COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Strand, London, WC2A 2LL
Friday 27th July 2001
B e f o r e :
LORD JUSTICE LONGMORE
MR JUSTICE CARNWATH
| JAMES EDWARD PERKS
|- and -
(HM Inspector of Taxes)
JAMES EDWARD PERKS
(HM Inspector of Taxes)
(1) DAVID ALAN NEWRICK
(2) JAMES GRANGER
|ALAN NICOLL GUILD
(HM Inspector of Taxes)
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Timothy Brennan QC (instructed by The Solicitor of Inland Revenue) for the respondents.
Crown Copyright ©
MR JUSTICE CARNWATH:
"employment consisting of the performance of duties on a ship (or of such duties and others incidental to them)".
"ship includes every description of vessel used in navigation not propelled by oars."
The Commissioners' findings
"(a) That the appellant was employed on the jack-up oil rig Santa Fe Magellan during the tax year in question as a senior drilling foreman.
(b) That the jack-up rig Santa Fe Magellan had a floating hull and retractable legs. From the profile drawing and photograph of the Santa Fe Magellan on station the Commissioners were satisfied that when the jack-up was stationary for the purposes of drilling the legs would be down so that the feet would stand upon the sea bed and the hull would be jacked up so that it was clear of the water. From the photograph of the Santa Fe Magellan under tow the Commissioners were satisfied that the legs could be retracted upwards to enable the floating hull to be towed from place to place.
(c) That the jack-up rig Santa Fe Magellan has no propulsive thrusters or engines of its own.
(d) The Santa Fe Magellan was moved by being towed by at least two tugs. A tow master controlled the towing operation, particularly as to the speed and direction of the tugs, giving instructions to the tugs from the bridge of the jack-up rig.
(e) An alternative method of transporting the jack-up rig is for it to be carried "piggy-back" style upon a cargo vessel."
(b) As there was no definition of "ship" in ICTA 1988, and as yet no case law on the subject, Revenue relies on the Merchant Shipping Act 1894.
(c) In deciding whether a jack-up is a "ship" the test to be applied is as follows:
i Is the jack-up capable of navigation?
ii Is the jack-up actually used in navigation?
iii Is the jack-up capable of free and ordered movement upon the sea?
iv It is contended that a jack-up fails each of these tests
"The Commissioners decided that the jack-up rig Santa Fe Magellan was a ship for the purposes of the Taxes Acts as it was capable of navigation, the motive power being the engines of the towing tugs with all aspects of navigation being controlled from on board the rig".
"The Commissioners listened to arguments from both sides regarding the definition of a ship but the most compelling evidence was the definition contained in IR CA 2451 and CT 1060 defining reliefs to be given in certain circumstances."
"(ii) That the jack-up rigs Santa Fe Monarch and Santa Fe Magellan were sister rigs with no rudder or motive power identical save for minor variations in specification;
(iii) that the said rigs were built in Singapore and transported to Rotterdam by sea to be used in the North Sea;
(iv) that the said rigs were towed from Rotterdam across the North Sea to the oil fields in the British Sector;
(v) that from time to time the said rigs were moved by being towed to different positions in the North Sea and then jacked up for drilling purposes;
(vi) that in all towing operations at sea the navigation of both the rig and the towing vessel was under the command of a towing master on the rig itself on which was installed a satellite navigation system known as Global Positioning System as well as a compass and depth sounder;
(vii) that the said rigs were (a) registered as ships with the Panama Merchant Marine Registry (b) flagged (c) marked with a load line (d) had a registered tonnage (e) had a radio call sign (f) carried lights as required by international regulations (g) complied with safety at sea regulations (h) carried certified coxswains (i) were fitted with the required radio equipment and global marine distress and safety equipment operated by a certified radio operator (j) were required to comply with the international convention for the prevention of pollution and (k) were subject to annual surveys as ships;
(viii) that both the said rigs were treated as ships by (a) port authorities (b) customs authorities (c) the Department of Transport and (d) the Health and Safety Executive."
"Jack-up vessels are capable of being used in navigation, with a few exceptions they are towed around by an Anchor Handler/Tug/Supply vessel on a towing bridle or moved on long voyages by transport vessels. When towed, a GPS (Global Positioning system) is set up on the Jack-up Vessel. The position of the vessel is shown on a digital display and the movement of the vessel on a VDU screen. When under tow, all control of the operation and navigation is under the command of the Towing Master. When transported on the deck of a transporter vessel the navigation equipment on the transporter vessel is used to give a position. All navigation is done by electronic means."
(i) We accepted as an accurate summary of the law on the definition of a ship the said paragraph in Halsbury's Laws of England
(ii) On the facts we found that both the Santa Fe Monarch and the Santa Fe Magellan were vessels used in navigation at sea and were therefore ships within the meaning of the Merchant Shipping Acts and for the purposes of the Income and Corporation Taxes Act 1988
(iii) We rejected the contentions of Mr. Ash on behalf of the Inspector of Taxes that it was necessary to the definition of a ship that a vessel should be able to navigate under its own power and that the said vessels were not constructed for navigation.
The Judge's decision
"I approach these appeals on the basis that both sets of the findings are applicable to both the structures with which I am concerned. To the extent that these findings represent findings of primary fact they are binding upon me. The meaning of the term 'ship' is, however, a matter of law on which I am entitled to give effect to my own view, as is the question of whether the facts found bring the case within that meaning." ( STC p483C).
(I shall return to that passage, because the appellant's primary contention before us is that that approach is wrong in law.)
"The correct approach must be, in my view, to examine the authorities for indications of the characteristics which, in the particular context, were considered to be relevant to the decision whether a particular structure is or is not a ship and then to consider whether those characteristics are relevant in the context of para 3(2A) of Schedule 2 and, if they are, whether they are possessed by the vessels with I am concerned."
"This suggests that the Commissioners have looked not just to the rigs themselves, which is what they ought to have considered, but to the composite item consisting of the rig and the tugs which are moving it"
"Even the Merchant Shipping Act does not purport to do this, for its definition is not exhaustive. Insofar as any one characteristic may be said to be required for something to be a ship it is, I think, that of being capable of being used, and in fact used, for the purpose of navigation. Beyond this the exercise must, I think, be to examine the particular features of the vessel in question and to reach a conclusion whether such a vessel is properly and reasonably described as a 'ship'".
"(1) Each rig has a hull which makes it capable of floating and moving upon water.
(2) The rigs do not have their own means of propulsion. However this, as the barge cases show, is a matter of comparatively minor significance.
(3) The rigs do not have rudders or other means of controlling their direction of travel. For this they are dependent, as I understand it, upon the giving of instructions to independent towing vessels by the tow-master who is on board while they are being moved.
(4) Although the rigs have quite sophisticated positioning equipment which can be, and presumably is, used in connection with the movement of the rigs from place to place, the main purpose of this equipment is to enable the rigs to be positioned accurately in the place where they are required to drill into the sea bed.
(5) It cannot realistically be said that the function of the rigs is 'navigation' in the sense of conveying persons or cargo from place to place by water. No doubt personnel, who may be called a crew, are present on board when the rigs are moved from place to place on the sea and stores and equipment are carried. But these are incidental to the real function of the rigs.
(6) That function is to provide a firm base at particular points on the earth's surface to enable the drilling part of the rig to drill to great depths under the bed of the sea. Once in position the rigs perform in a similar manner to that in which a drilling rig on land would perform. No part of them is floating. They are supported by their retractable legs which are positioned on the ocean floor. Their hulls are raised some considerable number of feet above the surface of the water and their entire weight is carried by the sea bed rather than by the water. They differ from land based drilling rigs only in that they are moved from place to place on water and, while drilling, they stand in and are surrounded by water."
"While some of these features are possessed by vessels or constructions which may fairly be described as 'ships' it seems to me that most of them are not and that the preponderance lies on the side of those features which are not characteristic of ships. I attach particular significance to those which I have mentioned under (5) and (6), taken in conjunction with the limited manoeuvrability of the rigs."
"…hollow structure intended to be used in navigation, i.e. intended to do its real work on the seas or other waters, and capable of free and ordered movement thereon from one place to another…"
"Correspondingly, the work of a jack-up drilling rig is to be positioned at a point on the surface of the earth, there to perform the static function of drilling into the earth's crust. Its ability to float and to be moved from place to place by means of outside assistance (not even under its own power and steerage as in the case of flying boat) is merely incidental to its static, non-floating, work. Overall it does not appear to me that the rigs with which I am concerned have sufficient characteristics of ships to lead to the conclusion that each of them is a ship for the purposes of para 3(2A) of Sch 12 to the 1988 Act. I hold that they are not ships for that purpose."
Fact or Law?
"The meaning of an ordinary word in the English language is not a question of law. The proper construction of a statute is a question of law. If the context shows that a word is used in an unusual sense the court will determine in other words what that unusual sense is. But here there is in my opinion no question of the word 'insulting' being used in any unusual sense. It appears to me… to be intended to have its ordinary meaning. It is for the tribunal which decides the case to consider, not as law, but as fact, whether in the whole circumstances the words of the statute do or do not as a matter of ordinary usage of the English language cover or apply to the facts which have been proved…"
"The meaning of a word or phrase in an Act of Parliament is a question of law not fact; even though the law may then declare that the word or phrase has no statutory meaning beyond its common acceptance and that it is a question of fact whether the circumstances fall within such meaning (Cozens v Brutus). But many words and phrases in English have many shades of meaning and are capable of embracing a great diversity of circumstance. So the interpretation of the language of an Act of Parliament often involves declaring that certain conduct must as a matter of law fall within the statutory language (as was the actual decision in Edwards v Bairstow); that other conduct must as a matter of law fall outside the statutory language; but that whether yet a third category of conduct falls within the statutory language or outside it depends on the evaluation of such conduct by the tribunal of fact. This last question is often appropriately described as one of 'fact and degree'."
"(1) It is a question of law what meaning is to be given to the word "plant", and it is for the courts to interpret its meaning, having regard to the context in which it occurs. (2) The law does not supply a definition of plant or prescribe a detailed or exhaustive set of rules for application to any particular set of circumstances, and there are cases which, on the facts found, are capable of decision either way. (3) A decision in such a case is a decision on a question of fact and degree and cannot be upset as being erroneous in point of law unless the Commissioners show by some reason they give or statement they make in the case stated that they have misunderstood or mis-applied the law in some relevant particular. (4) The Commissioners err in point of law when they make a finding which there is no evidence to support. (5) The Commissioners may also err by reaching a conclusion which is inconsistent with the facts which they have found."
"…it is our opinion that, while the determination of whether a set of facts applies to a particular object is essentially for the tribunal of fact, and where the issue is determined upon the selection of certain facts which may either be competing or diverse again is solely within the province of the tribunal of fact, the application of facts found proved or agreed to achieve a definition on any statutory basis is, in our opinion, a question of law. The question, therefore of status or categorisation of a flotel is one upon which this appeal tribunal has jurisdiction to consider as a matter of law, against a given state of facts agreed or found proved by the Industrial Tribunal." (p 781 F-G).
The "real work" test
"A flying boat's real work is to fly. It is constructed for that purpose, and its ability to float and navigate short distances is merely incidental to that work." (p 167)
"102. Meaning of 'ship'. Unless the context otherwise requires, 'ship' includes every description of vessel used in navigation. Whether a vessel comes within that meaning of a ship depends on the facts of each case; the statutory definition is intended to enlarge the meaning of 'ship'. To be a ship a vessel must be used in navigable waters, either inland or at sea, and, although she must be constructed for navigation, it is not necessary to the definition that she should be able to navigate under her own power. The presence of a rudder and the manning of the vessel with a crew are important as showing that a vessel is a ship, but the absence of either does not mean that a vessel is not a ship. The purpose for which a vessel has been and is being used is also material when considering whether she is used in navigation."
(1) A "Hopper-barge", used in connection with dredging (The Mac (1882) 7PD 126: The Mudlark  PD 116):
"She is used for dredging purposes and has a double bottom. She has no means of propulsion, but her owners employ a tug to take her to and from her destination when carrying dredged materials to sea for the purpose of discharging them." (ibid at p 117)
(2) A "Flotel" (in the Addison case, above):
"They comprise a platform attached by legs or columns to pontoons which enable them to float on water. The platform carries accommodation for several hundred workers; it has offices, workshops and storage areas. It is equipped with large cranes and helicopter landing facilities, and is capable of supplying power to the installation. A flotel is taken to the location of the installation, possibly under its own power, but usually under tow." ( ICR at p774C).
(3) A "backhoe dredger" (the "Von Rocks"  2 Lloyd's Rep 198, a decision of the Supreme Court of Ireland):
"a type of maritime dredger called a backhoe dredger which was primarily used in harbours, channels or estuaries to deepen the waters at such locations. When not in operation it was a floating platform comprising ten individual pontoons bolted together. When in use it was held in position on the sea bed by three spud legs which were capable of being hydraulically lowered and raised. The backhoe dredger had no bow, no stern, no anchors, no rudder or any means of steering and no keel or skeg. It had no means of self propulsion mechanical or otherwise and it had no wheelhouse." (headnote at p198).
This case was not cited to the learned judge. Although it is not binding on this court, its correctness was not questioned before us.
"The Von Rocks undoubtedly lacks some of the characteristics one would normally associate with a 'ship'. It is not self propelled, it normally is not manned by a crew and it has no form of rudder or other steering mechanism. But it is a structure designed and constructed for the purpose of carrying out specific activities on the water, is capable of movement across water and in fact spends significant periods of time moving across the seas from one contracting site to another." (p208)
(1) A "gas float" moored in tidal waters to give light to vessels (Wells v The Owners of the Gas Float Whitton No 2  AC 337):
"It is used for purposes connected with navigation in the same sense as a lighthouse, or as a buoy, whether used as a beacon or for mooring a ship; but it appears to me to be wholly unfit for the purpose of being navigated as a vessel, and that it never was used, or intended to be used, for any such purpose." (p348 per Lord Watson).
(2) A "pontoon crane" (see Merchants Marine Insurance Co Ltd v North of England Protecting and Indemnity Association (1926) 25 Ll.L.Rep 446; (1926) 26 Ll.L.Rep 201):
"A structure upon which a crane is fixed, and permanently fixed. …..It is undoubtedly capable of being moved, but it is obviously so unseaworthy that it can only be moved short distances, or comparatively short distances, and only when the weather is exactly favourable…. I think there are about five or six times when it has been moved since 1914…" (p202 per Bankes LJ).
(3) A flying boat (the Polpen Shipping case - see above). The flying boat -
"did not travel on the surface of the water, except when taking off or alighting." ( 1KB at 162).
LORD JUSTICE LONGMORE:
"'Ship' includes every description of vessel used in navigation".
LORD JUSTICE ROBERT WALKER:
"Employees who are seafarers for this purpose will therefore include not only sailors but anyone whose work is carried out on ships such as cooks, entertainers and couriers on luxury liners."