Scottish Court of Session Decisions

In this action the pursuers have the following conclusions:

The Convention referred to in Conclusion 2 is the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 ("the Fund Convention"). It established the defender ("the Fund"). The Merchant Shipping Act 1974 implements the Convention. It entitles the defender to limit its liability to a specific sum calculated in accordance with the Act. That sum constitutes the limitation fund available for the satisfaction of claims prestable against the defender in accordance with the 1974 Act.

In its defences the defender has tabled the following pleas.

The action is at the Open Record stage.

The defender has enrolled a motion "to sist the cause pending determination of the action by the pursuers against Braer Corporation and others (A200/9/1995) ... " This motion is opposed.

The pursuers are among the many claimants who have raised actions against The Braer Corporation, the owner of the Braer, and Assuranceforeningen Skuld ("Skuld"), its insurer, for compensation under the Merchant Shipping (Oil Pollution) Act 1971 for damage caused by contamination by oil. In all of these actions, the present defender has intervened as minuter.

In their action against The Braer Corporation and Skuld the pursuers claim compensation for loss of profits in their marketing of Shetland farmed salmon and for loss of profits that would have been earned by a joint venture planned by themselves and Kinloch Damph Limited which they did not pursue because of the mishap. That is the action referred to in the present motion. It awaits a hearing on the procedure roll on the preliminary pleas for the defenders and the minuter. Counsel agree that that action raises questions of economic loss similar to those raised by the actions in Landcatch Ltd v International Oil Pollution Compensation Fund ([1998] 2 Lloyd's LR 552) and Skerries Salmon Ltd v The Braer Corporation and Others (1 December 1998, unreported) both of which I have dismissed.

Two other actions have been raised that have a bearing on the motion in the present case. The Braer Corporation has raised an action against the present defender, the present pursuers and others for inter alia declarator of its entitlement to limit its liability, as owner of the ship, under section 1 of the Merchant Shipping (Oil Pollution) Act 1971 to a sum not exceeding 5,790,052.05 Special Drawing Rights and for distribution of the limitation sum rateably among those found entitled thereto.

Skuld has raised an action against the present defender, the present pursuers and others for inter alia declarator of its entitlement to limit its liability as insurer under section 12 of the 1971 Act to a similar amount. By interlocutor in that action dated 25 September 1997 I found Skuld entitled, quoad all but one of the defenders, to limit its liability in terms of its declaratory conclusion.

The primary liabilities of the owner and the insurer of a ship under sections 1 and 12 of the 1971 Act give rise to a contingent liability on the part of the present defender under section 4 of the Merchant Shipping Act 1974. I have discussed the nature of these liabilities in Landcatch Ltd v International Oil Pollution Compensation Fund (supra, at pp. 555-559).

Section 4 of the 1974 Act provides inter alia as follows:

Schedule 1 to the 1974 Act provides for the calculation of the limitation fund and the pro-rating of "established" claims against it (Fund Convention, article 4, paras. 4-5).

Counsel in the present case agree that in the immediate aftermath of the Braer mishap the defender disbursed a substantial sum by way of provisional payments of compensation to numerous claimants in Shetland. The 1974 Act does not expressly provide for the making of such payments, but the Convention does (art. 18.7). The purpose of the present action is to have the amount of such payments excluded from the calculation of the limitation fund available to meet those claims that are judicially constituted.

In support of the motion counsel for the defender argued that unless and until the pursuers established that they had a valid claim against The Braer Corporation and Skuld, it was questionable whether the issues raised in the present action were issues in which they had any interest. If the pursuers were to fail in their action against The Braer Corporation and Skuld, it would follow that they would have neither title nor interest to pursue the present action. If that were to happen, all of the procedure that would have been undergone to that date in the present action would have been futile. The action would have raised issues that were academic, at any rate so far as the pursuers were concerned.

Counsel for the pursuers argued that the present action raised questions of great importance to the pursuers, to the defender and to all the other claimants who have sued The Braer Corporation and Skuld. He accepted that there was a possibility that the pursuers' action against The Braer Corporation and Skuld could fail on relevancy for substantially the reasons for which I dismissed the actions in Landcatch Ltd v International Oil Pollution Compensation Fund (supra) and Skerries Salmon Ltd v The Braer Corporation and Others (supra). My decisions in those cases are now under appeal.

Counsel for the pursuers submitted that the relevancy of the pursuers' action against The Braer Corporation and Skuld might not be determined for a considerable time. There was a distinct likelihood of there being a sequence of appeals, whatever might be the judgment on the pursuers' action at first instance. In the meantime, the importance of the questions raised by this case required that it should proceed to judgment without delay so that the present pursuers, like the other claimants, would know what fund was available to meet their claims. This would be a matter of some importance in the event that there should be any settlement negotiations in the pursuers' case.

Counsel are agreed that the decision on the present motion is essentially one for the discretion of the court. I accept that the question raised by this action will be important to those who establish valid claims for compensation under the 1971 Act. I accept too that this question will be important to owners, insurers and the Fund in the Braer claims and in claims that may arise from other similar mishaps. This question can be properly determined only after the pleadings have been fully adjusted. Whether it will be determined after a debate or after enquiry, the court may safely assume at this stage that the determination of it will take up significant time and expense.

I accept that there is a risk of unfairness to the defender if it should be put to the trouble and expense of defending an action that raises a question that may be, so far as the pursuers are concerned, academic. That of itself would be a sound reason for sisting the action.

But the court too has an interest in the matter. In my view, it is undesirable that the time and resources of the court should be occupied by a litigation at the instance of a party who may in the end be found to have had neither title nor interest to pursue it.

It may be open to other claimants whose claims are admitted or judicially constituted to raise the same question. In that event, different considerations will apply.

On the whole the best course, in my view, is that the cases against The Braer Corporation and Skuld should be progressed expeditiously and that the present question, if it should remain contentious between the parties, should be decided after the relevancy of the pursuers' action against The Braer Corporation and Skuld has been finally determined. I shall therefore grant the motion.

If further considerations emerge that suggest that the present action should be progressed, that matter can be brought before the court by a motion for recall of the sist.

Act: Gale, Q.C.; A. R. Mackenzie

Paull & Williamsons.

Alt: C. M. Campbell, Q.C.; Tyre, Q.C.

Morton Fraser Commercial.

29 December 1998