value, and if this proportion is applied to the insured value declared in the policy or to the legally determined value in the case of an open policy.1

It turned out that in this admirable judgment Lord Mansfield assumed one point of importance, namely, that there could be no doubt about the amounts therein described by the words "sound arrived value" and "damaged arrived value." That their meaning was not free from doubt appeared in the case of Johnson v. Sheddon, 1802,2 long known as the Brimstone case. The policy in this case covered a shipment of brimstone and shumac on board the Caroline, from Sicily to Hamburg. Upon a calculation by Mr. Oliphant, to whom the loss was referred by the parties for adjustment, the loss was found to amount to £76:7:4 per cent. The matter came before the court, and after decision in first instance, a new trial was moved for, on the ground that the adjuster had made a mistake in his method of calculation, inasmuch as in estimating the loss he had taken for his basis the difference between the net proceeds of the damaged goods and their net sound value, instead of taking the difference between the gross damaged proceeds and the gross sound arrived value. Three points were agreed to by both parties:

(1) The loss to be estimated by the rule laid down in Lewis v. Rucker,3 that the underwriter is not to be subjected to the fluctuation of the market.

(2) The loss for which the underwriter is liable is that which arises from the deterioration of the commodity by sea damage.

(3) The underwriter is not liable for any loss which may be the consequence of duties or charges to be paid after the arrival of the commodity at the place of destination.

The matter came before the Court of King's Bench, and Mr. Justice Lawrence (in what Arnould, p. 985, describes as one of the ablest judgments ever delivered in West

1 As a matter of fact damaged goods never have a market value in the same sense that sound goods have, so that the underwriter can never be quite independent of considerations of market.

minster Hall") held the true rule of adjustment to be "that the percentage or aliquot part, which the underwriter has to pay of the prime cost or value in the policy, must be ascertained by comparing the gross produce of the sound with the gross produce of the damaged sales." By "gross produce" Mr. Justice Lawrence meant the price including freight, duty, and landing charges. His reason for adopting this price was that he desired to get at the intrinsic value of the goods in their sound and damaged conditions at destination; for it must be borne in mind that the essence of particular average is that it is a settlement on goods which have reached destination. He said: "When a commodity has been offered for sale to one who has nothing further to pay than the sum the seller is to receive, it is the quality of the goods which, in forming a fair and rational judgment, can alone influence him in determining what he shall pay. He has nothing to do with what it may have cost the seller, and the goodness of the thing is the criterion which must regulate the price; for, being liable to no other charges, he has only to consider its intrinsic value; and therefore if a sound commodity will go as far again as a damaged commodity by having twice its strength, or by being in any other respect twice as useful, he will give twice the money for the sound that he will for the damaged; and so in proportion." 1

3

Freight involved in Particular Average on Goods.— It is evident that in all cases in which the insured value is not below the gross sound arrived value, the assured is, by the principle established in Lewis v. Rucker 2 and Johnson v. Sheddon, secured in the payment in full by the underwriter of any particular average sustained by his goods. On the other hand, for any amount by which the gross sound arrived value exceeds the insured value the assured has to bear the loss himself. As has been already explained, the gross sound arrived value includes freight, landing charges,

1 By custom of Lloyd's particular average is adjusted on a comparison of bonded instead of duty-paid prices in claims for damage to tea, tobacco, coffee, wine, and spirits imported into this country. 2 Burr. 1167. 3 2 East 581.

2

and duties. But these expenses not being payable by the merchant until after the voyage is closed, are never incurred in case the vessel is totally lost before arrival. The shipper of goods has, therefore, no reason to insure these amounts against total loss of the ship or cargo. It is consequently only against the risk of the vessel's arrival with cargo so damaged as to give rise to a particular average claim that the shipper need insure the freight, landing charges, and duties. This is not a customary insurance in England, so that cases sometimes arise in which the application of Mr. Justice Lawrence's decision is felt by the merchant to involve him in some hardship. But in French policies on goods it is quite usual to find special provision for the insurance of freight payable abroad, warranted free of claim in case of the total loss of the ship; in return for this warranty the premium is generally made one-half of the rate on the goods.

In the case of goods manufactured for the consumption of one firm and adopted only for their trade, it may be impossible to arrive either by sale or by assessment at a true idea of the damage sustained by them. In such cases the damage is measured by the cost of reconditioning the goods at destination, the claim on the policy being in other respects treated in the same way as if the goods had been sold or the damage assessed.

Expenses of proving and adjusting Claim for Particular Average.—In determining whether a claim for particular average attains the franchise or not, no account is taken of anything but the actual physical damage. The clearness with which this is brought out in the French phrase, avarie particulière matérielle (material particular average), renders that designation superior to our shorter name "particular average." So far, expenses of survey, etc. etc., remain at the charge of the merchant himself. But if it is found that the actual material damage (diminution and deterioration) exceeds the stipulated franchise, there being evidently by that time a liability on the part of the underwriter, then the underwriter allows to the assured the sums spent in survey fees, etc., as being expenses incurred in the claim, which

were essential to the existence of the claim and therefore became part of it. On the same ground the cost of making-up or, as it is termed, adjusting the claim, is admitted when the assured employs an adjuster to make it up; but it is not (as a rule) admitted when the statement is prepared by the assured himself or by a member of his regular office staff.

On examination of adjustments of particular average on goods it will be found that these statements are simply applications of the principles explained above. The adjuster first determines from invoices and policy the insured value of the goods whose damage he is dealing with; then from account-sales or surveys he arrives at the proportion of loss sustained by the damaged goods: if this proportion exceeds the stipulated franchise he applies this. proportion to the insured value he has calculated, and to the result he adds the various costs incurred in ascertaining the amount of damage and his own fee for adjustment. It follows from what has already been said respecting costs of surveys, etc., that if there is found to be a claim on only some series of the damaged goods, the proportion of the costs attaching to the goods whose damage does not attain the franchise, falls to the assured's burden not being recoverable by him from his underwriter.

Particular Average on Freight. The most frequent occasion of claim for particular average on freight is the loss of some portion of a cargo by one of the perils insured against in the policy. For instance, take a cargo of sugar carried from Java to New York in return for freight of so much per ton payable when the cargo is delivered at New York. If the vessel meets with some disaster at sea or with bad weather it may happen that a portion, say onehalf, of the cargo is lost. In such a case there is evidently a good ground for claiming from the underwriter on freight the half of the amount he has insured.

A claim may arise on a policy covering the freight of certain goods without the occurrence of a claim on the policy covering the goods themselves. For it might happen that the goods were insured f.p.a. unless the ship

be stranded, and the freight on ordinary memorandum terms. In such case, if the vessel did not strand no loss on cargo except total loss could be claimed from the underwriter, while any loss on freight exceeding 3 per cent proceeding from sea perils of any kind could be recovered from the underwriter on freight.

The ordinary terms on which freight is insured are those laid down in the memorandum, but occasionally freight is insured f.p.a. unless the ship be stranded. This holds specially of freight of salt, and it is easily understood; if it is not possible to insure the salt except f.p.a. (and this holds true of insurance on salt effected on the ordinary form of policy), it is only to be expected that the freight which can be earned only when the salt is delivered in specie cannot be more favourably insured.

In the discussion of total loss of freight, it was remarked that mere delay on a voyage will not constitute a claim on an ordinary policy on freight. This holds equally true as regards particular average. The loss must arise from

some peril insured against.

It was also noticed that as English law takes no notice of a partial performance of a freight contract, a freight must either be earned in full by the shipowner or not earned at all. There cannot, consequently, be any claim on a freight policy for particular average arising from closing a marine venture short of destination. The nearest approach that can be got to that is a salvage loss; and such a settlement can only occur when an underwriter on the freight of cargo carried in a foreign ship1 pays a total loss, the ship failing through perils of the sea to deliver her cargo at destination, and is in consequence substituted in the rights of the foreign shipowner to receive distance freight pro rata itineris peracti. Such a case was decided by the Court of Queen's Bench in the sense indicated, and was confirmed by the Court of Appeal (The Canute, London Assurance v. Williams, 1893).2

1 Or on a British ship which has conferred on it pro tempore the rights of a foreign vessel as to distance freight.

2 9 Times Law Reports, 96, 257. In this case the vessel was