Salvage and Towage

Introduction

The main aim of this paper is to analyse the difference between salvage and towage under the legal point of view and explaining the function of the bill of lading as a document of title. The research questions this paper will try to answer are:

1) How salvage and towage services are differentiated? It is well known that salvage and towage have some similarities, at least at the first glance when examining them. But that is mainly due to the fact that under certain circumstances a towage can become salvage, but not the opposite. So, by focusing on the differences it will be clear how each of those terms differs from the other (White, 2000).

2) What is the function of the bill of lading as a document of title? Bill of lading is a security asset that contains a designation of a right characterized by its type, extent and property. This is a credit title. The right claimed in the bill of lading concerns the ownership of goods (cargo and general cargo) that have been loaded on a means of transport (vehicle, train, ship, airplane, etc.) for which it was issued. The bill of lading is generally a document proving the loading of cargo (cargo) to be carried, as well as a document proving the charter contract, especially when no charter has been drawn up (White, 2000). Those two questions will be answered with references to noticeable cases that will prove the differences to salvage-towage and explain the functionality of the bill of lading as a as a document of title.

Salvage and Towage

Definition of salvage and towage

What is Towage? Towage differs from the carriage of goods in that under a towage situation one vessel which is self-propelled generally tows one or more vessels, usually barges that are not self-propelled. Towage is “the supplying of power by a vessel . . . to draw another” vessel. The key determination between towing and salvage is whether a peril exists. Simply put, if the vessel is not in “peril” then it is not salvage. If a vessel is simply providing a service, i.e. fuel, tow, assistance, then it is likely a tow (White, 2000).

What is Salvage? A contract or three elements are necessary to a valid salvage claim: 1. A marine peril. 2. Service voluntarily rendered when not required as an existing duty or from a special contract. 3. Success in whole or in part, or that the service rendered contributed to such success. Therefore, as described above a vessel must be in trouble, danger, or specifically “peril”. For example, if it is a soft aground vessel the danger may not be described as peril, however if it is hard aground then the danger may fall into the realm of “peril”. When a vessel is in this perilous state the salvager must be doing so voluntarily, not under a duty like the coast guard or other similar mechanism. Finally, the salvage must be successful (SEMCO SALVAGE & MARINE PTE. LTD. , 1997).

Towage in comparison to salvage

The admiralty courts have addressed the difference between “simple towage” and salvage services on numerous occasions and have made it abundantly clear that, in most such situations, the services rendered are salvage. Indeed, one leading admiralty treatise has described the act of rescuing a ship at sea by towing her to a place of safety as the “prototypical” act of salvage. However, this does not necessarily mean that the salvor will be entitled to a huge reward for such services. As discussed, a salvage service implies that there was some degree of peril and assistance above towage that was provided. The peril does not have to be immediate. It is sufficient if the property is in danger, either presently or reasonably to be apprehended. The best way to understand the application of towage v salvage is to review the common law (Maritime Coverage Corp, 2016). To make clear the differences between salvage and towage we will examine and analyse some case studies.

Evanow v. M/V NEPTUNE The vessel Neptune encountered a major storm and docked in the Crescent City harbour. While in the harbour, the Neptune became disabled and grounded on a sandy shoal. The crew of the Neptune secured the barge alongside the disabled tug. That night, a terrible storm caused gusts up to ninety knots and swells inside the harbour to reach six to eight feet. These conditions pounded the barge against the port side of the tug. Because of the diesel fuel and oil aboard the Neptune as well as hydraulic fluid in the landing craft unit, the Coast Guard Pacific Pollution Strike Team assessed the threat of pollution as “substantial,” and a tow was called in to retrieve the barge (Evanow v. M/V NEPTUNE, 1998). The question presented was whether a contract is one for towage or for salvage. The Court enumerated that this distinction has several consequences.

The Court examined the character of the service rendered to determine whether a contract is one for salvage. The Court found a marked and clear distinction between a towage and a salvage service. When a tug is called or taken by a sound vessel as a mere means of saving time, or from considerations of convenience, the service is classed as towage; but if the vessel is disabled, and in need of assistance, it is a salvage service (Evanow v. M/V NEPTUNE, 1998). It was determined that the existence of a marine peril distinguishes a salvage contract from one for towage. Such a peril exists “when a vessel is exposed to any actual or apprehended danger which might result in her destruction.” Whether a marine peril exists is a question of fact reviewed for clear error. In this case it was determined that this was indeed a salvage action (Evanow v. M/V NEPTUNE, 1998). The Flottbek The Flottbek was a vessel caught in a rough storm about a quarter mile to a half mile from the rocks. While the peril was in dispute, the fact that the vessel was unable to pull out of the predicament on its own accord was not. Thus, it anchored and called for help. “In cases of simple towage, only a reasonable compensation is allowed, as upon a quantum merit. In case of salvage, the award is upon a broader and more liberal scale, as we have before stated. In McConnochie v. Kerr, Judge Brown said: ‘A salvage service is a service which is voluntarily rendered to a vessel needing assistance, and is designed to relieve her from some distress or danger either present or to be reasonably apprehended. A towage service is one which is rendered for the mere purpose of expediting her voyage without reference to any circumstances of danger” (McConnochie v. Kerr, 1881). The Court found that they crew felt that they were in enough peril to call for assistance and to drop their anchors for an expedited departure. Therefore, this was a salvage.

Mississippi Valley Barge Line Co. v. Indian Towing Co. A barge was adrift in a calm sea when a tug pulled beside the barge to get a mate on board. Thus, commencing the tow and delivering the barge at a Pensacola dock three hours later. “For a derelict barge, like a derelict person, may be exposed to many perils, the least of which is foundering on an obvious shoal. Salvage at sea may and often does call for the performance of exciting acts of great bravery to rescue lives or property from the jaws of a near and certain doom. But it need not, for the aim of salvage is to save. To aid before it is a do-or-die wager with high risks, high stakes, and high rewards, assures the greatest likelihood of recovery at the least peril. Maritime salvage is not reserved for hero alone. Its generous but judicious liberality is to encourage mariners instinctively to respond to need- be it great or small, drab or spectacular” (D. Mississippi Valley Barge Line Co. v. Indian Towing Co., 1956). Is a barge at drift, in peril? The Court thought so and therefore a salvage was found.

Bill of Lading

Bill of lading is a multiple choice of document i.e. it acts as contract of carriage of goods by sea, as a formal receipt for the goods shipped and as a document of title. The function attributed to bill of lading are based on ancient customs and usages followed by merchants in trade spheres which are largely regulated by their own law known as lex_marcatria law merchants. Unlike charter party, the contract of carriage of goods by sea in liner trade is evidenced by bill of lading which itself is not a contract of carriage of goods rather an evidence of an already concluded contract of carriage between shipper and carrier orally. It is to be noted that whatever orally was agreed between shipper and the carrier, do not bind the lawful holder who acts in good faith. The bill of lading as document of title. In modern international trade and shipping this is probably the most important characteristic of the bill of lading.

A "document of title" is a document that enables the holder (the person who "possesses" it) to deal with the goods described in it as if he was the owner. "Title" is the right to ownership. "Ownership" can be explained as the right of using, altering, disposing of (that is, selling) and destroying the goods. This "ownership" or "title" can be transferred by a formal transfer of the document, such transfer being an "endorsement" and/or delivery of the document itself (Wegener v Smith, 1854). Leduc And Co V Wards is a case which proves that specific nature of Bill of Lading, where the bill of lading contained a clause enabling the carrier to deviate from agreed route which caused the ship to be lost and delivery of goods was delayed. The lawful holder sued the carrier. The carrier took the plea that the shipper knew about the deviation clause in the bill of lading. Therefore, no breach of contract whatsoever has been created. However, the court refused to accept the claim of carrier and held that, “Lawful holder who has no knowledge of any such commitment my not be made, bound to follow it" (Case Leduc And Co V Wards, 1888).

Furthermore, as mentioned one of the characteristic of the bill of lading is as a document of title. A bill of lading to be a document of title must be negotiable which simply means it should be transferable. A bill of lading to be transferable must be draw as delivered or assignee. a bill which is specifically drawn in the name of a receiver, would not fall within the category of negotiable instrument and would not be able to transfer title to goods in transit, such a bill is called is called “straight bill", the traders prefer “order bill of lading “for the reason that it enables them to sell/transfer goods while they are at high sea (sanders bros. v Maclean, 1883). The proprietary function of the Bill of Lading as a document of title was customarily recognised first in the case (Lickbarrow v Mason, 1788) and the recognition as a document establishing the ownership of the goods and “constructive possession of goods by the transferee”. It was also clearly established in this case that the ‘right of stoppage in transit’ not applicable against a “bona fide” purchaser of the goods, but only between the buyer and seller.

Bill of Lading is therefore a “control document” and when it is transferred to another person by way of endorsement and delivery, a constructive possession is transferred “rather than the title”. In the case of a contract of sale when the shipper, first indorse some sets of original Bills of Lading to a party and then on a later date assigned and transferred remaining sets of original Bills of Lading to another party, the former would be the owner of the goods and not the latter one who subsequently received another set of original bills. In the case of documents of title to goods, the legal obligation is that the carrier or the holder who is having the physical possession of the goods can deliver the goods only to the ‘holder’ of the document of title to goods or Bill of Lading having “sufficient control” over the goods and not to any other person. But no assignment could be done once the delivery of the goods is completed. In this situation the carrier has no other choice but to deliver the goods to the person who is having “constructive possession” over the goods (Lickbarrow v Mason, 1788).

Conclusion

Bill of Lading When the cargo is in transit it is not possible to sell or resell it to other buyer by way of physical delivery of the goods. It is required to wait till the goods arrive the destination for selling or reselling. This was a big disadvantage for the shipper who must wait till the completion of the voyage. Sometimes due to various reasons the ship may subject to ‘prolonged period of transit by sea’. To overcome this hindrance, need arises for a sales process in transit, without physical delivery of goods. This is also popularly known as ‘High Sea sales’ among the international traders. Negotiability of Bills of Ladings help the traders to do a process of indorsing and transferring Bill of Lading in place of the goods and therefore do the transfer rights of the goods to more than one person’s even when the cargo is moving. Towage and salvage A contract for towage is for agreed purposes and an agreed sum, i.e. the tug's duties and the price are fixed beforehand, usually according to the towage company's tariff of rates. The towing vessel's services are not voluntary, and no salvage reward will be due unless some peril arises during the towage such as to require extraordinary assistance from the tug. Salvage, on the other hand, is governed by admiralty law. It is a voluntary action, and any reward is dependent on some measure of success. The term "no cure, no pay" is used in most salvage agreements. The reward can only be determined after completion of the salvage services.