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

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    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:

    "Now, that undoubtedly implies that there is negligence upon the part of the creditor, that he ought to have pursued his action sooner, and that he ought not to have allowed the three years to elapse. But how is that possible in the case of these pursuers if their statements be true? By the false pretences of the defender they were prevented from discovering that they were carrying sacks free for which they were entitled to charge. And the defender was in the full knowledge of that and failed to disclose it. To apply the statute to a case of that kind, it appears to me, would not only be entirely unjust, but would be entirely against the meaning of the statute. The statute assumes that the creditor is in a condition to sue, and it is because of his failure to sue - because of his negligence in putting off the making of his claim - that the statute imposes the penalty upon him. It is clear to my mind, therefore, that wherever a case of this kind can be made, that the failure to sue is due to the conduct of the defender (whether it amount to fraud or not), to concealment on the part of the defender, or to the bringing forth of pretences which are false in fact, whether fraudulent or not, the pursuer cannot be visited by the penalty of the statute, because there is no negligence upon his part, but the sole cause of the delay in bringing forward his claim and raising the action is the conduct of the defender."

    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:

    "We consider that on equitable grounds a defence against the suggested new short negative prescription should similarly be available to the creditor if he has been deterred from taking action within the prescriptive period by fraud or concealment by the debtor or by error on the part of the creditor, but only where the error has been induced by the words or conduct of the debtor. For the purposes of such a defence the actions of any person through whom the creditor or debtor claimed or from whom the creditor or debtor derived right should be regarded as actions of the creditor or debtor respectively and the actions of an agent for either party should be regarded as the actions of his principal. The effect of such fraud, concealment or error should be to defer the commencement of the prescription until the date when the fraud, concealment or error was discovered by the creditor or could, with reasonable diligence on his part, have been discovered."

    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 be 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.


    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.


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:

    "The following enactments, so far as they are applicable for the purposes and are not inconsistent with the provisions of this Act, are hereby incorporated with and form part of this Act….(b) the Harbours, Docks and Piers Clauses Act 1847 ."

except 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.

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