On 26 May 1993 the MV Nagos sank with loss of life and cargo 50 nautical miles south of Cape St Francis. It is the potential claims arising from the loss of this cargo that give rise to the present application. It is brought by the owner of the ship in terms of s 1(1)(w) read with s 5(2)(a) of the Admiralty Jurisdiction Regulation Act 105 of 1983 (the Act). The Court in its exercise of its admiralty jurisdiction is required to 'consider and decide any matter arising in connection with any maritime claim' which in the present context involves one 'arising out of or relating to the limitation of liability of the owner of a ship'. These procedural provisions reflect the substantive rights accorded a shipowner by s 261(1)(b) of the Merchant Shipping Act 57 of 1951 (the MSA).

The applicant claims the right, if any, to limit its liability in respect of cargo claims as provided for in s 261(1)(b) of the MSA. The first respondent objects to the Court's jurisdiction. This is based on the earlier proceedings. The first respondent subsequently withdrew the in rem proceedings against the ship. As a result it argues that the Court no longer has any power to entertain the present application. Furthermore, the first respondent questions that South Africa is the appropriate forum for an order limiting liability.

Held: (1) The rule nisi granted in case No 1939/93 in Port Elizabeth and referred to this Court is discharged;
(2) It is declared that the right of the applicant, if any, to limit its liability in respect of the claims of cargo claimants arising out of the sinking of the MV Nagos is to be determined in terms of s 261(1)(b) of the MSA;
(3) Without prejudice to any defence which may be raised to any alleged liability of the applicant or the second respondent to the first respondent or any cargo claimant, it is directed that the question of the applicant's right to limit such liability be determined in proceedings before this Court under case No A137/93;
(4) The applicant is hereby authorised to establish with the Registrar of this Court a limitation fund in the sum of ZAR 6,582,796;
(5) The Registrar is hereby directed to accept a bank guarantee from a first class South African bank to constitute the limitation fund;
(6) After a determination that the applicant is entitled to limit its liability, any cargo claimant which has proved its entitlement to damages arising out of the loss of such cargo by proceedings before a competent forum is given leave to move the Court on notice to all affected parties for directions as to the lodging of claims against the limitation fund and the distribution thereof;
(7)(a) A copy of this order shall be served within one month of the date hereof upon SA Forges de Clabecq; (b) SA Forges de Clabecq is given leave within one month of the date of service upon it of this order to apply for it to be varied or set aside;
(8)(a) This order shall not in any way affect the rights of any person to recover damages arising from injury suffered or loss of life occasioned in consequence of the sinking of the MV Nagos; (b) The applicant shall give notice within six weeks of the date hereof to all members of the crew of the MV Nagos and/or their dependants and/or their duly appointed representatives of their right to apply to the Court for the establishment of a limitation fund in terms of s 26(1)(a) of the MSA should they so desire.

The applicant seeks to establish a limitation fund with the Registrar in the amount of ZAR 5,140,498, alternatively ZAR 6,582,796. The alternative figure has come about as a result of Government Notice 1747 of 24 September 1993, which has put a new value on the '850 gold francs' mentioned in s 261(1)(b) of the MSA. It was promulgated after the present proceedings were commenced and, so far as it may be held retrospective, has raised the erstwhile equivalent value in ZAR terms from 139 to 178.

The first respondent, however, contends that, as there has been a loss of life in addition to loss of cargo, a limitation fund, if one is to be set up at all, must reflect the provisions of s 261(1)(c) of the MSA, which provides:

[I]f claims for damages in respect of loss of life or personal injury and also claims for damages in respect of loss of or damage to property or rights arise, be liable for damages to an aggregate amount exceeding an amount equivalent to 2 635 gold francs for each ton of a ship's tonnage: Provided that in such a case claims for damages in respect of loss of life or personal injury shall, to the extent of an aggregate amount equivalent to 1 785 gold francs for each ton of the ship's tonnage, have priority over claims for damages in respect of loss of or damage to property or rights, and, as regards the balance of the aggregate amount equivalent to 2 635 gold francs for each ton of the ship's tonnage, the unsatisfied portion of the firstmentioned claims shall rank pari passu with the lastmentioned claims.

Granted that there could be claims based on loss of life, then the operative figure for limiting liability would be '2 635 gold francs'. Under Government Notice 1747 the equivalent ZAR value has been determined as ZAR 552. Based on the ship's tonnage an amount of ZAR 15,976,224 would result. The first respondent contends that, as a matter of law, the new figure of ZAR 552 applies to the matter, and not the previous figure of ZAR 432 fixed in Government Notice 2515 of 8 November 1985 and which was withdrawn by Government Notice 1747.

The initial inquiry is whether this Notice, which came into effect after these proceedings commenced, applies its new values to the limitation fund which the applicant wishes to establish in terms of s 26(1)(b). There is a subsidiary issue. Assuming the Notice applies, should the fund be increased so as to provide for claims that may be brought for loss of life or personal injury in terms of s 261(1)(a)?

The Notice derives from the Director General of Transport's powers under s 261(5) of the MSA. Recalling that under s 261(1)(a) and (b) the amount for limiting liability is fixed at so many gold francs per ton of the ship's tonnage, he is entitled to determine what will be the equivalent (obviously in ZAR terms) of the two amounts therein mentioned, viz 2,635 gold francs for loss of life and personal injury claims, and 850 gold francs for claims in respect of loss or damage to property.

The problem is not new. It has frequently come before the English Courts sitting in Admiralty arising out of situations very close to the present and under corresponding statutory provisions. In The Abadesa: Furness Houlder Argentine Lines Ltd v Owners of Steam Tanker Miraflores [1968] 2 All ER 726 (PDA) ([1968] 1 Lloyd's Rep 493) it appeared that because the pound had been devalued, a new conversion rate had been established for the purpose of limiting a shipowner's liability. The new order came into effect after an apportionment of responsibility for the damage in question had been made. The Admiralty Registrar applied the new rate, which was substantially higher than what had been laid down before. The shipowner appealed. Karminski J decided that both orders were 'procedural', not legislative, and that 'each order is directed as stating only the rate of conversion into gold francs at the time that the order was made'. The appeal failed.

The Mecca: United Arab Maritime Co v Blue Star Line Ltd [1968] 2 All ER 731 (PDA) ([1968] 2 Lloyd's Rep 17) is a similar case. Brandon J rejected the argument that the appropriate date for conversion into sterling is the date when the damage occurred. The specific provisions of the Merchant Shipping Act 1958 (UK) indicated that the limit of liability in any particular case was to be determined by applying the equivalent values specified in the order. Dealing with the submission that the order under discussion should not be held retrospective, he said:

If on the true construction of the Act of 1958, the limit of liability for damage occurring on a certain date is to be ascertained by reference to a state of affairs, namely the relationship of sterling to gold francs as specified from time to time by order under ss (3), in existence at one or other of two later dates, then it is not really correct to describe the order which does such specifying as having retrospective effect.

The approach of Karminski J in The Abadesa was endorsed.

There is ample reason to apply the principles laid down in these two English cases to the present matter. The South African MSA reflects in s 261 the accepted principle that, in the interests of encouraging seabound trade and enterprise, a shipowner should be protected in a given amount, save where it has been at fault. By international Convention the unit for ascertaining this sum was the Poincaré gold franc, which South Africa as well as England has accepted. But as the gold franc must perforce be converted into the currency of the country where a limitation order is made, it must follow, as of course, that some method be devised in order to arrive at a commercially equivalent value at any given time. In South Africa the Director General of Transport is seized of the matter; and it does no disservice to the proper confines of judicial knowledge that in the present matter the shrinking value of the ZAR underlies the new and increased values he has now determined. The argument is of course obvious. A claimant under s 261 should not be bound to a ZAR equivalent of the gold franc which no longer represents its true value. The MSA envisages that changes can be called for. That is what has been done. It would be artificial in the extreme that the shipowner should be entitled to rely on an obsolete ZAR/gold franc conversion rate that no longer reflects its true value. The reasoning of Brandon J is, with respect, entirely persuasive. The Director General of Transport is not legislating retrospectively. He is determining a conversion rate in order to give proper substance to any limitation fund that may be set up. The applicant was well advised to put forward the alternative figure of ZAR 6,582,796 based on the new values.

The first respondent argues that this is insufficient. It only relates to claims of a proprietary nature under s 261(1)(b) and not to those for loss of life and bodily injury that may be brought under s 261(1)(a). The first respondent states that 'claims arising out of the loss of life have already been made'. No details are given. The applicant replies that it is not aware of any such claims. Claims by dependants of missing crew members are being negotiated directly with itself and the owners of the ship. It is disputed as 'highly improbable' that such dependants will pursue their claims before this Court or elsewhere. Reliance is placed on an affidavit by a solicitor representing the applicant in England to this effect.

Whether there will be claims under s 261(1)(a) cannot be resolved on the papers as they stand. The unsubstantiated averments by the first respondent are met by the somewhat nebulous answer that it is most unlikely that any will be. It seems that no basis at the moment exists for increasing the limitation fund to ZAR 15,976,224 as the first respondent would have it. The order to be made in this matter should draw the attention of all potential claimants to these proceedings so that, if so advised, they could apply for suitable relief by way of a separate limitation fund.