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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> BP Exploration Operating Co Ltd v Chevron Transport (Scotland) [2001] UKHL 50 (18th October, 2001)
URL: http://www.bailii.org/uk/cases/UKHL/2001/50.html
Cite as: [2002] 1 All ER (Comm) 1, 2001 SLT 1394, [2002] 1 LLR 77, [2003] AC 197, [2002] 1 Lloyd's Rep 77, 2001 GWD 33-1316, [2001] UKHL 50, [2003] 1 AC 197, 2001 SCLR 1029, [2001] 3 WLR 949, (2001) 98(45) LSG 26

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BP Exploration Operating Co Ltd v Chevron Transport (Scotland) [2001] UKHL 50 (18th October, 2001)

HOUSE OF LORDS

Lord Slynn of Hadley Lord Hope of Craighead Lord Clyde Lord Hobhouse of Wood-borough Lord Millett

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

BP EXPLORATION OPERATING CO LTD

(APPELLANTS)

v.

CHEVRON TRANSPORT

(SCOTLAND)

(RESPONDENTS)

ON 18 OCTOBER 2001

[2001] UKHL 50

LORD SLYNN OF HADLEY

My Lords,

1. I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Hope of Craighead and Lord Hobhouse of Woodborough.

2. As to the point of general importance raised on section 74 of the Harbours, Docks and Piers Clauses Act 1847 it is apparent that the "owner" of a vessel in different statutory contexts can, as the authorities cited to your Lordships show, sometimes include or mean a demise charterer. It seemed to me however clear on the submissions of Mr Campbell QC (and the speech of my noble and learned friend Lord Hobhouse of Woodborough makes it abundantly clear) that in section 74 of that Act "owner" has its natural meaning of the registered owner. Any other construction defeats the purpose of seeking to provide a clear-cut method of recovery without proof of negligence on the part of the owner whilst maintaining a claim in negligence against the master or person having charge of the vessel which does damage to the harbour or docks. On this point I accordingly differ from the opinion of the Inner House and I would allow the appeal on this point in the action against Transport.

3. As to the other points raised on this appeal I am in full agreement with the opinion of Lord Hope of Craighead and I would make the orders which he proposes for the reasons which he has given.

LORD HOPE OF CRAIGHEAD

My Lords,

4. On 28 February 1990 the vessel Chevron North America berthed at the Sullom Voe terminal in Shetland for the purpose of loading crude oil from the terminal into her cargo tanks. The terminal is owned and operated by BP Exploration Operating Co Ltd ("BP"), who are the appellants in these appeals. BP aver that the following day the average wind speed increased to about 40 knots with gusts up to 62 knots as the weather conditions deteriorated, and that the four loading arms on the jetty to which the vessel was attached sustained irreparable damage when the vessel's mooring winches rendered and she moved off the berth. They say that each of the loading arms required to be replaced at a total cost for parts of about £1m and that the removal of the existing loading arms and the installation of the new ones cost about £1.5m. They also say that they incurred interest and finance charges, loss of management time and associated expenditure for the period during which the jetty was out of operation amounting to about £0.5m. Following upon this incident BP raised the three separate actions of damages which are now before your Lordships' House in these appeals.

5. On 21 February 1995 BP raised their first action against Chevron Shipping Co ("Shipping"), a corporation formed under the laws of California. Shipping are designed in the instance of the summons as the owners of the vessel Chevron North America. In article 1 of the condescendence it is averred that Shipping are the owners, managers and operators of the vessel, that the master was employed by them and that he was acting for them and on their behalf at the time of the incident. These averments were at first admitted by Shipping in their defences, but on 12 June 1995 they withdrew these admissions. BP say that their solicitors were then told by Chevron's solicitors that the vessel was owned by Chevron Tankers (Bermuda) Ltd ("Tankers"), a company incorporated under the laws of Bermuda. In response to this change of position BP introduced averments into this action to the effect that Shipping are personally barred from asserting that they are not the owners of the vessel and do not bear responsibility for its on-board equipment and its operations and crew.

6. On 16 June 1995 BP raised their second action against Tankers. They aver that Tankers are, or any rate at the time of the incident were, the owners of the vessel, that the master was employed by them and that he was acting for and on their behalf at that time. On 18 August 1995 Tankers lodged defences to this action in which they admit that they are the owners of the vessel. But they aver that at the time of the incident she was the subject of a bareboat charterparty in terms of which the charterers were Chevron Transport Corporation ("Transport"), a company incorporated under the laws of Liberia. They also claim that any obligation on their part to make reparation to BP has prescribed in terms of section 6 of the Prescription and Limitation (Scotland) Act 1973 as the action was raised against them after the expiration of the prescriptive period of five years.

7. On 28 September 1995 BP raised their third action against Transport. They aver that Transport were at all material times the bareboat charterers of the vessel, that the master was employed by them and that he was acting for them and on their behalf at the time of the incident. In their defences to this action Transport admit that they were the bareboat charterers of the vessel, that the master was employed by them and that he was acting on their behalf. But they too claim that any obligation on their part to make reparation to BP has prescribed in terms of section 6 of the 1973 Act as the action was raised against them after the expiration of the prescriptive period.

8. Each of these three actions contains three separate grounds of fault, and each of them contains three separate grounds on which BP claim that they have a title to sue for the loss and damage. BP's first case of fault is that the accident was caused by the defenders' breach of their contract with them as the operators of the terminal. Their second case of fault is that it was caused by the defenders' negligence and that of the master for whose actions they were responsible. They aver that they have a title to sue both for breach of contract and on the ground of negligence in their capacity as the operators of the terminal, and that all the other participants in the terminal have assigned their rights to them in respect of the loss and damage. BP also aver that the jetty to which the loading arms were attached was constructed on land owned by the Crown Estates Commissioners and leased to Shetland Islands Council by whom their respective rights of action, if any, to sue for the loss and damage caused to their property have been assigned to them. BP's third case of fault is that the loading arms formed part of the property of Shetland Islands Council as the harbour authority, that the defenders are liable under section 74 of the Harbours, Docks, and Piers Clauses Act 1847 (10 & 11 Vict c 27) and that the harbour authority's right to payment under this provision has also been assigned to them.

9. In the courts below all three defenders were represented by the same counsel. Although the actions have not been formally conjoined, it was envisaged that in the event of a proof being allowed in more than one action they would be heard together. But the defenders submitted to the Lord Ordinary that Tankers and Transport should be assoilzied from the claims made against them on the ground that any rights against them had prescribed. They submitted that BP's averments of personal bar against Shipping were irrelevant and that, as this was the only basis upon which Shipping were said to be liable as owners of the vessel, the action against Shipping should be dismissed. They also submitted that BP's averments in support of their claims in each action that the defenders were liable for breach of contract and in negligence were irrelevant. With regard to the claims made in each action based on section 74 of the 1847 Act, they submitted that the averments in support of the cases against Shipping and Tankers on this ground too were irrelevant as the vessel was subject to a demise charter to Transport at the time of the incident.

10. The Lord Ordinary (Dawson) 2000 SLT 201 allowed a proof before answer in all three actions. After hearing reclaiming motions for the defenders in each action the First Division (the Lord President (Rodger) and Lords Sutherland and Cowie) 2000 SLT 1374 recalled the Lord Ordinary's interlocutors. The Lord President, who delivered the opinion of the court, dealt with the issues which were argued in the Inner House in the following order: (1) the plea relating to prescription in the action against Transport; (2) the plea relating to prescription in the action against Tankers; (3) the plea of personal bar in the action against Shipping; (4) the averments about the employment of the master in the actions against Shipping and Tankers; (5) the averments as to breach of contract and delict in the actions against Shipping and Tankers; and (6) the statutory case made against Shipping and Tankers under section 74 of the 1847 Act. The court sustained the plea of prescription in the action against Transport and dismissed that action. It also held that the statutory case made under section 74 of the 1847 Act in the actions against Shipping and Tankers was irrelevant, and the averments in support of it were excluded from probation. All the other issues raised in regard to these two actions were allowed to go to proof before answer.

The issues

11. In the appeals to this House the following issues have been raised: (1) whether a proof before answer should have been allowed of BP's averments in answer to the plea of prescription in the action against Transport; (2) whether, where a vessel is hired out under a bareboat demise charterparty, section 74 of the 1847 Act imposes liability on the registered owner of the vessel or on the charterer; (3) whether, in the action against Shipping, BP's averments of personal bar are nonetheless sufficient to allow them a proof before answer in respect of their claim against Shipping under section 74 of the 1847 Act; and (4) whether, in the actions against Shipping and Tankers, a proof before answer should have been allowed of the defenders' averments that the vessel was hired out under a bareboat charterparty.

12. The following consequences will follow as to further procedure if these issues are decided in favour of BP: (1) if a proof before answer is allowed as to prescription in the action against Transport, the question whether a proof before answer should be allowed on the whole case will depend on whether section 74 of the 1847 Act imposes liability on the charterer where there is a bareboat charterparty; (2) if it is held that section 74 of the 1847 Act imposes liability on the registered owner and not the bareboat charterer, it will follow that BP should be allowed a proof before answer of their whole case against Tankers, as a proof before answer has already been allowed on the other issues; (3) if it is held that section 74 of the 1847 Act imposes liability on the registered owner and not the bareboat charterer, it will follow that BP should be allowed a proof before answer on their whole case against Shipping also, as their averments that Shipping are personally barred from disputing that they were the owners of the vessel have already been held to be appropriate for a proof before answer; and (4) if it is held that section 74 of the 1847 Act imposes liability on the bareboat charterer, consideration will have to be given to BP's argument that their case under section 74 of the 1847 Act should not have been excluded from probation in their actions against Shipping and Tankers without proof of the defenders' averments that the vessel had been let under a bareboat charterparty to Transport, as BP have denied these averments on the ground that the precise arrangements for the management and control of the vessel between the various corporate entities in the Chevron Group are not known to them.

13. The principal issues of law which your Lordships must decide in these appeals are (1) prescription in the action against Transport, it being a matter of admission in that action that Transport were the bareboat charterers of the vessel at the time of the incident; and (2) the relevancy of the case made under section 74 of the 1847 Act against Tankers, it being a matter of admission in that action that Tankers were the registered owners of the vessel at that time of the incident. I shall deal briefly at the end of this judgment with the other two issues relating to (a) personal bar in relation to the statutory case against Shipping and (b) the defenders' averments in the actions against Shipping and Tankers about the bareboat charterparty. The course to be taken in respect of these two issues depends on the question whether section 74 of the 1847 Act imposes liability on the registered owner of the vessel or on the bareboat charterer.

Transport: prescription

14. Section 6(1) of the 1973 Act, read together with section 6(3) and paragraph 1(d) of Schedule 1 to that Act, provides that if, after the date when it became enforceable, an obligation to make reparation has subsisted for a continuous period of five years without any relevant claim having been made in relation to the obligation or the subsistence of the obligation having been relevantly acknowledged, then as from the expiration of that period the obligation shall be extinguished. The expression "relevant claim", in relation to an obligation, is defined in section 9(1) as meaning a claim made by or on behalf of the creditor for implement or part-implement of the obligation in appropriate proceedings. The expression "appropriate proceedings" is defined in section 4(2). It includes any proceedings in a court of competent jurisdiction in Scotland or elsewhere. The date of the commencement of an action in Scotland is the date of the execution of service on the defender: Erskine, III.iv.3; Alston v Macdougall (1887) 15 R 78; Smith v Duncan Stewart & Co Ltd 1960 SC 329, per Lord President Clyde; Canada Trust Co v Stolzenberg (No 2) [2000] 3 WLR 1376, 1397G-H. That is the date when, for the purposes of the negative prescription, a claim is made in proceedings in a Scottish court.

15. Section 6(4) of the Act provides:

16. Section 11(1) of the 1973 Act provides that an obligation to make reparation for loss, injury and damage caused by an act, neglect or default shall be regarded for the purposes of section 6 as having become enforceable on the date when the loss, injury or damage occurred. The incident at Sullom Voe which caused the damage to the loading arms occurred on 1 March 1990. The summons was not served on Transport until 28 September 1995, which was well outside the period of five years. It follows that any obligation on Transport to make reparation for the loss, injury and damage must be held to have prescribed unless BP can show that there was an interruption of the prescriptive period of the kind identified in section 6(4) of sufficient length between these two dates.

17. Article 10 of the condescendence contains the averments which BP have made in reply to the plea of prescription. In these averments the whole unhappy history which has led to the raising of these actions against three different companies in the Chevron Group in respect of the same loss, injury and damage is set out.

18. BP say that they and their legal and insurance representatives have been in regular correspondence with Shipping and their representatives since the date of the incident. They aver that throughout this correspondence Shipping represented to BP that they, and not Tankers or Transport, were responsible for the conduct of the vessel and its master at all material times and that they withheld from BP the information that the vessel was the subject of a bareboat charterparty. They refer to a letter which one of Shipping's representatives wrote to them on or about 12 April 1990 which they say was consistent only with Shipping being responsible for the vessel. They refer to a letter dated 5 September 1990 which was written by insurance managers to BP's insurance representative and copied only to Shipping stating that they had discussed the incident with the owners and had received their authority to deal with it on their behalf. They aver that various other representations were made thereafter to the same effect, in reliance upon which they took Shipping to be the owners of and responsible for the vessel. A summons was prepared against Shipping in which they were designed as the owners of the Chevron North America. On 7 February 1995 Shipping's solicitors wrote to BP's solicitors informing them that they would accept service of the summons. When the summons was served on 21 February 1995 the solicitors accepted service. This was just seven days before the expiry of the prescriptive period.

19. BP then say that when defences were lodged in this action on Shipping's behalf it was at first admitted that Shipping were the owners and operators of the vessel. But on 12 June 1995 adjustments were intimated to the effect that they were not the owners or operators of the vessel and that the master was not their employee. Their solicitors wrote to BP's solicitors on the same date saying that Tankers were the owners of the vessel. On 16 June 1995 BP served a summons on Tankers. It was when the defences to this action were lodged that BP were informed for the first time that the vessel had been chartered to Transport and a copy of the charterparty was produced to them. On 4 September 1995 a summons in which Transport were named as defenders was signeted. The defenders' agents refused to accept service of this summons, so BP had to resort to postal service. As Transport's registered office is in Liberia it was not until 28 September 1995 that service was effected on them.

20. BP aver under reference to section 6(4) of the 1973 Act that, by reason of error induced by the words and conduct of Shipping on behalf of Transport, they were induced to refrain from making a relevant claim against Transport in respect of their obligations arising out of the incident on 1 March 1990. There then follow these sentences:

21. The argument for BP in the Outer House, as recorded by the Lord Ordinary, 2000 SLT 201, 206G-H, was that in the circumstances averred the prescriptive period did not recommence until (a) BP were disabused of their error and (b) they had an opportunity to raise proceedings. The question was whether the period between the date when the proceedings should have been raised to avoid the prescription and the date when they were in fact raised was induced by the error. If it was, it would be unjust for the period not to be extended if BP were able to prove that they raised these proceedings as soon as they could after they became aware of the charterparty. The Lord Ordinary said, at p 206H-I that in his opinion the correct approach for the court to take to section 6(4) was to consider any period during which no action was taken to make a relevant claim and to ask whether that whole period was attributable to the error alleged. In the First Division the argument for BP, as recorded by the Lord President in paragraph 10 of his opinion 2000 SLT 1374, 1378J-K, was that the Lord Ordinary's approach was correct. Their case was that the fact that proceedings were not raised before 28 September 1995 was wholly attributable to error induced by Shipping on behalf of Transport. Had it not been for that error they would have made a relevant claim on or about 21 February 1995. The result of that error was that they refrained from making a relevant claim until 28 September 1995.

22. The First Division rejected this argument. The Lord President observed that from at least 4 September 1995 when the summons against Transport was signeted, and presumably from some days earlier than that when the summons was being drafted, BP had been taking active steps to make a relevant claim against them. Taking the ordinary meaning of the word "refrain" according to the New Oxford Dictionary of English as being "to stop oneself from doing something", he said, at pp 1378L-1379A, that the court had no difficulty in seeing that, on BP's 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 were a possible party against whom proceedings should be brought. But he said that it appeared to the court to be quite impossible to say that thereafter, at a time when they had been bending all their efforts to serving a summons on Transport, they were nonetheless still refraining from making a relevant claim.

23. One might have expected it to be argued for BP that the period of the interruption which was not to be reckoned as part of the prescriptive period in terms of section 6(4) of the 1973 Act began in or about April 1990 when, on BP's averments, they were first induced by Shipping on behalf of Transport into the erroneous belief which stopped them from making a relevant claim against Transport. The question whether it ended when they were told on 18 August 1995 that the vessel had been let on a demise charter to Transport or whether it should be extended to the date when the proceedings were brought would seem to be of lesser importance. If the period of the interruption began in or about April 1990 and ended in August 1995, almost the whole of the period which elapsed between the date of the incident on 1 March 1990 and the making of the relevant claim against Transport on 28 September 1995 would have to be left out of account in computing the five-year period. It would follow that, as the claim against Transport was made well within the prescriptive period thus calculated, it has not been extinguished by the prescription.

24. That however is not how the matter was developed in the submissions which were presented in the Court of Session. The entire argument for BP seems to have been directed to the question when the period of the interruption ended and not when it began. It seems to have been accepted that prima facie the period of the interruption ended when the error was removed. But it was submitted that it would be unfair for this period not to be extended to allow the some time during which the creditor could reasonably have been expected to raise proceedings. On this point the critical sentence in the Lord President's opinion is at p 1379C-D, where he said:

He concluded that BP only had themselves to blame for delaying starting the proceedings against Shipping until four years and 51 weeks of the prescriptive period had elapsed. As he put it, at p 1379F-G, 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 they would have been unable to achieve this by 28 February 1995, judging by the time it took to serve the summons on Transport in Liberia.

25. I agree with the view which the First Division took of the question whether the period attributable to the error induced by Shipping on behalf of Transport could be extended to allow a further period of time for proceedings to be raised by the creditor. But this still leaves unanswered the question, which appears to have been overlooked in the arguments presented to the Court of Session, which is: when did the period of the interruption begin? It was to this question that Mr Campbell addressed almost the whole of his argument in your Lordships' House. Although their pleadings as to when the period of the interruption began are barely adequate, I think that BP are entitled to say that they have made sufficient averments to the effect that their error began in or about April 1990 when they were led to believe by Shipping on behalf of Transport that Shipping were the owners and operators of the vessel at the time of the incident and that it was against Shipping that proceedings to enforce the obligation should be directed. In my opinion the effect of section 6(4) of the 1973 Act falls to be considered in the light of these averments.

(a) when did the period of the interruption begin?

26. The purpose of the negative prescription is to prevent delay in the bringing of proceedings to enforce the obligations to which section 6 of the 1973 Act applies. Subject to the special rules which apply to obligations of the kind specified in Schedule 2, time begins to run against the creditor as from the date when the obligation became enforceable. The assumption is that from that moment onwards he is in a position to make a relevant claim in relation to the obligation. Each day that passes thereafter without a relevant claim being made may be described as a day when the creditor has refrained from doing so. Whether this was due to a conscious decision on his part or to error or inadvertence is immaterial, unless he can show that section 6(4) applies. Subject only to interruption in the circumstances which section 6(4) describes, the prescriptive period continues to run against the creditor from the date when the obligation became enforceable whatever reasons may be given by him for his delay.

27. The purpose of section 6(4) is to address the injustice which would otherwise arise if the circumstances which led to the delay were brought about by fraud on the debtor's part or by error induced by the debtor's words or conduct. The fact that injustice can arise in cases of this kind was recognised in the old law of prescription which the 1973 Act replaced. In Caledonian Railway Co v Chisholm (1886) 13 R 773 it was held that the Triennial Prescription Act 1579 (c 83) did not apply where the pursuer's failure to sue timeously was due to the conduct of the defender. That was a case where the pursuers were entitled to charge for the carriage of empty grain sacks used otherwise than for the carriage of grain over their own lines. The defenders, who alone had the means of knowledge as to what their sacks had been or were to be used for, were said to have concealed from the pursuers the fact that a large number of their sacks were intended to be used, and were used, for the carriage of grain by sea or by other railway companies. The Lord President (Inglis) said, at p 776, of the fact that the action had not been pursued within the three-year period:

28. The Scottish Law Commission observed in its report on Reform of the Law Relating to Prescription and Limitation of Actions (1970) (Scot Law Com No 15), para 93 that it was a defence to the existing triennial prescription that the creditor had been induced by the action of the debtor to refrain from pursuing the claim within the prescriptive period:

29. The wording of section 6(4) of the 1973 Act reflects this approach. It applies only where there has been fraud on the part of the debtor or where the creditor's error was induced by the debtor's words or conduct. The actions of any person acting on the debtor's behalf in this respect are treated as those of his principal. The position into which the creditor must show he has been put by the fraud or error was identified in the report of the Scottish Law Commission by the words "he has been deterred from taking action within the prescriptive period." In section 6(4) the words used are "the creditor was induced to refrain from making a relevant claim." The question which lies at the heart of this part of the case is, what do these words in the subsection mean?

30. The dictionary definition of the intransitive verb "refrain" is to "to stop oneself from doing something". Clearly, a person cannot be said to refraining from doing that which he is trying to do. The creditor is not being induced to refrain from making a relevant claim when, in knowledge that the obligation exists and against whom it is enforceable, he is doing the best he can to make a claim against the debtor for implement of the obligation. Nor can it be said, if that is the state of affairs, that he is being induced by fraud or error from making the claim. But does this mean that some conscious act of self-restraint on the part of the creditor is required before the prescriptive period can begin to be interrupted? On a strict reading of the word "refrain" this might seem to be so.

31. But to read the word in this way in this context would be to open the door to the risk of the very injustice which the subsection was designed to avoid. It would mean that time would run against a person whose reason for not making a relevant claim was not that he was stopping himself from making it, as a matter of conscious and deliberate decision on his part, but that he was wholly unaware of the obligation because its existence was being concealed from him by the debtor's fraud. That was the position of the pursuers in Caledonian Railway Co v Chisholm 13 R 773, where it was held that it would be unjust for the statute to be applied against them. Departing in this respect only from paragraph 93 of the report by the Scottish Law Commission, section 6(4) does not mention the problem of concealment. But it is not hard to see that, where the existence of the obligation or of the identity of the debtor is concealed from the creditor, the effect of the concealment is that he is not in a position to enforce it. If these facts are concealed from him by the debtor's fraud, or by error which has been induced by the debtor's words or conduct, the ordinary use of language would seem to be enough to entitle one to say in that context that what has happened is that the debtor's conduct has induced the creditor to refrain from making the claim.

32. In Thorn EMI Ltd v Taylor Woodrow Industrial Estates Ltd (unreported) 29 October 1982 Lord Murray said that he could not see that it would make sense for Parliament to provide remedies for periods of time when a creditor's mind may be clouded by fraud or error and then to limit the availability of the remedies to the restricted circumstances where a creditor has been intent on pressing a claim and is then deflected from this course by a debtor's words or conduct. As he said, the effect of this would be that the greater fraud or error would go unchecked, but the lesser fraud or error would attract the statutory dispensation. Observing that the common law defence to the triennial prescription was not narrowly conceived, he found nothing in the words used by Parliament to compel the conclusion that section 6(4) was intended to provide a novel and greatly restricted remedy. I would endorse those remarks, which seem to me to be appropriate to what is required to deal justly with cases of this kind.

33. I would hold therefore that the period of time covered by the word "refrain" in section 6(4) includes time when the creditor does nothing to enforce the obligation, whether or not this is the result of a conscious decision on his part not to press the claim. As my noble and learned friend Lord Millett has said, it is not necessary for the creditor to identify the date when he would have made the claim but for the error. But the prescriptive period will only be interrupted if he can show that the reason why he did nothing to enforce the claim against the debtor was because he was misled by the debtor's fraud or by error induced by the debtor's words or conduct. And, under the proviso to section 6(4), the period of the interruption will not include any time after he could with reasonable diligence have discovered the fraud or error. In this way proper effect can be given to section 6(4) to avoid injustice on either side.

34. Applying this approach to BP's pleadings, I would hold that they contain averments of facts and circumstances which, if proved, had the effect of interrupted the running of the prescriptive period from the date in or about April 1990 when they first fell into the error induced by Shipping on behalf of Transport of thinking that the debtors in the obligation were Shipping and not Transport. The effect of the error was to conceal from BP the identity of the debtor in the obligation against whom the relevant claim had to be made before it prescribed. BP do not need to show what they would have done had they known that the claim had to be made against Transport. It is sufficient for them to show that the error was induced by words or conduct of Shipping on Transport's behalf for them to be entitled to the interruption of the prescriptive period.

(b) when did the period of the interruption end?

35. Mr Campbell submitted that the error continued to have effect beyond the date of its removal in view of the inevitable delay which BP faced in effecting service against Transport in Liberia. But he recognised the force of the arguments to the effect that the period of the interruption must be held to have ended as soon as the error was removed. I consider that the wording of section 6(4) is clear on this point. The proviso states that the period is not to include any time occurring after the creditor could have discovered the fraud or error with reasonable diligence. By implication the same rule must be applied to the case where the fraud or error has been discovered by or revealed to the creditor. The removal of the error restores the creditor to the state of knowledge which enables him to make a relevant claim. There is no longer any reason why the prescriptive period, whose function is to prevent delay in the making of such claims, should not run. In any event BP's actions when they were bending all efforts to prepare and serve the summons on Transport were wholly at variance with the ordinary meaning of the word "refrain".

36. I agree therefore with the judges of the First Division that to hold that the period of the interruption can be extended to allow for the effects of the error would be to distort the meaning of the words used in section 6(4). I consider that BP's averments in article 10 of the condescendence (at p 27B-C of the closed record as amended on 4 February 1997) that 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 charterparty and that the period ending with that date does not fall to be reckoned as part of the prescriptive period are irrelevant. In my opinion the appropriate way of giving effect to this conclusion would be to hold that these averments should not be remitted to probation. But, for the reasons already given, I consider that BP are entitled to a proof before answer of their averments to the effect that they were induced to refrain from making a relevant claim for a period which began sufficiently long before the date when the proceedings were raised against Transport to defeat the plea of prescription.

Shipping and Tankers: section 74 of the 1847 Act

37. The issue regarding section 74 of the 1847 Act arises in this way. When it was announced that substantial reserves of oil and gas had been discovered in the northern area of the North Sea steps were taken by Zetland County Council to obtain powers under a private Act which would enable them to attract and control the provision of appropriate marine facilities for use by the oil and gas industry. A suitable location for the development of a deep-sea oil terminal for use by very large oil tankers was identified at Sullom Voe. On 10 April 1974 the Royal Assent was given to the Zetland County Council Act 1974 (1974 c viii). Sullom Voe lies within the area of sea within which Zetland County Council is authorised by that Act to exercise jurisdiction as harbour authority. The harbour area for the purposes of that Act includes landing places and all other works and land belonging to or administered by the council for the purposes of the harbour undertaking.

38. Section 4 of the 1974 Act provides that various enactments which, so far as they are applicable for the purposes and are not inconsistent with the provisions of that Act, are thereby incorporated with and form part of the Act. Among those enactments is the 1847 Act (except for certain sections which are not in point in this case). Section 74 of the 1847 Act imposes strict liability on the owner of every vessel or float of timber 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. The question which is raised in this part of the case is what is meant by the word "owner" for this purpose where the vessel is let to a demise charterer under a bareboat demise charterparty.

39. The First Division 2000 SLT 1374, 1382I-J invited submissions on the significance, if any, of the provision in section 3 of the 1974 Act that the word "owner" in relation to a vessel "includes a charterer". In its view the appropriate starting point for considering this matter was the fact that the relevant sections of the 1847 Act are incorporated into the 1974 Act so as to form part of that Act. It followed that, where section 3 of the 1974 Act says that "in this Act" certain terms are defined in a particular way, these definitions are to be applied to the whole of the 1974 Act. This included the sections incorporated from the 1947 Act, except in so far as section 4 of the 1974 Act provides otherwise or the context requires a different approach to be adopted. Applying the legislation in that way, the First Division concluded, at p 1383A, that the definition of the "owner" of a vessel in section 3 of the 1974 Act applied to section 74 as incorporated from the 1847 Act. The Lord President, at pp 1385L-1386C, said that the definition of this expression in the 1974 Act provided additional support for the view which he had reached on a consideration of the provisions of the 1847 Act that the word "owner" in section 74 of that Act should be applied, where appropriate, to a charterer and that it was intended to clarify Parliament's intention in this respect 1385L-1386C:

40. I am unable, with respect, to agree with this view. The second proviso to section 4 of the 1974 Act states what various expressions are to mean and how various sections are to be read and have effect when the provisions of the 1847 Act so incorporated are being construed. Among the expressions so defined is the word "vessel". The proviso states that the word "vessel" as defined in section 3 of the 1974 Act shall be substituted for the meaning assigned to that word by section 3 of the 1847 Act. I regard the contents of this proviso as a clear indication that the words used in the 1847 Act are to be taken to have the same meaning when incorporated in the 1974 Act as they have under the 1847 Act, except so far as the proviso provides otherwise. That would be consistent with the way in which use is generally made in local and private Acts of the provisions in the Lands Clauses Acts and other similar enactments. One would not expect the words used in these general public enactments to be given different meanings in different local and private Acts unless express provision was made to this effect in those Acts.

41. I also think that the definition of the word "owner" of a vessel in the 1974 Act as including a "charterer" is too wide for it to be appropriate to be taken as indicating the meaning which is to be given to the word "owner" for the purpose of section 74 of the 1847 Act as incorporated in the 1974 Act. The issue is whether the word "owner" in that section includes a bareboat charterer. No-one has suggested that a time charterer or a voyage charterer could properly be considered to be the owner of the vessel for the purposes of section 74 of the 1847 Act, although the definition in section 3 of the 1974 Act would seem to be wide enough to include them.

42. For these reasons I consider that the definition of "owner" in section 3 of the 1974 Act is of not assistance in the search for the meaning of that expression in section 74 of the 1847 Act in a case where the vessel was let by the registered owner to a bareboat charterer.

43. As to the meaning which is to be given to the word "owner" for the purposes of section 74 of the 1847 Act, I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Clyde and Lord Hobhouse of Woodborough. For the reasons which they have given, with which I agree, I too would hold that the word in this context includes the registered owner of the vessel but not the bareboat charterer. It follows that I would hold that BP are entitled to a proof before answer of their statutory case against Tankers and that their statutory case against Transport should be excluded from probation.

Shipping: section 74 and personal bar

44. In paragraph 24 of his opinion 2000 SLT 1374, 1381G the Lord President said that the court considered that the preferable course was to leave all the questions relating to personal bar in the action against Shipping to be decided after proof. That being so, I consider that the appropriate course would be to allow the averments regarding the statutory case under section 74 of the 1847 Act in article 9 of the condescendence in that action to go to proof also, in addition to the averments in support of breach of contract and delict in respect of which a proof before answer has already been allowed.

Shipping and Tankers: the bareboat charterparty

45. In paragraph 51 of his opinion 2000 SLT 1374, 1386C-D the Lord President observed that BP's averments about the charterparty in article 1 of the condescendence in the action against Shipping and in article 2 of the condescendence in the action against Tankers went no further than referring to the document for its terms. But counsel for BP had approached the matter in argument on the footing that the challenge to the relevancy of their case could be disposed of on the basis of the opposing arguments about the effect on the statutory case of a demise charterparty. In that situation the First Division gave effect to its decision on this point by excluding the averments relating to the statutory case in both actions from probation.

46. As I have reached the view that the statutory case in both of these actions should go to proof on the basis that liability under section 74 of the 1847 Act extends to the registered owner of the vessel and not the charterer in a case where there is a bareboat demise charterparty, there is no longer a live issue on this point. The effect of the view which I have reached is that the defenders' averments in each of these actions about the existence of a charterparty are irrelevant as to a defence to the statutory case against the registered owner. They may nevertheless have a bearing on the case which is made against these defenders for breach of contract and in delict. As the averments are not admitted, I would hold that these averments too must go to proof before answer.

Conclusion

47. I would recall the interlocutors of the First Division of the Court of Session. In the action against Transport I would sustain the first plea in law for the defenders to the extent of excluding from probation the averments against them under section 74 of the 1847 Act in article 9 of the condescendence, together with those in article 10 of the condescendence from the words "The date of raising these proceedings" to the words "as part of the prescriptive period" on page 27 of the closed record in that case as amended. Quoad ultra I would allow a proof before answer in that case. In the actions against Shipping and Tankers, I would allow the parties a proof before answer of all their averments.

48. As to costs, I consider that account should be taken of the fact that the appellants have succeeded on the prescription issue against Transport on a ground which was not argued in the courts below and that the averments which are to be deleted from that action were included in response to the defenders' attempt to divert this claim from the action which they had raised against Tankers. In my opinion the appropriate order in this action is that no costs are due to or by either party in the appeal to this House. The costs attributable to the issue as to the relevancy of the statutory case in the actions against Shipping and Tankers must follow the event. So in the case of these two actions I would find the appellants entitled to payment by the respondents of the costs of their appeal to this House.

LORD CLYDE

My Lords,

49. The appellant company ("BP") is a member of a consortium which operates the Sullom Voe terminal in Shetland. The company for itself and as assignee of the other members of the consortium claims reparation for loss and damage which it avers was caused to certain loading arms on 1 March 1990 when a vessel which on the previous day had moored at the terminal moved away from its berth during a period of high winds. On 21 February 1995 BP served a summons on Chevron Shipping Co ("Shipping"). Between 1990 and 1995 there was correspondence and discussion of the claim with agents for Shipping and the pursuer avers that in the course of these communications it had been represented that the vessel was owned by Shipping. Indeed in the defences that was at first admitted by Shipping. On 12 June 1995 Shipping adjusted its defences to aver that it was not the owner nor the operator of the vessel. Its agents then explained that the owner was Chevron Tankers (Bermuda) Ltd ("Tankers"). BP thereafter on 16 June 1995 served a summons on Tankers claiming reparation from that company. On about 18 August 1995 Tankers averred in its defences that at the relevant time the vessel was subject to a bareboat charter to Chevron Transport Corporation ("Transport"). BP then served a summons on that company, but since that company was in Liberia that process took some time and the summons was not served until 28 September 1995.

50. The three actions came before the Lord Ordinary on procedure roll 2000 SLT 201 and after hearing argument on various preliminary points he sent all three actions to proof before answer. The First Division 2000 SLT 1374 dismissed the action against Transport on the basis of a plea of prescription but allowed a proof before answer in the other two actions subject to the exclusion of a case based upon section 74 of the Harbours, Docks and Piers Clauses Act 1847 which was incorporated into the Zetland County Council Act 1974 and thereby made applicable to the Sullom Voe terminal. The pursuer has now appealed to this House.

Section 74

51. The first question is whether the First Division was correct in excluding the case based on section 74 from probation in the actions against Shipping and Tankers. The section is concerned with the liability of an "owner" of a vessel and of a master of a vessel for damage done by a vessel to a harbour, dock or pier. The particular question is whether the word "owner" is to be understood in the present instance as meaning a bareboat charterer. This is a question of the proper construction of that section. But it is convenient first to clear out of the way a possible problem raised by the 1974 Act. In section 3(1) of that Act it is provided that "In this Act…'owner' in relation to a vessel includes a charterer". Section 4 provides:

except for certain sections of which section 74 is not one. Thus section 74 is incorporated in the 1974 Act. The question then arises whether the definition of "owner" in section 3 of the 1974 Act is to be applied to section 74 for the purposes of the 1974 Act.

52. It is clear to me that it is not so to be applied. The possibility that it might be a relevant consideration was raised by the judges of the First Division after the hearing had been completed and an opportunity was given for further submissions to be made on the point. It may be that the late discovery of the point gave it an undue prominence. But it seems to me that on a proper construction of the 1974 Act the definition is not intended to apply. The definitions set out in section 3 are in terms of the opening words of that section to apply "in this Act". Then in section 4 there are express provisions dealing with a number of points of construction of the 1847 Act. Among these is a provision that the meaning of the word "vessel" as defined in section 3 is to be substituted for the meaning given to it in the definition section of the 1847 Act. In the light of the express provisions made in the 1974 Act for the particular definition of specified terms in the 1847 Act, of which the provision relating to the word "vessel" is the most significant example, it seems to me clear that unless express provision is made the terms of the 1847 are to retain the meaning which they have always had. No provision is made for importing into the 1847 Act the extended definition of the term "owner" given in the 1974 Act. In my view the 1974 Act is not relevant to the present debate and the question in issue falls to be resolved by reference to the 1847 Act by itself.

53. There is authority for the view that the word "owner" may include or even mean a demise charterer. In I Congreso del Partida [1978] QB 500, 539 various descriptions of a demise charterer in past cases were quoted, such as "owner pro hac vice", or the person who is "for the time the owner of the vessel". But the matter is one of construction of the particular context, be it statute or contract or other deed, in which the word appears. Accordingly there is little to be gained by considering what the word may mean outside the 1847 Act. The question in the present appeal is what was the meaning intended by Parliament in that Act.

54. Approaching the problem as one of the construction of the 1847 Act, I am of the view that in that section "owner" means proprietor. That is the ordinary meaning of the word. I find nothing absurd or irrational in applying that meaning to the word in the present context. Indeed there seems to me good reason for giving the word its ordinary meaning. The evident purpose of the provision was to create a liability without fault, so as to simplify the undertaker's remedy in the event of damage being done by a vessel to the harbour installations. This was a measure designed in the interest of the undertaker. The owner, whose identity can readily be ascertained from registers, is the obvious person to saddle with this strict liability. There should be no unfairness to the owner in this course since if he chooses to charter the vessel to another, whatever the nature of the charter, he can make a contractual provision for recovery from any person to whom he charters the vessel.

55. I find nothing in the 1847 Act to require an extended meaning. On the contrary section 3 gives an express definition to the word "owner" "when used in relation to goods" which extends the ordinary meaning to include a number of other people including the consignor, the consignee and the shipper as well as the owner. It does not give any definition of "owner" in relation to a vessel. That seems to me to be an indication that no extended meaning is intended. I do not consider that goods here can include a vessel. The express restriction of the application of the definition to goods must reflect a distinction between goods and vessels.

56. Section 74 makes a clear distinction between the absolute liability of the owner and the wilful act or negligence of "the master or person having the charge of such vessel or float of timber". On the face of it the provision for absolute liability seems to refer to the real owner as distinct from any charterer who may have charge of the vessel. The First Division put particular significance on the proviso to section 74, although it would be strange if the effect of a proviso were to be such as to determine the meaning of the principal part of the section. The proviso to section 74 seeks to make an exception to the liability of the owner while the vessel is under compulsory pilotage. What it says is that the owner, which I define as the real owner, is not to bear liability for "such damage", that is, damage to "the harbour, dock, or pier, or the quay or works connected therewith" as set out earlier in the section, "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". It is argued that the person who has control of the vessel is the one who would otherwise be liable for the acts of a pilot and so the proviso supports the view that the word "owner" refers to the person having charge of the vessel, which would include a demise charterer. But the language is "such owner or master". The word "master" is defined in section 3 as meaning in relation to any vessel "the person having the command or charge of the vessel for the time being". The word "such" in the phrase "such owner or master" simply takes one back to the earlier parts of the section where the owner referred to is "the owner of every vessel or float of timber" and the master is referred to in the phrase "the master or person having the charge of such vessel or float of timber". The person who employs the pilot might be the owner, or the master or someone else who had command or charge of the vessel. The effect of the proviso to my mind is that where a compulsory pilot has to be employed, whether by the true owner or the master or anyone having the command or charge of the vessel, the liability which the section imposes on the true owner is not to arise. The proviso to my mind is perfectly consistent with the definition of "owner" as meaning the true owner.

57. Sections 75 and 76 also seem to me to support the conclusion that it is the real owner who is to be saddled with liability. The vessel may under section 74 be detained until sufficient security has been given for the amount of the damage. Under section 75 provision is made for the vessel to be distrained or kept and if necessary sold in order to pay the amount of the due damages. The compulsory sale of the vessel does not seem to me to fit well with the idea that the person liable is someone other than the true owner. Section 76 provides for the owner to recover the amount of damages paid by him from the person who actually did the damage. There is the less need for that provision if "the owner" means or includes a demise charterer.

58. So far as the case law is concerned such indications as there are seem to me to support the view that by the term "owner" is meant the actual owner, the proprietor. In River Wear Commissioners v Adamson (1877) LR 2 HL 743 mention was made of the difficulty for the undertakers of the harbour of investigating whom to pursue when damage was done to their harbour works by a vessel, whether as Lord Cairns LC said, at p 751, "the fault has been the fault of the owner, or of the charterer, or of the persons in charge". The solution devised by Parliament was in my view not only to impose a liability without proof of fault, but to pin the liability on one person who could be readily identified, namely the registered owner. Lord Blackburn observed, at pp 768-769:

In Great Western Railway Co v Mostyn (Owners) [1928] AC 57 it was recognised that the Act imposed liability on the owners qua owners. As Lord Shaw of Dunfermline put it, at p 86 "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". Lord Blanesburgh, at p 103, in talking of the position of the owner, contrasts him with "anyone else - the hirer, the ship repairer, any one on board but not in charge". In Workington Harbour and Dock Board v Towerfield (Owners) [1951] AC 112, 157 Lord Radcliffe observed that once it had been decided in The Mostyn that the shipowner's liability:

It appears to me that throughout these cases their Lordships were proceeding upon the basis that it was the registered owner and not any hirer or any charterer who was fixed with liability under the Act. It is of course correct to notice that in none of these cases was the House concerned with the question before us, whether "owner" means or includes a demise charterer, but it seems to me that the assumption behind the decisions was that the reference to "owner" was a reference to the true owner and not a charterer.

59. For these reasons I consider that the reference to "owner" in section 74 is a reference to the proprietor or true owner, and that it does not mean nor include any charterer, not even a bareboat charterer.

Prescription

60. As I have already mentioned the action against Transport was not served until 28 September 1995, which was more than five years after the date of the incident giving rise to the claim. In this action the defender has tabled a plea of prescription. The defender makes no reference to the statutory basis for the plea in his defences but it is common ground that the case is susceptible to the operation of section 6(1) of the Prescription and Limitation (Scotland) Act 1973. That subsection provides:

a

c

The obligation to make reparation falls within Schedule 1 so that by virtue of section 6(2) it qualifies as an obligation to which the section applies. The "appropriate date" is in terms of section 6(3) the date when the obligation became enforceable. That date in the present case is 1 March 1990 when there occurred both the injuria and the damnum for which reparation is claimed. That is the terminus a quo for the running of the five-year period. There is no question here of any relevant acknowledgement having been made. The expression "relevant claim" means, according to section 9, a claim made by or on behalf of the creditor in appropriate proceedings. That last expression is somewhat imprecisely defined in section 4 and was taken, for the purposes of the present case, to be the date of service of a summons.

61. BP however in its pleadings expressly found upon section 6(4) of the Act. That subsection provides:

shall not be recognised as, or as part of, the prescriptive period.

Provided that any period such as in 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."

Section 6(5) provides that any period excluded from the calculation of the period by virtue of section 6(4) is not to be regarded as separating the time immediately before it from the time immediately after it. A continuity in the time building up to the five year period can thus be secured.

62. Before the First Division 2000 SLT 1374 the ground on which BP proceeded was to the effect 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 within, but only about a week before the expiry of, the five year period. That approach was rejected by the First Division. It was pointed out that BP could not be said to be refraining from making a claim when, at least after the apparent disclosure of the error on 18 August 1995, BP was actively taking steps towards making a claim against Transport. It was further held that once the error was removed the time immediately started to run again and there was no room to imply some extension of the excluded period to cover the time reasonably taken in connection with the raising of proceedings.

63. Before this House however a somewhat different approach was taken. It was argued that it was not necessary to embark on what was described as a hypothetical course of proving the date on which or by which the creditor would have raised proceedings had he not been in error. What has to be identified is the period during which by reason of the error the creditor was induced to refrain from making the claim. The error originated in the earliest communications with those acting for Transport in 1990 and it lasted all the time up until Transport withdrew its admission that it was the owner in August 1995. On that basis there is no question of the five years having run before the summons was served.

64. There is a question whether this approach is within the scope of BP's pleadings. The pleadings state that but for the error it would have raised proceedings:

On the approach now taken BP can accept that the prescriptive period starts to run again when the error was disclosed, so that the period between that date and the actual making of the claim does not require to be excluded. In that respect the submission now presented cuts across the pleadings. But on the other hand BP has left open the period prior to 21 February 1995 in averring that it would have raised proceedings "at latest" on that date and that the period when it were induced by the error to refrain from making the claim ran "at least" from that date. In my view it would be taking too technical a view of the pleadings to hold that the presentation now made is excluded by the averments in reply to the plea of prescription. The factual averments relating to the correspondence by which BP was misled remain untouched. It avers that representations were made to it "throughout the said correspondence" that Shipping and not Tankers were responsible for the conduct of the vessel. The substance of the case now presented is within the scope of the present pleadings and the defenders have sufficient notice of it. Obviously on the argument now presented there are some averments which are misleading and unnecessary. On the approach which is now, in my view rightly, taken by BP it is unnecessary for it to aver and prove any particular date on which it might have raised proceedings had it not been misled. Nor is it correct to include in the period during which it says it was induced to refrain from action the period after it learned what appears now may be the truth. The pleadings now seem distinctly untidy but I do not consider that it is for us to delete any part of them. I turn to the substantial point of the construction of section 6(4).

65. The language of subsection (4) is not entirely happy. The word "induced" is used twice in the critical passage, first to refer to the error as having been induced by the debtor and secondly to refer to the creditor being induced to refrain. The word implies a more vigorous connection than a merely causal one, although that element must be embodied in it. But the causal element is also brought in by the words "by reason of". Putting it shortly, the case expressed in the subsection is one where the creditor is induced to refrain from claiming by reason of error induced by the debtor. Error induced by the debtor must be something short of fraud, because that kind of case is dealt with expressly in paragraph (a). So the word "induced" does not necessarily carry with it any sinister overtone. The debtor may have been acting entirely innocently and in good faith, but nevertheless has led the creditor to believe something different from the truth. In my view what is meant is that the debtor has led the creditor into error by his, or his agent's, words or conduct and because of the error the creditor has been brought into the position of refraining from making a claim.

66. The word "refrain" also requires consideration. The Inner House took the dictionary definition of to "stop oneself from doing something".

67. But that phrase may be too restrictive to serve as an adequate explanation if it is taken in the sense that one can only stop oneself from doing something if you know that you could do that thing. But one can in the ordinary use of words refrain from doing something without consciously holding back or abstaining from it. In the present context the creditor is under error, and is necessarily not conscious of the right which he has to raise proceedings or of the necessity to raise them without delay. So it would be too narrow a definition of the word in this context to confine it to a conscious stopping from doing something. If the narrow view was adopted then there would be no protection for the period in which the creditor did not know that there was a possibility of his making a claim at all. On the narrow view a creditor who was deceived into thinking that he was negotiating with the only person who might be liable to him would have no protection against the running of the prescriptive period, because he had not consciously held himself back, had not stopped himself, from making a claim against the true debtor. That cannot have been the intention of the Act. In the present context it seems to me that in substance the word means simply that the creditor did not raise proceedings.

68. This more generous approach to the construction of the subsection is in my view supported by reference to the policy which lies behind the exception. That policy was clearly stated by Lord President Inglis in Caledonian Railway Co v Chisholm 13 R 773, 776 in the context of the old Act of 1579 (Triennial Prescription Act, c 83) providing for the former triennial prescription. He said:

In my view that is the philosophy which lies behind section 6(4) and it should be construed in the light of that philosophy.

69. This approach accords with the view which was taken by Lord Murray in Thorn EMI Ltd v Taylor Woodrow Industrial Estates Ltd (unreported) 29 October 1982. In that case it was held that section 6(4) should not be narrowly construed so as to relate only to the deterring of court proceedings which would otherwise have gone ahead, or the abandoning of proceedings already under way. Lord Murray held that:

He then referred to the common law defence available to bar the operation of the old triennial prescription and concluded:

70. So far as this chapter of the appeal is concerned it seems to me that BP is entitled to argue the defence to the plea of prescription along the broader line which it introduced in this House and that section 6(4) should be given a more generous construction than seems to have been permitted by the First Division.

Conclusion

71. In the action against Shipping BP averred that Shipping was the owner of the vessel. BP also averred, on the basis of the various communications between the parties and the original admission in the defences, that Shipping is now personally barred from asserting that it was not the owner. The case of personal bar has been allowed to go to proof. Even if Shipping was not the real owner the case against it under section 74 may conceivably be open on the basis of the personal bar. It does not seem to me that that case can be excluded from inquiry.

72. In the action against Tankers BP avers that the Tankers was the owner of the vessel and that is admitted. On the view which I have taken of section 74 the statutory case in this action should go to inquiry. The defenders have tabled a plea of prescription in this action but it is agreed that that plea should be admitted to proof.

73. Finally, in the action against Transport, BP avers that Transport was the bareboat charterer of the vessel and on that basis in condescendence 9 plead a case under section 74. On the view which I have taken that ground of liability is not open in this action. The First Division sustained the defenders' plea of prescription in this case and dismissed the action. On the revised approach to the issue of prescription and on the view which I have taken of the construction of section 6(4) that action should be allowed to go to inquiry, subject to the exclusion from probation of condescendence 9 and of the two sentences in condescendence 10 to which Lord Hope has referred. In short, I would allow the appeals in all three actions and subject to that exclusion in the case of Transport I consider that a proof before answer in all three cases would be appropriate.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

74. The three appeals before your Lordships' House concern three separate actions. In each BP Exploration Operating Co Ltd ("BP") is the pursuer. In the first, the defender is Chevron Shipping Co ("Shipping"), in the second, Chevron Tankers (Bermuda) Ltd ("Tankers") and, in the third, Chevron Transport Corporation ("Transport"). Each action is concerned with the damage alleged to have been done by the Liberian steam turbine, 196,334 tons gross, tanker 'Chevron North America' to Jetty No.4 at Sullom Voe on 28 February 1990. The causes of action relied upon are in contract, in delict and in statutory debt under the Zetland County Council Act 1974 which incorporates, among other provisions, section 74 of the Harbours, Docks and Piers Clauses Act 1847. S.74 provides that the "owners" of every vessel shall be answerable for any damage done by the vessel to the harbour works. Under s.6 of the Prescription and Limitation (Scotland) Act 1973, the period of negative prescription for all the claims is 5 years. For reasons which are not before your Lordships and which it must be recognised may not redound to the merit of BP, the proceedings in the first action were not raised until 21 February 1995. This has enabled the defenders to adopt procedural tactics which have so far met with a measure of success which must have surprised even them. Having at first taken no point that Shipping was not the right party to be sued, the defenders revised their pleading to rely upon the fact that Tankers and not Shipping was the owner of the vessel. Accordingly, BP then raised proceedings against Tankers. The defenders then took the point that Tankers was also not the right party to sue, revealing for the first time the existence of a demise charterparty in favour of Transport which they said was operative at the material time and, when proceedings were then accordingly raised against Tankers as well, the defenders responded with the prescription defence. These procedural tactics appear to have no inherent merit whatsoever as between commercial groups of international companies and it cannot be allowed to pass without comment that an international oil corporation should consider that this is an appropriate way in which to resolve whatever is the real dispute between the respective insured interests.

75. It is, thus, the delay of the pursuers and the procedural tactics adopted by the defenders which have necessitated the decision by your Lordships of questions of the construction of the 1973 and 1974 Acts. I have had the benefit of reading in draft the speeches of my noble and learned friends Lord Hope of Craighead and Lord Clyde. I gratefully adopt Lord Hope's recitation of the procedural history and their treatment of the points which have arisen under the 1973 Act. I agree with what they have said and their reasons for allowing the appeals of BP. It falls to me to deal more fully with the points arising under the 1974 and 1847 Acts.

76. It is not in dispute that at all material times the registered owner of the vessel was in fact Tankers. Tankers is a company incorporated under the laws of Bermuda. It is the defenders' pleaded case that Tankers had transferred the possession of the vessel to Transport under a bareboat demise charterparty dated 11 May 1988. The defenders contend that Transport was the employer of the crew and solely responsible for the navigation of the vessel including any liability that may have arisen under the 1974 Act. Transport is another company in the Chevron group. It is incorporated under the laws of Liberia with its registered office at 80 Broad Street Monrovia. The defenders have produced a copy of the charterparty upon which they rely but it remains in issue whether this document was in force at the relevant time and whether the Liberian company, Transport, was in truth at the material time the employer of the crew and in possession of the vessel, though this is of course the basis on which the claim against Transport has been made in the third action. Shipping are a Californian operating company in the Chevron group with which the pursuer dealt because (as the pursuer alleges) Shipping represented that it, Shipping, was the owner of the vessel and was accepting responsibility for her operation and for the acts and omissions of her crew. The case of Shipping is that it was no more than the manager of the vessel as part of the Chevron Shipping Company fleet. The claim against Shipping is accordingly put substantially on the basis of personal bar.

77. The issue of law which arises upon the 1974 Act is whether, if the vessel doing the damage has been demise chartered, the statutory debt attaches to the registered owner or to the demise charterer or to both of them. If it is only the registered owner, it will give a basis of claim against Tankers and, by personal bar, against Shipping but not against Transport. If it is only the demise charterer, it will be Transport and Shipping but not Tankers. If it can be both, then liability under the 1974 Act can potentially be raised in all three actions. The Lord Ordinary held that the liability was the owner's alone. The First Division held that the liability was that of the demise charterer to the exclusion of the owner.

The Demise Charterparty:

78. The charterparty document dated 11 May 1988 upon which the defenders rely is of a kind which is broadly typical. It "lets" the vessel to the charterer for a period of about 4½ to 5½ years. The charterer is required to maintain the vessel and keep her in a seaworthy state of repair. The charterer is to "man, fuel, victual, supply and operate [the] vessel at charterer's sole risk and expense" (cl.4). The effect of the charterparty is that the charterer is to have the possession of the vessel. The charterer has the right to choose how the vessel shall be used and takes upon itself all the relevant risks. The profits and losses belong solely to the charterer. The charterer must insure the vessel and give the owner the benefit of the insurance as a co-insured and pay the owner the proceeds of any claim for a total loss. The charterer must indemnify the owner against all liabilities incurred as a result of its use of the vessel and gives the owner the right to join in the defence of any significant claim against the vessel. Such a clause is necessary because many of the claims which may arise from the trading of the vessel are claims for which the claimant has a maritime or statutory lien upon the vessel itself and, therefore, although no claim in personam may lie against the owner, the property of the owner, and, specifically, the vessel itself, may be arrested and sold to satisfy the claim. Thus, if the charterer's crew navigate the vessel negligently and cause the vessel to collide with and damage, say, another vessel, the chartered vessel may be arrested at the suit of the injured party, judgment may be given condemning the vessel in the amount of the judgment and, if the judgment is not satisfied, the value of the vessel may be realised and sufficient to satisfy the judgement paid over to the claimant.

79. A bareboat demise charter differs from the common kinds of charterparty, such as time charters and voyage charters. They involve no transfer of the possession of the vessel to the charterer; they are simply contracts for services to be provided by the 'owner' (who may or may not be the actual owner and frequently is just another charterer higher up the line) to the charterer. A voyage charter can be a contract of carriage. A time charter normally includes an express or implied indemnity for the consequences of complying with the charterer's orders but the vessel remains under the command and control of the owner's master and crew as if she was being traded for the owner's own account. A bareboat demise charter by contrast is truly a contract for the hire of the vessel and involves the delivery of the vessel into the possession of the charterer and the control of the vessel resting with the charterer's employees. The vicarious liability in personam for the delictual or tortious acts of the master and crew rests with their employer, the demise charterer.

80. Legislation, often following international conventions, has tended to recognise and reflect the various different ways in which members of the maritime and mercantile communities are involved with ships. In international and municipal law vessels have a nationality being that of the country in which they are registered and of which they fly the flag. On the register there must be a registered owner and the name of this registered owner will appear on the vessel's certificate of registry. The registered owner is the legal owner. This is the natural and normal meaning of the word "owner". Legal mortgages are likewise registered and qualify the property rights of the registered owner. Legislation has also recognised that the beneficial ownership of the vessel may be different from its legal ownership: s.58 of the Merchant Shipping Act 1894, s.21(4) of the Supreme Court Act 1981. From the days before the corporate ownership of vessels became the norm, owners were required to register a managing owner or "ship's husband" who was personally liable for the performance of the owner's statutory duties: s.59 of the Merchant Shipping Act 1894. Demise charterers have been expressly referred to in legislation: s.9(4) of the Maritime Conventions Act 1911. Sections 20 and 21 of the Supreme Court Act 1981, defining the scope of the Admiralty jurisdiction of the High Court, refers to both demise charters and ordinary charters, following the scheme of the 1952 Arrest Convention. There is also legislation which simply refers to charterers clearly covering all types of charterparty and including both demise charters and ordinary charters: s.3 of the Merchant Shipping (Liability of Shipowners and Others) Act 1958. Thus, in approaching the construction of an Act passed in 1974, it is relevant to have in mind the various contractual and proprietary relationships that may exist and that legislators may make appropriate provision to accommodate them.

The Zetland County Council Act 1974

81. As spelled out in the preamble and the recitals, the purposes of this Private Act included enabling the county council to provide proper marine facilities at Sullom Voe. The directly relevant provision of the Act is the incorporation section, s.4, which reads -

(a) the Lands Clauses Acts, except sections 120 to 124 and 127 of the Lands Clauses Consolidation (Scotland) Act 1845; (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):

this Act

Provided further that in construing the provisions of the Harbours, Docks and Piers Clauses Act 1847 so incorporated - (i) the expressions "the promoters of the undertaking" and "the undertakers" shall mean the Council and the expression "the harbour, dock or pier" shall mean a harbour area;

(ii) the meaning of the word "vessel" as defined in section 3 (Interpretation) of this Act shall be substituted for the meaning assigned to what word by section 3 of that Act;

(iii) section 15 shall be read and have effect as if for the words from "shall forfeit" to the end of the section there were substituted the words "shall be liable to a fine not exceeding one hundred pounds";

(iv) section 23 shall be read and have effect as if the words "provided that no such lease be granted for a longer term than three years" were omitted;

(v) section 63 shall be read and have effect as if for the words from "penalty" to the end of the section there were substituted the words "penalty not exceeding one hundred pounds";

(vi) section 69 shall be read and have effect as if for the words from "sum" to the end of the section there were substituted the words "sum not exceeding fifty pounds"."

The scheme adopted in relation to the 1847 Act is to include the modifications which the draftsman requires to be made in the six subparagraphs in the second proviso to s.4. Subparagraph (iii) shows that where the draftsman wishes to incorporate a definition from s.3 of the 1974 Act, he does so expressly. Thus I do not consider that the definition in s.3 of "owner" as including a charterer has relevance in the present case. That definition is relevant to other provisions of the 1974 Act, eg, s.36 concerning dangerous goods, but not to s.4. S.16 dealing with wreck removal is likewise not directly relevant, but in cross-referring to sections 530 and 532 of the Merchant Shipping Act 1894 provides an example of the right to recover expenses from the owner of the vessel at the time it became a wreck and to use the proceeds of its sale to reimburse that expenditure. These liabilities are strict, not fault based, and are linked to the ownership of the relevant property.

82. The operative statute is the 1974 Act. Therefore it is the statute which has actually to be construed but, by incorporating sections of the 1847 Act, the sections incorporated are to "form part" of the 1974 Act and "be construed therewith as forming one Act": s.1 of the 1847 Act. This presents some problems of identifying the correct approach to the exercise of interpretation. In 1847 the maritime and mercantile worlds were very different from what they had become in 1974 and have become since. Almost every aspect of the operations carried out in ports has changed beyond recognition. The berthing and loading or discharge of a VLCC is a wholly different exercise to what would have been involved in the days of the sailing ship and the infancy of steam navigation. The role of the master has changed. The use of flags of convenience and one ship companies has transformed the structures of ownership. The legal environment has also changed. Styles of statutory drafting are very different. The maritime law governing the jurisdiction of the Admiralty Court and the liability of the vessel in rem was in the process of development. The damage lien was recognised but its basis was not yet fully settled: The Bold Buccleugh (1850) 3 W Rob 220, (1851) 7 Moo PC 267, Currie v M'Knight [1897] AC 97. The concept that the vessel would be liable without more on the proof that it had been the physical instrument by which the damage was done was rejected in favour of a fault-based liability. But that still left the question of what fault would suffice. This was finally settled in cases later in the 19th century: The Utopia [1893] AC 492, 499: "the foundation of the lien is the negligence of the owners or their servants at the time of the collision." Who are the owners for this purpose is a matter to which I will return; it was the subject matter of the judgment of Sheen J in The Father Thames [1979] 2 Lloyd's Rep 364, discussing and following the judgments in The Ticonderoga (1858) Swa 215 and The Lemington (1874) 2 Asp MLC 475. These dates speak for themselves. They show the relatively fluid state of the law of admiralty in the 19th century and help to explain why there should initially have been some disagreement about the construction of s.74 of the 1847 Act.

Section 74

83. As previously observed, the 1847 Act is drafted in a style typical of legislation of that date but untypical of modern legislation. Over-precise syntactical constructions are inappropriate. It is necessary to rely upon the natural meaning of the words used, guided by a consideration of the purpose of the statute. Contemporaneous judicial statements are likely to be the most reliable guide rather than any attempt to reconstruct the context after the lapse of a century and a half. The Act itself is one of a group of Acts which were passed in the 1840s to facilitate the legislative task of giving entrepreneurs, developers and local authorities the necessary powers to acquire land and construct works. It is an Act which collects together, "consolidates", in one Act provisions "usually contained in Acts authorising the making and improving of harbours, docks and piers". These statutes provide a model codes for use in whole or in part in other legislation. The codes can be adapted to the needs of specific situations. It is no argument that a particular interpretation might in some exceptional situation not be wholly adequate; it is for the draftsman of the special Act to anticipate and provide for that situation. S.74 is the first of a group of three sections dealing with damage to harbour works.

"74. Owner and Master of Vessel answerable for damage to Works - Saving as to Vessels in charge of Licensed Pilot - 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. Ascertainment and recovery of amount of Damage - If the amount claimed in respect of any such damage as aforesaid do not exceed fifty pounds, such damage 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. Owner paying damages or penalty or costs for act of servant may recover from him - 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."

The proviso to s.74 was effectively repealed by the passing of s.15 of the Pilotage Act 1913: The Towerfield [1951] AC 112. (See now s.16 of the Pilotage Act 1987.) It is however relevant to one of the arguments advanced upon behalf of the defenders.

84. The submission of the defenders is that in s.74 the word "owner" does not refer to the registered owner but is a word used to refer to the person or entity which has the possession of the vessel and employs and has the right to control the master and crew. In other words it is not a proprietary term but relates to the control of the vessel and the responsibility for those in charge of her. In support of this submission the defenders rely upon three strands of argument. First, they rely upon authorities which have construed the word "owner" in other statutes and contexts as extending to demise charterers. These authorities only provide limited assistance to the defenders since they do not exclude the primary meaning of "owner" as the actual owner and still leave Tankers potentially liable. However two authorities have construed the word "owner" in an exclusive fashion as referring only to the charterer where the vessel was demise chartered. But none of these authorities involved the 1847 Act; it seems that the present question has never before been raised in relation to the 1847 Act and s.74. The second strand of argument was that liability should conform to responsibility for the navigation of the vessel and therefore be confined to the demise charterer. Thirdly, they argued that the proviso showed that the "owner" was the employer of the crew. The First Division accepted these arguments considering that it made better sense that the liability under s.74 should fall upon the demise charterer rather than upon the registered owner.

The Authorities upon s.74:

85. The first case which discussed the scope and effect of s.74 was River Wear Commissioners v Adamson (1877) 2 App Cas 743. Mr Adamson and others were the owners of a steam vessel which was on a voyage from the Thames to the Tyne when she encountered a violent storm near the mouth of the Wear. She went aground at low tide near to the entrance to Sunderland docks. The crew were rescued by rocket apparatus but were unable to take down the sails before they abandoned the vessel. The result was that when the tide rose she was blown on to the pier and damaged it. There was no negligence on the part of the master and crew. The damage to the pier had been occasioned by the violence of the wind and waves at a time when the master and crew had been compelled to abandon the vessel. The House of Lords (Lord Gordon dissenting) held that the owners were not liable under s.74 to pay the cost of making good the damage. The question considered was whether the purpose of sections 74 to 76 was to impose a liability upon the owner of the vessel doing the damage independently of any fault in the navigation of the vessel or was limited to providing a remedy against the owner without the need to inquire whether the owner was responsible for those who were at fault. The decision of the House was based upon the acceptance of the latter alternative. The claim failed not because the owners were not the right parties to sue but because there was no fault on the part of anyone. Lord Cairns LC said (p.751):

Lord O'Hagan said at p.760:

as

Lord Blackburn at pages 767 to 769 made the same points at greater length in a passage which is too long to quote. He summarised the effect of the common law. A person is only liable in personam if he commits the tort himself or can be proved to have been in the relationship of master and servant to him who did and, as we would say now, is therefore vicariously liable for that person's tort. The owner of a vessel is commonly the employer of the master but it is not necessarily so and, if he is not, he is not liable in personam merely because he is the owner. Ownership might be prima facie evidence that he was the employer of the master but this could be disproved. -

He then made the same point in relation to a compulsory pilot who would not be the servant of the owner. He then went on to consider the purpose of the Act. Its purpose was in a rough and ready way to avoid the need for litigation and to provide a simple and effective remedy in personam against the owner.

He thus identified the mischief to which the sections were directed as "the expense of litigation". As will have been noticed, Lord Blackburn construed s.74 as imposing a strict liability but he nevertheless concurred in the decision of the majority to dismiss the appeal. (p.772-3)

86. The Adamson case was not treated as having decided that the owner could be held liable under s.74 in the absence of negligence on somebody's part. The difference of opinion on this point between Lord Blackburn and the remainder of the majority demonstrated this. Fifty years later the point was settled by the House of Lords in The Mostyn [1928] AC 57. The vessel was moving from one dock to another at Swansea and in doing so fouled and damaged an electricity cable with its anchor. The undertakers sued the owners of the vessel under s.74 for the cost of making good the damage. The trial judge found that there had been no negligence. The judge and the Court of Appeal held that in these circumstances there was no liability. The House of Lords by a majority allowed the undertakers' appeal and held that there was a strict liability. The speeches disclose problems in accepting Lord Cairns's view that s.74 had retained the need to prove negligence. The essence of the decision was that, provided human agency was involved in the occurrence of the accident, the owner should be liable. S.74 did more than change procedure; it also changed the substantive law. The reasoning of Lord Blackburn appears to have been adopted. It was referred to with approval by Viscount Haldane, save that Viscount Haldane would have treated Adamson's case as being one where there was no human agency involved, akin to a case of derelict. (p.71-2) Lord Shaw of Dunfermline referring to decisions which were inconsistent with Lord Cairns's view said that Adamson should have been decided on the basis that the vessel there had been equivalent to a derelict over which all means or chance of possible control by human agency had disappeared. (p.81) But he then goes on to affirm that the statutory liability is that of the "shipowners, as such". (p.82) Having considered the speeches of Lord O'Hagan and Lord Blackburn, Lord Shaw expresses his own view of the effect of the wording of s.74:

ex delicto

quasi ex delicto

ex dominio

Lord Phillimore, although dissenting, expressly recognises that the statutory liability is that of the shipowner, using the same example as was used by Lord Blackburn of a shipowner who has placed his vessel in the hands of a ship-repairer; the shipowner must pay the undertakers and then recover over from the ship-repairer. (p.94) Lord Blanesburgh considered both the actual language of the section and what had been said about its purpose in Adamson, in particular by Lord O'Hagan and Lord Blackburn.

also

same

In discussing the speech of Lord Cairns, he reiterated that the first main result of the drafting of s.74 was that "the undertakers were relieved of the burden of finding, for the purposes of suit, the real wrongdoer" and "the owner in every case was the only necessary defendant". (p.101) He also, at p.103, used the examples given in Lord Blackburn's speech - the hirer and the ship-repairer.

87. In The Mostyn, the House was influenced by the case of The Crystal [1894] AC 508 which had also had to consider the speeches in Adamson. It concerned the cost of wreck removal. The vessel had sunk in the Tyne following a collision which was not her fault. She was a total loss and had been abandoned to underwriters. The harbour authority incurred expense dispersing the wreck. It was acting under its statutory powers under s.56 of the 1847 Act which was the predecessor of the Merchant Shipping Act 1894. The authority sought to recover those costs from the owner of the vessel, that is to say her owner at the time she sank. The claim was rejected. The liability was strict and was a liability of the person who owned the property. But the property in question was the wreck not the vessel before she sank. A point which particularly influenced the House was the provision that the harbour authority was given a power of sale in order to recoup the expenditure with any surplus being returned to the owner. As was particularly pointed out by Lord Herschell at p.519, it would produce an inconsistency if s.56 were construed as referring to different persons as the owner at different places: the person liable as owner is the same person as the owner entitled to be paid the surplus (if any). This reasoning, based on property not control, was applied in The Mostyn to s.74 as is demonstrated by the quotations I have made and the reasoning from s.56 (which is, incidentally, also incorporated into the 1974 Act) is equally applicable to sections 74 and 75 with the powers of detention distraint and sale which they contain. Similar reasoning was also adopted in The Towerfield [1951] AC 112. In his speech, Lord Radcliffe described The Mostyn as deciding "that the shipowner's liability under it did not depend on any imputation of default to him or to others who might be in charge of the ship"; "it was plain that the section was conceived in the interests of the dock or harbour authority and was calculated to produce on occasions what might be very rough justice indeed". (p.157) He also pointed out that it was an error to import legal conceptions of responsibility in tort into the simple words of s.74 which had been held in The Mostyn not to be directed to any considerations of tortious liability.

88. These authorities might be thought to be conclusive in favour of BP. They confirm the natural meaning of 'owner' as being the registered owner. The liability is a liability which arises ex dominio and not from any conception of responsibility in tort or delict. They recognise that to make the registered owner liable when he was in no way at fault may be harsh but point out that the liability is strict and not based on fault and that where another has been at fault s.76 gives the owner a right of recovery over. The primary purpose is to give the undertaker a simple and direct method of recovering his expenditure without having to investigate or prove who was in possession of the vessel and actually responsible for the navigation of the vessel at the material time. The registered ownership is easy of ascertainment and, indeed, it is the scheme of the Act that the master of the vessel is under an obligation when called upon to do so to produce the certificate of registry of the vessel. (s.36) It can be added that the present case provides an excellent illustration of the wisdom of this approach. The argument of the defenders is that it is essential before the liability under s.74 can be enforced to investigate and prove who was in fact at the material time in possession of this vessel. This argument is contradicted by the speeches in each of the three leading House of Lords decisions on s.74. It is to be noted also that the speeches in these cases take into account the position where there is a compulsory pilot and the proviso to s.74 and conclude that they support the conclusion they arrive at. Further, the provisions for the detention and sale of the vessel also support the conclusion that the relevant criterion is ownership not control.

The Defenders' Arguments:

89. Before turning to the authorities upon which the defenders particularly rely, it is helpful to refer to two authorities which assist the understanding of the relevance of the existence of a demise charter to remedies in rem and in personam. The first is The Father Thames [1979] 2 Lloyd's Rep 364. The question was whether the negligent navigation of a demise chartered vessel gave the owner of the damaged property a maritime lien against the ship. Sheen J, following two 19th century authorities, The Ticonderoga (1858) Sw 215 and The Lemington (1874) 2 Asp MLC 475, held that it did. The argument unsuccessfully advanced by the defendant shipowner in that case used the same reasoning as that of the defenders in the present case: the liability in tort is a liability for the acts and omissions of the master and crew; where the vessel has been demise chartered, it is the charterer who is the employer of the crew and it is only he who should be liable, not the owner through the arrest of his ship. The scheme of admiralty law reflected by these authorities is that, where the actual owner has voluntarily put the vessel in the possession of another, the owner must accept that the vessel and, indirectly, himself will be under a liability for the consequences of the navigation of the vessel even though those navigating the vessel may not be his servants. Where the liability is strict and not fault based, the same conclusion follows with even greater force.

90. The second case is The I Congreso del Partido [1978] QB 500, Robert Goff J. There were a number of points. The relevant one was the scope of the admiralty jurisdiction under s.3(4) of the Administration of Justice Act 1956 (the predecessor of the Supreme Court Act 1981) . Robert Goff J refused to construe the Act so as to include a demise chartered vessel within the expression "beneficially owned as respects all the shares therein" saying (p.538-9),

Generally speaking, the essential characteristic of a demise charter is that it constitutes a contract of hire of the ship, under which the possession of the ship passes to the charterer, the master of the ship being the servant of the charterer, not of the owner. It is to be compared with the ordinary form of time charter, which is not a contract of hire but a contract of services, under which the possession remains in the owner and the master is the servant of the owner: see Sea and Land Securities Ltd v William Dickinson & Co Ltd [1942] 2 KB 65, 69-70, per Mackinnon LJ, and Scrutton on Charterparties, 18th ed. (1974), articles 24-26. It is true that a demise charterer has in the past been described variously as "owner pro hac vice:" see, for example, Frazer v Marsh (1811) 13 East 238, 239, per Lord Ellenbrough CJ, The Lemington (1874) 2 Asp MLC 475, 478, per Sir Robert Phillimore, and The Tasmania (1888) 13 PD 110, 118, per Sir James Hannen P.; or as a person who is "for the time the owner of the vessel": see Sandeman v Scurr (1866) LR 2 QB 86, 96, per Cockburn CJ; or as a person with "special and temporary ownership:" see The Hopper No 66 [1908] AC 126, 136, per Lord Atkinson. I doubt however if such language is much in use today; and its use should not be allowed to disguise the true legal nature of a demise charter."

" A demise charterer has, within limits defined by contract, the beneficial use of the ship; he does not have the beneficial ownership as respects all the shares in the ship."

The importance of this judgment for present purposes is that it demonstrates the limits of basing arguments upon the use of the expression "owner pro hac vice" and recognises that if modern legislation is intended to use the word "owner" as meaning demise charterer it is likely to say so expressly.

91. The authorities relied upon by the defenders in support of the argument that the liability of the "owner" under s.74 should be read as meaning demise charterer where the vessel is at the time demise chartered do support the submission that the employer of the master and crew will then be the demise charterer not the registered owner. The vicarious liability in personam for their torts lies with their employer: Fenton v Dublin SS Co (1838) 8 A & E 835. It will be remembered that this was one of the points referred to by Lord Blackburn in Adamson as supporting the view that s.74 provided a remedy against the actual owner rather than the person in possession. As regards the liability in rem the position is covered by The Father Thames and the cases there cited. The same logic and limitations apply to the case of a master signing a bill of lading. Prima facie he is signing on behalf of his employer. Commercially he is, and to make sense must be, signing on behalf of the bailee of the cargo shipped, that is to say, where the vessel is in the possession of the demise charterer and his crew, the demise charterer. Thus in Baumwoll Manufactur von Carl Scheiber v Furness [1893] AC 8 goods were shipped upon the defendant's ship under a bill of lading which was signed by the master who was the employee of the demise charterer as were the rest of the crew. During the voyage the vessel foundered and the cargo was lost. The cargo owner could not sue the defendant. He was not the bailee of the cargo. The master had no authority to contract on his behalf. The decision was straightforward. The defenders rely upon the breadth of the language used by Lord Herschell LC, in particular at p.17, -

This passage does describe the demise charterer as having some of the powers of the shipowner and therefore capable of being properly termed the owner. But Lord Herschell is careful to remind the reader of the confusions which arise from failing to take account of the limited purposes and authority within which the demise charterer may assume the powers of owner and therefore properly be termed the owner. Properly understood with these qualifications, the passage is as much against the defenders as in their favour. In any event, it must defer to the specific authorities dealing with s.74 itself.

92. The other cases cited by the defenders I will take more shortly. Meikelereid v West (1876) 1 QBD 428 concerned a claim by the wife of a crew member of a demise chartered ship. Her husband had signed an allotment note and the Merchant Shipping Act 1854 gave the wife a right to sue upon the allotment note for the wages. The court unsurprisingly held that the liability was that of the demise charterer with whom he had his contract of employment not the registered owner who was a stranger to the contract of employment even though the Act referred to the "owner". The Hopper No 66 [1908] AC 126 held that a demise charterer could limit his liability under the Merchant Shipping Act 1894. In Elliot Steam Tug v Admiralty Commissioners [1921] AC 137 the change of the terms upon which a tug had been requisitioned by the Crown from a manned basis to a bareboat basis was held to carry with it the implication that the Crown should be entitled to any salvage earned. It was the Crown that was rendering the salvage service not the registered owner. Finally, the defenders relied upon the case Trinity House v Clark (1815) 4 M & S 288. This concerned a ship chartered to the Crown. Trinity House had claimed from the registered owner of the ship 'Britannia' tolls and duties on account of the vessel having over a period of about two years passed or crossed certain lights buoys and beacons during foreign voyages in the service of the Crown. It seems that Trinity House were not entitled to recover from the tolls and duties from the Crown. The charters and letters patent allowed Trinity House to recover dues etc from the "owners" of vessels. Lord Ellenborough CJ held that on the facts of that case it meant the charterer not the registered owner: "It seems also that there is no distinction in reason between vessels of which the King has a temporary ownership, and those which were built in the dockyards of the Crown, if it appears that the King was the owner during the voyage for which the duties are claimed." (p.291)

93. The rationale of each of these decisions is easily understood. They recognise a potential breadth of meaning for the word "owner" and show that it can in certain contexts be read as including or meaning the charterer of a demise chartered vessel. But they do not contradict, nor should they be read as contradicting, what has been expressly said about the rationale of s.74 in speeches specifically concerned with that section. The purpose of s.74 is to provide a direct and easy means of recovery from the actual owner without investigating any question of fault or responsibility. This purpose can only be served by reading "owner" in its natural and primary sense as meaning the registered owner. The defenders' arguments are irreconcilable with this purpose. The argument based upon the proviso was taken into account in the leading authorities on s.47 and considered to be fully consistent with this conclusion. As put by the defenders before your Lordships, it was a linguistic argument based upon the inclusion of the word "such" before the word "owner" in the proviso; the argument was inappropriate to an Act of that date and in any event the drafting was simply to enable the proviso to refer back to the person liable under the main part of the section, that is to say the registered owner. Those deciding the primary authorities upon the 1847 Act have found further support for the construction they have adopted in sections 75 and 76. They were clearly justified in doing so.

Conclusion:

94. For these reasons, my Lords, I agree that the defenders' arguments upon s.74 should not be accepted and that the decision of the First Division on this point should be set aside. The pursuers are entitled to claim against Tankers under s.74 and to rely upon the same reasoning in support of their claim against Shipping based upon personal bar. The claim against Transport under s.74 is irrelevant and should not proceed to proof. However, in so far as there are also claims against any of the defenders based on contract or delict, they are not affected by the decision on the s.74 point (unless it has rendered such claims, which potentially cover wider classes of loss, academic). Since the s.74 point was raised entirely by the defenders in order to support their tactical objectives, the fact that Transport have been held not liable under s.74 should not in my opinion affect the liability of the defenders to pay BP's costs of this part of the argument both here and below.

LORD MILLETT

My Lords,

95. I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hobhouse of Woodborough with which I am in full agreement. I do not wish to add anything on the meaning of "owner" in section 74 of the Harbour, Docks, and Piers Clauses Act 1847 as incorporated in the Zetland County Council Act 1974.

96. I have also had the advantage of reading in draft the speeches of my noble and learned friends Lord Hope of Craighead and Lord Clyde dealing with the proper application of section 6(4) of the Prescription and Limitation (Scotland) Act 1973 ("the Act"). This raises a question of general importance in the law of Scotland, and in deference to the Inner House it is appropriate that I should set out in my own words why I agree that on this aspect of the case the appeal should be allowed.

97. The pursuers ("BP") own and operate an oil terminal at Sullom Voe. They aver that while berthing at the terminal on 28 February 1990 the vessel Chevron North America caused damage to the terminal. On 21 February 1995 they commenced proceedings against Chevron Shipping Co ("Shipping"), believing that company to be the owner of the vessel and the party responsible for operating it at the relevant time. In fact the vessel was owned by Chevron Tankers (Bermuda) Ltd and at the time of the incident was the subject of a bareboat charter to Chevron Transport Corporation ("Transport"). The pursuers aver that their error was the result of representations made to them or their solicitors by Shipping and others as agents for Transport.

98. The pursuers did not discover the error until 18 August 1995. They then brought proceedings against Transport, but they were unable to serve them until 28 September 1995. This was more than five years after the incident which gave rise to the obligation to make reparation, and accordingly the obligation was prima facie extinguished by the operation of section 6(1) of the Act.

99. In response the pursuers have invoked section 6(4) of the Act. This excludes from the computation of the prescriptive period:

"(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. 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."

It is common ground that in Scotland a claim is made against a defender when the proceedings are served on him.

100. Two questions arise on the application of this subsection to the facts averred by the pursuers in the present case. The first concerns the meaning of the words "refrain from making a relevant claim." The Inner House understood the expression to mean "stop oneself from making a relevant claim." So understood, it would appear to involve a conscious decision not to make the claim, and hence not even to make an attempt to do so. But I do not think that it bears this meaning in section 6(4). If the subsection required a conscious decision not to make the relevant claim, it would be difficult to apply to the ordinary case where, by reason of the error, the pursuer was wholly unaware that he had a claim of any kind against anyone. In my opinion the key to the meaning of the expression lies in the fact that the subsection is an amplification of section 6(1), and the two subsections must be read together. The primary prescriptive period is a period of five years "without any relevant claim having been made in relation to the obligation". Section 6(4) then excludes from the calculation of the primary period any period during which the creditor was induced to refrain from making a relevant claim. The words "induced to refrain from making a relevant claim" are a reference to "without any relevant claim having been made" and embrace the same concept. In my opinion they mean no more than "induced not to make a relevant claim."

101. The second question concerns the identification of the relevant period to be excluded from the computation, in relation both to the date of its commencement and to the date of its termination. The pursuers arguments below assumed that the excluded period began at the latest on 21 February 1995, but they contended that it did not end until 28 September 1995 when they effected service on Transport. The Inner House held that it ended on 18 August 1995 when the error was discovered. The Inner House 2000 SLT 1374 saw no difficulty in seeing that the pursuers were refraining from making a relevant claim against Transport while they were unaware that Transport was the charterer of the vessel and so a possible party against whom proceedings should be brought. But they could not be said to be refraining from making the claim when they were "bending all their efforts" to doing so (p 1378). Excluding the period from 21 February 1995 to 18 August 1995 from the primary prescriptive period still left a period of more than five years from the date of the incident to the date when Transport was served, with the result that any obligation on its part to make reparation was extinguished.

102. Before your Lordships the pursuers have concentrated instead on the commencement of the excluded period. They had averred that they were induced to refrain from making the claim against Transport "for at least the period between [21 February 1995] and [28 September 1995]." The Inner House observed that this was because they:

"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."

The pursuers offered to prove that, but for the error induced by Shipping on behalf of Transport, they would have served Transport on or about 21 February 1995. The Inner House declined to accept the offer because it would not have saved the obligation from extinction if the period to be excluded from the calculation of the prescriptive period ended on 18 August 1995.

103. This raises a question of some general importance. Is it sufficient for the creditor to identify the period during which he was induced by the error to refrain from making the claim, or must he go further and identify the date on which he would have made the claim but for the error?

104. I am satisfied that he need not take this further step, which involves a hypothetical inquiry which can never be answered precisely and may sometimes be incapable of being answered at all. A representee can say why he acted as he did. He can say that it was, inter alia, because of the representation. But he can only speculate on what he would have done if the representation had not been made.

105. As a matter of English law, a representee must always be prepared to prove that the representation had an effect upon his mind. But it is sufficient for him to prove that the representation was an inducing cause which led him to act as he did; he need not prove that it was the inducing cause: Edgington v Fitzmaurice (1885) 29 ChD 459; Arnison v Smith (1889) 41 ChD 348 (see especially at p 369). Whether, if a full disclosure of the truth had been made, he would or would not have acted differently is a question to which English law does not require an answer; it is sufficient that he might have done so: see Spencer Bower and Turner, Actionable Misrepresentation (1974) at p 139. There are many authorities to this effect: thus

"I do not think a court of equity is in the habit of considering that a falsehood is not to be looked at because, if the truth had been told, the same thing might have resulted": In Re Imperial Mercantile Credit Association, Williams' Case (1869) 9 Eq 225, 226, per James V-C.

Summarising the authorities and paraphrasing a passage in the judgment of Byrne J in a prospectus case (Drincqbier v Wood [1899] 1 Ch 393, 404) the authors of Spencer Bower and Turner continue

"'Would you have taken the shares if something had been left out, and something else had been put in' is an extremely difficult question to answer, and one which the representor is not entitled to ask and to which the representee can give a perfectly adequate reply by saying 'I cannot say; I have never seen such a prospectus'." I do not understand the law of Scotland to differ in this respect.

106. Although the context is different, I think that the same principle must operate. It is sufficient for the pursuers to prove that for a period they believed that Shipping was the owner and operator of the vessel, that this belief was induced by words or conduct on the part of Transport or persons acting on its behalf, and that as a result they did not make a relevant claim against Transport. They do not have to show that but for the error they would have made a claim against Transport or that they would have done so on any particular date. This would have depended on the response of Transport and its agents to letters written to them by the pursuers' solicitors which in the event were never written. Since all three defenders are members of the same group of companies and employ the same agents, the likelihood is that nothing would have happened any differently from what did happen save for the substitution of Transport for Shipping. But this does not affect the principle that what would have happened is hypothetical and depends on making a number of assumptions the truth of which cannot be known; and that on the pursuers' averments the reason it is a hypothetical question is the fault of Transport or those acting on its behalf.

107. It follows that the pursuers' averment that if they had known the truth they would have made the claim against Transport on or before 21 February 1995 is irrelevant.

108. I think that section 6(4) of the Act operates in a very simple way. The first step is to take the period between the date when the obligation to make reparation arose and the date when the particular defender was served. If this primary period exceeds five years, then section 6(1) has the effect of extinguishing the obligation at the end of the fifth year. In the present case the obligation to make reparation arose on 1 March 1990 and the proceedings were served on Transport on 28 September 1995, more than five years later. Any obligation on the part of Transport to make reparation was prima facie extinguished.

109. The next step is to exclude from the calculation of the primary period any period during which the creditor's failure to serve the defender was the result of an error which was induced by the defender or someone acting on his behalf. This period is coterminous with the subsistence of the error in question. It cannot begin until the creditor is induced to make the error and it ends when he discovers the truth. On the pursuers' averments, the period to be excluded began in 1990 or 1991 and continued until 18 August 1995. It did not begin only on 21 February 1995 when they served Shipping. If they prove what they have averred, their failure to serve Transport before that date was due to their belief that Shipping was the party responsible for the operation of the vessel; and the fact that had they known the truth they still might not have served Transport until that date is neither here nor there.

110. On the other hand, the excluded period ended on 18 August 1995 when the pursuers discovered the error. This is not, as the Inner House suggested 2000 SLT 1374, 1378-1379, because they could not be said to be refraining from making the claim when they were "bending all their efforts" to doing so. It is because their failure to serve Transport after 18 August 1995 cannot be said to be "by reason of" any error when they knew the truth. As the Inner House observed, in paragraph 13, this is confirmed by the proviso to the subsection. If the excluded period is brought to an end as soon as the creditor could with reasonable diligence have discovered the error in question, then a fortiori it must come to an end when he actually did so. The periods before and after the error operated on the creditor's mind are not excluded from the five-year primary period, not because it is assumed that in the absence of any error the creditor would bring proceedings to enforce the obligation to make reparation immediately it arose, but because that is what he is given five years to do.

111. If the matter stopped there, any obligation on the part of Transport to make reparation was not extinguished by the time it was served with the present proceedings. But Transport may still succeed in showing that its obligation was extinguished before 28 September 1995 by invoking the proviso to curtail the duration of the period to be excluded from the calculation of the primary period. If it can establish that the pursuers could with reasonable diligence have discovered the error at some time before 18August 1995, then the excluded period will end at that earlier time.

112. For these reasons, as well as the reasons which they have given, I agree with the order which Lord Hope of Craighead and Lord Clyde propose.