Scottish Court of Session Decisions

These three actions arise out of an incident when a ship "Chevron North America" sought to berth at a jetty at Sullum Voe Terminal on 28 February 1990. The terminal was operated and maintained by a consortium of which the pursuers were a member. The other members had granted assignations in respect of the present litigations to the pursuers. It is averred that damage was done to the said jetty and loading arms thereon by the said ship causing loss to the pursuers. The defenders in the first action ,Chevron Shipping Company (hereinafter referred to as "Shipping"), were the managers of the vessel. The defenders in the second action, Chevron Tankers (Bermuda) Limited (hereinafter referred to as "Tankers"), were the registered owners of the vessel and the defenders in the third action, Chevron Transport Corporation (hereinafter referred to as "Transport"), were the charterers of the vessel under what was referred to as a "bareboat" charter.

In each action the loss and damage was identical and in each the same grounds of fault or liability were averred. For the defenders it was submitted that it was unlikely that more than one was the correct defender. It was further submitted that the correct defenders were Transport - the charterer as they had possession of the vessel and employed the crew. It was agreed for the purpose of the debate that all three actions should be heard together.

In the first action (Shipping) which allegedly was raised on 21 February 1995 (the period of quinquennial prescription expiring on 28 February 1995) it was alleged that Shipping were the owners of the vessel. The quinquennium then expired. In June 1995 the defences to that action were adjusted and an averment was for the first time made that Shipping were not the owners but Tankers were. In consequence a second action was raised against Tankers in which it was averred, correctly, that they were the owners. That action was signetted on 14 and served on 16 June 1995. At the same time the pursuers averred in the first action (Shipping) that the defenders were personally barred from denying that they were the owners. In August 1995 it became apparent to the pursuers that Transport were the charterers of the vessel. That was because the charterparty had been lodged in the first action. As at 17 August 1995 the defences in the second action (Tankers) had so identified them. Accordingly the third action was raised averring that Transport were the charterers. That action was signetted on 4 September 1995 and served on 28 September 1995. In these circumstances it was submitted by counsel for the defenders that issues of prescription arose in relation to the second and third actions. The pursuers' submission was to be that in terms of Section 6(4) of the Prescription and Limitation (Scotland) Act 1973 Act by error induced by the defenders they refrained from commencing proceedings. Accordingly the time during which they were under error did not count in the calculation of the quinquennium. The same would be said to apply in both the second and third actions.

Mr Glennie, for all three defenders, then made reference to the pleadings in the first action (Shipping). Article 2 of Condescendence was a description of the events which occurred on 28 February 1990. Article 3 alleged that the incident was caused by a breach of contract on the part of Shipping. In this Article it is averred that the Master of the vessel, acting on behalf of Shipping, entered into a contract with the pursuers by signing an acknowledgement that he had received a letter sent to him which contained a stipulation that he would comply with certain enclosed Jetty Regulations. It was averred that he was by his actions in breach of the terms of those regulations. Article 4 of Condescendence averred a case based on common law negligence by these defenders as managers and operators and as vicariously responsible for certain failures in duty by the Master. Article 9 of Condescendence averred a breach of statutory duty with regard to Section 74 of the Harbour Docks and Piers Clauses Act 1847. The other Articles related to loss and damage and to the pursuers' title to sue. There were thus three grounds of action, breach of contract, negligence and breach of statutory duty. The same three grounds were pled in each action.

Counsel then proceeded to deal with the question of prescription. The averments thereanent were conveniently to be found in Condescendence 10 of the third action (Transport) and the answers thereto. There was no doubt that the second and third actions were raised more than five years after the date of the incident. However the pursuers' case was that in computing the prescriptive period no account should be taken of certain periods during which, it was alleged, they were induced by the words or conduct of the alleged debtor to refrain from making a relevant claim. Reference was made to Section 6(4) of the Act of 1973. In general terms it was averred that throughout the five year period the original defender (Shipping) and those acting for them had never disputed that they were the parties responsible for the conduct of the vessel and the Master. It was only after expiry of that period that any suggestion was made that another company owned the vessel and, even later, that the existence of a charterparty was disclosed.

Section 6(4) of that Act provides as follows:

Section 6(5) provides:-

In relation to the third action (Transport) the period during which it was alleged that the pursuers were under such error was from the date on which the action against Shipping was raised (21 February 1995) and the date on which the action against Transport was raised (28 September 1995). For the defenders it was submitted that for Section 6 to apply to the benefit of the pursuers it must apply to the whole of that period. The error alleged was that Shipping were the owners and thus partly responsible as relevant defenders. It was further alleged that such error was induced by Shipping on behalf of the true debtor (Transport). However it was clear from the pursuers' own pleadings that by 12 June 1995, Shipping had adjusted their pleadings to aver that they were not the owners of the vessel or employers of the Master. It was submitted that the pursuers were this disabused of their error by that date. The relevant period under which they were in error stopped on that date as was clearly shown by the raising of the second action on 16 June. In any event, the Charterparty was lodged and its existence and relevance was pled in the second and third actions on 18 August 1995. Any residual error as to the correct factual or legal positions must at least have been corrected by then. The third action was signetted on 4 September but not served till 28 September. It was submitted that any one of the three above mentioned dates were sufficient to end the relevant period which could fall to be discounted for the purposes of Section 6. It was further submitted that the date relevant in terms of that section for the interruption of the prescriptive period was the date of service or citation. Reference was made to Alston v MacDougall 1887 15 R. 78 and Smith v Steward 1960 S.C. 329. On that basis, it was suggested that the pursuers' averments in relation to Section 6 were irrelevant and that the defenders in the third action should be assoilzied.

It was further submitted that in any event the pursuers' averments in the third action to the effect that they were induced into error were irrelevant. The error was said to be that Shipping were the owners and the responsible party. None of the representations made by Shipping could be construed as to indicate that they were anything other than the managers of the fleet, which was the true position. Ignorance of the existence of the charterparty was not an error induced by Transport or anyone on their behalf.

Counsel for the defenders then raised other points of relevancy. The first concerned the breach of contract case and was common to all three actions. It was submitted that there were no relevant averments of the existence of a contract. The Master's acknowledgement of receipt of a copy of the Jetty Regulations did not constitute an undertaking to comply with them.

Counsel then dealt with the averments in Articles 7 and 8 in each action which were concerned with the assignations to the pursuers of the rights of action of the other members of the consortium and the rights of ownership of the damaged loading arms. His argument was that there was no suggestion in the defences that anyone other than the pursuers had any such rights of ownership and therefore the averments about possible ownership in others and averments about assignations were unnecessary and irrelevant. This point was common to all three actions.

The next point made concerned the statutory case as averred in Article 9 and was also common to all three actions. The first argument here was the same as that made in relation to Articles 7 and 8 and concerned the averment as to ownership of the harbour and the lack of dispute on that question which were said to be irrelevant also.

Section 74 of the 1847 Act provides as follows:

It was clear that the obligation created by that Section was placed on the "owners". It was important therefore to establish which of the three defenders were the "owners" for the purposes of this Section as the statutory case would thus be irrelevant against the others. Reference was made to the terms of the Charterparty (No. 14/1 of process) by which the vessel was let by the registered owners (Tankers) to Transport. Clause One provided for a five year period of charter which covered the date of the incident. Clause Two provided for delivery of the vessel. Clause Four placed certain obligations on the charterer which, it was suggested, were effectively the obligations of ownership. In particular that Clause provided that the charterer should keep the vessel in a seaworthy and efficient state and man and supply the vessel. It was submitted that the transfer of possession in terms of that contract constituted the Charterer was pro hac vice owner and employer of the Master. It was thus his responsibility to comply with any relevant regulations and be responsible in terms of the Statute for any collision damage to harbours. In the second action, therefore, all three cases against the registered owners were irrelevant. In contract the Master could not be said to be acting on their behalf. The registered owners were not responsible for his negligence and they were not the true "owners" for the purpose of Section 74. This was a "bareboat charter" (sometimes referred to as a "Demise Charter") in which just the vessel and not the crew were supplied. The legal situation with regard to such a charter was described by Lord Herschell L.C. in the case of Baumwoll Manufactur v Furness 1893 AC 8 thus (at p.17):

and at p.16 thus:

Reference was also made by counsel to Elliot Steam Tug 1921 1 A.C. 137, Scrutton on Charterparties pp. 59-63 and Stair Encyclopaedia V.21 para. 534. This principle was also applied for certain purposes in Trinity House v Clark V105, English Reports, 4 M & S 841 and "The Hopper" 1980 A.C. 6. It was accepted that there was no direct authority to point to the application of such a principle to Section 74. It was submitted however that such a conclusion could be drawn by analogy and that it made sense as the charterer was to all intents and purposes the owner. He employed the Master who then acted on the charterer's behalf. Counsel submitted that for this reason the averments in Article 9 of the second action were irrelevant also.

Counsel for the defenders then proceeded to make some specific points concerning the first action, that against the managers (Shipping). In Article 1 of Condescendence it is averred that Shipping are "the owners, managers and operators" of the vessel. A number of averments of fact are then made in response to the defences to support a conclusion that "in the 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". In so far as "owners" are concerned, it is admitted in the second action that Tankers are the owners. Therefore only a case on personal bar could make Shipping "owners" for the purposes of this action. The phrase "operators" was lacking in specification and irrelevant. As far as managers are concerned it is admitted that they acted as fleet managers. However, it was submitted that there was no basis on record for putting these defenders qua managers under any duty to the pursuers whether in contract, delict or under the statute. There were no averments that fleet management involved any responsibility for navigation or seamanship or seaworthiness or indeed for the acts of a Master employed by the Charterers as was admitted in the third action. Accordingly the averments that these defenders were liable as managers or operators were irrelevant and should not be admitted to probation. Articles 3 and 4 fell into that category as they were not based on ownership of the vessel.

As far as ownership was concerned it was submitted that the averments relating to personal bar were also irrelevant. To sustain such a plea there must be a representation of fact which was acted upon to the prejudice of the party to whom it was made (Gatty v McLean 1921 S.C. (H.L.) 1). The prejudice claimed by these pursuers was that they have missed the opportunity of suing the correct party in time. If that is factually correct then Section 6(4) of the 1973 Act would apply. If the pursuers were misled then the other actions are made good by that Section, in which case there is no prejudice. The statute gives an appropriate mechanism by which a pursuer who has been misled into deferring action against a defender can still bring an action timeously (Greater Glasgow Health Board v Baxter Clark & Paul 1990 S.C. 237, per Lord Clyde). Furthermore, it was submitted that the representation alleged here was not one as to fact but as to law and therefore irrelevant.

Counsel for the pursuers began by outlining the background. The accident occurred on 1 March 1990. Over the next four and a half years the pursuers corresponded and met with Shipping. The position adopted by Shipping was that they bore the responsibility. There was talk of a counterclaim and a contributory negligence case. There was no suggestion that Shipping acted on behalf of some other company. Negotiations continued and the time bar loomed ever nearer. It became necessary to raise an action to protect the position. The required assignations from other parties took time which led to the date of raising the action being 21 February 1995. Correspondence continued with solicitors who accepted service and endorsed a summons for Shipping in which they were described as owners. In due course defences were lodged which admitted that fact and also made averments about liability such as to show that they had knowledge of the circumstances. Adjustment then took place. On 12 June 1995 the defenders adjusted by deleting the admission but made no mention of who was the owner/operator of the vessel. This caused consternation. A letter was written to say that the owners were Tankers. Proceedings were immediately raised against that company the Summons in which was signetted on 14 June and served on 16 June 1995. Defences to that action were lodged which for the first time made mention of the Charterparty. A third action was raised which had to be served in Liberia. That took time and eventually was effected on 28 September, the earliest possible date.

Counsel then dealt with the third action and the question of prescription. 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.

Counsel then dealt with the relevancy and specification of the averments dealing with induced error. In this context he referred to the detailed averments in Condescendence 10 relating to the dealings between the parties and the representations made to the pursuers. He suggested that in relation to the question of error those averments disclosed a relevant case and taking them all together would, if proved, bring the pursuers within the terms of Section 6(4). I agree with that proposition. Taking the averments as a whole there is sufficient to suggest that Shipping were aware all along of the charterparty and that they held themselves out over the relevant period as being the party "responsible for the vessel". Furthermore there is in my opinion, ample specification of the dates, times, persons involved and representations made to allow the case on induced error to proceed to proof. It cannot in my opinion be said that this case would necessarily fail.

In relation to the case on breach of contract, counsel submitted firstly that the employment of the Master by Transport was admitted. Further the averments concerning acknowledgement by the Master of receipt of the Regulations were sufficient to constitute a contract between the Terminal and the defenders whereby the Master agreed to comply with them. I agree with this argument also. In my opinion, it is at least arguable that by signing the acknowledgement the Master agreed to abide with the requirements put upon him in the documents he acknowledged to have received. It is in this context significant, in my view that permission to enter harbour was contingent upon the acknowledgement. Again it cannot in my opinion be said that the pursuers must necessarily fail.

Counsel then dealt with the esto cases regarding the ownership if the land. He submitted that although the loading arms were owned by the consortium (the Terminal) and the pursuers had acquired the necessary assignations. They therefore had a title to sue. However, this was not admitted. In these circumstances, he suggested questions might arise as to who has in fact suffered the loss. The arms themselves were on the jetty and attached to it. The jetty was on the foreshore owned by the Crown Estates Commissioners and leased to Shetland Islands Council who built it. Questions of accession might arise in relation to the loss if any sustained by the pursuers. None of these averments were admitted by the defenders. Counsel submitted that until these averments as to title to sue were unequivocally admitted, the pursuers are entitled to retain the esto cases. With some hesitation I am prepared to accede to that argument at this stage. The averments of loss are not admitted and it is not inconceivable that in that context such questions might arise. In my opinion, in these circumstances the pursuers are entitled to the protection of these averments which are not therefore irrelevant.

Counsel then dealt with the statutory cases in terms of the Act of 1847. He submitted that on a proper construction of Section 74 it was not the case that only the "owner" was made liable. In his submission the section imposed a strict liability on the "owner" and a liability for negligent or wilful acts of damage on the "Master or person having the charge of" the vessel. That construction finds support in the terms of Section 76 which provides for repayment to the owner who has had to pay by the negligent person in charge. That is, there is a right of relief by the owner against the charterer if the charterer is negligent. Counsel submitted that this was a coherent scheme set up by the Act which envisaged the owner not being the person having control of the vessel. Counsel accepted that in certain circumstances and for certain purposes the charterer would have certain obligations which might otherwise fall on the owner. Thus in Baumwoll (op. cit.) the owner was found not to be liable for goods under a Bill of Lading signed by the captain. This was unsurprising since the Master was employed by the charterers and therefore only had authority to bind them in contract. That case was not authority for the proposition that "owner" means "charterer" for the purposes of Section 74. Nor was the case of Elliot Steam Tug (op. cit.) of assistance as it dealt with a question between owner and charterer as to which was entitled to salvage in respect of a rescued vessel. Counsel also sought to distinguish the cases of Meiklereid v West 1876 1 Q.B. 428, Trinity House v Clark (op. cit.), The Hopper (op. cit.) and River Wear Commissioners v Adamson 1877 2 A.C. 743 on the basis that they either turned on their own facts and the questions of law to which they gave rise or gave no help in the proper construction of Section 74. None of these cases assisted in the proposition that the registered owners were in some way divested of liability under Section 74 by the existence of a charterparty. On the contrary, the scheme of the Act of 1847 as contended for is supported in the case of The Mostyn 1928 A.C. 57 where the view was expressed that the purpose of the Act was to place liability for damage on the owner beyond that provided by the common law. The owner was liable simply because he was the owner, not as a "representative" or because he hired the Master. If there were exceptions to that rule there was not where the ship was let on charterparty to someone else.

In the event, I am not satisfied that the defenders have made out the proposition advanced namely that in the case of a bareboat charter the persons liable in terms of Section 74 as owners are the charterers. 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 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.

In relation to the second action and the issue of prescription counsel for the pursuers adopted mutatis mutandis his submissions in the third action. I agree that the averments in this action concerning induced error under Section 6(4) are also sufficiently relevant for proof.

As for the first action, counsel submitted that the only outstanding matter was the question of the responsibility of the defenders as managers or otherwise. In this connection the liability of these defenders was a live issue. The pursuers' averments were such that they were sufficient to establish in fact the connection of the defenders to the ship and in law to give a basis for liability. I agree with the proposition that these averments are such as to entitle the pursuers to a proof before answer.

On the question of personal bar which relates to the first action, counsel for the pursuers took no issue with the definition in Gatty v McLean 1921 SC (HL) 1 as a general statement of the law. He accepted that prejudice to the recipient of the representation was necessary. The prejudice, it was suggested, would arise if, at the end of the day, the defenders were successful in having decree of dismissal pronounced in the second and third actions. While accepting that if the pursuers succeeded in those actions no right of action would have been lost in the first action, counsel submitted that the whole matter should be admitted to proof and not decided at Procedure Roll debate.

I further agree with that submission. In this context, in my opinion, the three actions are bound up together and the answer to this point in the one action may well be dependant upon the outcome of the others. In these circumstances, a proof before answer is the appropriate further procedure in relation to the question of personal bar also, (Stuart v Potter Chatto & Prentice 1911 SLT 311). Furthermore, in the peculiar circumstances of these three actions, I do not consider that the observations of Lord Clyde in Greater Glasgow Health Board v Bafter Clark & Paul (op cit) necessarily preclude that cause of action.

Further expansion of the above arguments were advanced by Mr Glennie in reply and by senior counsel for the pursuers. These submissions did not cause me to alter the views I have already expressed. Accordingly, in the whole matter I make no order with regard to the parties' pleas-in-law and at the suggestion of counsel for the defenders will ordain all three actions to be put out By Order for a discussion on further procedure.