Further, you may have checked with the court records that there is no outstanding litigation involving the vessel in which case, on any analysis, you would be entitled to consider that you had acted as a prudent purchaser.

However, if the vessel(s), for whatever reason, are not registered on, for example, Part 1 of the British Registry there would be no way of checking whether there were any outstanding mortgages registered against the security of the vessel. It follows that you could be a bona fide purchaser of an unregistered vessel when you had no way of establishing, by way of actual or constructive knowledge, the existence of any loans made against the security of the vessel by way of a mortgage.

This could have arisen in a number of ways.

First, a Bank could have simply lent the money to the previous owner or indeed to the company building the vessel and not, at the time, insisted on the vessel and/ or the charge being registered.

Second, an individual could have borrowed some money against the security of the vessel from a financial organisation and/or individual and recorded that loan in a document which you had no means of knowing existed - let alone the content.

Surely, in these circumstances, you as a purchaser cannot be held liable for that loan made against the security of a vessel that you now own? You made the purchase in good faith for full value and had no reasonable way of knowing whether or not there was any money loaned against the vessel.

Unfortunately the law provides no assistance. Although, for general commercial transactions the 19th century Bills of Sale Act sought to rectify problems that arose out of the transfer of title transactions - by extinguishing any rights the vendor may have - ships, of whatever nature, both registered and unregistered, were not included in this legislation.

The position was not rectified by the 1894 Merchant Shipping Act nor, despite a case which decided the law in 1991 (the Shizelle ) was it rectified by Parliament in the 1995 Merchant Shipping Act.

It has been admitted by the High Court (and was particularly brought to the attention of practitioners by Judge Hamilton ) that there is a 'lacuna' in the law but, for whatever reason, Parliament has steadfastly not addressed the issue.

Accordingly the position remains the same as it did in the 19th Century despite the 1995 Act.

As a result of the above, if you do purchase any vessel where there is a charge or mortgage against it which the mortgagee seeks to enforce after you have purchased the vessel, you as the new owner will be liable to repay the mortgagee the amount of the outstanding loan. As you would anticipate, in some cases this could, on for example a new 20m boat, be very substantial indeed. The British Marine Federation are aware of the problem and the only advice they have given to date is that a solicitor should be consulted before purchase; this is sensible advice. As the law provides no protection in these circumstances it is self evident that you can never be too careful when purchasing your next vessel.

MJInformation No: 19901