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House of Lords
Session 2001- 02
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Judgments

Judgments - BP Exploration Operating Co Ltd v Chevron Transport (Scotland)

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 Tankers.

    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 the shipping'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:

    "In the computation of a prescriptive period in relation to any obligation for the purposes of this section -

    (a) any period during which by reason of -

    (i) fraud on the part of the debtor or any person acting on his behalf, or

    (ii) error induced by words or conduct of the debtor or any person acting on his behalf,

    the creditor was induced to refrain from making a relevant claim in relation to the obligation, and

    (b) any period during which the original creditor (while he is the creditor) was under legal disability,

    shall not be reckoned as, or as part of, the prescriptive period:

    Provided that any period such as is mentioned in paragraph (a) of this subsection shall not include any time occurring after the creditor could with reasonable diligence have discovered the fraud or error, as the case may be, referred to in that paragraph."

    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:

    "Had it not been for their said error they would have raised proceedings against the defenders in respect of the said obligations at the latest on the date when, in the event, they raised proceedings against Chevron Shipping, to wit 21 February 1995. Accordingly, they were induced to refrain from making a relevant claim for at least the period between that date and the date when the present proceedings were raised. The date of raising these proceedings was the earliest possible date on which the present proceedings could reasonably have been raised following the disclosure of the existence of the charterparty. The said period does not fall to be reckoned as part of the prescriptive period."

    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:

    "In our view, once the error is removed, the period begins to run again and - however difficult it may prove to be and even if it should indeed prove to be impossible - the creditor has merely the balance of the five years in which to serve his action."

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.

 
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