Scottish Court of Session Decisions

This action is a further stage in the Braer litigations. The pursuer, as insurer of the Braer, is directly liable under section 12 of the Merchant Shipping (Oil Pollution) Act 1971 to claimants who have valid claims against the owner of the vessel, the Braer Corporation, under section 1 of the Act. It has raised this action under section 5 of the Act in order to limit its liability to an amount determined in accordance with section 4 and to have the claims upon its limitation fund resolved.

The first defender is the International Oil Pollution Compensation Fund. The other 18 defenders are claimants who have raised actions against the owner (cf. Anderson v The Braer Corporation, 1996 SLT 779). The Lord Advocate is one of the defenders. He has enrolled two motions for late lodging of his claims on the pursuer's limitation fund.

Section 9 of the 1971 Act applies to claims against the owner under section 1. It provides inter alia that no action to enforce a claim in respect of a liability incurred under section 1 shall be entertained by any court in the United Kingdom unless the action is commenced not later than three years after the claim arose. If the claimant loses his right to enforce a claim against the owner by reason of section 9, he also loses his recourse against the insurer (cf. s. 12(1)). It is agreed that the Lord Advocate sued the owner timeously in respect of both claims and therefore had the right to make a claim against the insurer under section 5.

Section 5(3) applies to claims on the insurer's limitation fund. It provides as follows:

If a successful claimant against the insurer receives only a dividend from the insurer's limitation fund, he will have recourse for the shortfall against the International Oil Pollution Compensation Fund under section 4 of the Merchant Shipping Act 1974 (cf. Landcatch Ltd v The International Oil Pollution Compensation Fund, [1998] 2 Lloyd's LR 552, at pp. 555-9; 563). In that event, the IOPCF will be entitled to limit its own liability (1974 Act, s. 4(10); Sched. 1). All parties concerned seem to expect that the aggregate of valid claims will exceed the amount of the insurer's limitation fund and that the resulting claims against the IOPCF will exceed the limitation fund of the IOPCF. But there is some uncertainty as to the amount of the IOPCF limitation fund. That amount depends on whether provisional payments already made to claimants by the IOPCF are to be taken into account in the calculation of the fund. An action has been raised to determine that question (cf. Framgord Ltd v International Oil Pollution Compensation Fund, unrepd., 29 December 1998).

The pursuer has now paid its limitation fund into court and has been exonered and discharged of all liability that might otherwise attach to it under section 12 in relation to the liabilities of the owner. 363 claims have been lodged on the fund. The total of these claims is about £32,000,000. The limitation fund, with accrued interest, is about £5,000,000. The Braer Corporation is one of the claimants. It seeks compensation of about £1,700,000, plus interest, under section 5(5) of the 1971 Act for the costs of certain remedial action in relation to the oil spill. Trouw UK claims on the fund for about £1,400,000 for the loss of contaminated fish.

The Lord Advocate has lodged two claims on the limitation fund. The first is made on behalf of the Scottish Office for £978,306, plus interest. The second is made on behalf of the Department of the Environment, Transport and the Regions for £2,608,743.19, plus interest.

The last date appointed for the lodging of claims was 19 February 1999. These claims were lodged on 17 March 1999.

Counsel for the Lord Advocate intimated at an earlier stage, and has repeated at the hearing on these motions, that if the pursuer's limitation fund were to be insufficient to meet all valid claims in full, the Government would waive its right to any dividend from the fund.

A motion has been enrolled in relation to each claim in the following terms:

Both motions are opposed on behalf of the pursuer, the Braer Corporation and Trouw UK. The grounds of opposition are as follows:

Counsel argued two questions at the hearing: (1) whether the discretion of the court under section 5(3) of the 1971 Act to allow further time may be exercised after the expiry of the period appointed by the court for the lodging of claims; and (2) if it can be so exercised, whether it should be exercised in favour of the motioner in these cases.

Rule of Court 51.11 gives the court a discretion to allow a claim to be received late; but counsel agree that the provisions of the Rule must yield to any statutory provision the effect of which is to exclude such a discretion.

Counsel for the pursuer, the owner and Trouw UK submitted that the court had no discretion to grant the motions. When the date fixed under section 5(3) for the lodging of claims had passed, the right to lodge a claim expired. The court could not thereafter resuscitate that right by granting further time. This construction of section 5(3) was in keeping with the usual approach of the court to time limits. It made practical sense. It kept the claims procedure under proper control. The pursuer and the court required to know with certainty what claims were being made against the limitation fund. When the deadline came, all parties involved could assess the maximum potential liability of the fund. The allowance of late claims could reduce the amount available to meet valid claims that had been made timeously.

Counsel for the Lord Advocate submitted that the question depended in every case on the context and the wording of the relevant statutory provision. In some cases a failure to seek an extension of a period of time before the period elapsed was fatal (e.g. Blyth & Blyth's Trs. v Kaye, 1976 SLT 67; Secretary of State v Tronsite Ltd, 1978 SLT 34; Gifford v Buchanan, 1983 SLT 613). In others it was self-evident that an extension could be sought after the elapse of the original period (e.g. Companies Act 1985, s. 420). Section 5(3) of the 1971 Act was not explicit either way. There was nothing in the wording of section 5(3) to suggest that the court's discretion could be exercised only in advance. In sheriff court procedure the court's power to prorogate the time for the taking of certain procedural steps could be exercised after that time had expired (e.g. Macnab v Nelson 1909 SC 1102). The English courts had taken a similar approach (e.g. Lord v Lee (1868) 3 QB 404; Arieli v Duke of Westminster (1984) 269 EG 535).

In my opinion, the court may allow further time under section 5(3) after the appointed date has passed.

There is nothing in section 5(3) to imply the contrary view. The power of the court to allow further time is unqualified. I see no reason to read into section 5(3) the requirement that further time can be allowed only prospectively. If Parliament had intended that late lodging would be fatal to a claim in these proceedings, I would have expected that to be made explicit in the subsection, or at least to be unmistakeably implied.

Section 9 of the Act provides for the prescription of claims against the owner (cf. Gray v The Braer Corporation, 29 December 1998) and therefore, by reason of section 12, of claims against the insurer. It would be surprising if section 5(3) gave further protection to the insurer by extinguishing a claim that was not lodged in the insurer's limitation proceedings by the appointed date.

That result would be all the more surprising since the only formal notification that a prospective claimant on the insurer's limitation fund may receive is a newspaper advertisement (R.C. 51.8). He may learn of the court's order for claims only after the appointed date has passed.

In my view, the purpose of section 5(3) is not to extinguish a claim made out of time. It is merely a procedural provision regulating the making of the claim. If that is right, further time for the lodging of the claim may be granted retrospectively.

I am supported in this view by Arieli v Duke of Westminster ((1984) 269 EG 535). In that case the tenants of leasehold property were entitled to apply to the county court for the determination of certain matters relevant to their purchase of the freehold. The statute provided that such an application had to be made within six weeks of a certain date "or such longer time" as the court might allow. The Court of Appeal held that since the wording of the relevant provision was unqualified, the expiry of the six weeks period did not confer on the landlord a vested right that precluded any subsequent extension of that period (ibid., at 535-6). In that case an extension of time was granted retrospectively as a matter of discretion.

For similar reasons, in Lord v Lee (supra) the court retrospectively enlarged the term for the making of an arbitrator's award at a time when the reference to the arbitrator remained live.

Counsel for the pursuers, the owner and Trouw UK argued that section 5(3) operates to keep claims under control and may even in some cases be the sole means of preventing the procedural chaos that would arise if claimants could lodge claims at any time after the appointed day. In my view, this is simply a consideration that goes to the court's discretion. The court might well refuse a late claim where a material change of circumstances after the appointed day made it inequitable that the claim should be received (e.g. Lord v Lee, supra, Blackburn J at 408-9).

Three cases were referred to in the debate in which it was held that a time limit for the doing of an act could be extended only before the time limit was reached. But these were cases where the occurrence of the time limit itself had an extinctive effect.

In Blyth & Blyth's Trs. v Kaye (supra) the contractual remit to the arbiter provided that he had to make his award within 12 calendar months from the date of the remit or within such "extended" time as the court might allow. The obiter dicta in that case indicated that such an extension had to be sought before the expiry of the 12 months period. That view was based on a provision in the contract that after the expiry of that period the arbiter lost his power to act. The court could not re-invest the arbiter with that power by granting a retrospective extension of the period.

In Secretary of State v Tronsite (supra) the Land Commission Act 1967 provided that a notice of assessment to betterment levy could be resisted by the taxpayer by means of a counter-notice. The counter-notice had to be served within two months of the notice of assessment or within such "extended" period as the Land Commission might allow. In that case a counter-notice was not served within the two months period. Section 49 of the Act provided inter alia that after the period for service of the counter-notice expired, the assessment became "operative"; that is to say, it could no longer be contested (cf. 1967 Act, s. 50). Since the right to contest the assessment was extinguished upon the elapse of the specified period, the court could not resuscitate it by a retrospective extension of the period.

In Gifford v Buchanan (supra) a similar point was considered in the context of the Succession (Scotland) Act 1964. Section 16(2) and (3)(b) of the Act, so far as relevant, provide that after the death of a tenant of an agricultural holding, the tenant's executor is entitled within a period of one year to transfer the tenant's interest in the lease to any one of a class of eligible relatives. The executor has the right to seek, by summary application to the sheriff, a longer period within which to execute the transfer. If the transfer is not executed within the period of one year, or within such extension of it as the sheriff may allow, the landlord is entitled to serve notice of termination of the lease. In that case the anniversary of the death occurred on 6 April 1982. The landlord served notice of termination on 13 May 1982. Thereafter the executor applied to the sheriff for an extension of the period within which to transfer the interest. The ratio of the court in refusing the application was that since the landlord had served notice of termination, it was on any view too late for the executor to seek an extension of the period. However, the majority were of the view that the emergence, on the anniversary of the death, of the landlord's right to terminate the lease extinguished the executor's right to transfer the tenant's interest. Therefore the court could not resuscitate the executor's right by granting any subsequent application for an extension.

In my view, these cases are distinguishable. In each of them the statutory or contractual provision provided that on the expiry of the specified period a right or power was extinguished. It was logical for the court in those cases to require that any extension of that period should be made while the right or power remained live.

Counsel for the motioner argued that the late lodging of the claims was a matter of inadvertence. The claims had been lodged, and the motions enrolled, as soon as the oversight had been discovered. No party to the proceedings had taken any irrevocable step since the cut-off date in reliance on the Lord Advocate's failure to lodge the claims timeously. These were not new claims. They had already been made in the actions against the Braer Corporation, whose liabilities the pursuer was obliged to meet. The pursuer had no material interest in the outcome of the motions. The claimants opposing the motions merely stood to receive a windfall benefit if these claims were excluded from the competition.

Counsel for the pursuer, the owner and Trouw UK accepted that the claims had not prescribed under section 9 of the 1971 Act and that no irrevocable step had been taken by any party after the relevant date. He argued that there was prejudice to the other claimants since their dividends could be reduced if the claims were received late. The pursuer's own expenses, which would in all likelihood be granted as a first charge on the limitation fund, would be increased to a minor extent if the present claims were admitted. The Lord Advocate had no worthwhile purpose to serve in maintaining these claims. The limitation fund was bound to be insufficient to meet the claims in full. The Government's undertaking would become effective. It would be a pointless exercise to claim and then to renounce the resulting dividend. If the Lord Advocate were to be excluded from the present competition, the parties opposing these motions would argue that he should also be excluded from claiming on the IOPCF limitation fund, if that were in due course to be constituted, on the view that the latter was available only to meet valid claims made out in the present proceedings.

In my opinion, the court's discretion should be exercised in this case in favour of the motioner. The motioner's claims against the Braer Corporation under section 1 of the 1971 Act were timeously made. No party has acted to his detriment in the belief that the present claims have been abandoned.

I accept that the late lodging of the claims resulted from an oversight. The oversight was promptly dealt with. To deny the motioner the opportunity to pursue these claims would be a penalty out of all proportion to the venial nature of the motioner's oversight.

The pursuer, having been exonered and discharged, has no interest of any significance in the outcome of these motions. The Braer Corporation and Trouw UK will not sustain any prejudice if the motions are granted, except in the sense that they will lose a chance opportunity to benefit from the exclusion of two potentially valid claims.

There is also a question whether if these claims were excluded from the present process the Lord Advocate would thereby be excluded from claiming on the IOPCF limitation fund, if that were to be established. That question does not arise at this stage; but the possibility that that could be the consequence of my refusing the motions confirms me in the view that I have reached.

I do not consider that the Lord Advocate's statement of his intention to waive his claims in certain events is material to this decision. Whatever the parties may expect to be the outcome of these proceedings I am not prepared, on the information available to me, to assume that the Lord Advocate's statement is bound to come into effect.

I shall therefore pronounce interlocutors allowing further time for the making of the claims. I shall extend the relevant date to 17 March 1999, the date on which the claims were lodged.