of performance of a duty of care with a claim for reimbursement, since an agent is undoubtedly entitled to an indemnity for expenses incurred reasonably to benefit his principal.
However, I respectfully agree with the Court of Appeal (1981] QB 403,424 that ‘The relevant time, for the purpose of considering whether there was a necessity, or an emergency … is … the time when the existence of the supposed emergency became apparent. The emergency would be the arrival, or expected arrival, of salved cargo at Manila, with no arrangements for its off-loading or for its preservation in proper storage having been made or put in hand. There never was, so far as one can ascertain from the evidential matter here, such an emergency.’
In addition to the factual difficulty in treating the case as one of agency of necessity, there are legal difficulties in the way of the salvor. For an agency of necessity to arise, the action taken must be necessary for the protection of the interests of the alleged principal, not of the agent; the alleged agent must have acted bona fide in the interests of the alleged principal: Bowstead on Agency, 14th edn., p. 668; Prager v. Blatspiel, Stamp and Heacock Ltd [1924] 1 KB 566, 571, 572, 573. The Court of Appeal [1981] QB 4-03, 425 held that the salvor’s purpose in storing the salved cargo was to maintain his lien on it. This was assuredly at least in part the salvor’s pur pose. The law does not seem to have determined in this context what ensues where interests are manifold or motives mixed: it may well be that the court will look to the interest mainly served or to the dominant motive. In view of the opinion I have formed on the rights arising by impli cation from the Lloyd’s open form and from the common law bailment, it is unnecessary to come to any conclusion on these issues.
Nor is it necessary to express any view on the arguments based on quasi-contract or estoppel.
In re Rhodes
(1890) 44 Ch. D 94, Court of Appeal
Cotton, LJ: TThe] question is, whether there can be an implied contract on the part of a lunatic not so found by inquisition to repay out of her property sums expended for necessaries supplied to her. Now the term ‘implied contract’ is a most unfortunate expression, because there cannot be a contract by a lunatic. But whenever necessaries are supplied to a person who by reason of disability cannot himself contract, the law implies an obligation on the part of such person to pay for such necessaries out of his own property. It is asked, can there be an implied contract by a person who cannot himself contract in express terms? The answer is, that what the law implies on the part of such a person is an obligation, which has been improperly termed a contract, to repay money spent in supplying necessaries. I think that the expression ‘implied contract’ is erroneous and very unfortunate….
But, then, although there may be an implied obligation on the part of the lunatic, the neces saries must be supplied under circumstances which would justify the Court in implying an obligation to repay the money spent upon them.
I have no difficulty as to the question of the expenditure being for necessaries, for the law is well established that when the necessaries supplied are suitable to the position in life of the lunatic an implied obligation to pay for them out of his property will arise. But then the provi sion of money or necessaries must be made under circumstances which would justify the Court in implying an obligation. Here the lady, who was never found a lunatic, was confined ina pri vate asylum, in 1855, at a cost of £140 a year, and her brother from that time down to the time of his death supplied her with the sums required to make good the necessaries for her mainte nance. After his death the Appellant, who was his father’s executor, and his brother and sisters, contributed towards the expense of her maintenance. I do not so much rely on the circumstance that there is no evidence to shew that the father intended this to bea debt. But we must look to the facts of the case in order to see whether the payments for the lunatic were made with the intention of constituting thereby a debt against the lunatic’s estate. It is said that the father and the brother and sisters always intended to be recouped. And, no doubt, at the rime the pay ments were made, the persons making them were the next of kin, or some of the next of kin, of the lady, and it is very probable that, although they did it as relations, they,no.doubt, in mak ing such payments did look to the fact that, as next of kin, they would ultimately come into the lunatic’sproperty. Nobooks have been produced, but we must assume that the Appellant kept no account between himself and his brother and sisters. And the observation occurs that, if it had been intended by the Appellant that these payments should constitute an obligation in his favour, as against the estate of the lunatic, he would not have asked his brother and sisters to contribute, but would have paid the money himself. The certificate has, no doubt, found that the sisters had no intention of making a gift, and this in favour of theAppellant. But although they had no particular intention of making a gift, they contributed the money; and, if they intended to be repaid, it is very strange that they make no claim on their own behalf, but leave their brother to make it for them. In my opinion, the true effect of the evidence is that all these persons-the Appellant, and his brother and sisters, and the father–did provide this money under circumstances from which no implied obligation could arise.
Lindley, LJ.: .. Thqueestion whether an implied obligation arises in favour ofa person who supplies a lunatic with necessaries is a question of law, and in In re Weaver a doubt was expressed whether there is any obligation on the part of the lunatic to repay.I confessI cannot participate in that doubt. I think that that doubt has arisen from the unfortunate terminology of our law, owing to which the expression ‘implied contract’ has been used to denote not only a genuine contract established by inference, but also an obligation which does not arise from any real contract, but which can be enforced as if it had a contractual origin. Obligations of this class are called by civilians obligationes quasi ex contractu.
Now, in order to raise an obligation to repay, the money must have been expended with the intention on the part of the person providing it that it should be repaid.I think that that inten tion is not only not proved, but is expressly negatived in the present case.I do not believe that the brother ever intended to constitute himself a creditor of his sister so as to render her estate liable to repay him. He was a kind and affectionate brother; but ifhe had had any such an inten tion, beinga man of business, he would naturally have kept some kind of account between him self and his sister. There is no real ground for saying that he ever dreamt ofrepayment. Since his death his children maintained this lady by contribution, and, while there is no direct evi dence to shew that the money contributed was a gift, there is still less evidence to shew any intention to be repaid.
Upon the facts, then, I come to the conclusion that the constitution of a debt between themselves and the lunatic was the last thing that the persons who made the payments contemplated.
Great Northern Railway v. Swaffield
(1874) LR 9 Ex. 132
Kelly CB: Iam clearly of opinion that the plaintiffs are entitled to recover. My Brother
Pollock has referred to a class of cases which is identical with this in principle, where it has been held that a shipowner who, through some accidental circumstance, finds it necessary for the safety of the cargo to incur expenditure, is justified in doing so, and can maintain a claim for reimbursement against the owner of the cargo. That is exactly the present case. The plaintiffs were put into much the same position as the shipowner occupies under the circumstances I have described. They had no choice, unless they would leave the horse at the station or in the high road to his own danger and the danger of other people, but to place him in the care of a livery stable keeper, and as they are bound by their implied contract with the livery stable keeper to satisfy his charges, a right arises in them against the defendant to be reimbursed those charges which they have incurred for his benefit.
Pollock, B: I am of the same opinion. If the case had rested on what took place on the night when the horse arrived, I should have thought the plaintiffs wrong, for this reason, that although a common carrier has by the common law of the realm a lien for the carriage, he has no lien in his capacity as warehouseman; and it was only for the warehousing or keeping of this horse that the plaintiffs could have made any charge against the defendant.
But the matter did not rest there; for it is the reasonable inference from what is stated in the case, that on the next day, when the defendant himself came, he could have had the horse with out the payment of anything; but he declined to take it, and went away. Then comes the ques tion, first, What was the duty of the plaintiffs, as carriers, with regard to the horse? and secondly, If they incurred any charges in carrying out that duty, could they recover them in any form of action against the owner of the horse? Now, in my opinion it was the duty of the plain tiffs, as carriers, although the transit of the horse was at an end, to take such reasonable care of the horse as a reasonable owner would take of his own goods; and if they had turned him out on the highway, or allowed him to go loose, they would have been in default. Therefore they
did what it was their duty to do. Then comes the question, Can they recover any CXpcnlOI thu1 incurred against the owner of the horse? As far as I am aware, there is no decided cue in Enallah law in which an ordinary carrier of goods by land has been held entitled to recover this charge against the consignee or consignor of goods. But in my opinion he is IO entitled. It had been long debated whether a shipowner has such a right, and gradually, partly by cuatom and partly by some opinions of authority in this country, the right has come to be established. It was clearly held to exist in the case of Notara v. Henderson,1 where all the authorities on the subject are reviewed with very great care; and that case, with some others, was cited and acted upon by the Privy Council in the recent case of Cargo ex Argos.2 The Privy Council is not a Court whose decisions arc binding on us sitting here, but it is a Court to whose decisions I should certainly on all occasions give great weight; and their judgment on this point is clearly in accordance with reason and justice. It was there said3 (after referring to the observations of Sir James Mansfield, CJ, in Christy v. Row4), ‘The precise point does not seem to have been subsequently decided, but several cases have since arisen in which the nature and scope of the duty of the master, as agent of the merchant, have been examined and defined.’ Then, after citing the cases, the judg ment proceeds: ‘It results from them, that not merely is a power given, but a duty is cast on the master, in many cases of accident and emergency, to act for the safety of the cargo in such man ner as may be best under the circumstances in which it may be placed; and that, as a correla tive right, he is entitled to charge its owner with the expenses properly incurred in so doing.’ That seems to me to be a sound rule oflaw. That the duty is imposed upon the carrier, I do not think any one has doubted; but if there were that duty without the correlative right, it would be a manifest injustice. Therefore, upon the whole of the circumstances, I come to the conclu sion that the claim ofthe company was a proper one, and that the judgment of the learned judge of the county court must be reversed. ,
In re Berkeley Applegate Ltd
[1989] Ch. 32
Edward Nugee QC The order which the liquida tor now seeks is an order for the payment to him as remuneration and/or fees, expenses, costs, disbursements and liabilities in such sum as to the court shall seem just, out of the assets of the company and out of the funds in the clients’ accounts and the sums realised from the mortgages or from the investors if and to the extent that the mortgages are not realised; and asa less sat isfactoryalternative, an order that the company be entitled to be paid and retain such sums as the court shall think fit by way of remuneration as trustee of the trust assets. The question whichI am now asked to determine is the question of principle, namely, whetherany part of the liquidator’s expenses or remuneration can be paid out of the trust assets, eitherdirectly or byway of payment to the company. If the answer to that question is yes, I am not asked at this stage to decide how the expenses and remuneration should be borne as between thecompany’s assets and the trustassets, nor am I asked to determine whether any particular item of expenses or remuneration claimed by the liquidator should be allowed. Both these questions will require consideration in due course if payment can properly be made out of the trust assets, but there is not sufficient evidence to enable them to be decided at present. The liquidatoris, however, entitled to know before he incurs further expense whether his proper expenses and proper remuneration for his work will be met from the trust assets in the event of the company’s own assets proving insufficient.There is no reported authority directly in point.. In my judgment Mr de Lacy’s submissions are based on too narrow a view of the principles on which the court acts. It is true that the legal title to the mortgages and to the clients’ accounts is not vested in the liquidator but remains in the company; but the investors still need the assist ance ofa court of equity to secure their rights. In this respect their position is different from that of the claimant in Fa/eke v. Scottish Imperial Insurance Co., 34 Ch. D 234, where Bowen LJ said, at 251: ‘It is not even a case where the owner of the saved property requires the assistance ofa court of equit.y .. to get the property back.’ As a condition of giving effect to their equitable rights, the court has in my judgment a discretion to ensure that a proper allowance is made to the liquidator. His skill and labour may not have added directly to the value of the underly ing assets in which the investors have equitable interests; but he has added to the estate in the sense of carrying out work which was necessary before the estate could be realised for the bene fit of the investors. As was the case in Scott v. Nesbitt, 14 Ves. Jun. 438, if the liquidator had not done this work, it is inevitable that the work, or at all events a great deal of it, would have had to be done by someone else, and on an application to the court a receiver would have been appointed whose expenses and fees would necessarily have had to be home by the trust assets. On the evidence before me, the beneficial interests of the investors could not have been estab lished without some such investigation as has been carried out by the liquidator.
The allowance of fair compensation to the liquidator is in my judgment a proper application of the rule that he who seeks equity must do equity. ‘That … is a rule of unquestionable justice, but which decides nothing in itself; for you must first inquire what are the equities which the defendant must do, and what the plain tiff ought to have:’ Neesom v. Clarkson (1845) 4 Hare 97, 101 per Wigram V.-C.
‘The rule means that a man who comes to seek the aid of a court of equity to enforce a claim must be prepared to submit in such proceedings to any directions which the known principles of a court of equity may make it proper to give; he must do justice as to the mat ters in respect of which the assistance of equity is asked:’ Halsbury’s Laws of England, 4th edn., vol. 16 (1976), 874, para. 1303, which in my judgment correctly states the law.
The authorities establish, in my judgment, a general principle that where a person seeks to enforce a claim to an equitable interest in property, the court has a discretion to require as a condition of giving effect to that equitable interest that an allowance be made for costs incurred and for skill and labour expended in connection with the administration of the property. It is a discretion which will be sparingly exercised; but factors which will operate in favour of its being exercised include the fact that, if the work had not been done by the person to whom the allowance is sought to be made, it would have had to be done either by the person entitled to the equitable interest (as in In re Marine Mansions Co., LR 4 Eq. 601 and similar cases) or by a receiver appointed by the court whose fees would have been home by the trust property (as in Scot v. Nesbitt, 14 Ves. Jun. 438); and the fact that the work has been of substantial benefit to the trust property and to the persons interested in it in equity (as in Phipps v. Boardman (1964] 1 WLR 993). In my judgment this is a case in which the jurisdiction can properly be exercised. It seems to me that this principle is entirely consistent with the basis upon which the Court of Appeal acted in In re Duke of Norfolk’s Settlement Trusts (1982] Ch. 61. What the Court of Appeal held in that case was that, if the increase of the trustees’ remuneration was beneficial to the trust administration, there was an inherent jurisdiction to require the beneficiaries to accept, as a condition of effect being given to their equitable interests, that such an increase in remu neration should be authorised. The court there was concerned with the good administration of a settlement of a conventional kind; but the jurisdiction which was held to be exercisable in that case is in my judgment equally exercisable in other cases in which a person seeks to enforce an interest in property to which he is entitled in equity. The principles on which a court of equity acts are not divided into watertight compartments but form a seamless whole, however nec:ea sary it may be for the purposes of exposition to attempt to set them out under distinct head
ings. I have already referred to the way in which Kekewich J in In re Staffordshire G4S and Col, Co. [1893] 3 Ch. 523 treated expenditure on the preservation of trust property as coming under the head of ‘salvage,’ and the petitioning creditor in In re Anglo-Austrian Printint and Mlill,-, Union (1895] 2 Ch. 891 sought to persuade Vaughan Williams J to do the same. It is of inter est that in In re Duke of Norfolk’s Settlement Trusts [1979] Ch. 37, 59B–c, WaltonJ reprdecl the cases in which the court authorises additional remuneration in order to secure the services of a particular trustee as also being ‘closely analogous to “salvage”.’ I think this can fairly regarded as confirmation of the underlying unity of the inherent jurisdiction which is exercised in such diverse circumstances as those which existed in In re Marine Mansions Co., LR 4 Eq. 601; Scott v. Nesbitt, 14 Ves. Jun. 438; Phipps v. Boardman [1964) l WLR 993 and In re Duke of Norfolk’s Settlement Trusts [1982) Ch. 61.
Another example of the exercise of the inherent jurisdiction which seems to me to fall within the same principle occurs when the court sets aside a settlement for undue influence or on the bankruptcy of the senior. Although there is no longer any property subject to the settlement, the court has a discretion to allow the trustees to take their costs out of the fund before hand ing it over to the successful litigant: see Merry v. Pownall [1898] l Ch. 306, 310-11 and Bullock v. Lloyds Bank Ltd [1955) Ch. 317, 327.
The particular aspect of the inherent jurisdiction which is sometimes referred to as ‘salvage’ was said by Evershed MR and Romer LJ in In re Downshire Settled Estates [1953) Ch. 218, 235, to be exercisable
‘where a situation has arisen in regard to the [trust] property (particularly a situation not originally foreseen) creating what may be fairly called an “emergency”-that is a state of affairs which has to be presently dealt with, by which we do not imply that immediate action then and there is necessarily required–and such that it is for the benefit of every one interested under the trusts that the situation should be dealt with by the exercise of the administrative powers proposed to be ponferred for the purpose.’
The situation which existed in the present case immediately before the commencement of the winding up could similarly fairly be called an emergency; and although the observations of Evershed MR and Romer LJ were directed to.the court’s jurisdiction to confer administrative powers upon trustees, the cases to which I have referred show that the inherent jurisdiction is wider than this and extends to making an allowance for costs incurred and skill and labour expended by those who have acted without obtaining the prior authority of the court.
I should notice three particular objections which were made to the existence of the jurisdic tion in the present case. First it was said that the liquidator was not in the position of a trustee, in that the legal interest in the trust assets remained throughout in the company and did not vest in him. In my judgment this does not preclude the court from making an allowance to him out of the trust assets in respect of his expenses and remuneration, although it is no doubt a fac tor to consider when determining to what extent compensation for his expenditure of money, skill and labour should be borne by the trust assets rather than the company’s own assets. In several of the cases to which I have referred the person to whom the court made an allowance was not in the ordinary sense a trustee, although like the liquidator he was subject to fiduciary obligations; and the fact that he was not a trustee did not prevent the court from making a pay ment to him out of the trust assets. The salvage jurisdiction referred to in In re Downshire Settled Estates [1953) Ch. 218 was described in terms which were restricted to the conferment of powers on trustees; but Evershed MR and Romer LJ recognised that salvage was only one aspect of the inherent jurisdiction, and the court’s powers are clearly not exercisable only in favour of those who hold office as express trustees.
Secondly it was said that the contract between the company and the investors relieved the investors from any liability for further payments. I have referred in my earlier judgment to the summary of the investment scheme which was provided to all investors, and which stated, inter alia that ‘No costs whatsoever are incurred by the investor.’ While this is again a factor to con sider when the court cdrnes to determine how any costs and remuneration of the liquidator should be borne, and would no doubt carry much weight if the question was whether the com pany itself should be entitled to payment of any part of the expenses incurred by it out of the trust assets, it does not in my judgment preclude the court from exercising the inherent juris diction in favour of the liquidator. It is significant that in In re Duke of Norfolk’s Settlement Trusts [1982) Ch. 61 an argument that the trustees’ remuneration could not be increased because it was based upon contract and the court had no power to vary the terms of a contract was rejected by the Court of Appeal. The circumstances in that case were of course different from those existing here; but if the terms of a settlement do not prevent the court from exer cising its inherent jurisdiction in favour of the trustees in a proper case, I do not consider that the terms of the investment scheme in the present case prevent it from doing so in favour of the liquidator.
Thirdly, it was said that the business carried on by the company was contrary to sectionl of the Banking Act 1979, and that this is a ground for declining to exercise the inherent jurisdic tion. It is not necessary for me to express any view on the legality of the company’s business, which appears to be a question of some difficulty. I am satisfied that even if it was illegal, this does not preclude the court from exercising the jurisdiction in favour of the liquidator, whose own conduct is blameless in this respect.
Accordingly I propose to declare that the liquidator is entitled to be paid his proper expenses and remuneration out of the trust assets if the assets of the company are insufficient.I am not deciding how such expenses and remuneration should be borne as between the company’s assets and the trust assets, nor as between the different classes of trust assets, nor whether any part of them should be borne by the trust assets if the company’s own assets should in the end prove sufficient to meet them. It is premature to determine questions of incidence when the full extent of the liquidator’s claims to expenses and remuneration are not yet known and the assets of the company may yet be swelled as a result of the litigation in which it is engaged. But the liquidator is entitled to know at this stage that his proper expenses and remuneration will be paid if necessary out of the trust assets, and that he will not be left at the end of the winding up with the possibility of receiving no recompense for his work or of having to bear part of the expenses out of his own pocket.