The London Steamship Owners Mutual Insurance Association Ltd v Westdeutsche Landesbank Girozentrale and Others

• Jurisdiction: South Africa
• Judge: Corbett CJ, Smalberger JA, Eksteen JA, Van Den Heever JA and Olivier JA
• Judgment Date: 24 August 1995
• Citation: 1996 (1) SA 1 (A)
• Docket Number: 725/93
• Hearing Date: 12 May 1995
• Counsel: M J D Wallis SC for the appellant (the heads of argument were drawn by M J D Wallis SC (with him C J Pammenter SC)). D J Shaw QC for the first respondent (cross-appellant). No appearance for the second, third and fourth respondents.
• Court: Appellate Division

Eksteen JA:

On 1 August 1990 and at London, England, the Westdeutsche I Landesbank Girozentrale ('the first respondent') concluded a written loan agreement with a Liberian company known as the Pacific Trader Corporation ('the Corporation') in terms of which it lent the Corporation US $3 000 000 in order to enable it to purchase the ship MV Pacific Trader (which I shall refer to simply as the 'Pacific Trader'). The agreement provided J that the borrower would repay the sum lent in

Eksteen JA

A 15 equal consecutive quarterly instalments of US $200 000 each, together with interest thereon. The first instalment was payable three months after the date on which the capital amount lent had been advanced. Subsequent instalments were payable at three-monthly intervals thereafter. The Pacific Trader was to serve as security for the loan. In pursuance of B this agreement the Corporation, on 2 August 1990, executed a deed of covenants and a mortgage over the vessel in favour of first respondent.

Thereafter, during the period from August 1990 to November 1991 the Corporation duly paid the first five instalments. The sixth instalment C which, it was alleged, was payable on 26 February 1992, was not paid on due date or at all. In terms of the agreement the aggregate of the loan, all interest accrued thereon, and all sums of whatsoever nature payable under the agreement and/or the mortgage and deed of covenants then became immediately due and payable.

The London Steam-Ship Owners Mutual Insurance Association Ltd ('the D appellant') carried on business as a protection and indemnity club,

providing its members with mutual insurance in respect of any maritime claims arising out of such member's activities as a ship owner or operator. The appellant's relationship with its members is governed by a set of rules in terms of which a member 'enters' a specific vessel in the E club. The owner of the Pacific Trader was a member of the appellant and had entered the ship in the club. In return the owner was obliged to pay subscriptions or premiums, known as 'calls', to the appellant. From time to time - usually about twice a year - the appellant would review its financial position by comparing its funds available with claims paid or to F be paid, as well as making allowance for claims which may have arisen but which had not yet formally been claimed. In the light of this review it would, if it considered it necessary, make 'supplementary calls' on its members. In the event of a vessel's entry being terminated, or of a vessel being withdrawn from the club, the appellant was entitled to levy what was known as a 'release call' to cover any further claims which might G arise in respect of an incident occurring during the period of the vessel's membership. Such release calls were, in terms of the rules, payable within 30 days after the member had received notification thereof.

Rule 24 provided that:

'Applications for insurance may be made and accepted in respect of ships H of which the beneficial ownership is separate on terms that the ships concerned shall be deemed (for these insurance purposes only) to form part of a specified fleet whereby the association shall deal with the entries of such ships in combination and not individually in consideration for which all members within each such fleet entry shall accept joint and several liability to pay all amounts due to the association by way of I calls or otherwise in respect of all ships within that fleet entry.'

The entry of the Pacific Trader was made in terms of this rule. It was one of a number of ships owned by single shipowning companies, but managed and operated by a company known as Multifleet Marine Ltd ('Multifleet'). Multifleet was also a member of the appellant's protection and indemnity J club.

Eksteen JA

A From the judgment a quo and the papers before us it would appear that in early May 1992 Multifleet ceased to act as manager of the vessels in its fleet, and in fact ceased to trade. It was subsequently liquidated. On 22 May 1992 the appellant approached the Durban and Coast Local Division and obtained an order in personam attaching the Pacific Trader ad B fundandam jurisdictionem for the recovery of calls then due by the owner. On 25 May 1992 a rule nisi returnable on 9 June was granted by the same Local Division calling on all interested parties to show cause why there should not be an order that the Pacific Trader be sold in terms of s 9 of the Admiralty Jurisdiction Regulation Act 105 of 1983 ('the Act') and the proceeds of the sale be held in a fund as provided for in that section. C The rule went on to provide for the payment, out of the proceeds of the sale, of various expenses incurred in the preservation of the ship, and in effecting the sale itself, and

'in payment of claims by creditors as may be directed by the Court in accordance with the provisions of s 11 of Act 105 of 1983'.

D On 27 May 1992 the appellant, acting in terms of its rules, elected to terminate the entry of the Pacific Trader, as well as the other vessels comprising the Multifleet entry, and gave notice to the owners accordingly. It also demanded payment of release calls in respect of each of these ships. In terms of rule 24 the owner of the Pacific Trader became jointly and severally liable with the owners of all the other E vessels for the payment of the unpaid calls, including the release calls, levied in respect of all the vessels in the fleet. In terms of appellant's rules these calls became due and payable on 26 June 1992.

In the meantime the rule nisi referred to above was confirmed on 9 June F 1992, and on 16 July 1992 the ship was sold by judicial auction for the sum of US $1 500 000. This amount was held, and continues to be held, by the Registrar of the Court as the fund referred to above. This fund ('the fund') is the second respondent in the present appeal.

On 26 August 1992 the Court issued a further order appointing a referee to receive 'any claim against the MV Pacific Trader and, after her sale, G against the fund constituted by the proceeds of her sale'; to consider such claims; and to report to the Court, inter alia, on the ranking of all such claims.

Among the claims proved against the fund were those of the first respondent, the appellant, the Standard Steamship Protection and Indemnity H Association of Bermuda Ltd (the third respondent) and the Standard Steamship Owners' Mutual Freight, Dead Freight, Demurrage and Defence Association Ltd (the fourth respondent). The referee, in his report, ranked all the proved claims according to the provisions of s 11 of the Act prior to its amendment by s 9 of Act 87 of 1992, which came into I effect on 1 July 1992. The appellant, and third and fourth respondents objected to this ranking and maintained that the claims should have been ranked according to the section after it had been amended.

After settling claims in respect of a number of the ships in the fleet, appellant proved a claim for US $774 006,39 against the fund. This amount J represented not only the sum owing in respect of the Pacific

Eksteen JA

Trader alone, but also the joint and several liability of the Corporation for unpaid calls in respect of all the vessels which had been included in the Multifleet entry. The fund, as I have indicated, consisted of some US $1 500 000. If first respondent's claim of US $2 000 000 were to rank ahead of appellant's claim, as the referee proposed, then there would be B nothing left in the fund for appellant to recover. If, however, s 11 of the Act were to be applied in its amended form, then, it is common cause, appellant's claim would rank ahead of that of the first respondent, and first respondent would only be able to take what was left in the fund after the appellant's claim had been satisfied. A

C First respondent, therefore, brought an application before the Court a quo seeking an order declaring that s 11 of the Act, before its amendment, was to be applied in determining the ranking of the claims against the fund. The appellant and third and fourth respondents thereupon applied for and were granted leave to intervene. Both third and fourth respondents are D also protection and indemnity insurers and both had submitted claims against the fund in respect of calls and release calls. Their interests in the application brought by the first respondent are similar in practically all respects to those of the appellant. Their contention was that, since the sale of the Pacific Trader took place on 16 July 1992, and the fund only came into existence after such sale, the amended s 11, which E had come into force on 1 July 1992, should be applied to determine the ranking of claims.

After hearing argument the Court a quo upheld the appellant's contention that the ranking of claims fell to be determined by the section as amended, but that its preferently ranking claim should be limited to calls due in respect of the Pacific Trader only, and did not include the joint F and several liability of the Corporation for calls due by the other ships in the fleet. It is against this latter part of the order that the present appeal is brought. The third and fourth respondents have not appealed against the order. First respondent has however noted a cross-appeal against the first part of the Court's order.

G From the papers before us it would appear that a number of subsidiary matters were placed in issue between the parties, but in his judgment the learned Judge a quo has recorded that the parties had agreed that the following issues should be decided, viz:

'(a)

whether s 11 of the Admiralty Jurisdiction Regulation Act 105 of 1983 as amended by Act 87 of 1992 applies to the distribution of the H respondent fund;

(b)

if the answer to (a) above is in the affirmative then do the provisions of s 11(4)(c)(viii)...