Credit Europe Bank NV v The Fund Comprising the Proceeds of the Sale of the MV "Tarik III"

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Moodley J
• Judgment Date: 06 May 2021
• Court: KwaZulu-Natal Local Division, Durban
• Docket Number: A 80/2014

Moodley J:

Introduction:

[1]

This is an application in terms of s 10A(1) of the Admiralty Jurisdiction Regulation Act 105 of 1983 ('AJRA') [1] for an order with regard to the payment out of the fund ('the Fund') [2] constituted by the proceeds of the judicial sale of the motor vessel 'Tarik III' ('the Vessel'). The order sought entails a partial confirmation of the report by Advocate Darryl Cooke, as referee ('the Referee'). [3]

[2]

The Vessel was sold and the Fund was constituted pursuant to an order of this Court granted on 5 December 2014 ('the Sale Order'). The Sale Order provided further for the appointment of the Referee with the authority to receive and examine claims lodged against the Fund and objections thereto, and to report thereafter to the Court on the validity and the ranking of claims submitted against the Fund.

[3]

The Vessel was sold by public auction on 4 February 2015. Credit Europe Bank N.V. ('Credit Europe'), who is the applicant herein, and the second to eighteenth respondents (and the master and crew of the Vessel) lodged claims against the Fund with the Referee. On 10 September 2015 the Referee delivered his final report to this Court ('the Report') setting out his recommendations as directed in respect of the

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validity and ranking of the claims of the second to eighteenth respondents for payment out of the Fund, the value of which on that date was USD1 823 044,44.

The Referee's Report

[4]

It is common cause that the majority of the claimants did not arrest the Vessel in rem prior to her sale. However, as their claims are based on the underlying in personam liability of Caliskan Ic Ve Dis Ticaret Sanayi A.S ('Caliskan'), who was the charterer of a demise charter in respect of the Vessel, the second to twelfth respondents (collectively referred to as 'the disputed claimants/suppliers') relied further on the deeming provision in s 1(3) of AJRA which stipulates that: 'For the purposes of an action in rem, a charterer by demise shall be deemed to be, or to have been, the owner of the ship for the period of the charter by demise.' As explained in Hare Shipping Law and Admiralty Jurisdiction in South Africa:

'Liabilities of the vessel in rem which depend upon the underlying personal liability of her owner, will not generally be incurred as a result of acts of the demise charterer and or its master and crew. But s 1(3) of the Admiralty Jurisdiction Regulation Act deems the demise charterer to be the owner "for the purposes of an action in rem, for the period of the charter by demise." [4]

The learned author further states:

'Now the vessel stands for the debts of the demise charterer, but only for the duration of the charter.' [5]

[5]

Consequently the primary areas of contention in the claims process were:

(a)

The extent to which the respective claimants were entitled to rely on the deeming provision in s 1(3), if at all. This involved the consideration of whether the leasing agreement/demise charter ('the demise charter') [6] had terminated, and if so when the termination occurred.

(b)

The validity of the claims by the seventeenth respondent, Garanti Finansal Kiralama A.S ('Garanti'), which was the registered owner of the Vessel prior to her judicial sale, and which had concluded the demise charter with Caliskan. Garanti's

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claims included claims for 'outstanding hire' and for costs incurred by Garanti in relation to the Vessel whilst she was under arrest.

[6]

In his Report to the Court, the Referee recommended payment of Credit Europe's damages claim, ranked as contemplated in s 11(4)(f) of AJRA, and its preservation claim, ranked as contemplated in s 11(4)(a). The Referee, being of the view that the demise charter was still extant at the time of the sale, concluded that all the claimants (save for Garanti) were entitled to rely on the deeming provision in lodging their claims against the Fund. He therefore recommended, inter alia, the payment of the claims of the second to sixteenth respondents but rejected Garanti's claims.

[7]

Credit Europe's claims and the ranking as aforesaid are not in dispute. With the exception of two claims, [7] all of the other claims which the Referee recommended be paid, rank above Credit Europe's damages claim as they are all necessaries claims, and fall to be ranked in accordance with s 11(4)(c)(v) of AJRA.

[8]

I am mindful that the Referee's report is a recommendation which does not bind the Court. In Associated Marine Engineers (Pty) Ltd v Foroya Banki PF [8] it was held that while a court is not bound by recommendations made by the referee, it will in given circumstances give effect to the recommendations of the referee. Nevertheless, I am indebted to Mr Cooke for his thorough investigation and comprehensive report which has been of invaluable assistance in determining the issues referred to this Court.

Credit Europe's application

[9]

This application was commenced by Credit Europe on or about 16 October 2015. Initially Credit Europe sought relief in two parts:

(a)

The relief sought in Part A related to confirmation of the Referee's Report in respect of the claims of Credit Europe and the thirteenth to sixteenth respondents, and

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the payment out of the Fund of those claims ranking in terms of s 11(4)(a) [9] (the preservation claims) and s 11(4)(b) of AJRA, and the payment of legal costs.

(b)

The relief sought in Part B was inter alia for:

(i)

The immediate payment of the residual funds in the Fund to Credit Europe, subject to the retention of sufficient funds to satisfy the payment of any legal costs outstanding pursuant to Part A of the order;

(ii)

Alternatively, that the second to twelfth respondents be directed to commence actions in rem against the Fund to so as to prove their claims, and that Credit Europe be given leave to defend those claims on behalf of the Fund.

(iii)

Payment to Credit Europe of the costs of this application on an attorney and own client scale from the Fund with the costs to be ranked in accordance with s 11(4)(a) of AJRA.

[10]

On 12 January 2016 the Court granted a consent order in respect of certain of the relief sought in Part A. The Court ordered the payment of the relevant claims (which have been paid), and directed that the balance of the funds be retained in the Fund pending the determination of the opposed application in respect of the remaining relief. At that stage the second to the twelfth and seventeenth respondents had filed notices of opposition.

[11]

Before this Court, Credit Europe filed an amended draft order setting out the relief it seeks. In effect, Credit Europe seeks partial confirmation of the Referee's report as it requires this Court to refuse the payment of higher ranked necessaries claims as recommended by the Referee. Such an order will ensure that Credit Europe's claim for costs and as residual creditor, will be paid. The relief sought also includes the confirmation of the Report in respect of the recommendation that Garanti's claims not be paid, as clarified by Mr Mullins SC who with Mr Mackenzie, represented Credit Europe in this application.

[12]

At the hearing of this matter, Arkas Petrol Urunleri VE Ticaret A.S ('Arkas'), KPI Bridge Oil Limited ('KPS') and Monjasa DMCC ('Monjasa'), the fifth, eighth and tenth respondents respectively (collectively referred to as 'the Opposing Suppliers'), who

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were represented by Mr MacWilliam SC assisted by Mr Bowley, persisted in their opposition. They seek confirmation of the Referee's report in its entirety which would ensure the payment of their claims, and the costs of their opposition to this application.

[13]

Garanti, which was represented by Mr Gordon SC, who appeared with Ms Pudifin-Jones, also persisted with its opposition to the relief sought by Credit Europe. Garanti further filed a counter-application comprising a main and alternative claim, in which it seeks payment of its claim for preservation costs contrary to the recommendation by the Referee.

[14]

Although Credit Europe requested two days for the hearing of this matter and the days of 8 and 9 May 2017 were allocated, a further day was necessary for the completion of argument by the respondents together with Credit Europe's response. At the next hearing on 7 September 2017, towards the end of his substantial reply, Mr Mullins referred to the amended draft order sought by Credit Europe. He made further submissions in respect of the costs sought by Credit Europe in the amended draft order and undertook to file a further amended order, specifically in respect of the costs order sought in respect of this application. The reason therefor was that the parties were in agreement that the costs of this application should not be paid out of the Fund but be borne by the unsuccessful party/parties.

[15]

Subsequently, on 29 September 2017, Credit Europe's attorneys filed a written note which tendered 'an explanation of the orders sought by the Applicant'. In response thereto counsel for the Opposing Suppliers delivered 'Fifth, Eighth and Tenth Respondent's Objection and reply to the Applicant's written note of 29 September 2017'. In the response, Mr MacWilliam expressed his disquiet that the written note was not a revised draft order but constituted 'an improper attempt by the Applicant, long after the conclusion of oral argument, and without leave of the Court, to further argue its case under the guise of a note.' Mr MacWilliam stated further that Credit Europe had sought to make amendments to the relief it sought which had not been sought in the documents filed of record or at the hearing. Thereafter Mr Mullins submitted a response on behalf of Credit Europe to the objections raised by the Opposing Suppliers.

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