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[2016] ZASCA 21
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Viking Inshore Fishing (Pty) Ltd v Mutual and Federal Insurance Co Ltd (41/2015) [2016] ZASCA 21; [2016] 2 All SA 730 (SCA); 2016 (6) SA 335 (SCA) (18 March 2016)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 41/2015
In
the matter between:
VIKING
INSHORE FISHING (PTY)
LTD
Appellant
and
MUTUAL
AND FEDERAL INSURANCE CO
LTD Respondent
Neutral
citation:
Viking Inshore
Fishing (Pty) Ltd v Mutual and Federal Insurance Co Ltd
(41/2015)
[2016] ZASCA 21
(18 March 2016)
Coram:
MAYA AP, WALLIS, SALDULKER and SWAIN JJA and
VICTOR AJA
Heard
:
8 March 2016
Delivered
:
18 March 2016
Summary:
Marine Insurance – hull policy –
Inchmaree clauses – vessel lost in collision as a result of
negligence –
whether claim for indemnity barred by virtue of a
breach of a Merchant Shipping Act warranty – application of
warranty –
whether collision resulting from a want of due
diligence by the owner.
ORDER
On
appeal from:
Western Cape Division of
the High Court, Cape Town (Yekiso J sitting as court of first
instance):
The
appeal is upheld with costs and the judgment of the court below is
set aside and replaced with the following:
‘
There
will be judgment for the Plaintiff for:
1
Payment of the sum of R3 990 000,
together with interest on the sum of R3.5 million at a rate of 15.5%
per annum from
8 October 2005 to date of payment.
2
Costs of suit, such costs to include the
qualifying expenses of Captain Cox.’
JUDGMENT
Wallis
JA (Maya AP, Saldulker and Swain JJA and Victor AJA concurring)
[1]
Shortly
after midnight on 8 May 2005 a few miles off the coast near Cape St
Francis the fishing vessel
Lindsay
collided
with the
Ouro
do Brasil
,
a bulk juice carrier on a voyage from Singapore to Santos, Brazil.
Given the disparity in size of the two vessels
[1]
the outcome was virtually inevitable and tragic. The
Lindsay
capsized
and sank soon after the collision and 14 crew members were drowned.
Only the master, Captain Landers, who was off duty
and asleep in his
cabin near the bridge, and Mr John Ehlers, a sparehand
[2]
who had been on watch at the time survived. Captain Landers nearly
died as a result of the ingestion of diesel oil and has as a
result
of post-traumatic stress disorder been forced to give up his life on
the sea.
[2]
The
respondent in this appeal, Mutual & Federal Insurance Co Ltd
(Mutual & Federal), insured the
Lindsay
in terms of a marine hull insurance policy. The owner of the
Lindsay
,
Viking Inshore Fishing (Pty) Ltd (Viking), claimed an indemnity under
the policy for the agreed value of the vessel, namely R3.5
million
plus VAT. Mutual & Federal rejected the claim and Yekiso J in the
Western Cape Division of the High Court, Cape Town
dismissed Viking’s
action in which it sought to recover that sum. This appeal is with
his leave.
[3]
The
policy
[3]
Three provisions of the policy are relevant
to Viking’s claim and Mutual & Federal’s defence to
that claim. First,
there are the two clauses under which Viking
contends that it is entitled to an indemnity. The policy incorporated
the Institute
Fishing Vessel Clauses and the relevant perils insured
against were set out in clause 6.2, which reads as follows:
‘
This
insurance covers loss of or damage to the subject-matter insured
caused by
6.2.1
accidents in loading discharging or shifting catch fuel or stores
6.2.2
bursting of boilers breakage of shafts or any latent defect in the
machinery or hull
6.2.3
negligence of Master Officers Crew or Pilots
6.2.4
negligence of repairers or charterers provided such repairer or
charterers are not an Assured hereunder
6.2.5
barratry of Master Officers or Crew,
provided
such loss or damage has not resulted from want of due diligence by
the Assured, Owners or Managers.’
[4]
Further cover was provided by the inclusion
in the policy of the Institute Additional Perils Clauses –
Hulls, specifically
devised for use with the Institute Fishing Vessel
Clauses, which provided the following additional cover:
‘
1.
In consideration of an additional premium this insurance is extended
to cover –
1.1
…
1.2
loss of or damage to Vessel caused by any accident or by negligence,
incompetence or error
of judgement of any person whatsoever.
2.
…
3.
The cover provided in Clause 1 is subject to all other terms,
conditions and
exclusions contained in this insurance and subject to
the proviso that the loss or damage has not resulted from want of due
diligence
by the Assured, Owners or Managers.’
[5]
These
two clauses are of the type commonly described as Inchmaree
clauses,
[4]
because they extend
the indemnity under the policy to situations beyond perils of the
sea. This description was important because
of the terms of the
Merchant Shipping Act
[5]
warranty (the MSA warranty), which provided the principal line of
defence for Mutual & Federal. The warranty read as follows:
‘
Warranted
that the provisions of the South African Merchant Shipping Act and
the regulations appertaining thereto shall be complied
with at all
times during the currency of this policy, provided that this warranty
shall be effective only to the extent of those
regulations which are
promulgated for the safety and/or seaworthiness of the vessel(s).
It
is understood and agreed that this warranty shall in no way be
construed to nullify the “Inchmaree” Clause, or any
part
thereof in the Institute Clauses attached to this Policy.’
We
were informed that this is a standard clause in marine hull policies
issued by South African underwriters in relation to South
African
vessels.
[6]
The parties were at odds over the meaning
and effect of the second proviso to the MSA warranty. Viking said
that its effect was
to render the warranty irrelevant to the
assessment of its claim as that claim arose under the two Inchmaree
clauses. Mutual &
Federal said that the operation of the warranty
could be reconciled with the Inchmaree clauses and therefore breaches
of the warranty
could properly be raised as a defence to Viking’s
claim. This was the primary issue in the appeal.
[7]
In the alternative to its defence based on
the MSA warranty Mutual & Federal argued that the loss of the
Lindsay
resulted from a want of due diligence on the part of Viking as the
owners of the vessel. Assuming that was the case, by virtue
of the
provisions of the two Inchmaree clauses there was no liability to
indemnify Viking for its loss.
The
facts
[8]
There
is no real dispute about the circumstances in which the
Lindsay
sank,
and it is helpful to describe them briefly in order to set the stage
for considering Mutual & Federal’s defences.
Before doing
so it is appropriate to mention that Mutual & Federal denied both
the fact of the sinking and that it had been
occasioned by negligence
on the part of either the persons on the bridge of the
Ouro
do Brasil
or
the master, officers and crew of the
Lindsay
or
a combination of the two. They freely admitted that they did so for
tactical reasons. In preliminary proceedings Davis AJ, relying
on
Williams
v Tunstall
,
accepted that there was nothing inappropriate in this.
[6]
She was wrong to do so. Since 1965, when the Uniform Rules of Court
were first promulgated, Rule 18(5) has provided in regard to
denials
that:
‘
When
in any pleading a party denies an allegation of fact in the previous
pleading of the opposite party, he shall not do so evasively
but
shall answer the point of substance.’
A
tactical denial does not do that. Rule 9(3)(
b)
of the
Admiralty Court Rules follows rule 22(2) of the Uniform Rules and
rule 18 is excluded (Admiralty Rule 24), but I see no
reason to
construe those rules to permit the tactical denial of factual matter
that the pleader knows is not in dispute. And
Williams v Tunstall
has been rejected by this Court. Harms DP said in relation to an
attempt to rely on it that:
‘
The
other objection, namely that motion proceedings give the applicant a
procedural advantage because the respondent is not entitled
to rely
on a bald denial, as is possible in trial proceedings, and that it
would be unfair to deprive the respondent of this advantage,
no
longer holds water. Litigation is not a game.’
[7]
I
agree. This case illustrates the abuse that arises from tactical
denials, where a case that had already been the subject of extensive
investigation in the course of a Court of Marine Enquiry was
traversed afresh in circumstances where it was apparent that the
insurer had no fresh evidence on which to base its case and where the
principal witness on whom it wished to rely was unavailable.
This
involved a waste of time and costs.
[9]
The principal facts emerge from the
evidence of Captain Cox, who gave evidence at both the Court of
Marine Enquiry that followed
upon the sinking and the trial in the
High Court. He analysed the information available from the
Ouro
do Brasil’s
navigational
equipment and information from Marine and Coastal Management in
relation to the position of the
Lindsay.
Using that he was able to plot the
course taken by the two vessels over the period of about 45 minutes
before the collision.
In turn this enabled him to express a view on
the cause of the collision.
[10]
The
Lindsay
had
finished fishing operations for the day and was sailing in a broadly
easterly direction. Its aim was to be in position the following
morning to commence fishing at a different fishing ground selected by
the master, Captain Landers. She was approximately 18 nautical
miles
from the coast. Another, much larger vessel, the
Umgeni
was
following a similar course a mile
[8]
or so further from shore and overtaking the
Lindsay.
The
Ouro
do Brasil
was
travelling down the coast in a westerly direction.
[11]
Captain Cox tracked the two vessels over the period from about
midnight on 7 May 2005 until the collision at about 00.45
am on
8 May 2005. At the beginning they were over 30 miles apart.
The vessels’ initial courses would have taken
the
Ouro
do Brasil
across the bows of the
Lindsay
,
but at a safe distance in front of it. According to Captain Cox,
given the distance between them and allowing for their relative
speeds and courses, would, if their courses had remained unchanged,
have meant that the
Ouro do Brasil
would have safely passed to port of the
Lindsay
.
This remained the position until about 00:30 am on 8 May 2005.
Captain Cox’s opinion to this effect was not challenged.
Things
changed when, at about 00.30 am, the
Ouro
do Brasil
gradually altered course to
starboard. At the time the vessels were between 6 and 7 miles apart.
But the change in course, if not
addressed, would have led to a close
quarters situation between the two vessels. It was not a situation
that the
Lindsay
could
avoid by itself turning to starboard because that would have risked
bringing it into a collision situation in relation to
the
Umgeni,
which was overtaking her on the
starboard side.
[12]
According
to Captain Cox the starboard turn effected by the
Ouro
do Brasil
was
insufficiently bold to enable the
Ouro
do Brasil
,
as the give-way vessel,
[9]
to
avoid a collision. Had its turn been bolder the
Ouro
do Brasil
could have passed to port of the
Lindsay
.
Instead the turn was too gentle and created the risk of collision.
There is no explanation in the record for the
Ouro
do Brasil
doing
this, but as its own navigational equipment was not at that time
showing the presence of the
Lindsay
it may not have realised the dangers involved in the manoeuvre.
According to its supplemental deck log book it was trying to ensure
that there was adequate room between it and the
Umgeni
for
the two to pass safely. No-one from the
Ouro
de Brasil
gave
evidence at the trial so we are left in the dark as to the reasons
for it adopting the course it did.
[13]
From
the perspective of the
Lindsay
it was the stand-on vessel
[10]
and therefore obliged in terms of the collision regulations to
maintain its course and speed. Furthermore, because of the gentle
nature of the movement to starboard by the
Ouro
do Brasil
,
it would have been difficult for those on the bridge of the
Lindsay
to
appreciate that a dangerous situation with a risk of collision had
been created. There was a wind blowing at force 6 on the Beaufort
Scale (approximately 25 knots) and a south-westerly swell ranging
from 4 to 6 metres in height. As the
Lindsay
rode
up the swells and sank into the troughs it would not have been easy
to control and the bow would have yawed back and forth.
Those on
board a small fishing vessel would have found it difficult to
appreciate from a distance at night the relatively minor
and slow
change in course of the much larger
Ouro
do Brasil
.
At a late stage, and presumably because they realised the danger of a
collision, they turned to port with a view to crossing in
front of
the
Ouro
do Brasil.
However,
their turn was insufficiently bold and merely created a situation
where the starboard side of the
Lindsay
collided
with the port bow of the
Ouro
do Brasil,
with
the catastrophic consequences already adverted to.
[14]
All
of this was relatively common cause at the trial, which is hardly
surprising in view of the fact that a lengthy Court of Marine
Enquiry
had sat to investigate the cause of the loss of the
Lindsay
.
What was not common cause were the circumstances on board the
Lindsay
that
night and who constituted the navigational watch immediately before
and at the time of the collision. The officer of the watch
was the
first mate, Mr Levendal. The first and principal point of dispute was
whether he was in fact attending to the watch at
the material time.
Mutual & Federal’s case was that he was not. It argued that
the vessel was on auto pilot and the watch
consisted only of Mr
Koeries, a deckhand, and Mr Ehlers, neither of whom was entitled, so
it said, even to form part of a navigational
watch, much less be the
only members of it. It argued that Mr Levendal’s alleged
absence from the bridge and the fact that
Mr Koeries and Mr Ehlers
were not certificated to form part of the navigational watch were in
breach of the Safe Manning Regulations,
[11]
and hence the MSA warranty.
[15]
In advancing these contentions Mutual &
Federal did not rely on any direct oral evidence from a witness.
Instead it placed reliance
on a statement by Mr Ehlers, recorded
shortly after the incident, to the effect that only he and Mr Koeries
were on the bridge
as the navigational watch immediately prior to and
at the time of the collision. Viking adopted a two-pronged approach
to these
statements. It contended that although potentially
admissible as hearsay evidence in terms of s 6(3) of the
Admiralty Jurisdiction
Regulation Act (the Act) it should not have
been admitted. If admitted, it submitted that no weight should have
been attached to
it in the exercise of the court’s powers under
s 6(4) of the Act. But even if it was admitted and established a
breach
of the MSA warranty that was irrelevant because such a breach
could not be relied on by Mutual & Federal to negate its
liability
under the Inchmaree clauses.
Liability
under the Inchmaree clauses
[16]
There can be no doubt that the collision
would not have occurred and the
Lindsay
would not have sunk were it not for
negligence on the part of either or both of the crews of the two
vessels. Captain Cox’s
evidence demonstrated that there was
ample sea room available to them to pass each other safely and
without risk of a collision.
The unexplained alteration in direction
of the
Ouro de Brasil
created
the risk of collision and neither vessel thereafter took appropriate
steps to avoid the collision.
[17]
Clearly the risk that materialised was a
risk covered by the policy in terms of the Inchmaree clauses. Counsel
for Mutual and Federal
explained in the course of his reply that his
client’s attitude was that Captain Cox’s evidence
established negligence
on the part of those responsible for the
navigation of the
Lindsay
and
it accordingly accepted that the risk that eventuated was one covered
by these clauses and there was no need to differentiate
between them.
We can accept that concession without making any binding findings of
fact on issues that may arise in further proceedings.
That negligence
gave rise to an obligation by Mutual & Federal to indemnify
Viking for its loss, unless it was entitled to
rely on a breach of
the MSA warranty to avoid that liability or could show that the loss
of the
Lindsay
was
due to a want of due diligence by Viking in terms of the proviso to
each of the Inchmaree clauses.
The
MSA warranty
[18]
Viking adopted a straightforward approach
to the construction of the MSA warranty. It said that once it was
claiming in respect
of a risk insured under the Inchmaree clauses
there was no scope for Mutual & Federal to rely on the warranty
as a ground for
avoiding liability. To hold otherwise would be to
permit that which the proviso to the warranty did not allow, namely,
nullifying
the liability imposed on Mutual & Federal by the
Inchmaree clauses.
[19]
Mutual & Federal apparently argued in
the High Court that the effect of this would be to draw a line
through the first part
of the warranty and that instead the two must
be read together. This approach was accepted by Yekiso J. The effect
instead was
to draw a line through the proviso because it said
explicitly that the MSA warranty should in no way be construed so as
to nullify
the liability arising under the Inchmaree clauses.
[20]
In its heads of argument Mutual &
Federal sought to harmonise the warranty and the Inchmaree clauses by
saying that Viking would
be provided with an indemnity for the loss
of the
Lindsay
caused
by an accident or by negligence, incompetence or error of judgment of
any person, provided that the loss did not result from
want of due
diligence
‘
but there would be no
indemnity if the owner of the “Lindsay” did not ensure’
compliance with the warranty. This
formulation was no more
satisfactory in reconciling the warranty’s application in this
case with the express provision that
excluded its application to
nullify liability under the Inchmaree clauses.
[21]
It is not as if the straightforward
construction of the warranty and the proviso rendered the warranty of
no application. It continued
to have full application to claims
arising under the policy other than those arising under the Inchmaree
clauses. These included
under clause 6.1 of the Institute Fishing
Clauses, liability for perils of the sea, where the warranty’s
requirement of compliance
with safety and seaworthiness regulations
might be thought to have particular relevance. Several examples
spring to mind. An insured
vessel setting out without the charts or
navigation equipment required by regulations and running aground
provided a perfect example
of a situation where a claim for an
indemnity in respect of an insured peril could be resisted on the
grounds of a breach of the
MSA warranty. A claim arising from a fire
on board the vessel could be resisted if the regulations in regard to
fire-fighting equipment
had been breached. So there was ample scope
for the warranty to apply within the limits defined by the policy and
the belief that
Viking’s contentions drew a line through it was
misplaced.
[22]
That
renders it unnecessary to explore Mutual & Federal’s
grounds for contending that the warranty was breached. Had that
been
necessary it would also have been necessary to analyse the scope of
the warranty in far greater detail. Mutual & Federal
adopted the
approach that at every moment of every day during the period of cover
Viking was obliged to comply with every regulation
promulgated under
the MSA for the safety and seaworthiness of the vessel. It contended
that any departure from this rigorous degree
of compliance entitled
it to avoid liability under the policy, citing the classic statement
by Innes CJ on the nature of a warranty
in
Lewis
Ltd v Norwich Union Fire Insurance Co Ltd
.
[12]
[23]
Those
contentions adopted an extreme view of what was required from the
insured in order to comply with the warranty. I am by no
means
satisfied that it was a correct view. Such warranties are to be
construed favourably towards the insured because of their
impact upon
the liability of the insurer.
[13]
In other words they are to be given a practical and businesslike
construction in the light of the purpose of the clause and the
insurance policy.
[14]
They are
therefore not lightly to be construed as invalidating cover on
grounds unrelated to the loss.
[24]
Looking
at the MSA warranty in this light, it is plainly intended to require
the insured to comply with those regulations promulgated
under the
MSA that have to do with safety and seaworthiness. But it is less
plain that Mutual & Federal’s liability under
the policy is
always contingent upon such compliance. Where that liability arises
from an insured peril having nothing to do with
the safety or
seaworthiness of the vessel, such as for example, violent theft by
persons from outside the vessel, piracy, breakdown
of or accidents to
nuclear installations or reactors, contact with aircraft or similar
objects, or earthquake, volcanic eruption
or lightning,
[15]
it can hardly be thought that the identity and qualifications of the
crew on board or the absence of fire fighting equipment or
life
jackets, should affect Mutual & Federal’s liability to make
good a loss under the policy. That points towards a
construction of
the warranty that it applies when the breach of regulations is
materially connected to the loss that has occurred.
[25]
Then account must be taken of the ordinary
eventualities that may accompany a sea voyage. A life jacket may be
lost overboard or
be damaged. A fire extinguisher used to stop a
small fire from spreading may be exhausted. Various items of the
vessel’s
equipment may malfunction, be broken or lost. Is it to
be thought that the vessel must in every such instance return
immediately
to port to remedy the deficiency spurred on no doubt by
the thought that until it did so it would have no marine hull cover
under
the policy? I doubt it. And what is to happen if, while the
vessel is returning to port for that very purpose, it is lost for
reasons
unrelated to the deficiency? It seems a very harsh
construction of the warranty to say that there is no cover in such
circumstances.
That suggests that there may be a time qualification
arising under the warranty. Properly interpreted it may possibly only
require
compliance with the regulations when the vessel sets out on a
voyage, and cover is not lost if during the voyage it ceases to be
compliant.
[26]
These and other difficult issues of
construction would have arisen had a breach of the MSA warranty been
available to Mutual &
Federal to resist Viking’s claim for
an indemnification under the policy. As in my view it is not
available for that purpose
because the claim arises under the cover
provided by the Inchmaree clauses, it is not necessary to develop
this enquiry any further.
The next issue is whether the loss of the
Lindsay
resulted
from want of due diligence on the part of Viking.
Due
diligence
[27]
There
appears not to be any extensive authority on the question of the
requirement in the proviso to Inchmaree clauses that the
cause of the
loss should not be want of due diligence on the part of the insured
or the owners or managers of the insured vessel.
It is of course an
expression that is used in other contexts in the area of maritime
law. Under the Hague-Visby rules the carrier
is required before and
at the beginning of the voyage to exercise due diligence to make the
ship seaworthy; properly to man, equip
and supply the ship; and to
make the holds refrigerating and cool chambers, and all other parts
of the ship in which goods are
carried, fit and safe for their
reception, carriage and preservation. But exercising due diligence to
equip a vessel to carry cargo
safely, which is a positive obligation
resting on the carrier, is not necessarily the same thing as
demonstrating that loss or
damage to an insured vessel was caused by
a want of due diligence. I agree, however, with Professor Rose that,
just as in the former
case it is necessary for the carrier to show
the exercise of reasonable care, in the latter instance a failure to
exercise reasonable
care that is causally related to the loss will
operate to exclude the insurer’s liability under the proviso to
the Inchmaree
clause.
[16]
I
also agree that the need to adduce proof of due diligence only arises
when the insurer has advanced some evidence that the cause
of the
loss or damage was a want of due diligence.
[17]
It is unnecessary to express a firm view in regard to the onus of
proof on this issue and whether it rests on the insurer to show
a
causal want of due diligence or on the insured to show that there was
no want of due diligence. My inclination, however, in accordance
with
the practice of underwriters,
[18]
and the view in
Arnould
,
[19]
would
be to say that it is for the insurer to show a want of due diligence.
That is in accordance with the ordinary construction
of such clauses.
[28]
Mutual & Federal’s arguments
under this head were not always clear, but as I understand them they
sought to raise two
related points. The first was that the mate, who
was supposed to be on duty at the time of the collision, was not
present on the
bridge, and that the
Lindsay
was effectively in the hands of Mr
Koeries, assisted by Mr Ehlers. The second was that neither of these
two was certificated to
undertake a navigational watch.
[29]
Even
if both those propositions were correct, a matter to which I will
revert, that does not seem to be decisive of the issue. What
must be
established is a want of due diligence on the part of the insured,
the owner or the manager – in this case Viking
– causing
the loss. And that does not depend on the conduct of the crew but on
the conduct of those responsible at a higher
level of management in
the company. It must, as
Arnould
expresses
it, ‘be personal failure of the assured, owners or managers, or
their alter ego in the case of corporate bodies,
rather than a
failure by a subordinate’. Want of due diligence is concerned
with equipping the vessel for the voyage and
not with seagoing or
operational negligence, which is one of the perils insured
against.
[20]
That is
illustrated by the Canadian case of the
Brentwood
to
which we were referred.
[21]
[30]
In the
Brentwood
the master of a converted ferry carrying goods in coastal trade
caused her to be loaded with only an 18 inch freeboard at the stem,
aggravated by a rake of one foot down by the stem. When travelling at
7½ knots the vessel generated a bow wave of two feet
in a flat
calm. This broke over the bow so that water entered the hold via the
ventilators causing the vessel to capsize. The master
was plainly
negligent in loading the vessel in this fashion bringing the claim
within the Inchmaree clause. But the owner had commissioned
inclination tests that demonstrated the safe limits of loading and
the proper distribution of cargo. It had been advised in a written
report that a minimum safe freeboard midships was 18 inches at even
trim, which meant a freeboard at the stem of 2½ to 3
feet. But
the insured failed to inform the master of the contents of the
inclination tests or the advice given by the naval architect
who
undertook the tests and failed to give loading instructions in
accordance with that information. There were no draft marks
on the
vessel and it had on a number of occasions gone to sea more heavily
laden than recommended by the naval architect. The court
held that
this amounted to a want of due diligence on the part of the owner. It
said:
‘
The
duty of due diligence imposed upon the owner is not satisfied if for
years he closes his eyes and does nothing.’
[22]
[31]
There were at least two officers on board the
Lindsay
who
held appropriate qualifications in regard to navigation and
watchkeeping, namely Captain Landers, the skipper, and Mr Levendal,
the mate.
[23]
The evidence
showed that they shared the watches, with Captain Landers on duty
during the day when they were fishing and Mr Levendal
taking the
night watch. There was no evidence that this was an unsatisfactory
arrangement or that it was departed from in practice.
In fact in
regard to the night when the tragedy occurred Captain Landers said
that he handed the watch over to Mr Levendal at about
21.00 hours
before retiring to his cabin to sleep. Mr Bacon’s evidence was
that Mr Levendal was an experienced, skilled and
meticulous mate, who
Viking had encouraged to sit for his master’s ticket, but who
preferred to continue as mate on board
its vessels. Even if it were
established by Mutual & Federal that on this night there was a
departure from the path of rectitude
and Mr Levendal inexplicably
neglected his duties that would not be the result of a want of due
diligence on Viking’s part.
[32]
But it is as well to deal with the
suggestion that Mr Levendal was neglecting his duties that evening.
In my view there was no evidence
that this was the case. Captain
Landers testified that Mr Levendal took over the watch at about 21.00
hours. Before the incident
the
Lindsay
had been operating on auto pilot. That
was not, one would expect, a decision that Mr Koeries, a deckhand not
even qualified as an
able seaman, would have made of his own
volition, particularly given the weather and sea conditions and the
fact that the
Lindsay
was
making its way to new fishing grounds. Only Mr Levendal could have
set the course to do that. Equally, the attempt to avoid
the imminent
collision by turning to port and trying to cross in front of the
Ouro
do Brasil
, rather than taking the
instinctive step of trying to turn away to starboard, is indicative
of the person in charge being an experienced
seaman and realising
that a starboard turn would likely bring the
Lindsay
into collision with the
Umgeni
.
One of the interesting features of the interviews with Mr Ehlers is
that he never mentioned the presence of two large vessels,
only the
‘skuit’ (boat) with which they collided. It is plain that
the ship he talked about was the
Ouro do
Brasil
, which collided with the
Lindsay
.
[33]
Yekiso J accepted that Mr Levendal was not
on the bridge at the time of the incident on the basis of an
interview conducted eight
days after the collision by Captain
Campbell with Mr Ehlers, who did not give evidence. In that interview
Mr Ehlers was asked some
questions arising from a statement that he
attested before Captain Campbell. To put his later answers in context
it is appropriate
to set out the material portion of his statement.
In doing so it is appropriate to record that Mr Ehlers was unable to
write his
own statement and while the document is largely in English
it is apparent that he was Afrikaans speaking. The material portion
of the statement read:
‘
I
went to the bridge at 23h30. I saw this “Skuit” as soon
as I was on the bridge.
I
told the deckhand on watch that “hy moet oppas die skuit kom
vinnig nader …” The reply was “moenie worry
nie
die skuit gaan verby ons”.
[24]
I
then went outside to phone my wife and have a smoke. The next moment
we were struck by the other vessel.
Our
vessel capsized and I swam to the life raft.’
At
the foot of the statement it is recorded that “Mr Reddell has
read this statement back to me and I agree to that this is
my full
statement at this time.’ How skilled Mr Reddell was in acting
as an interpreter we do not know.
[34]
Captain Campbell then asked a number of
follow-up questions. But there were many important areas that he left
untouched. For example
there was a significant problem with the times
given by Mr Ehlers in this statement. He suggested that the collision
occurred fairly
soon after he reported for duty on the bridge because
the ‘skuit’ was visible and closing fast. But at that
time the
Lindsay
and
the
Ouro de Brasil
were
some 30 miles apart and certainly not visible to one another. The
collision occurred nearly an hour and a quarter later during
which
time he had thought it appropriate to leave his post for a cigarette
and conversation with his wife. The statement’s
reliability was
immediately suspect.
[35]
Captain Campbell asked what Mr Ehlers saw
when he saw a ‘skuit’ and was told that he saw a red
light. In the context
of this collision that would have been the port
light of the
Ouro do Brasil
,
which he said was showing on the
Lindsay
’s
port side. At the time he said he was standing near the steering
wheel of the
Lindsay
on
the bridge. When asked whether there was an officer on the bridge
with them he said there was not and indicated that the skipper
and
the bosun were sleeping and the mate (Mr Levendal) was in his cabin.
He was not asked why the mate was in his cabin, or what
he was doing
there. He did not know what turn the
Lindsay
took before the collision but said that
when the collision occurred he was on the starboard landing, that is,
outside the bridge,
and that the collision was on the starboard side
in the vicinity of the stocker pond near the stern of the vessel. It
caused the
Lindsay
to capsize to starboard.
[36]
All of this might seem reasonably clear
were it not for a curious passage at the end of the question and
answer session. Mr Ehlers
was asked whether everything he had told
Captain Campbell was true which he answered affirmatively. He was
asked whether he was
sure and again answered affirmatively. But then
the transcript goes on as follows:
‘
Statement.
The Mate made a turn by us.
[25]
107
At what time?
I have
no idea.
108
When the Mate came on the bridge, could you see the big ship?
The
Mate came to the bridge, Royden mentioned the other vessel, the Mate
said he was going to the toilet and was coming back quickly,
and then
the accident happened.’
[37]
For some reason Captain Campbell did not
think it necessary to explore this with Mr Ehlers. But it cast doubt
on everything that
had gone before. It placed the mate on the bridge
and aware of the presence of the
Ouro do
Brasil
. But it did not explore when
this happened or what happened then. This was important given the
problems with the times given in
his statement. According to his
answers Mr Ehlers was outside the bridge on the starboard landing at
the top of the ladder leading
up to the bridge smoking. Presumably if
he thought a collision was imminent he would not have been having a
cigarette and phoning
his wife to wish her well for Mothers’
Day. He knew nothing of the manoeuvres undertaken in order to avoid a
collision, yet
the collision occurred astern of where he was standing
and on the same side – the starboard side – of the
vessel. Even
the obvious question whether the mate in fact left the
bridge to go to the toilet, which was situated off the bridge down a
short
flight of stairs, was not asked.
[38]
This interview with Mr Ehlers was not
particularly illuminating in regard to the conduct of Mr Levendal on
the night in question.
Such light as it did cast on that was
effectively doused when, at the Court of Marine Enquiry, Mr Ehlers
repudiated it. He then
added to his original statement that the mate
had been on the bridge when he came on duty. When he (Ehlers)
mentioned the presence
of the ‘skuit’, the mate said that
it was far away from them. Mr Ehlers then attributed the comment that
the ‘skuit’
would pass them to the mate and not Mr
Koeries. He accepted that he had not told the truth to Captain
Campbell.
[39]
Yekiso
J admitted all this evidence and then decided that the statements
made by Mr Ehlers at his interview with Captain Campbell
were to be
preferred to those he made at the Court of Marine Enquiry. In doing
so he indicated that he was adopting the approach
to be adopted when
a court is confronted by irreconcilable versions of the facts set out
by Nienaber JA in
Stellenbosch
Farmers’ Winery
.
[26]
But that approach relates to irreconcilable versions emanating from
different witnesses. In this case they emanated from the same
witness
and different considerations must apply. That is not to say that
there may not be circumstances in which a court may accept
some
aspects of a witness’ evidence and reject other aspects –
even possibly where they are diametrically opposed –
but it
cannot arrive at that decision on a conventional weighing of the
probabilities. The reason why the witness’ version
has changed
necessarily intrudes and assumes central importance. This highlights
the problem with the approach of the trial court.
Nienaber JA listed
a number of factors such as the witness’ candour and demeanour
when giving evidence; any possible bias;
internal and external
contradictions and the calibre and cogency of the witness’
performance when giving evidence. Testing
the reliability of the
evidence is vital and that could not be done in this case because Mr
Ehlers did not give evidence.
[40]
Leaving these difficulties aside the trial
court did not pay regard to a warning about the quality of Mr Ehlers
as a witness contained
in the loss adjuster’s report prepared
by Mr Arnold on behalf of Mutual & Federal. Mr Arnold also
interviewed Mr Ehlers,
in the presence of Mr Hattingh, the shore
manager for Viking. He noted in his report that Mr Hattingh said that
the version of
events given to him by Mr Ehlers was the fifth or
sixth differing version he had heard from him. Mr Arnold’s
conclusion was
blunt. He said that ‘Ehlers is endeavouring to
hide the truth or alternatively advising persons what he believes
they want
to hear.’ In some respects he regarded his evidence
as nonsensical.
[41]
The
judge was faced with two issues. The first was whether to admit as
evidence the statements by Mr Ehlers and the second, if he
did so,
was to determine the weight to be attached to them. Section
6(3) of the Act permits the admission of hearsay evidence
in
admiralty proceedings subject to such directions and conditions as
the court thinks fit. The general approach to the admission
of such
evidence is generous.
[27]
Once
admitted the principal issue under s 6(4) is the weight to be
attached to the evidence. It is unnecessary to have regard,
as did
the trial court and as submitted by Mutual & Federal in its heads
of argument, to
s 3
of the
Law of Evidence Amendment Act 45 of 1988
.
The power of a court exercising its admiralty jurisdiction to admit
hearsay evidence is not constrained by the requirements of
that Act.
[42]
Although the approach to the admission of
hearsay evidence in admiralty is a generous one there will be cases
where the court must
draw the line and refuse to admit the evidence.
In my view this was one such case. The statements made by Mr Ehlers
were tenuous
and conflicting. They failed to explain why Mr Levendal,
a competent and meticulous seaman, would neglect his duties in the
manner
suggested. There was information via Mr Arnold that Mr Ehlers
was not reliable. The attempts to find him and bring him to court
to
give evidence were limited and ineffective. As a result the various
statements could not be tested under cross-examination.
And there
were no other witnesses to provide corroboration of what he said.
Even a generous approach to the admission of hearsay
in admiralty,
which I do not in any way decry, must have its limits in the
interests of a fair trial. In this case those limits
were in my view
exceeded. But even if I am wrong in that the question of the weight
to be attached to those statements remained.
In my view it was
impossible for the court to attach any weight to them. They were
thoroughly unreliable.
[43]
In those circumstances the main evidential
plank of Mutual & Federal’s case was removed. It is not
possible to determine
on the evidence presented in this case where Mr
Levendal was when the collision occurred and what he was doing. I am
careful to
say that this is the conclusion to be reached on the
evidence tendered in this case. Whether in other litigation –
and Mr
Arnold’s report referred to other cases having been
instituted – additional and better evidence can be produced is
a matter on which it would be inappropriate for this court to express
a view.
[44]
The other basis upon which Mutual &
Federal relied for saying that the loss of the
Lindsay
was due to a want of due diligence on
the part of Viking related to the qualifications of Mr Koeries and Mr
Ehlers to act as members
of the watch. It said that in terms of
regulation 4(1)(i
i) of the Safe Manning Regulations it was the
responsibility of Viking to ensure that no rating formed part of a
navigational watch
‘unless he or she holds appropriate valid
certification entitling him or her to do so’. Neither Mr
Koeries nor Mr Ehlers
held any such certification and so it was said
that there was a want of due diligence by Viking.
[45]
Once again there is a problem with the
issue of causation. The proviso to the Inchmaree clauses operates
when the want of due diligence
caused the loss or damage. It is not
clear on what basis the absence of certification would have that
causative effect. Presumably
it would need to be joined with some
evidence that an incompetent watch was kept and that this meant that
the
Lindsay
did
not avoid a collision when it could have done so. There is no such
evidence.
[46]
But in any event it is not apparent that
there was a breach of the regulations in this respect. The
Lindsay
was crewed in a manner compliant with
the requirements of regulation 18 of the Safe Manning Regulations as
appeared from a certificate
issued by the South African Maritime
Safety Authority (SAMSA), which in terms of s 2(1) of the MSA is
the Authority in regard
to safety matters. Captain Louw of SAMSA
pointed out that on a fishing vessel such as the
Lindsay
only one certificated rating is
required to be on board in terms of regulation 18. As it is not
practical for that rating to be
on duty 24 hours a day ‘other
crew on board must be used to keep a lookout’.
[47]
There is a difficulty in ascertaining what
is meant by the reference to a rating being ‘certificated’
to form part of
a navigational watch. Mutual & Federal stressed
the importance from a safety perspective of the watchkeeping role
especially
at night when travelling in a busy sea lane. It suggested
therefore that some form of special certification is required. But it
was unable to point to a provision in which any such certification
was identified. The word ‘certificated’ is defined
in
regulation 1(1) as meaning:
‘…
duly
certificated under the Act or deemed under the Act to be so
certificated …’
That
requires one to go to the MSA in order to ascertain what is meant by
this expression. Chapter III of the MSA deals with ‘certificates
of competency, service and qualification’ without making any
provision for a certificate enabling a seaman to participate
in a
navigational watch. Certification is dealt with in s 73(1) which
provides that:
‘
Subject
to the provisions of this section, the owner and the master of every
South African ship operating at a port in the Republic
or going to
sea from any port whatsoever shall ensure that there is employed on
board that ship, in their appropriate capacities,
the number of
officers and other persons, duly certificated as prescribed by
regulation, or deemed to be so certificated.’
That
takes us back to SAMSA’s certification of what crew and
officers the
Lindsay
required
in terms of the Safe Manning Regulations
.
The evidence showed that it was
properly crewed.
[48]
I have been unable to find any provision of
the MSA or any regulation under the MSA that provides for a special
certification for
crew to be qualified to participate in a
navigational watch. It may be that regulation 4(1)(ii) overlooked
this. Or it may be that
it is resolved by having regard to s 85 of
the MSA, which provides that:
‘
Notwithstanding
the provisions of section 73 the Authority may, in its discretion and
for such periods and under such conditions
as it may specify if it is
satisfied that no suitable holder of a certificate of the required
grade and granted under this Act
or referred to in section 83 or 84
is available, permit a South African ship to go to sea from any port
whatsoever … without
the prescribed number of certificated
officers or other persons, and whilst such permission remains in
force any person who acts
in terms thereof shall not, if the
conditions under which it was granted are complied with, be deemed to
have contravened the provisions
of section 73.’
SAMSA’s
attitude appears to be as expressed by Captain Louw. He made it clear
that the use of other crew on board to keep
a lookout is permissible,
in view of the fact that there would only be one able seaman on
board. That may constitute a permission
in terms of the provisions of
s 85. In any event it is clear that there is no proper
foundation for Mutual & Federal’s
complaint under this
heading.
[49]
It follows that the contention that the
loss of the
Lindsay
was
due to a want of due diligence on the part of Viking must fail. That
means that the appeal must succeed and Viking is entitled
to an
indemnity under the marine hull policy. There was some argument in
this court, albeit not raised in the pleadings or canvassed
at the
trial, about the proper quantum of that indemnity. It is to that
issue that I now turn on the assumption that these were
questions of
law that could properly be raised for the first time on appeal.
Quantum
[50]
The policy was a valued policy. The subject
matter of the insurance was dealt with under two headings, namely,
hull, machinery and
equipment and everything connected therewith and
increased value of hull and/or disbursements. An amount of R2.8
million was the
value under the first head and R700 000 under
the second. The cover to the policy said that the amount insured was
for “100%
of values and amounts herein’. On that basis
Viking claimed R3.5 million plus VAT of R490 000 and interest at
a rate
of 15.5% per annum from 8 October 2005, being the date when
Mutual & Federal repudiated liability under the policy. Neither
the amount of the claim nor the rate of interest was disputed during
the trial, but arguments were raised in respect of both before
us.
[51]
In regard to the portion of the claim
relating to hull, machinery and equipment counsel drew attention to
the following provision:
‘
Deductibles
as per Clause 12.1 of 5% of Hull and Machinery Sum Insured (such
deductible to be applied before the addition of VAT)
In
addition all claims are subject to an Annual Aggregate Deductible of
R1 000 000 incorporating a Stop Loss of R400 000.’
On
the basis of this provision counsel submitted that the amount of
R2.8 million fell to be reduced by the stop loss amount
of
R400 000.
[52]
There is no merit in this argument. Clause
12.1 made provision for deductibles and the statement of an amount
that would be deductible
from the aggregate of all claims arising out
of each separate accident or occurrence. The amount was left blank.
But the clause
went on to say that it did not apply to a claim for an
actual or constructive total loss, such as the loss of the
Lindsay
.
Counsel accepted this but said that the sentence that followed made
provision for such a deductible. That is incorrect. What it
did was
put an annual aggregate maximum on the deductibles as well as a stop
loss on the amount of the deductible in respect of
any single claim
in circumstances where the policy made provision under clause 12.1
for a deductible. As clause 12.1 did not make
such a provision, which
is hardly surprising in relation to a valued policy, these provisions
did not affect Viking’s claim.
[53]
The
second argument raised by counsel related to the interest rate of
15.5% claimed by Viking. Under s 5(2)
(f)
of
the Act the court is empowered to make ‘such order as to
interest, the rate of interest in respect of any sum awarded by
it
and the date from which interest is to accrue, whether before or
after the date of commencement of the action, as to it appears
just’.
The effect of this was to free a court sitting in an admiralty case
from the provisions of the Prescribed Rate of
Interest Act 55 of 1975
(the Interest Act). No doubt that was deliberate as it enabled the
court, which will frequently be seized
of matters involving disputes
arising in other countries and currencies where interest rates may
bear little or no relation to
the rates current in South Africa or
the interest rate prescribed under the Interest Act, to exercise a
discretion based on the
justice of the case as to the appropriate
order in regard to interest.
[28]
[54]
Viking claimed interest on the capital sum
due to it less VAT at a rate of 15.5% per annum from the date upon
which Mutual &
Federal repudiated liability under the policy. It
was submitted that the appropriate date was the date of issue of
summons. I do
not agree. An indemnity should have been furnished by 8
October 2005. Instead Mutual & Federal repudiated liability and
have
kept Viking out of the money to which they were entitled for
over ten years. I can see no reason why they should not pay interest
from that date.
[55]
As
regards the rate of interest that is more debatable. The world has
been experiencing record low interest rates for a number of
years
since the financial crisis of 2007 and 2008. But it was only in 2014
shortly before the commencement of the trial that the
rate prescribed
under the Interest Act was reduced to nine per cent. Mutual &
Federal submitted that it would be more appropriate
for interest to
be levied at this rate. In doing so it submitted that this would also
mean that the interest accrued on the debt
would not exceed the
amount of the capital and hence would not exceed what is permissible
under the
in
duplum
rule. Counsel referred us to the recent decision of the
Constitutional Court in
Paulsen
,
[29]
which overturned the decision of this court in
Oneanate
[30]
that had held that the operation of the
in
duplum
rule
was suspended once litigation commenced.
[31]
In a curious argument he submitted that we should award Viking a
lower rate of interest because then the
duplum
would
not be reached. Why that would be relevant escapes me. If the
duplum
has
been reached then Mutual & Federal’s liability is frozen at
double the capital sum it is obliged to pay Viking. Any
saving
accruing to it in consequence of that would be minor given the
lengthy period during which it has withheld payment from
Viking.
[56]
Viking’s claim is a South African
claim against a South African insurer where the loss has been felt in
South Africa currency.
It was reasonable therefore for it to claim
interest at the rate generally payable on judgment debts in South
Africa. This was
not challenged and no evidence was led by Mutual &
Federal to show that this was an inappropriate rate of interest. Had
that
been done it would have been open to Viking to lead evidence to
show that it would be just for it to recover interest at that rate.
Because it was not questioned at the trial it was deprived of the
ability to lead such evidence, for example, evidence that it
had to
borrow money to replace the
Lindsay
,
or evidence of financial loss it suffered in consequence of Mutual &
Federal refusing to pay the indemnity for which it had
contracted. In
those circumstances it seems to me inappropriate to depart from the
conventional rate of interest. The consequences
of that insofar as
the
in duplum
rule
is concerned will have to be worked out when payment is made.
Order
[57]
I make the following order:
The
appeal is upheld with costs and the judgment of the court below is
set aside and replaced with the following:
‘
There
will be judgment for the Plaintiff for:
1
Payment of the sum of R3 990 000
together with interest on the sum of R3.5 million at a rate of 15.5%
per annum from 8
October 2005 to date of payment.
2
Costs of suit, such costs to include the
qualifying expenses of Captain Cox.’
M J D WALLIS
JUDGE
OF APPEAL
[46]
Appearances
For
appellant: R W F Macwilliam SC
Instructed by:
Webber Wentzel, Cape Town
and
Webbers, Bloemfontein.
For
respondent: D A Gordon SC (with him A V Voormolen
SC)
Instructed by:
Cox Yeats Attorneys,
Durban and
McIntyre
& Van der Post, Bloemfontein.
[1]
The
Lindsay
had
a gross registered tonnage (GRT) of 174.24 tons and overall length
of 31.22 metres. The
Ouro
Do Brasil
had a GRT of 15 218 tons and a length overall of 172 metres.
[2]
The
term describes a seaman with only basic training whose principal
role on a fishing vessel is to assist with the fishing operations
and provide manual labour.
[3]
There
was some confusion about the terms upon which Yekiso J granted leave
to appeal, but that was clarified on application to
this Court, when
Brand JA and Schoeman AJA gave unrestricted leave to appeal.
[4]
After the vessel involved in
Thames
& Mersey Marine Insurance Co Limited v Hamilton, Fraser & Co
(1887)
12 AC 484.
[5]
Merchant Shipping Act 57 of 1951 (the MSA).
[6]
Williams
v Tunstall
1949
(3) SA 835
(T) at 838-839.
[7]
Cadac
(Pty) Ltd v Weber-Stephen Products Co and Others
2011
(3) SA 570
(SCA) para 10.
[8]
References to a mile here and elsewhere in this judgment is to a
nautical mile.
[9]
As the name implies this is the vessel that under the Collision
Regulations must take avoiding action to prevent a collision.
[10]
In terms of the Collision Regulations this is the vessel that must
maintain its course or station when faced with a potential
collision
situation.
[11]
Merchant Shipping (Safe Manning) Regulations, 1999 published in
Government Notice R1548 in
Government
Gazette
20772
of 30 December 1999 as amended. Hereafter the Safe Manning
Regulations.
[12]
Lewis
Ltd v Norwich Union Fire Insurance Co Ltd
1916
AD 509
at 514-515;
Parsons
Transport (Pty) Ltd v Global Insurance Co Ltd
2006
(1) SA 488
(SCA) para 6.
[13]
Kliptown
Clothing Industries (Pty) Ltd v Marine & Trade Insurance Co of
SA Ltd
1961
(1) SA 103
(A) at 106H-108D.
[14]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) para 18.
[15]
All perils covered by clause 6.1 of the Institute Fishing Vessel
Clauses.
[16]
Francis D Rose
Marine
Insurance: Law and Practice
2ed
(2012) para 13.12 at 259.
[17]
Ibid para 13.13.
[18]
Julian
Hill (ed)
O’May
on Marine Insurance
(1993)
137.
[19]
Jonathan
Gilman QC
et
al
Arnould’s
Law of Marine Insurance and Average
17
ed (2008) para 23-62.
[20]
Arnould
fn 17
supra.
[21]
Coast
Ferries Ltd v Century Insurance Co of Canada and others
[1975]
2 SCR 477.
[22]
At 483.
[23]
The bosun may also have had such qualfications.
[24]
In translation these passages would read ‘he must look out,
the ship is rapidly coming closer’ and ‘Don’t
worry. The ship is going past us.’
[25]
This must be an English translation of the idiomatic Afrikaans
expression “Die Maat het ʼn draai by ons gemaak’
meaning that the mate came there and engaged with them.
[26]
Stellenbosch
Farmers' Winery Group Ltd and Another v Martell et Cie and Others
2003
(1) SA 11
(SCA) para 5.
[27]
Cargo
laden and lately laden on board the
MV
Thalassini Avgi v MV Dimitris
1989
(3) SA 820
(A) at 841D – 842H.
[28]
This appears to have been overlooked in
The
MV Sea Joy: Owners of the Cargo lately laden on board the mv Sea Joy
v The MV Sea Joy
1998
(1) SA 487
(C) at 508E-I. In
MT
Argun: MT Argun v Master and Crew of the MT Argun and Others
2004
(1) SA 1
(SCA) para 38, Farlam JA correctly said that s 5(2)
(f)
confers
a wide and unfettered discretion. The underlying reasons for this
are set out in Shaw
Admiralty
Jurisdiction and Practice in South Africa
83-84.
[29]
Paulsen
v Slip Knot Investments 777 (Pty) Ltd
[2015] ZACC 5; 2015 (3) SA 479 (CC).
[30]
Standard
Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in
Liquidation)
[1997] ZASCA 94; 1998 (1) SA 811 (SCA).
[31]
The manifestly unfair consequence of the
Paulsen
judgment for Viking is that it has through not particular fault on
its part taken over ten years for it to enforce its right
to an
indemnity and nine years since the commencement of action, yet it
will not be able to recover interest for the entire period
of delay
because of the operation of the rule.