MV Nyk Isabel Northern Endeavour Shipping Pte Ltd v Owners of MV Nyk Isabel and Another

• Jurisdiction: South Africa
• Judge: Leach JA, Theron JA, Seriti JA, Wallis JA and Kathree-Setiloane AJA
• Judgment Date: 01 June 2016
• Citation: 2017 (1) SA 25 (SCA)
• Docket Number: 972/2015 [2016] ZASCA 89
• Hearing Date: 25 May 2016
• Counsel: M Wragge SC (with JD McKenzie) for the appellant. SR Mullins SC (with S Linscott) for the respondents.
• Court: Supreme Court of Appeal

Wallis JA (Leach JA, Theron JA, Seriti JA and Kathree-Setiloane AJA G concurring):

[1] This appeal involves a claim for security by the second respondent, Nippon Yusen Kabushiki Kaisha trading as NYK Line (NYK), against the appellant, Northern Endeavour Shipping Pte Ltd (NES). Mnguni J sitting H in the KwaZulu-Natal Local Division, Durban, exercising its admiralty jurisdiction, upheld the claim and ordered NES to provide the security demanded by NYK in an amount of nearly USD 10 million within ten days of the court's order. The penalty for it failing to do so was that the deemed arrest of the NYK Isabel, which it had obtained in order to I pursue an action in rem against that vessel in respect of a claim against NYK, would fall away and become of no force and effect. In addition the order provided that the action would either lapse automatically, or that NYK could approach the court for an order dismissing the action. In practical terms the effect of the order was that NES would be unable to continue with its action. The High Court granted leave to appeal to this J

Wallis JA

A court against that order. The circumstances in which the claim for security was made were unusual and it is necessary at the outset therefore to set out the factual background in some detail.

The background facts

B [2] By a time-charterparty dated 2 November 2000, Kien Hung Shipping Co Ltd (Kien Hung) chartered the Andhika Loreto from its owners, Lady Loreto Shipping Inc. On 20 November 2001, by way of an addendum, NES assumed the rights and obligations of the owners under the charterparty. At some stage, although the date is unclear, the vessel was renamed Northern Enterprise and it is by that name that I will refer to C it.

[3] In the latter stages of 2002 Kien Hung, NYK and another shipping line, referred to as CSAV, which played no part in these events, concluded a slot-exchange agreement for the operation of a regular container service from the Far East to the East Coast of South America, via South Africa. D The service was to be known as Supergex and would operate a weekly round-trip service using vessels provided by each of the participants. Each line would nominate vessels for the service and would in respect of those vessels be the ship operator. The lines, other than the ship operator in relation to each vessel, would charter slots on the vessels so nominated in agreed proportions. These charters would be governed E by the terms of a standard slot-charter agreement. Each line would, however, issue its own bills of lading in respect of cargo booked on a vessel and would be the principal carrier in respect of such cargo.

[4] On 22 February 2003 Kien Hung nominated the Northern Endeavour F to undertake this service for a voyage from Pusan, South Korea, to Santos, Brazil, via various ports including Singapore and Durban. At Singapore NYK loaded a number of containers on board the vessel in bay 22. When the vessel arrived in Durban there was a request, the nature of which was disputed, that these containers be restowed. It is alleged by NES that NYK refused that request, a dispute we do not have to G address. The vessel then sailed for Brazil. Off the Cape of Good Hope it encountered a fierce storm with force 10 or 11 winds, heavy seas and waves of up to 9 metres in height. In that storm the container stack in bay 22 collapsed. Eleven containers were washed overboard and lost and the cargo in a number of other containers in that bay was damaged.

H [5] Cargo underwriters, acting under rights of subrogation, instituted action against NYK in Brazil to recover the losses suffered as a result of these events. They relied upon the fact that NYK had issued the bills of lading under which the cargo was carried and was the carrier of the cargo under those bills of lading. NYK joined NES to the proceedings, claiming I an indemnity from it in the event of it being held liable to the cargo underwriters. The Brazilian court upheld both the cargo underwriters' claim and NYK's claim against NES for an indemnity in the same amount as it had been held liable to pay to the underwriters. An appeal against that judgment failed. There is apparently a further appeal pending before the highest court in Brazil, but the volume of cases awaiting a hearing is J such that it is improbable that the appeal will be heard in the near future.

Wallis JA

[6] NES was aggrieved by this result as it holds NYK entirely liable for the A losses that were suffered on this voyage. It alleged that the reason for the collapse of the containers stacked in bay 22 was the improper manner in which NYK caused them to be stowed. It levelled three complaints against NYK. The first was that it caused 24 containers to be stowed on the port side of bay 22 and another 24 on the starboard side with only a single B container in the central portion of the stow, thereby depriving the outside containers of necessary support and the stow of stability. Second, it contended that the upper containers in the stow were loaded with heavier cargo than the lower containers, and this also affected the stow's stability. Third, it claimed that, when the vessel arrived in Durban, NYK was requested to restow these containers in a more satisfactory manner C and that it refused to do so. It alleged that the defects in the stow were caused by this improper method of stowing the containers and pointed to the fact that, notwithstanding the magnitude of the storm that the Northern Endeavour encountered, no other containers were lost and no other cargo was damaged.

[7] NES contended that any amount that it is obliged in due course to pay D NYK pursuant to the Brazilian judgment will constitute damages suffered by it in consequence of NYK's actions in causing the improper stowage of containers in bay 22 on the Northern Endeavour. It alleged that it was entitled to recover these damages from NYK in an action in tort or delict, based on negligence. To that end it caused the NYK Isabel, a vessel E owned by Mercurius Shipping Pte Ltd (Mercurius), but controlled by its parent, NYK, to be arrested as an associated ship on 23 January 2013, when it called at Durban. Security was furnished on 25 January 2013 to secure the release of the vessel and there is now a deemed arrest in place in terms of s 3(10) of the Admiralty Jurisdiction Regulation Act 105 of 1983 (the Act). F

[8] A writ of summons was served in the action and an appearance to defend delivered on behalf of both Mercurius and NYK. Particulars of claim were delivered as was a plea embodying a number of special pleas. There is a replication in response to the plea. The litigation over the G claim threatens to be protracted unless it is forestalled by the present application.

The application

[9] On 26 November 2013 NYK and Mercurius brought an application against NES claiming the following relief: H

'1.

Nippon Yusen Kabushiki Kaisha (NYK Line) is granted leave to be joined to these proceedings as an intervening applicant; and

2.

In terms of s 5(2)(b) of the Admiralty Jurisdiction Regulation 105 of 1983 (the Act) the respondent is ordered to provide security to the Intervening Applicant for its claim against the respondent I advanced in proceedings (No 1242/04) before the court of Santos, Brazil and which has resulted in a judgment in favour of NYK Line against the respondent currently subject to a challenge by special appeal.

3.

The respondent is directed to provide said security:

3.1

in the sum of US$11 428 277; J

Wallis JA

3.2

A within 10 days of the date of this order;

3.3

in a form to the satisfaction of the applicants' attorneys or, failing that, to the satisfaction of the registrar of this court.

4.

In terms of s 5(2)(c) of the Act, it is ordered that:

4.1

the deemed arrest of MV NYK Isabel at the instance of the respondent (as plaintiff) in the action under case No B A7/2013 is made subject to the respondent providing the security as set forth in paras 2 and 3 of this order;

4.2

in the event that the respondent does not provide the security in compliance with paras 2 and 3 of this order:

4.2.1

the aforesaid deemed arrest of the MV NYK Isabel will fall away and be of no force or effect;

4.2.2

C the letter of undertaking provided by the first applicant to the respondent to secure the release of the MV NYK Isabel from arrest (and of which a copy is annexure SMSD1 to the founding affidavit of Mr Dwyer in this application) shall be null and void and returned for destruction; and

4.2.3

D the respondent's in rem action will be dismissed with costs, alternatively, the applicants shall have leave, on the same papers supplemented insofar as may be necessary, to make application to this court for an order that the respondents claim in the in rem action is dismissed with costs.

5.

E The respondent is ordered to pay the applicants' costs of the application.'

[10] The security sought by NYK was not security for a counterclaim in the existing in rem action. Instead it was security for the indemnity claim F advanced by NYK against NES in Brazil, for which it had already been granted judgment. The High Court held that it was incumbent on it to order security 'in order to render the court's judgment effective if it finds against' NES. Other than a reduction in the amount of the security, the relief that the High Court granted was in accordance with the prayer.

G [11] In the founding affidavit it was said that 'arguably' NYK was already a party to the pending litigation, but to place matters beyond doubt it sought an order that it be granted leave to 'join in the proceedings as the second intervening applicant in this application'. There was a considerable amount of ambiguity in this to which I will need to refer in due H...