In The Fanti, claimants in respect of loss and damage to cargo obtained judgment in default against the shipowner, a Ghanaian company, which was then wound up in the English Companies Court. The shipowner had third party liability insurance with a P. & I. Association, whose rules for the relevant year provided that an insured shipowner member would be indemnified against “claims and expenses which he shall have become liable to pay, and shall in fact have paid …”.

Staughton, J., was thus asked to decide a point which had long troubled the marine insurance industry but had never previously been litigated, namely, whether it was open to third party claimants to recover their losses directly from P. & I. Associations despite the existence of a rule requiring the shipowner to “pay first” before he had a right to claim reimbursement from the Association, where on the facts no payment of the third party’s claim had taken place.

In his judgment, Staughton, J., followed the leading decision in Post Office v. Norwich Union Fire Insurance Society Ltd.,4 which established the rule that an insured, and any third party standing in his shoes pursuant to the 1930 Act, could not claim against insurers until the liability of the insured to the third party had been established.

The claimants in The Fanti said that, once there had been a transfer of rights