The Law of Tug and Tow and Offshore Contracts

Simon Rainey

• Publisher: Informa Law from Routledge
• Year: 2017
• ISBN:
  9781351364843
• Edition: 4
• Topic: Jura
• Subtopic: Seerecht

Fully updated and revised to take into account the new BIMCO Supplytime 2017 contract with a detailed analysis of the changes since the Supplytime 2005 form and including a new analysis, for the first time, of the BIMCO Bargehire form, this is the only modern work on the law of towage and offshore vessel services. It gives a comprehensive and extensively researched account of the general law coupled with a detailed clause-by-clause commentary and analysis of all of the major standard contracts used in the international offshore, towage and heavylift sectors, comprising the BIMCO Towcon, Towhire, Supplytime and Heavylift forms, the full suite of BIMCO Wreck Removal forms and, now, also the BIMCO Bargehire form, as well as the ISU Salvcon and Salvhire forms.

The Law of Tug and Tow and Offshore Contracts has rapidly established itself as a leading text and is written by, Simon Rainey QC, one of the foremost shipping practitioners with unrivalled experience in the field.

Key reasons to buy The Law of Tug and Tow and Offshore Contracts, Fourth Edition

• the only clause-by-clause commentary on all of the major standard form contracts used by the offshore industry

• the only in-depth analysis of the drafting history of the BIMCO standard form offshore contracts, comparing the recent amended versions in their drafting context;

• the only authoritative analysis of the case law and arbitration decisions affecting the towage and offshore industries

• written from the perspective of a leading practitioner with unrivalled practical experience over many years of the contract forms and of the issues which arise under them (many of which are unreported) and involved in almost all of the leading cases and arbitrations in the field

• written with an eye on the practicalities of how the contracts work given the everyday problems which arise in the industry, with guidance where the standard forms may require amendment

Chapter 1

The contract of towage

Part A. Preliminary considerations

Defining towage

1.1 The towage of one ship by another as a common maritime operation began with the development of the steam paddle tug in the 1820s and 1830s. The first tug upon the River Thames appears to have been the Lady Dundas in 1832 (see F C Bowing, A Hundred Years of Towing: A History). Not long afterwards in 1839, in perhaps the most celebrated and certainly the most beautiful depiction of towage, Turner painted the Téméraire under tow from Sheerness to Beatson’s breakers-yard in Rotherhithe on the evening of 6 September 1838. Soon, steam tugs were assisting the sailing ships in the rivers and ports of England. As they grew more powerful, they were engaged to tow sailing ships on longer voyages to hasten the arrival or departure of the ships. So, by the mid-nineteenth century sailing ships would “take steam” to and from the places where the outward pilot was dropped or the inward pilot was taken on board. The definition of towage given by the courts reflected the limited nature of the service that tugs then performed. A towage service was described in The Princess Alice (1849) 3 W Rob 138 at p. 139 by Dr Lushington:

as the employment of one vessel to expedite the voyage of another when nothing more is required than the accelerating [of] her progress.

This definition was adopted and endorsed in successive editions of Bucknill, Tug and Tow (1st edn, 1913; 2nd edn, 1927).

1.2 By the time of the second edition of Bucknill (above), Dr Lushington’s definition of towage had already become too narrow and did not reflect the varied nature of the services which tugs were performing. Today, his definition aptly describes but one aspect of the varied work upon which tugs are commonly engaged. In addition to the towage of ships and other water-borne objects such as oil and gas rigs, tugs frequently render a wide range of services, both in terms of handling and supply, to the offshore industries.

Towage arises ex contractu

Towage arises from a contract

1.3 However towage is defined and whatever the particular nature of service being performed by the tug, since towage arises from the engagement or employment of the tug by another vessel to perform a particular service or for a particular purpose, towage arises from a contract concluded between the tug and the tow. As was said by Bucknill (above, 2nd edn), p. 1:

In Admiralty law “towage” expresses the idea of work done under a towage contract as distinguished from towage work done by a salvor.

The contract of towage is merely a species of contract. With the exception of certain special incidents attaching to the formation and content of the mutual relations under that contract, the ordinary principles of the law of contract will apply (for these, see eg Chitty on Contracts (32nd edn, 2015)). It is these special incidents which form the subject-matter of this chapter.

The relationship between towage and salvage

1.4 The contractual nature of towage is of particular significance in considering the relationship between towage and salvage as the passage cited from Bucknill (above) demonstrates. Since the service as a service, whether of pure towing work or of any allied operation, being performed by a tug can be performed by that tug contractually or as a salvage service, the dividing line between contractual towage and towage rendered as salvage will depend on the presence of a towage contract and on the extent of the contractual services to be rendered under and as defined in that contract. The old cases when speaking of contractual towage describe it as “ordinary towage” (see The Strathnaver (1875) 1 App Cas 58 at p. 63) or as “mere towage service” (see The Reward (1841) 1 W Rob 174 at p. 177 per Dr Lushington) in distinguishing those services which a tug renders under contract from those which it renders as salvor.

1.5 Salvage and the entitlement to remuneration or reward arises irrespective of the existence of a contract between the salvor and the vessel or other property being salved. Although a form of salvage contract is frequently entered into, the most common form being Lloyd’s Open Form or “LOF” (which has gone through various revisions, the latest form being LOF 2000, recently revised in minor respects as LOF 2011), salvage does not depend on the conclusion of a contract. Thus, in The Hestia [1895] P 193, Bruce J stated at p. 199:

But salvage claims do not rest upon contract. Where property has been salved from sea perils, and the claimants have effected the salvage, or have contributed to the salvage, the law confers upon them the right to be paid salvage reward out of the proceeds of the property which they have saved or helped to save.

No doubt the parties may by contract determine the amount to be paid but the right to salvage is in no way dependent upon contract, and may exist, and frequently does exist, in the absence of any express contract, or of any circumstances to raise an implied contract.

1.6 Accordingly, where a tug is engaged by a vessel under a towage contract to perform some towage operation, that operation and the work which the tug has to effect to achieve it will not constitute salvage. It is only where the tug has to perform some service outside the contract, and in circumstances of danger to the vessel, that salvage will arise. The touchstone is the scope and nature of the service contemplated by and provided for in the contract. In the celebrated opinion of the Privy Council in The Minnehaha (1861) 15 Moo PC 133, per Lord Kingsdown at pp. 152–154, it was put in this way:

But if in the discharge of this task, by sudden violence of wind or waves, or other accidents, the ship in tow is placed in danger, and the towing vessel incurs risks and performs duties which were not within the scope of her original engagement, she is entitled to additional remuneration for additional services if the ship be saved and may claim as salvor instead of being restricted to be paid for mere towage.

1.7 The settled view is that while the tug is acting as salvor and extra-contractually, the towage contract is “superseded” or “suspended” (see per Lord Kingsdown in The Minnehaha, op. cit.) or as Sir Samuel Evans P put it in The Leon Blum [1915] P 90, after an exhaustive review of the authorities, at pp. 101–102:

The right conclusion to draw from the authorities, I think, is that where salvage services (which must be voluntary) supervene upon towage services (which are under contract), the two kinds of services cannot co-exist during the same space of time. There must be a moment when the towage service ceases and the salvage service begins and, if the tug remains at her post of duty, there may come a moment when the special and unexpected danger is over, and then the salvage service would end, and the towage service would be resumed. These moments of time may be difficult to fix, but have to be, and are fixed in practice. During the intervening time, the towage contract, insofar as the actual work of towing is concerned, is suspended. I prefer the word “suspended” to some of the other words which have been used, such as “superseded”, “vacated”, “abandoned”, etc.

1.8 As Sir Samuel Evans P states, it is often difficult to discern the point at which a service being rendered by a tug under a towage contract ceases to be regarded as one rendered under the contract and constitutes salvage. The relationship between contractual towage and salvage is considered in greater detail in Chapter 8 below.

Gratuitous towage

1.9 While not often encountered in practice, especially in the field of commercial towage or the towage of large water-borne objects, instances occasionally arise where the towing vessel agrees to tow another vessel in difficulties without payment. Thus, a friendly tow may be offered and accepted between small boats such as yachts or between sister ships or ships which, although nominally owned by different companies, are in effect sisters. In such a case there is no contract as such. However, the tug is obliged to exercise reasonable care in the performance of the tow and will be liable to the tow in tort if it executes the tow negligently (see Skelton v London & North Western Rly (1867) LR 2 CP 631). In that case, a railway company voluntarily followed the practice of shutting a gate by a railway crossing but on one occasion forgot to do so. Willes J, applying the decision in Coggs v Bernard (1703) 2 Ld Raym 909, stated at p. 636:

If a person undertakes to perform a voluntary act, he is liable if he performs it improperly, but not if he neglects to perform it.

Similarly the tow will owe a duty of care to the tug and will also be obliged to exercise reasonable care in respect of its role in the towage. As it is put by Bucknill (above) (2nd edn, p. 1, footnote (b)), where the towage is rendered gratis, “the general duty to take reasonable care governs the mutual relations of each vessel.

1.10 The standard of the reasonable care to be exercised by the “friendly tug” and “friendly tow” will depend on all the circumstances including the type of vessel and nature of the operation proposed; the gratuitous nature of the service will be relevant.

1.11 Thus in the Canadian case of The West Bay III (Maurice Federation v Stewart) [1969] 1 Lloyd’s Rep 158, a “boom-boat” which was used to push floating logs into position suffered an engine failure. A fisheries patrol vessel agreed to give her a tow; she did so gratuitously. During the towage, she increased speed so as to give herself necessary steerage-way but this capsized the boom-boat, causing loss of life. The court (Exchequer Court, British Columbia Admiralty District) held that the patrol vessel owed those duties as were usually owed by the tug. Sheppard J, however, held that there was no negligence. At p. 163 he stated:

In the case of a gratuitous service, such as that of [the patrol vessel’s master] in this instance, there is no liability at law where the fault may be excused as an error in judgement.

See also Karavias v Callinicos [1917] WN 323 (gratuitous carriage of persons), Armand v Carr [1926] SCR 575, Supreme Court of Canada, and the American cases of The Mifflin 1931 AMC 326 and The Warrior 1929 AMC 41 which are to the same effect.

The contract of towage is a contract for services

1.12 Under a contract of towage, the tug owners agree to provide services for the tow with tug, which they themselves officer, crew and supply, for an agreed or defined service or to attain an agreed defined result or for an agreed or defined period of time in exchange for periodic or lump sum payments.

1.13 However, in towage contracts and, in particular, in many of the common standard form towage contracts, terms are often used which imply or connote a lease of the tug to the tow or the hire by the tow of the tug. The tug owner is often described as “letting” the tug to the tow; the tow is usually described as “the hirer” of the tug and the contract will commonly refer to the “delivery” to the tow of the tug and of the “redelivery” by the tow of the tug upon the completion of services. Notwithstanding the use of such terms, a towage contract is not a lease nor a contract for the hire of the tug nor is possession of the tug passed to the tow under the contract. The towage contract is merely a contract for the provision to the tow of services, which services are provided by the tug owners through their tug and tug crew. The position under a towage contract is, therefore, similar to the position under a time charterparty of which Lord Reid said in The London Explorer [1971] 1 Lloyd’s Rep 523 at p. 526:

Under such a charter there is no hiring in the true sense. It is not disputed that, throughout, the chartered vessel remains in the possession of the owners, and the master and crew remain the owners’ servants. What the charterer gets is a right to have the use of the vessel.

In The Madeleine [1967] 2 Lloyd’s Rep 224 at p. 238, Roskill J commented as follows in relation to the delivery of a vessel under a time charterparty:

An owner delivers a ship to a time charterer under this form of charterparty by placing her at the charterers’ disposal and by placing the services of her master, officers and crew at the charterers’ disposal, so that the charterers may thenceforth give orders (within the terms of the charterparty) as to the employment of the vessel to the master, officers and crew, which orders the owners contract that their servants shall obey.

Is the contract of towage one of bailment (or akin thereto)?

1.14 While under a towage contract the tow does not obtain possession of the tug; on the other hand, the tug may often be put in possession of the tow for the period of the service. So, if the tow is unmanned (eg a dumb barge), or is merely an object which is being conveyed by sea (eg a caisson or a part of a rig), or if the tow is manned by a riding crew put on board by the tug, the tug will have physical possession of the tow. Contrast, however, the position where the tow is fully manned and is simply being towed or propelled or assisted by a tug; in such a case there is no physical possession but only a service being rendered to the tow. In former cases, the contract may appear to be analogous to a contract of bailment or to a contract for the carriage of goods rather than a species of contract for services: as has been said, “it might be said to be natural to regard the tow as in the possession of the tug so as to suggest a bailment of the tow to the tug owner, eg where the tow is an unmanned dead ship or an object such as an oil rig”: Palmer, Bailment (3rd edn, 2009) at para. 20–037. The principal relevance of the distinction lies in the nature of the obligation upon the tug owner. If he is to be regarded as a bailee, then he is liable for loss of or damage to the tow unless he can exculpate himself; if he is merely a provider of services and obliged to exercise care and skill, if the tow sustains loss or damage, the tow must show a breach of the tug’s obligations of care and skill in order to recover (see Palmer, op. cit., at, para. 1.047 et seq).

1.15 It is submitted that the approach of the Privy Council in The Julia (1861) 14 Moo PC 210 and in The Minnehaha (1861) 15 Moo PC 133 (considered in detail below) in analysing and classifying towage contracts as contracts where the tug is to be engaged to render services, and to which specific obligations of due care in and about and performance of those services are attached, is inconsistent with the concept of bailment and that of the bailee’s strict responsibility for the subject-matter of the bailment in the event of loss subject to very limited exceptions such as Act of God. In Harris v Anderson (1863) 14 CB (NS) 499, the Court of Common Pleas rejected an argument that since a tow had grounded during the towage, the tug was to be liable for the same unless it could explain and excuse it. The court held that the claim was bad since it contained no allegation of fault or neglect on the part of the tug. In The West Cock [1911] P 23, Sir Samuel Evans P considered the question of the nature of the obligation upon a tug owner to provide a seaworthy tug. He regarded the obligation as an absolute one like that upon a carrier (which is doubtful – see the discussion below), but it is to be noted that he did not seek to support that conclusion by classifying a towage contract as importing the relationship of bailment but kept the two types of contract quite ...