VIEWPOINTS 2007 WHAT IS A VESSEL?

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1 VIEWPOINTS 2007 WHAT IS A VESSEL? 1) The Institute Time Clauses Hulls ( , and IHC 2003) provide indemnity for the Assured s collision liability in respect of three-fourths of their liability arising from "loss of or damage to any other vessel..". The American Institute Hull Clauses refer to any other ship or vessel, but the comments in this paper are largely directed towards the English Law/Institute Clauses position. 2) Statutory definitions of "ship" or "vessel" are relatively limited. Section 313 (Definitions) of the Merchant Shipping Act of 1995 states: ""ship" includes every description of vessel used in navigation". The same Act, under Part VI, Chapter III, incorporated the International Convention on Civil Liability for Oil Pollution Damage 1992 and for this purpose states that "ship" means "any seagoing vessel or sea-borne craft of any type whatsoever". Under Part VII the 1976 Limitation Convention is incorporated, including Article 2, paragraph 12 which states: "Meaning of "ship" 12. References in the Convention and in the preceding provisions of this Part of this Schedule to a ship include references to any structure (whether completed or in course of completion) launched and intended for use in navigation as a ship or part of a ship." The 1995 Act also enacted the 1989 Salvage Convention as part of English Law; Article 1 of the Convention states that "vessel means any ship or craft, or any structure capable of navigation". Additionally Article 3 states: "Platforms and drilling units. This Convention shall not apply to fixed or floating platforms or to mobile offshore drilling units when such platforms or units are on location engaged in the exploration, exploitation or production of sea-bed mineral resources." The nature of the statutory definitions has changed little since the 1894 Merchant Shipping Act, Section 742 of which stated: 1

2 ""vessel" includes any ship or boat, or any other description of vessel used in navigation. "ship" includes every description of vessel used in navigation not propelled by oars". The definition of "ship" was extended by Section 1(1) of the Merchant Ship Act 1921, which provided that "ship" included: "Every description of lighter, barge or light vessel used in navigation in Great Britain, however propelled: provided that a lighter, barge or light vessel used exclusively in non-tidal waters, other than harbours, is not for the purposes of the Act, to be deemed to be used in navigation". Section 4 of the Merchant Shipping (Liability of Shipowners) Act 1958, included in the definition of a "ship": "Any structure whether completed or in the course of completion launched and intended for navigation as a ship or part of a ship". 3) The test of intended or actual use in navigation has therefore been to the forefront when these issues have been considered by the Courts. Dumb barges or hopper barges were held to be ships for Merchant Shipping Act purposes, despite having no means of propulsion (the "Mac" 1882, the "Mudlark" 1911, the "Harlow" 1922) but each of these vessels were fitted with a rudder and usually had crew on board. Nonetheless, a dredger without propulsion or steering was found to be a "ship" for the purpose of Docks Regulations in Cook v Dredging and Construction (1958), because it was held to be used in navigation, as it moved between work locations. Conversely, a vessel shaped marker buoy, that was permanently moored as an aid to navigation, was held not to be a ship or vessel since "it was not constructed for the purpose of being navigated or for conveying cargo or passengers" (Lord Herschell in the Gas Float Whitton No.2, 1897). Two other important cases also looked at the primary purpose of the object under discussion. The first case, Merchants Marine Insurance v North of England (1926), involved a floating crane that was moved very infrequently, and then only over short distances due to its unseaworthy and unwieldy structure which included a fixed 70ft. jib positioned across the pontoon. The Court of Appeal declined to attempt a more comprehensive definition but were clear that the pontoon was functioning as a floating platform for the crane and was not a ship or vessel occasional movement was not equivalent to navigation. 2

3 No claim was therefore allowed under the Collision Clause. As an interesting footnote a similar pontoon was, several decades later, considered to be a ship when it was used to transport part of its then dismantled crane to Southampton, and an implied warranty of seaworthiness was applicable (Marine Craft Contractors v. Erland Blomqvist, 1953). In Polpen Shipping Co. v Commercial Union (1943) Mr. Justice Atkinson determined that a flying boat was not a ship or vessel for the purposes of the Collision Clause. Both of these terms involved a structure that was "intended to do its real work upon the seas or other waters and which is capable of free and ordered movement". The "real work" of the flying boat was to fly and its ability to float and navigate was merely incidental to its real work. The effect of these cases is summarised in Halsbury's Laws (4th ed.) as follows: "102. Meaning of "ship". Unless the context otherwise requires, "ship" includes every description of vessel used in navigation. Whether a vessel comes within that meaning of a ship depends on the facts of each case; the statutory definition is intended to enlarge the meaning of "ship". To be a ship a vessel must be used in navigable waters, either inland or at sea, and, although she must be constructed for navigation, it is not necessary to the definition that she should be able to navigate under her own power. The presence of a rudder and the manning of the vessel with a crew are important as showing that a vessel is a ship, but the absence of either does not mean that a vessel is not a ship. The purpose for which a vessel has been and is being used is also material when considering whether she is used in navigation." No other cases have been traced dealing specifically with the collision clause since Polpen Shipping. However, various non insurance cases have had reason to review many of the authorities already discussed. In Addison and others v. Denholm (1997) an Employment Appeal Tribunal heard a complex case involving employment rights of workers aboard floatels operating in the North Sea. The floatels were of the semi-submersible type and were anchored close to fixed platforms to provide accommodation for workers over a long period. Lord Johnston, rejecting the sole test of primary purpose, said: We recognise that there is force in the criticism, on behalf of the respondents, that the industrial tribunal directed itself erroneously, or placed too much emphasis, on the apparent distinction between a hull and a pontoon, since, in our opinion, the real question is whether the vessel in question floats and is used, or is capable of being used, for navigation for whatever else it may be used. In this respect, Polpen 3

4 Shipping Co. Ltd. V. Commercial Union Assurance Co. Ltd. (1943) 1 E.R. 162 is important, but not conclusive. In the presence to which we have referred in the industrial tribunal s decision with regard to purpose, it is clear that the main influencing factor in mind of the tribunal was that these objects are essentially accommodation hotels. However, by relying on upon that undeniable fact to a material extent, we consider that the tribunal misdirected itself, whether as a matter of law by applying the wrong test, or as a matter of fact and therefore as a matter of law by taking into account a fact or factors which should have been left out on account, viz. purpose. In our opinion, so long as the test involves evaluation of an object capable of floating, and capable of navigation, which is used in navigation at least to some extent, to whatever other uses it may be put, and whether those uses or one of them may even be its main purpose, does not, in our opinion, bear upon how it should be categorised. Its categorisation must be a constant, and cannot be subject to a variable, viz. one purpose rather than another. Thus, some object which is plainly a ship which is moored alongside, or in the vicinity of, an oil installation to provide accommodation does not cease to be a ship merely because it does not move for a considerable period of time. What was once a ship may cease to be one if it becomes permanently something else, namely, beached or attached to land to such an extent that it has become a fixture and is no longer being used in navigation, nor capable of being so used. These objects are certainly not within the category. If we are right in this approach, the crews have the protection of the Merchant Shipping Act 1995 but, according to how the Transfer of Undertakings (Protection of Employment) Regulations 1981 are construed, may not have rights in that respect. In our opinion, therefore, the industrial tribunal erred in law in determining that these vessel were not ships, and that decision, in our opinion, cannot stand. We declare them to be ships, and also, be definition since the greater would include lesser, they are obviously to be regarded as sea-going vessels conforming to article 1(3) of the Acquired Rights Directive (77/187/E.C.C). In 2001 the Court of Appeal in Perks and Clark v. MacLeod dealt with an appeal by the Inland Revenue against a decision by the Tax Commissioners that a jack-up rig was a "ship", thereby entitling those working aboard it to certain tax exemptions. The High Court had previously found in favour of the Revenue, following the Polpen approach of determining what the "real work" of the item in question was. The Judge, had taken the view that the "real work" of the rig was to perform a static function of drilling into the earth's crust, to which the ability to float and move was entirely incidental. In the Court of Appeal, Mr. Justice Carnwath disagreed, approving the broader definition in Halsbury's Laws. Referring to some of the cases mentioned above he said: 4

5 "41. The Merchants Marine case is of particular interest, because notwithstanding the very specialised nature of the structure and the limited movement involved, it was not regarded as a clear-cut case. The Judge (Mr. Justice Roche) accepted that there might be floating cranes which would be "ships or vessels" within the definition (25 Ll.L. Rep. p. 447). In the Court of Appeal, Lord Justice Scrutton would say no more than that he was "not convinced that the learned Judge below was wrong", and he considered it impossible to lay down a satisfactory definition ((1926) 26 Ll.L. Rep. at p. 203). 42. Those examples show that, so long as "navigation" is a significant part of the function of the structure in question, the mere fact that it is incidental to some more specialised function, such as dredging or the provision of accommodation, does not take it outside the definition. There may be an issue of degree as to the significance of the navigation on the facts of a particular case, but that, as the observations of Lord Justice Scrutton show, is a question for the fact-finding tribunal. Those examples also show that "navigation" does not necessarily connote anything more than "movement across water"; the function of conveying persons and cargo from place to place" (in the Judge's words) is not an essential characteristic." In addition to the cases summarised above, the Judge also referred with approval to the decision of the Irish Supreme Court in "The Von Rocks" (1998). A backhoe dredger was held to be a "ship" for the purposes of the Maritime Convention Act, despite having no motive power or steering capability of its own, since it was capable of traversing significant water surfaces and did in fact regularly so traverse them, when not working on location anchored by spud legs. In terms of the Maritime Conventions Act (Steadman v. Scofield, 1992) and the Merchant Shipping Act 1995 (R v. Goodwin, 2006) jet skis and similar personal water craft have been held not to be a ship. In the latter case, Lord Phillips in the Court of Appeal referred to Perks and the Von Rochs and agreed that it was not a necessary requirement that a ship should be used in transporting persons or property to an intended destination. However, use in navigation required something more than people simply messing about in boats. 4) Only a few of the cases referred to above relate to the Collision Clause and there is therefore limited authority on the meaning of the word vessel in that context. The Concise Oxford Dictionary offers the following definitions: 5

6 Craft: Ship: Vessel: boat, vessel, aircraft or spacecraft. vessel with bowsprit and three, four or five square rigged masts; any large seagoing vessel. ship, boat esp. large one. Leaving aside the traditional definition of a ship as a specific type of sailing vessel, the terms ship and vessel are often used interchangeably, with vessel having the broader sense of the two. The wording used the Collision Clause has not changed materially since its first appearance in ITC Hulls in 1888 which referred to any other ship or vessel. Since 1952, the Clause has referred simply to any other vessel, which is as it appears in the latest IHC In the Merchants Marine case referred to above, Lord Justice Scrutton famously declined to offer a comprehensive definition: One might possibly take the position of the gentleman who dealt with the elephant by saying he could not define an elephant, but he knew what it was when he saw one, and it may be that that is the foundation of the learned judge s judgment, that he cannot define ship or vessel but he knew this thing is not a ship or vessel. I should have liked to be able to give a definition here, because considering that these words are the words in every ordinary marine policy and in every club policy and that they are also, with some addition, the words in the Merchant Shipping Act, it is rather a pity that the Courts are not able to give a definition of the words which are constantly turning up in a mercantile transaction. But the discussion today, while I personally was endeavouring to see if I could get a satisfactory definition, of the numbers of various incidents and various kinds of things to which this definition has been applied, has convinced me that it is of no use at present to try to define it, and the only thing I can do in this case is to treat it as a question of fact and to say that I am not satisfied that the learned judge was wrong. In the absence of any clear definition, it would seem the best approach is to follow the cases as far as seems appropriate. There are a number of types of craft that are in the possible grey area, including units such as floating cranes, dry-docks and dredgers that have been around for a long time and more modern equipment such as drilling rigs, floating storage and possessing plants and other specialist craft. The jack up rig is a good place to start. On the cases reviewed above, the term would include a jack up rig which is clearly capable of water-borne movement in open waters, and relies on 6

7 this capability to perform its primary function of drilling where there is a commercial demand for it to do so. However, a jack up rig of course has a particular operational feature that is absent from a semi-submersible rig or from dredgers (while dredgers may use spud legs to hold themselves in position they generally continue to rely on buoyancy to support their weight). When in operation the rig is supported on the seabed and held clear of the water does it then loose its characteristic as a vessel? If it was thought desirable to draw a line as to the applicability of the Collision Clause to such rigs, being jacked up clear of the water would be a convenient point at which to draw it by appropriate wording. In the absence of such wording (and without any specific market understanding on the point) it may be helpful to break the issue down further into four different scenarios. If a jack up rig is under tow or lying afloat at anchor while relocating to another site, the guidance of the authorities would seem to be strongly in favour of treating this rig as a vessel. What if a jack up rig undertaking a wet tow to another location, calls in to an anchorage to shelter from bad weather and jacks up to give a safe minimum clearance? While jack up rigs are fitted with anchors, it will always be more prudent (if seabed conditions permit) to hold the rig in position by jacking it up, particularly if bad weather is expected. However, the question remains as to whether, once supported by the sea-bed, it looses its vessel status, notwithstanding that coastal vessels often take the ground in loading berths and all vessels will from time to time be placed in a dry-dock or on a slipway, all without changing the essential characteristics of a vessel. I think the answer is no. Pelton Steamship Co v. North of England (1925) dealt with a collision claim in respect of damage done to a vessel that had sunk and was in the process of a lengthy salvage operation. As a result of the collision, the continuation of the salvage operation was no longer worthwhile. Hull insurers declined to pay their ¾ proportion on the basis that the other vessel was a wreck and not a ship or vessel. Referring to the similar case of Chandler v. Blogg (1896) Mr Justice Greer disagreed, saying that navigability at the time of the collision cannot be a decisive test. Prior to the collision the salvors had a reasonable chance of refloating the vessel, which had not therefore ceased to be a ship or vessel. 7

8 The Court of Appeal in Perks and Clark (see above) appeared to see no need to distinguish between submersible, semi-submersible and jack up rigs and the cases reviewed above do not support an activity rather than functionality based set of criteria. Only a significant change in circumstances over a prolonged period would appear to be enough to change a vessel into something else. Next let us assume that a jack up rig jacks up on a location to carry out exploratory drilling scheduled to last for two months. In European and Australian Royal Mail v. P&O (1866) it was held that a vessel that had been purchased and converted for use as a coal hulk and workshop had, after four years, lost its status as a ship in terms of the Merchant Shipping Act. Similarly, although the pontoon in the Merchants Marine case had been towed a considerable distance before being converted to a crane barge, this did not prevent its subsequent loss of its vessel status after a significant passage of time. In neither case is there any guidance as to what the minimum period might be for this to take place, but it seems likely that it would need to be more than a few months certainly that is the impression gained from the floatel case. Finally, a marginal field with an anticipated life of ten years uses a jack-up rig as a production platform. On the basis of the above cases, this must cease to be a vessel in such circumstances. Where conventional tankers are put into a temporary storage role as buyers speculate on the price of oil, they clearly do not lose their vessel characteristics. If a tanker gets assigned to a particular field for storage purposes the position does not immediately change, but a complete version to full FPSO status must begin to raise questions, particularly if the vessels propelling machinery is removed. Once moored permanently in position is an FPSO, however ship-like in shape or origin, any different from a Single Buoy Mooring? Probably not. Perhaps Lord Justice Scrutton was right: this is one of those points on which a definitive definition may be impossible to achieve. R. R. Cornah 28 September