FIRST DIVISION, INNER HOUSE, COURT OF SESSION
Lord President Lord Sutherland Lord Cowie
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OPINION OF THE COURT delivered by THE LORD PRESIDENT in RECLAIMING MOTIONS FOR DEFENDERS in the causes BP EXPLORATION OPERATING COMPANY LIMITED Pursuers and Respondents; against |
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1. |
CHEVRON SHIPPING COMPANY |
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2. |
CHEVRON TANKERS (BERMUDA) LIMITED |
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3. |
CHEVRON TRANSPORT CORPORATION Defenders and Reclaimers: |
Act: C. M. Campbell, Q.C., Wolffe; Maclay Murray & Spens (Pursuers and Respondents)
Alt: Glennie, Q.C., Hanretty; Henderson Boyd Jackson, W.S. (Defenders and Reclaimers)
13 April 2000
[1] We have before us reclaiming motions against the interlocutors of the Lord Ordinary allowing a proof before answer in three cases. In all three actions the pursuers are the same, B.P. Exploration Operating Company Limited, and in all of them the pursuers seek £3,000,000 as damages for loss which they allege that they suffered when four loading arms on a jetty at Sullom Voe Terminal were irreparably damaged in an incident on 28 February 1990 involving the oil tanker "Chevron North America". The three actions are directed against different defenders, however. The first is directed against Chevron Shipping Company ("Shipping"); the second against Chevron Tankers (Bermuda) Limited ("Tankers") and the third against Chevron Transport Corporation ("Transport"). The actions were raised in that order and the reasons why there are three actions will emerge in the discussion which follows.
[2] In the court below and in this court, all three defenders were represented by the same counsel and it is clear that they were in a position to deal with the various issues which arose in the separate actions. Consistently with this approach, counsel for both sides envisaged that, in the event of a proof being allowed in more than one action, the proofs would be held together. But counsel for the defenders submitted that the Lord Ordinary should have sustained the first plea-in-law for Transport and should have assoilzied them on the ground that any rights against Transport had prescribed. In the other cases, they submitted that the pursuers' averments relating to liability on the basis of contract and delict were irrelevant. In the case against Shipping counsel argued that the pursuers' averments of personal bar were irrelevant and that, since they formed the only basis upon which the pursuers sought to make Shipping liable as owners of the vessel, the action should be dismissed. In that case and in the case against Tankers counsel argued that the actions, so far as based on Section 74 of the Harbours, Docks, and Piers Clauses Act 1847, were irrelevant since, the vessel having been subject to a demise charter to Transport at the relevant time, any liability under Section 74 lay Transport rather than on Shipping or Tankers.
[3] The general background to the matters which we have to decide can be sketched in at this stage, even though we shall have to examine certain aspects in more detail. After the incident the pursuers' agents entered into correspondence with legal and insurance representatives who, the pursuers allege, represented that Shipping were responsible for the conduct of the vessel and of its master at all relevant times. Moreover, they allege that the correspondence was consistent with Shipping being the owners of the vessel. Proceeding on this basis, the pursuers eventually served a summons against Shipping on 21 February 1995, within the five-year prescriptive period, and in their defences, when lodged initially, Shipping admitted that they were the owners of the vessel. The representations which we have mentioned form the basis for the pursuers' contention in the action against Shipping that the defenders are personally barred from denying that they were the owners and responsible for the conduct of the vessel and its master at the relevant time. However, on 12 June 1995 Shipping made adjustments to their defences to that action, indicating that they were not the owners or operators of the vessel, nor the employers of the master. In correspondence the agents for Shipping clarified the position by indicating that Tankers were the owners of the vessel. On 14 June the pursuers signeted the summons against Tankers and it was served on 16 June. Then, on or about 18 August 1995, in their defences to that action Tankers averred that at the relevant time the vessel was subject to a bareboat charter to Transport. In due course on 4 September the pursuers signeted a summons against Transport but the defenders' agents declined to accept service and so on 8 September the summons had to be sent to Liberia where it was eventually served on 28 September 1995. The dates of these various events are not in dispute. Against that background both Tankers and Transport have pleas that they should be assoilzied on the ground that any obligation on their part to make reparation to the pursuers has prescribed.
[4] We find it convenient to begin with the pleas relating to prescription and to deal first with the action against Transport in which the issue is sharply focused.
Transport: Prescription
[5] In terms of Section 6(1) and (2) of the Prescription and Limitation (Scotland) Act 1973 any obligation of Transport to make reparation to the pursuers for any loss which they suffered in the incident on 28 February 1990 would prescribe after the expiration of a period of five years calculated in accordance with that section if no relevant claim had been made in relation to the obligation. Since the summons was not served until 28 September 1995, more than five years after the incident, any obligation on the part of Transport will have prescribed unless a sufficient part of the intervening period was not to be reckoned as part of the prescriptive period by virtue of subsection (4) which provides inter alia:
"In the computation of a prescriptive period in relation to any obligation for the purposes of this section -
(a) any period during which by reason of
(i) fraud on the part of the debtor or any person acting on
his behalf, or
(ii) error induced by words or conduct of the debtor or any
person acting on his behalf,
the creditor was induced to refrain from making a relevant
claim in relation to the obligation ... shall not be reckoned as, or
as part of, the prescriptive period:
Provided that any period such as is mentioned in paragraph (a) of this
subsection shall not include any time occurring after the creditor could
with reasonable diligence have discovered the fraud or error, as the
case may be, referred to in that paragraph."
[6] The pursuers' averments on this matter are to be found in Article 10 of Condescendence:
"The pursuers, by reason of error induced by the words and conduct of Chevron Shipping on behalf of the defenders, were induced to refrain from making a relevant claim against the defenders in respect of their obligations arising out of the said incident. Had it not been for their said error they would have raised proceedings against the defenders in respect of the said obligations at the latest on the date when, in the event, they raised proceedings against Chevron Shipping, to wit 21st February 1995. Accordingly, they were induced to refrain from making a relevant claim for at least the period between that date and the date when the present proceedings were raised. The date of raising these proceedings was the earliest possible date on which the present proceedings could reasonably have been raised following the disclosure of the existence of the charterparty. The said period does not fall to be reckoned as part of the prescriptive period. The pursuer had no reason to disbelieve Chevron Shipping when they represented to the pursuers that they owned and were responsible for the operation at the material time of the vessel. Chevron Shipping accepted liability in principle for failures attributable to the said vessel and the Master thereof. Even had the pursuers doubted the said representations by Chevron Shipping on behalf of the defenders they could not have ascertained by reference to any public register the fact that the defenders were bareboat charterers of the vessel."
[7] It is important to notice that, although the alleged representations by Shipping on behalf of Transport, as averred earlier in Article 10, are said to have stretched over a period from at least April 1990, the pursuers simply aver that they were induced to refrain from making a relevant claim "for at least the period" between 21 February 1995 and 28 September 1995. This is because the pursuers accept that they cannot say that, even if they had been aware of the situation, they would actually have raised proceedings against Transport any earlier than 21 February 1995 when they served the action on Shipping. So far as the period after 21 February is concerned, the pursuers make certain other averments which we require to consider:
"On or about 12th June 1995 Chevron Shipping intimated adjustments to their Defences to reflect their present position that they were not the owners or operators of the vessel, nor the employers of the Master of the vessel. On or about the same date the defenders' agents wrote to the pursuers' agents to the effect that Chevron Tankers (Bermuda) Limited were the owners of the vessel. The identity of the defenders as charterers was not disclosed. On or about 18th August, 1995 the defenders' agents intimated Defences in the action against Chevron Tankers (Bermuda) Limited which named the present defenders as charterers and intimated a copy of the charterparty. By this time the pursuers could not place reliance on the accuracy of information emanating from Chevron Shipping or their agents, the initial admission of ownership having been made and withdrawn. On considering the position, however, they raised the present proceedings. The Summons in this action was signeted on 4th September, 1995. The defenders' agents refused to accept service of the Summons. The Summons was despatched to Liberia on 8th September, 1995 and service was effected on 28th September, 1995."
[8] The contention for Transport was that, on the face of these averments, any obligation on their part had prescribed. The error became operative on 21 February 1995, at a stage when the prescriptive period had only one week to run. It followed that, if any more than a week had elapsed between the end of any period which fell to be left out of account in terms of Section 6(4) and service of the summons against Transport, any obligation on the part of Transport had prescribed. On the pursuers' own averments it was on 18 August 1995 that the defenders introduced the averments to the effect that Transport were the charterers of the vessel. As from that date at the latest, there was no error on the pursuers' part which induced them to refrain from suing Transport. That date was accordingly the latest date for the end of any period to be disregarded under Section 6(4). Since the summons was not served on Transport until more than a month after that date, any obligation on their part had in the meantime expired on or about 25 August.
[9] The Lord Ordinary records the argument advanced by counsel for the pursuers in the Outer House and his decision on it:
"He submitted that the approach taken by counsel for the defenders to Section 6(4) of the 1973 Act was faulty. That section referred to 'any period which by reason of ... error ... the creditor was induced to refrain from making a relevant claim ...". In this case the pursuers offer to prove that as soon as they became aware of the charterparty they raised proceedings as soon as they could. The fact that proceedings were not raised before that date was wholly attributable to error induced by Shipping on behalf of Transport. He submitted that in the circumstances averred the prescriptive period does not recommence until (a) the pursuers are disabused of their error and (b) they have an opportunity to raise proceedings. One should look to when the claim was made and ask was the period between when it should be raised and when it was raised induced by the error. If the defenders were correct then that would lead to an unjust position, a position which the Section is designed to prevent.
I agree with that interpretation of Section 6. In my view any other interpretation could lead to absurdity and injustice. It is correct that the Court must consider 'any period' during which no action was taken and ask whether that whole period was attributable to the error alleged. In these circumstances I agree with the submission that the averments in this action that there was an error and that that error induced the pursuers not to raise proceedings are habile of proof."
[10] Before us counsel for the pursuers submitted that the Lord Ordinary's approach had been correct. Mr. Campbell, Q.C., summarised their contention in this way. The pursuers did not serve a summons on Transport until 28 September 1995. They offer to prove that, but for the error induced by Shipping on behalf of Transport, they would have made a relevant claim on or about 21 February 1995. The result is that the pursuers refrained from making a relevant claim until 28 September 1995, notwithstanding the fact that they were taking active steps to signet and serve the summons from at least 4 September 1995 and indeed, presumably, from some days earlier when the summons was being drafted.
[11] In our view the pursuers' argument is inconsistent with the wording of Section 6(4) and must be rejected. The period in question is one during which error induces the creditor to "refrain" from making a relevant claim. The verb "refrain" is an ordinary English word and should be treated as such. According to the New Oxford Dictionary of English, it means to "stop oneself from doing something". Applying that ordinary meaning, we have no difficulty in seeing that, on the pursuers' averments, they would have stopped themselves from making a relevant claim against Transport for so long as they were unaware that Transport had been the charterers of the vessel and, so, a possible party against whom proceedings should be brought. But it appears to us quite impossible to say that, thereafter, at a time when, on their counsel's own admission, the pursuers would have been bending all their efforts to serving a summons, they were none the less still "refraining" from making a relevant claim. So to hold would be to distort the meaning of the provision which Parliament has enacted.
[12] The terms of subsection (4) leave no room in our view for the court to imply that the period should be extended to allow for some time during which the creditor could reasonably have been expected to raise proceedings. The precise terms of the subsection are particularly significant when there are other sections in the same Act, for example, Sections 17 and 18, where Parliament has specifically used the language of reasonable practicability. In any event, the suggestion that allowance should be made for such a period is inconsistent with the nature and purpose of subsection (4). That subsection operates within the context of Section 6 as a whole, which is Parliament's declaration that five years from the appropriate date is the proper period to be allowed to a creditor to raise a relevant claim. As with any strictly defined time-limit, it can on occasions operate somewhat harshly, but that disadvantage to particular parties is to be weighed against the advantage to other parties in having a defined and easily ascertained period. Indeed in terms of Section 6 five years is the proper period in all cases, but subsection (4) provides that you do not reckon as part of those five years any period during which the pursuer is induced by error induced by the debtor to refrain from making the claim. In our view, once the error is removed, the period begins to run again and - however difficult it may prove to be and even if it should indeed prove to be impossible - the creditor has merely the balance of the five years in which to serve his action.
[13] In holding that the period ended as soon as the pursuers became aware that Transport were the charterers of the vessel and in rejecting the suggestion that the period should include some time in which the creditor could take steps to raise proceedings, we are not only giving effect to the plain meaning of the provision but we are also construing it in conformity with the approach which is taken in the proviso to the subsection. In terms of that proviso the period is not to include "any time occurring after the creditor could with reasonable diligence have discovered the fraud or error". If the period is to be brought to an end as soon as the creditor could with reasonable diligence have discovered the error in question, then equally clearly - or indeed a fortiori - it must come to an end as soon as the creditor does in fact discover the error.
[14] The Lord Ordinary appears to have thought that the construction which we favour could lead to absurdity and injustice. That it can appear, at first sight at least, to operate somewhat harshly in a case like the present may be accepted. But in reality the difficulties for the pursuers arise, not from the operation of Section 6(4), but from the fact that they delayed starting proceedings until four years and fifty-one weeks of the five-year prescriptive period had elapsed. This meant that they left themselves little leeway for complications. In particular, if they had all along been aware that Transport had been charterers of the vessel but had delayed until 21 February 1995 to try to serve the summons on them, then, to judge by the time which it took to serve the summons in Liberia in September 1995, the pursuers would have failed to serve it by 28 February and so any obligation on Transport would have prescribed in any event. To look at the matter in another way, if the pursuers had begun proceedings against Shipping in, say, February 1994 and the various revelations had emerged in the same way and on a similar time-scale, the pursuers would have had plenty of time within which to serve the summons on Transport.
[15] For these reasons we are satisfied that in the action against Transport we must sustain their first plea-in-law and assoilzie the defenders.
Tankers: Prescription
[16] In the action against Tankers the pursuers rely on the same representations, but aver that they were made by Shipping on behalf of Tankers. They offer to prove that they were induced to refrain from making a relevant claim against Tankers for at least the period from 21 February 1995 until 16 June 1995 when they served the action on Tankers, four days after being alerted to the fact that Tankers, rather than Shipping, were the owners of the vessel at the time of the incident. For the reasons which we have explained above, in this case, once any period to be left out of the reckoning by virtue of Section 6(4) came to an end, the pursuers would have had a week within which to make a relevant claim. If, therefore, there was such a period which ended on 12 June, the pursuers served their action on 16 June within that seven-day period and so any obligation on the part of Tankers would not have prescribed. The defenders do not dispute that this would be so if there was indeed a period under Section 6(4) which ended on 12 June. But in Answer 5 they invoke the proviso to subsection (4) by making the following averments:
"Further explained and averred that esto the defenders were for any reason obliged to make reparation to the pursuers (which is denied) such an obligation has prescribed in respect that the loss and damage averred was sustained in excess of five years prior to the raising of the present action. Reference is made to the terms of Section 6 of the Prescription and Limitation (Scotland) Act 1973. Further explained and averred that the exercise of reasonable diligence on the part of the pursuers or their representatives would have disclosed the identity of the owners. At no time during the course of the said correspondence were the defenders or any representative thereof requested to identify the owners. Had any such request been made it would have been responded to. In any event, it is common practice to verify the ownership of the vessel by reference to the entries in Lloyds Register of Shipping. Had the pursuers or their representatives adopted the said common practice they would have appreciated prior to the expiry of the quinquennium that the defenders were in any event the owners of the vessel. No inducement was made by the defenders or anyone acting on their behalf. It is well known that shipping companies' affairs are conducted by managers responsible for substantial numbers of vessels which vessels are owned by owners distinct from the managers thereof. The pursuers were alerted to the true identity of the owners following upon the said incident. The Master of the vessel, Captain Porter, wrote Letters of Protest following upon the incident addressed to the pursuers. Said Letters of Protest were on headed notepaper of the defenders."
In reply the pursuers aver that they had no reason to disbelieve Shipping when they represented that they owned the vessel and say that Shipping accepted liability in principle for failures attributable to the vessel and its master. The pursuers also make averments in reply to the defenders' averments about the Letter of Protest. More particularly the pursuers aver
"Even assuming it was possible conclusively and independently to ascertain the identity of the true owners of the vessel (which is denied), in the circumstances, reasonable diligence would not entail seeking such verification of the position which had been adopted by Chevron Shipping."
[17] As these competing averments show, the prescription issue in this case depends on matters of fact which are in dispute. In these circumstances both parties accepted that there requires to be a proof before answer on this matter.
Shipping: Personal Bar
[18] In their action against Shipping the pursuers aver that they "are the owners, managers and operators of" the vessel. They go on to make extensive averments about correspondence with representatives of Shipping which conclude with the averment:
"The said correspondence was all consistent with the defenders being the owners of and bearing responsibility for the on board equipment and for the acts and omissions for the operators, master and crew of the vessel at the material time. In reliance on the said representations the pursuers took them to be so. They raised the present proceedings against the defenders on that basis."
It will be recalled that the defenders initially admitted that they were the owners of the vessel and then, on adjustment, withdrew that admission and averred, first, that Tankers had been the owners and, secondly, that the vessel had been chartered to Transport under a bareboat charter. Alluding to these matters, the pursuers conclude Article 1 of Condescendence in this way:
"By the time the defenders adjusted their defences to reflect their present position that they were not the owners or operators of the vessel, nor the employers of the Master of the vessel, more than five years had elapsed since the said incident. In the foregoing circumstances the defenders are personally barred from asserting in this action that they are not the owners and that they do not bear responsibility for the on board equipment, for the operations and for the master and crew of the said vessel. Further explained and averred that the Letters of Protest all ran in the name of the Master and were worded in the first person singular. They began, 'I, my owners and charterers....' No indication was given in any of the Letters of the identity of the owners of the vessel, the employers of the Master, the identity of the charterers nor the nature of the charterparty. Separatim and in any event further explained and averred that the defenders were at the material time the managers and the operators of the said vessel and thus were in any event subject to the duties hereinafter condescended upon."
[19] Both parties were content to proceed on the basis of the classic formulation of the doctrine of personal bar which is to be found in the speech of Lord Birkenhead L.C. in Gatty v. Maclaine 1921 S.C. (H.L.) 1 at p. 7:
"Where A has by his words or conduct justified B in believing that a certain state of facts exists, and B has acted upon such belief to his prejudice, A is not permitted to affirm against B that a different state of facts existed at the same time."
[20] Furthermore, it is unnecessary for the court to express any view about the nature of the alleged representations that Shipping were the owners of the vessel, since counsel for the defenders did not argue that they were not representations about the existence of a certain state of facts. In addition, the pursuers' case against Shipping as owners of the vessel appears to be based entirely on personal bar. Although it might be said - echoing the famous words of counsel quoted by Birkett L.J. in Combe v. Combe [1951] 2 K.B. 215 at p. 224, a case of promissory estoppel - that in the present case personal bar was being used as a sword rather than a shield, counsel for the defenders did not seek to persuade us that the pursuer's averments were irrelevant on that account. So, again, there is no need for the court to explore that matter.
[21] Scrutiny of the pursuers' averments reveals that they do not spell out particularly clearly the manner in which the pursuers are said to have acted to their prejudice on the basis of their belief that Shipping were the owners of the vessel. Somewhat tentatively, counsel for the pursuers argued that the mere raising of the action against Shipping might itself be regarded as an act to the pursuers' prejudice. We reject that argument which would seem to imply that, in any case where a party based his action on personal bar, irrespective of the outcome, that would in itself count as an act to his prejudice. This would in effect deprive the requirement that the party should have acted to his prejudice of all real content. On the other hand it appears that the prejudice upon which the pursuers really rely is the prejudice which they would suffer if, by reason of their delay in raising actions against Tankers or Transport because of the representations of Shipping, their rights against Tankers and Transport had prescribed. Subject to the point which we examine immediately below, counsel for the defenders accepted that it would be unduly technical to criticise the pursuers' pleadings on the ground of prematurity - in other words, on the ground that it remained to be seen whether their rights against the other defenders had prescribed. In these circumstances, subject to considering the defenders' other argument, we consider that the pursuers' averments of personal bar should be allowed to go to proof, so that the issue of prejudice can be determined once the defenders' prescription plea has been disposed of in the action against Tankers.
[22] The defenders' other argument was to the effect that there was no room for a plea of personal bar based on representations inducing error which induced the pursuers to refrain from taking proceedings against Tankers or Transport since the law provided the appropriate remedy for a party affected by such representations in Section 6(4) of the Prescription and Limitation Act.
[23] In support of their argument counsel for the defenders relied on certain observations of Lord Clyde in Greater Glasgow Health Board v. Baxter Clark & Paul 1990 S.C. 237. In that case the pursuers had appointed the defenders as architects in relation to the construction of a new hospital which turned out to have a large number of defects. The defenders had a plea that any rights against them had prescribed but, by reference to Section 6(4), the pursuers argued that a period of years ending on 3 March 1978 fell to be disregarded in any computation of the prescriptive period since during that period they had been induced to refrain from raising proceedings against the defenders by an erroneous belief induced by the defenders that the only fault had been on the part of the contractors. In addition, however, the pursuers sought to argue that the defenders were personally barred, by reason of these representations and the pursuers' reliance on them, from maintaining that the pursuers ought to have been aware before 3 March 1978 that loss, injury and damage had been caused by the defenders' negligence. Lord Clyde held (1990 S.C. at p. 257) that any representation by the defenders had been one of law rather than of fact and added:
"Furthermore, I was not persuaded that this plea would be open to the pursuers in the present case. Section 6(4) appears to be designed to cover the situation where such a plea might run and it would be curious if it was also competent to invoke a plea of bar outwith the statutory provision and indeed outwith the period of prescription."
[24] It appears to us that the situation in the present case is distinguishable from the situation in the Greater Glasgow Health Board case. There the defenders had a plea of prescription which the pursuers were seeking to elide by virtue of the provisions of Section 6(4). In that context Lord Clyde doubted whether it was open to the pursuers to use the same facts to set up a plea of personal bar, since Section 6(4) was intended to cover the situation. Here, by contrast, the personal bar plea is raised in proceedings between the pursuers and Shipping, proceedings in which no issue of prescription can or does arise. The issues of prescription arise in proceedings against other parties. It is by no means clear to us that the objection to the plea of personal bar envisaged by Lord Clyde would arise in this situation. In any event, we note that in the action against Tankers an important issue relates to the possibility that the pursuers might have discovered the true position by the exercise of reasonable diligence. It is not clear to us how, if at all, that issue might affect any plea of personal bar. In those circumstances we consider that the preferable course is to leave all the questions relating to personal bar in the action against Shipping to be decided after proof.
Averments about the Employment of the Master
[25] The pursuers' actions against Shipping and Tankers contain averments of breach of contract in Article 3 and averments of a case based on delict in Article 4 of Condescendence. They are in many ways similar in both actions, being founded on the actings of the master who is averred to have been the servant of the defenders in each of the actions, but counsel for the defenders were particularly critical of the averments in the action against Tankers.
[26] The pursuers aver that the incident was due to breach of contract on the part of the defenders. They aver that on behalf of the Sullom Voe Terminal the pursuers sent to the master of the vessel a copy of the relevant Jetty Regulations and that he signed the acknowledgement attached to Schedule A to those Regulations. In so signing, the master of the vessel "acted for and on behalf of her owners, by whom he was employed". The pursuers' case is that in this way the master entered into a contract on behalf of Tankers with the pursuers and that the incident which subsequently occurred constituted a breach of the contract so formed.
[27] Counsel for the defenders criticised the averment that the master was acting for and on behalf of the owners (Tankers) "by whom he was employed" in the wider context of the pleadings where, in Article 2, in response to an averment by the defenders that the vessel was subject to a bareboat charterparty at the time, the pursuers refer to the charterparty for its terms. Clause 4 of the charterparty provides that "Charterer shall also man ... Vessel at Charterer's sole risk and expense and in compliance with Bermudan requirements". We see some force in that criticism, but these actions are somewhat unusual in that, for whatever reason, there does appear to have been considerable confusion even on the part of those acting for Shipping at least, about the true nature of the arrangements for the employment of the master. In that situation, we consider that it would be preferable to allow the pursuers' averments about the master's actings and about the exact nature of his relationship with Tankers to go to proof before answer
[28] In adopting that approach we are influenced by the fact that counsel for the defenders accepted that the position of the master in relation to Shipping could be resolved only after a proof. In that action also, of course, the pursuers aver - on the basis of personal bar - that the defenders are owners of the vessel. But they also aver that Shipping were the "managers and operators" of the vessel, that it was "under the management of the defenders", that they were responsible "for the operations and for the master and crew of the said vessel" and that at the material time the defenders were "the managers and the operators of the said vessel and thus were in any event subject" to the relevant duties. It is also said that the master reported to Shipping. The issue of the employment of the master (and of the crew) will require to be explored in evidence in any proof in the Shipping action. The evidence on that matter will in effect resolve any possible issue relating to the master's employment by Tankers, as averred by the pursuers in their action against Tankers. In that situation we consider that the proper course is to admit the pursuers' averments in relation to the employment of the master by Tankers to proof before answer.
Breach of Contract and Delict: Shipping and Tankers
[29] As we have explained, the pursuers' case, in both of the actions, is that the contract between the parties was constituted by the master signing an acknowledgement of the Jetty Regulations. It has to be said that the alleged breaches of the Regulations are not set out in the pursuers' pleadings with all the clarity that might be desired. But the pursuers do spell out particular aspects of the Jetty Regulations and aver that the defenders breached those conditions. They also aver that these breaches caused the pursuers' loss and damage. Applying the approach in Jamieson we have come to the view that the pursuers' averments of breach of contract are sufficient to go to proof in both of the actions. The duties which are said to lie upon the defenders in delict are simply reflections of the contractual duties and so, for the same kinds of reason, we consider that those averments also should go to proof.
Shipping and Tankers: Section 74 of the Harbours, Docks, and Piers
Clauses Act 1847
[30] That leaves the argument as to the relevancy of the pursuers' statutory case. Again, this point arises in both of the actions, against Shipping and Tankers, since, in each of them, the defenders are alleged to be the owners of the vessel at the relevant time.
[31] As the pursuers aver, at the relevant time the harbour authority in respect of Sullom Voe Oil Terminal were the Shetland Islands Council. Although counsel did not explore this point at the original hearing before us, the Council's position in this matter derived from Section 6 of the Zetland County Council Act 1974 which provides that the council is to exercise jurisdiction as a harbour authority within the Sullom Area. Section 4 of the 1974 Act provides inter alia:
"The following enactments, so far as they are applicable for the purposes and are not inconsistent with the provisions of this Act, are hereby incorporated with and form part of this Act:-
...
(b) the Harbours, Docks and Piers Clauses Act 1847 (except
sections 6 to 13, 16 to 19, 22, 25, 26, 28, 41, 43, 48 to 53, 77 and 83 to 101)...."
Sections 74 to 76 of the 1847 Act are therefore incorporated with and form part of the 1974 Act. They provide:
"74. The owner of every vessel or float of timber shall be answerable to the undertakers for any damage done by such vessel or float of timber, or by any person employed about the same, to the harbour, dock, or pier, or the quays or works connected therewith, and the master or person having the charge of such vessel or float of timber through whose wilful act or negligence any such damage is done shall also be liable to make good the same; and the undertaker may detain any such vessel or float of timber until sufficient security has been given for the amount of damage done by the same: Provided always, that nothing herein contained shall extend to impose any liability for any such damage upon the owner of any vessel, where such vessel shall at the time when such damage is caused be in charge of a duly licensed pilot whom such owner or master is bound by law to employ and put his vessel in charge of.
75. If the amount claimed in respect of any such damage as aforesaid do not exceed fifty pounds, such damages shall be ascertained, and the amount thereof shall, in England or Ireland, be recovered before two justices, and in Scotland before the sheriff; and in addition to the remedies hereby provided for the recovery of the same, the justices or sheriff before whom the same are recovered may cause the vessel or float of timber causing such damage, and any tackle and furniture thereof, to be distrained and kept until the amount of damages and costs awarded by them is paid, and, if the same be not paid within seven days after such distress or keeping, may cause the property so distrained or kept, or any part thereof, to be sold, and out of the proceeds of such sale may pay the amount of damages and costs awarded by such justices or sheriff, and all the charges incurred by the distress, keeping, and sale of such property.
76. If the owner of any vessel or float of timber make satisfaction for any such damage as aforesaid wilfully or negligently done by the master or person having charge of such vessel or float of timber, or if the owner of any vessel or goods in any other case have been compelled to pay any penalty or costs by reason of any act or omission of any other person, the person who actually did such damage or who committed such offence shall repay to the owner of such vessel or such goods the amount of the damage or penalty and costs, together with the costs of the proceedings to enforce such repayment; and if such damage or penalty respectively do not exceed fifty pounds, the sum may, in England or Ireland, be recovered before two or more justices, and in Scotland before the sheriff."
[32] The pursuers aver that Shetland Islands Council have assigned to them their right to payment in terms of Section 74 of the 1847 Act and that Shipping or Tankers, qua owners of the vessel, are liable to them for the damage done to the loading arms. For their part counsel for Shipping and Tankers submitted that, since the vessel was subject to a demise charter to Transport, the charterers, Transport, would fall to be treated as "the owner" of the vessel for the purposes of Section 74. The Lord Ordinary rejected that argument, holding that
"The scheme of the Act, in my opinion, is to make the registered owners of a ship liable for damage done by that ship, irrespective of fault on their part and notwithstanding that they were not in charge of the vessel at the time. I find little assistance in the cases which deal with pro hac vice ownership which seem to me to turn on matters other than the scheme of the 1847 Act. In my opinion the purpose of the Act is to give immediate redress to those offended [sic] by the damage against the registered owners. Their identity can be immediately established from the register itself and any injustice is cured by the creation of joint liability with those in charge of the vessel provided in Section 74 and the right of redress constituted by Section 76."
[33] At the hearing of the reclaiming motion, as in the Outer House, the point was argued on the footing that the issue turned on the terms of the 1847 Act viewed in isolation. While the case was at avizandum, however, the court drew the attention of counsel to the 1974 Act and, in particular, to Section 3(1) which provides inter alia that
"In this Act - ... 'owner' in relation to a vessel includes a charterer".
We invited submissions on the significance, if any, of that definition for present purposes.
[34] For the pursuers counsel submitted that the court should hold that the definition in Section 3(1) did not apply to Section 74 of the 1847 Act. Mr. Campbell referred to Sections 1 and 5 of the 1847 Act which are in these terms:
"1. This Act shall extend only to such harbours, docks, or piers as shall be authorized by any Act of Parliament hereafter to be passed which shall declare that this Act shall be incorporated therewith; and all the clauses of this Act, save so far as they shall be expressly varied or excepted by any such Act shall apply to the undertaking authorized thereby, so far as they are applicable to such undertaking, and shall, with the clauses of every other Act incorporated therewith, form part of such Act, and be construed therewith as forming one Act.
5. For the purpose of incorporating part only of this Act with any Act hereafter to be passed, it shall be enough to describe the clauses of this Act with respect to any matter in the words introductory to the enactment with respect to such matter, and to enact that the clauses so described, or that this Act, with the exception of the clauses so described, shall be incorporated with such Act; and thereupon all the clauses of this Act so incorporated shall, save so far as they shall be expressly varied or excepted by such Act, form part of such Act, and such Act shall be construed as if such clauses were set forth therein with reference to the matter to which such Act relates."
[35] Mr. Campbell drew attention to the references in each of these sections to the clauses being "expressly varied" and argued, as we understood him, that, since Section 74 had been incorporated without being expressly varied, it should be interpreted without reference to the definition in Section 3 since to apply that definition would be to vary Section 74 by implication rather than expressly. In support of that submission he pointed to the definitions substituted by the proviso to Section 4 of the 1974 Act and also to the fact that certain terms, such as "master", were not only in Section 3(1) of the 1974 Act but also in Section 3 of the 1847 Act.
[36] In our view that argument falls to be rejected. The appropriate starting-point for considering this matter is that, both in terms of Section 5 of the 1847 Act and in terms of Section 4 of the 1974 Act, which faithfully adopts the approach envisaged in Section 5, the relevant sections of the 1847 Act are incorporated into the 1974 Act so as to form part of the 1974 Act. In particular the 1974 Act is to be construed as if those sections were set out in it. It follows that, where Section 3 of the 1974 Act says that "in this Act" certain terms are defined in a particular way, those definitions apply to the whole of the 1974 Act, including the sections incorporated from the 1847 Act, except in so far as either Section 4 of the 1974 Act provides otherwise or, we may suppose, the context requires a different approach to be adopted. Applying the legislation in that way, we are satisfied that, in the absence of any other statutory definition, the definition of the "owner" of a vessel in Section 3(1) of the 1974 Act must apply to all its provisions, including Section 74 as incorporated from the 1847 Act.
[37] The defenders' argument, that Transport fall to be regarded as the owners for the purposes of Section 74, arises only because Transport are said to have been the demise charterers of the vessel. The effect of a demise charter is that the shipowner hands over possession and control of the vessel to the charterer. The shipowner relinquishes possession and control of the vessel, irrespective of whether, as here, the charterer provides the master and crew - a bareboat charter - or the owner provides them but they are employed pro hac vice by the charterer (as, for instance, in The Master, Wardens and Assistants of the Trinity House v. Clark (1815) 4 M. & S. 288). The classic exposition of the position is to be found in the speech of Lord Herschell L.C. in Baumwoll Manufactur von Carl Scheibler v. Christopher Furness [1893] AC 8, a case concerning the liability for the loss of goods shipped under bills of lading signed by the captain of a vessel which was subject to a demise charter. The House of Lords held that the captain was the servant of the charterer and that, accordingly, the charterer rather than the owner of the vessel was liable. Lord Herschell observed ([1893] A.C. at p. 17) that
"there may be two persons at the same time in different senses not improperly spoken of as the owner of a ship. The person who has the absolute right to the ship, who is the registered owner, the owner (to borrow an expression from real property law) in fee simple, may be properly spoken of, no doubt, as the owner; but at the same time he may have so dealt with the vessel as to have given all the rights of ownership for a limited time to some other person, who, during that time, may equally properly be spoken of as the owner. When there is such a person, and that person appoints the master, officers, and crew of the ship, pays them, employs them and gives them the orders, and deals with the vessel in the adventure, during that time all those rights which are spoken of as resting upon the owner of the vessel, rest upon that person who is, for those purposes during that time, in point of law to be regarded as the owner. When that distinction is once grasped it appears to me that all the difficulties that have been raised in this case vanish. There is nothing in your Lordships' judgment, as I apprehend, which would detract in the least from the law as it has been laid down with regard to the power of a master to bind an owner, or with regard to the liabilities which rest upon an owner. The whole difficulty has arisen from failing to see that there may be a person, who, although not the absolute owner of the vessel, is, during a particular adventure, the owner for all those purposes."
Similarly, in The Hopper No. 66 [1908] AC 126, the House of Lords held that the demise charterer of a ship, who had control over her and navigated her by his own master and crew, was "owner" of the ship in terms of Sections 503 and 504 of the Merchant Shipping Act 1894 and was entitled therefore to the limitation of liability to damages conferred upon "owners" by those sections. Lord Loreburn drew attention ([1908] A.C. at p. 130) to the fact that the construction to be put on the word "owner" varied according to the section of the Merchant Shipping Act in which it was found and in some parts the term had, of necessity, to include a charterer by demise.
[38] In these respects there can, in our view, be no difference between the law of England and the law of Scotland. Indeed we note that Lord Herschell's reasoning was adopted in the leading Scottish textbook, A.R.G. Macmillan, Scottish Maritime Practice (1926), p. 117 and, more recently, in the article on "Shipping and Navigation" in the Stair Encyclopaedia of the Laws of Scotland Vol. 21, para. 534 (1994), Mr. Colin Mackenzie cites both Baumwoll Manufactur and The Hopper No. 66 as authority for the Scots law on the matter.
[39] Applying that approach to the facts of the present case, counsel for the defenders submitted that, although Transport were not the absolute owners of the vessel, during the particular adventure they were the owners for the purposes of the liability of the owner under Section 74. Construing the section in this manner meant that the liability for the damage caused by the vessel would rest on the charterer who would, as between himself and the registered owner, be the person who would reap the gains of the adventure. In this way a just and commercially sensible result would be achieved.
[40] Counsel for the pursuers did not dispute that in certain situations the law treated demise charterers of a vessel as its pro hac vice owners. Their contention was, rather, that each situation had to be considered individually and here the only question was whether "the owner of every vessel" in Section 74 of the 1847 Act was to be construed as referring to the demise charterer rather than to the registered owner of the vessel which caused the damage. In cases where the term "owner" had been construed as meaning the demise charterer, that had been because the possession and control of the vessel were of significance in the particular context. But under Section 74 the issue of control was not of critical importance and so there was no reason to depart from the ordinary meaning of the word "owner". To do so would be to inject confusion and uncertainty into a provision which had been designed to create a clear and certain rule.
[41] The intention of Section 74 had been radical. Under the common law, as it operated before the Act came into force, it would often be difficult to discover who would be responsible for damage caused by the negligent navigation of a vessel. So Parliament introduced a new rule: so long as someone was in control of the vessel - no matter who - the owner was to be liable for the damage which it did. The owner would, in turn, have a right of relief against the wrongdoer. Even if the owner could not pass on his liability, that did not matter since the policy of the legislature had been to promote the development of docks and harbours by transferring the burden of the damage from the innocent harbour operator to the innocent shipowner.
[42] By way of support for their position counsel for the pursuers relied chiefly on a passage from the speech of Lord Cairns L.C. in The River Wear Commissioners v. William Adamson (1877) 2 App. Cas. 743. Of course, they were well aware that the decision of the House of Lords in that case is generally regarded as having done more to confuse than to clarify the interpretation of Section 74 and that much of the reasoning of their Lordships had been commented on unfavourably in The Mostyn [1928] A.C. 57. In particular, in the later case their Lordships had disapproved Lord Cairns' view that Section 74 was procedural only and did not create a new and extended liability. None the less, said counsel, even assuming that Lord Cairns had been wrong in that respect, his remarks on the intention of the legislature to affix liability to the registered owner of a vessel rather than to anyone else remained compelling. The highpoint in the Lord Chancellor's speech, and the highpoint therefore in the authority on which counsel relied, was to be found in the following passage (2 App. Cas. at p. 751):
"By the Common Law, if a pier were injured by a ship sailing against it, the owner might be liable if he was on board and directing the navigation of the ship, or if the ship was navigated by persons for whose negligence he was liable. But the owner would not be liable merely because he was the owner, or without showing that those navigating the vessel were his servants.
In my opinion, it was to meet this state of the law that this section was introduced. It proceeds, as it seems to me, upon the assumption that damage has been done of the kind for which compensation can be recovered at Common Law against some person; that is to say, damage occasioned by negligence or wilful misconduct, and not by the act of God. The section relieves the undertakers from the investigation, always a difficult one for them to pursue, whether the fault has been the fault of the owner, or of the charterer, or of the persons in charge. It takes the owner as the person who is always discoverable by means of the register, and it declares that he shall be the person answerable; that is to say, the person who is to answer, or is to be sued for the damage done. It does not absolve the master or crew, if there has been wilful fault or negligence on their part. They, in that case, may be sued as well as the owner, but if the owner is thus in the first instance made to pay the damage where there has been wilful or negligent conduct on the part of the master or crew, the owner may, under the subsequent sections of the Act, recover over against the master or crew; and if the damage has occurred by reason of the act or omission of any other person, if, for example, some one who had hired the ship, sent her to sea insufficiently manned, and the accident occurred in consequence, the owner might apparently under those sections recover from the hirer by reason of this act or omission."
Counsel drew particular attention to the Lord Chancellor's view that the section is framed with reference to the owner of the vessel since he is someone who is always discoverable by means of the shipping register and to his indication that, if the damage was due to the act or omission of someone who had hired the ship, the owner would remain liable under Section 74, though he might apparently recover from the hirer. This showed clearly that the Lord Chancellor considered that the policy of the section was to make the shipowner liable because his identity would be readily ascertainable and that policy prevailed even where the ship had been hired by someone else under a demise charter.
[43] Counsel also attached importance to a passage from the speech of Lord O'Hagan (2 App. Cas. at p. 760) as illustrating the policy behind the section of placing liability on shipowners whose identity could readily be ascertained:
"I do not know the exact history of the legislation, but, in this state of things, the undertakers may, perhaps, have reasonably complained that, having performed great public service in forming a harbour, a dock, or a pier, they found themselves unable to recover for injuries confessedly done to works accomplished with much expense and labour, and of the utmost importance to the commerce of the country. And the Legislature may have fairly said, that greater protection was due to them than they derived from the law which had grown up before that commerce and those works had been created, involving the necessity of safeguards theretofore uncalled for and unknown. Accordingly, the Legislature made the owner - a person easily and always to be found - 'answerable,' as owner, and dispensed with the proof of negligence or any other proof, save of the fact of injury by the vessel - in all the cases contemplated by the Act. This was a great change, and a great addition to any security which the undertakers enjoyed at Common Law; and it was so, whether we give the clause the universal force for which the Appellants contend, or the more restricted application, which, with the Court of Appeal, I think your Lordships ought to attribute to it."
Counsel also drew attention to the language of Lord Shaw of Dunfermline in The Mostyn where he held that Section 74 imposed a liability on the owners of a vessel qua owners and added ([1928] A.C. at p. 86):
"To use the language of a Roman lawyer, the liability imposed is not a liability ex delicto, nor is it a liability quasi ex delicto; but it is expressly a liability ex dominio."
[44] Despite what is said in these passages, we have come to the view that, where a vessel is subject to a demise charter, the charterer should be treated as the owner for the purposes of Section 74 of the 1847 Act. In forming that view, we have had regard to a number of factors.
[45] Dealing first with the passage from the speech of Lord Shaw of Dunfermline, we do not consider that it provides any guidance on the question with which we are concerned. His Lordship was making the point that liability under Section 74 did not arise from tort or delict or even from quasi-delict but from ownership of the vessel concerned. In making that contrast, he did not require to define who fell to be considered as the "owner" for these purposes. It would therefore be wrong to read into the use of the Roman terminology of dominium any implication that demise charterers could not qualify as owners for these purposes.
[46] In The Mostyn the House of Lords held that under Section 74 the owner of a vessel was liable for damage, whether occasioned by negligence or not, where, at the relevant time, the vessel was under the control of the owner or his agents. On that basis, they were able to distinguish the decision in Wear Commissioners since in that case the ship had been abandoned by its crew at the time when the damage to the harbour occurred. Viscount Haldane observed ([1928] A.C. at pp. 71 - 72):
"We appear to me to be bound by the authority of the Adamson case to hold that the section in question is not to be read literally, but as applying when the damage complained of has been brought about by a vessel under the direction of the owner or his agents, whether negligent or not. The decision further exempts the owner when the vessel is not under such control but is for instance derelict."
For present purposes that observation is of some importance since, contrary to one aspect of the submissions for the pursuers, it suggests not merely that Section 74 applies only where the vessel which does the damage is under control, but also that the owner is liable when the damage is brought about by a vessel under the direction of the owner or his agents. In other words, Viscount Haldane is envisaging the owner under the section as being the person who directs the vessel either personally or through his agents. Where the vessel is subject to a demise charter, it will be under the direction of the charterer rather than of the registered owner. It would therefore be consistent with the basic nature of Viscount Haldane's analysis to hold that in such circumstances the demise charterer should be regarded as the owner and held liable for any damage caused by the vessel under his direction.
[47] We recognise, on the other hand, that in the passage which we have quoted from the speech of the Lord Chancellor in Wear Commissioners his Lordship does seem to envisage that the registered owner of the vessel would be liable under the statute even where, as here, the vessel had been hired by a charterer. It is proper, however, to notice that the Lord Chancellor's comments on the situation where a charterer is involved were obiter since no such issue arose in that case. Moreover, in The Mostyn Lord Blanesburgh in particular subjected this passage to close criticism in which he pointed out that, contrary to Lord Cairns' view, the statute made provision for a right of recourse against the master only and not against the hirer of the vessel ([1928] A.C. at pp. 102 - 103). Finally, Wear Commissioners was heard in 1877, some fifteen years before the House of Lords' decision in Baumwoll Manufactur holding that for certain purposes the demise charterer of a vessel fell to be treated as its owner. Doubtless, some at least of the thinking which was ultimately to crystallise in that decision would already have been current, but it might well not have been so well-established as to occur even to Lord Cairns when formulating this obiter passage.
[48] There is no doubt that both Lord Cairns and Lord O'Hagan seem to have attached importance to the ease of identifying the owner for the purposes of Section 74 by consulting the shipping register. And, of course, in many cases that may be an advantage. On the other hand, the provision also applies to unregistered vessels and vessels on a foreign register. As was held in The Mostyn, the real advantage of the provision therefore is that it imposes statutory non-fault liability on the owner, so that the harbour operator does not need to prove fault against anyone. That advantage remains, whether or not the owner, for this purpose, is the demise charterer. We do not therefore find this particular argument compelling.
[49] Counsel for the defenders argued that their construction made better sense of the proviso at the end of the section. It was designed to ensure that liability did not extend to the owner of a vessel in charge of a duly licensed pilot "whom such owner or master is bound by law to employ and put his vessel in charge of". The obligation to employ a pilot, in the case of a ship under a demise charter, rests on the charterer or master, rather than on the owner of the vessel. It appears to us therefore that, on the pursuers' approach, this particular clause would not fit well with the rest of the section. On their approach the rest of the section would refer to the owner of the vessel, even though it was subject to a demise charter. The purpose of the proviso would be to prevent that owner being made liable for damage caused when the vessel was under compulsory pilotage. But, if the ship was subject to a demise charter, the proviso would not work to prevent liability extending to the owner of the vessel under compulsory pilotage since the vessel would not be in charge of a duly licensed pilot whom the owner was bound by law to employ. On the other hand, if the defenders' construction is correct, the ship owner is excused from liability where the ship is under his direction and control and he is bound to employ a pilot, while the demise charterer is similarly excused from liability where he has possession and control of the vessel and is bound to employ a pilot. On that approach the proviso appears to work satisfactorily. This suggests that the defenders' approach to the Section as a whole is to be preferred. This argument as to the interpretation of Section 74 retains its validity notwithstanding the change to the law of compulsory pilotage introduced by Section 15 of the Pilotage Act 1913 (now Section 16 of the Pilotage Act 1987).
[50] For these reasons, even without any reference to Section 3 of the 1974 Act, we should have been of the view that where a vessel was subject to a demise charter, the liability under Section 74 of the 1847 Act would fall on the charterer rather than on the registered owner. The definition contained in the local Act supports that approach. For one thing, it destroys the argument advanced at one stage by counsel for the pursuers to the effect that the term "owner" in relation to a vessel should be given its ordinary meaning because Parliament had provided an extensive definition of "owner" in relation to goods in Section 3 of the 1847 Act and must therefore be taken to have deliberately refrained from giving a similarly expanded meaning to the term when used in relation to a vessel. More particularly, it shows that, in relation to the provisions enacted by Parliament for this particular harbour at Sullom Voe, Parliament did indeed intend that, where appropriate, provisions framed in respect of the "owner" of a vessel should be applied to a charterer. We have already explained why in our view it would be appropriate for liability under Section 74 to attach to the demise charterer rather than to the owner of a vessel. We are satisfied that Section 3 of the 1974 Act provides additional support for that view and is indeed intended to clarify Parliament's intention in this respect.
[51] We therefore consider that the pursuers' averments against Shipping and Tankers, so far as designed to make them liable qua owners of the vessel even though it was subject to a demise charter at the relevant time, are irrelevant. The pursuers' averments about the charterparty go no further than referring to it for its terms (Article 1 of Condescendence in the action against Shipping and Article 2 of Condescendence in the action against Tankers). But in argument before the court counsel for the pursuers approached the matter on the footing that the challenge to the relevancy of their case under Section 74 could be disposed of by the court on the basis of the opposing arguments advanced about the effect of a demise charterparty. In that situation we shall give effect to our conclusion on that matter by excluding the pursuers' averments in Article 9 of condescendence in both actions from probation.
Summary
[52] We shall recall the Lord Ordinary's interlocutors; sustain the first plea-in-law for the defenders and dismiss the action against Transport; sustain the second plea-in-law for the defenders in the actions against Shipping and Tankers to the extent of excluding the pursuers' averments in Article 9 of Condescendence in both actions from probation; and quoad ultra we shall of new allow a proof before answer.