Maritime Law

Christopher Hill, Yash Kulkarni

• Publisher: Informa Law from Routledge
• Year: 2017
• ISBN:
  9781351559140
• Edition: 6
• Topic: Diritto
• Subtopic: Diritto marittimo

Maritime Law is an exhaustive introduction to this complex area of law. The book is ideal for newcomers and experienced professionals requiring an update on the general principles and case law. • Charterparties chapter • Passengers chapter • Salvage – includes developments in case law and introduction of new Lloyd's Open Form Salvage Agreement • Sale of ship and shipbuilding contracts • Collisions • Oil pollution – Convention on bunker spills

Chapter 1
Ownership and Registration

Ownership

What constitutes absolute ownership of the thing, whether it be goods or a ship, has been the subject of much discussion since the beginning of time. Some define ownership simply as the possession of the absolute right to sell the thing, the right to enjoy quiet and uninterrupted possession of it. These are certainly facets of true ownership and indeed are reflected in the historical legal maxim, nemo dat quod non habet, a free translation of which could be ‘no one can pass to another a title which is not his to give’. Clearly the vendor of anything, be it goods or a ship or land, can effectively pass to another person the rights only which he himself possesses. With land it is all-important that the title should be traced back as far and as carefully as possible so that the purchaser can satisfy himself as far as is humanly possible that his title is as unshakable as it can be made. Even freeholders of real property can never be absolutely sure that their title is good as against ‘all the world’. When property passes from hand to hand it is usually, but not always, as the result of a commercial agreement supported by consideration to bind the exchange of promises into a contract enforceable at law. A total failure of consideration on either side will abort the contract and prevent the passing of property.

Evidence of ownership must necessarily largely rest on documents and, in the case of vessels, regard will be had to relevant entries in the port of registry or to executed bills of sale but this must nevertheless be necessarily prima facie evidence only, displaceable by more positive proof to the contrary. (The bill of sale under which the ownership of British ships is transferred is in no way connected with or affected by the Bills of Sale Acts.)

The Horlock (1877) 2 PD 243

In an action re co-ownership, it was alleged that A by process of bill of sale was registered as sole owner of the ship and that subsequently another bill of sale was executed to B, the plaintiff, who acquired the same property for value. A denied that he had signed the bill of sale and contended that if any such bill of sale was registered it was done so fraudulently.

Held: that as legal ownership had passed to B for valuable consideration by the execution and registration of a bill of sale without notice of fraud, B had acquired a good title.

A total failure of consideration in a commercial transaction can render a prospective new shipowner powerless to become effectively the true new owner no matter how strenuous and meticulous his efforts in completing the formal re-registration and allied statutory documentation required of a shipowner on his own behalf. How the shipping laws of the United Kingdom can in certain circumstances complicate such situations will be seen later when sale of ships is discussed.

Co-ownership

Co-owners are of two classes. (1) Joint owners, in whom are vested the property in a ship or a share therein jointly with unity of title and no distinction of interest. (2) Part owners or co-owners properly so-called, in whom is vested severally distinct shares in the ship, but with an undivided interest in the whole.

The former are joint tenants of the property held, the latter are tenants in common with each other of their respective shares. Normally the relations of the co-owners inter se are regulated by express agreement; the management of the ship being delegated to a ship’s manager or husband who may or may not be a part owner. Where, however, there is no agreement, their rights inter se are governed, at any rate in English law, by the principle that the will of the majority must prevail, provided that the interests of the dissenting minority can be properly protected. The power of sale will be exercised, though with reluctance, even on the application of a minority of part owners.

Since very early days, a ship has been notionally divided into 64 parts. Nobody really knows the reason, except possibly the obvious and practical one that dealings in and transfers of ships are simplified.

A person, or corporation, may own more than one part, but it is not practical (though perfectly possible) for more than one person to own one part. If more persons than one do own a single part, they must be regarded as joint owners in the undivided part and not as several owners of separate fractions.

A corporation may be registered as owner under its corporate name and the formation of a limited liability company is common practice in the ship-owning business. Where a ship’s owner is such a corporate entity, she is registered under its corporate name and not under the names of each individual shareholder in the company.

Part owners are not necessarily partners in a business in the legal sense. They will almost certainly be partners in individual ventures in which the ship may be engaged from time to time, share in profits and losses, and be mutually obliged to honour liabilities incurred by the ship’s manager, who may or may not be a servant or employee of the owner. Although the name of such a manager must be registered, the registration does not have the drastic effect per se of making the 64 part owners fully responsible for the mass of obligations which a vessel finds herself facing in the course of her working career. The authority extended to the manager must exist independently of the formal register. Whereas he will almost certainly have implied authority to arrange employment for the ship by way of charter or other form of contract, his authority will not extend to altering or cancelling them. For reasons of seizing profitable opportunities for the timely employment of the ship at short notice it may not always be possible for the prior consent of all part owners to be obtained before a contract needs to be concluded. A dissentient minority’s rights can be protected by bond under the provisions of section 20(2)(b) of the Supreme Court Act 1981 (see further page 90 et seq, post).

Ownership and registration

The notion of 64 shares is expressed in the Merchant Shipping (Registration of Ships) Regulations 1993 which came into force on 21 March 1994. Regulation 2(5) states that entries in the Register are made in accordance with the following provisions, which are summarised:

• (a) the property in a ship shall be divided into 64 shares;
• (b) not more than 64 persons shall be entitled to be registered at the same time as owners of any one ship;
• (c) a person shall not be entitled to be registered as owner of a part of a share; but any number of persons not exceeding five may be registered as joint owners of a ship or of any share or shares in a ship;
• (d) joint owners shall be considered as constituting one person only as regards the persons entitled to be registered and shall not be entitled to dispose in severalty of any interest in a ship or in any share in a ship in respect of which they are registered.

The Merchant Shipping Acts 1894 to 1994 have been consolidated by the Merchant Shipping Act 1995 (which came into force on 1 January 1996). By virtue of the Interpretation Act 1978, s.17(2)(b) regulations made under the repealed legislation are continued in force unless otherwise stated. By virtue of the Merchant Shipping Act 1995, s.314 and Sched. 14, para. 2 any references in any other Act (not amended by the 1995 Act, Sched. 13), or in any instrument made under any other Act to the registration of a ship or a fishing vessel under certain enactments is construed, unless the context otherwise requires, as, or as including, a reference to registration under the 1995 Act, Pt. II (ss.8–23). Sections 9 and 10 provide for registration regulations for and in connection with the registration of ships as British ships. No regulations pursuant to this Act have been made and the 1993 Regulations are still in force, although the 1993 Act (below) has been repealed. Minor amendments and corrections were made to those regulations by the Merchant Shipping (Registration of Ships) (Amendment) Regulations 1994 (SI 1994 No 541).

Who can own a British ship?

Ships are potentially the means by which their owners can incur liabilities to third parties—sometimes of catastrophic proportions. It is, therefore, logical that ships should be given a nationality so that their owners’ obligations, duties, rights, liabilities, immunities etc, can the more easily be regulated and recognized. In short, ships should and do fly a national flag.

The qualifications for ownership of a British-registered ship were set out in section 1 of the Merchant Shipping Act 1894. The prerequisites for the registration of a British ship then underwent a change due to the coming into effect of Part I of the Merchant Shipping Act 1988 on 1 April 1989. The Merchant Shipping (Registration, etc) Act 1993 received the Royal Assent on 1 July 1993 (‘1993’ Act). The Act arose from the report by the General Council of British Shipping and the Department of Transport Joint Working Party entitled British Shipping: Challenges and Opportunities.

The 1993 Act came into force on 21 March 1994 (The Merchant Shipping (Registration, etc) Act 1993 (Commencement No 1 and Transitional Provisions) Order 1993—1993 No 3137). There was a saving in respect of vessels currently registered which might otherwise cease to be eligible to be registered by reason of any change in qualification for ownership. Detailed provisions relating to ship registration are contained in the Merchant Shipping (Registration of Ships) Regulations 1993 which also came into force on 21 March 1994 (‘1993 Regulations’).

The 1993 Act and 1993 Regulations principally came about due to the impact of the EC and the Factortame litigation (see below) and replaced the law relating to ship registration contained in the 1894 and 1988 Acts. The Merchant Shipping (Registration etc) Act 1993 was, however, repealed in its entirety by the Merchant Shipping Act 1995. The previous position leading up to these recent developments is quite important, at least to show the gradual evolution away from the idea of the British Empire. The European Community is very important and has brought about many changes to English law.

Historical development

In the old 1894 statute (s.1), it was provided that in the case of corporations or duly registered companies owning ships (this method of ownership is these days by far the most common) these must have their principal place of business in Her Majesty’s Dominions.

The Polzeath [1916] P 241, CA

A ship was owned by a company which was registered in the UK that was in fact controlled from Hamburg by the Chairman of Directors, who held the majority of shares and resided there. Proceedings were instituted for forfeiture of the ship.

Held: that the principal place of business was not in His Majesty’s Dominion and, therefore, the ship was forfeit to the Crown.

The Polzeath ruling appears then to have interpreted ‘principal place of business’ as meaning that place from where the effective control was maintained. A ‘British’ ship would seem, therefore, to have been one owned by British interests with the ‘double’ requirement that, if owned by a company, the company should not only be registered within Her Majesty’s Dominions, but also have its principal place of business there. Unless the ship was thus a ‘British’ ship, she could not fly the British flag. There has, nevertheless, been nothing to prevent British shipowners taking advantage of the flag of convenience system described later in this chapter.

The determination of what and where is the ‘principal place of business’ in any given context was the subject of judicial scrutiny in The Rewia (1991 2 Lloyds Rep. 325). Legatt LJ said at p. 334

‘In my view principal means in this context, as well as generally, “chief” or “most important” …. It is not necessarily the place where most of the business is carried out …. In my judgement there is nothing uncommercial or inapposite about the conclusion that the principal place of business (on the Rewia facts) is in Hamburg of a company registered in Liberia owning a ship, the earnings of which would ultimately be remitted to Germany and about which most important decisions would be taken in Germany. That is the conclusion to which the reasoning in Polzeath inexorably leads ….’

So The Polzeath doctrine on this particular point still holds good at the end of the twentieth century and indeed in December of 2002 in a case involving Crown Resources¹, the charterer of The Prestige (of oil spill fame), The Polzeath doctrine, as embraced in The Rewia, was again followed and described as ‘an essential tool’ in determining the location of ‘the principal place of business’.

The Victorian-origin section 1 of the 1894 Act was replaced by the Merchant Shipping Act 1988. The purpose was to dissolve the imperial concept which had lingered on in the 1894 Act. That part of the 1988 Act which dealt with registration of ocean vessels became effective in the UK on 1 April 1989 and in many of the dependent territories even sooner than that. It should be borne in mind that the 1894 and 1988 Acts have been consolidated with consequential repeals by the Merchant Shipping Act 1995. The 1988 Act brought about the following fundamental changes:

• (1) Under the old Victorian legislation the UK was capable of forcing its maritime law on dependent territories. In other words, whether it liked it or not and whether it had the administrative capability or not, a colony was obliged to register a British ship. The 1988 Act prevented this by bringing about the complete domestication of the 1894 Act and confining its effects to the mainland UK. This makes sound sense in the modern world where the dominions such as Canada, Australia or New Zealand are totally independent with an absolute right to ‘shut the door’ on British shipowners. The same may be said of some colonial territories.
• (2) Under the old 1988 Act, there was no longer an obligation to register. It was an entitlement. The 1988 Act removed the compulsory nature of registration and thus also the exempted categories and it made registration an entitlement provided that the person applying for it can exhibit the required qualifications. This gave recognition to what is already the custom that British owners are not barred from seeking other registries, i.e. ‘flagging out’. Thus a definition of a British ship changed from being one which, owned by British subjects or corporate persons, is obliged to be registered, to one of which the majority interest is owned by persons qualified to own a British ship and is actually so registered.

One of the prerequisites of the entitlement to register under the 1988 Act was that the majority interest in the ship shall be owned by a qualified person or persons and if those persons are not UK residents, then a representative person must be appointed who, if an individual person, must be a UK resident and, if a corporate body, must be incorporated in the UK and have its principal place of business there—a double ‘prerequisite’. The above requirements seem to be directed towards ships over 24 metres in length (as defined by the 1894 tonnage rules) and although this is not entirely clear, it would seem that ships of a lesser length than 24 metres may qualify in their own right as British ships, pro...