MV Silver Star Owners of the MV Silver Star v Hilane Ltd

• Jurisdiction: South Africa
• Judge: Ponnan JA, Wallis JA, Pillay JA, Zondi JA and Gorven AJA
• Judgment Date: 28 November 2014
• Citation: 2015 (2) SA 331 (SCA)
• Docket Number: 82/2014 [2014] ZASCA 195
• Hearing Date: 18 November 2014
• Counsel: DA Gordon SC (with S Pudifin-Jones) for the appellants. MJ Fitzgerald SC (with JD Mackenzie) for the respondent.
• Court: Supreme Court of Appeal

Wallis JA (Ponnan JA, Pillay JA, Zondi JA and Gorven AJA concurring):

[1] The respondent, Hilane Ltd (Hilane), was the owner of the Sheng Mu. On 6 July 2011 it concluded a voyage charterparty on the Gencon I form with Phiniqia International Shipping LLC (Phiniqia), for the carriage of a cargo of coking coal from Bandar Abbas, Iran, to Vizag, India. Arising from that charterparty it has claims against Phiniqia. It has pursued those claims by way of the arrest on 12 August 2013 in Port Elizabeth of the Silver Star as an associated ship in relation to the Sheng Mu, in terms of s 3(6) read with s 3(7), of the Admiralty Jurisdiction J

Wallis JA (Ponnan JA, Pillay JA, Zondi JA and Gorven AJA concurring)

A Regulation Act 105 of 1983 (the Act). An application by the registered owners of the Silver Star, a Hong Kong company called Action Partner Ltd (Action Partner), for the release of the vessel was dismissed by Eksteen J in the Eastern Cape Local Division, Port Elizabeth. Leave to appeal was refused by the high court but granted on petition by this B court.

[2] Action Partner raises two legal issues on the basis of which it contended that an associated ship arrest was impermissible in respect of the claims advanced by Hilane. In addition it contended that Hilane had failed on the facts to establish the association on the necessary balance of C probabilities. [1] This judgment deals with the two legal issues and that of my brother Ponnan JA, with which I agree, the question of association on the facts.

[3] The charterparty concluded between Hilane and Phiniqia provided that it was to be governed by and construed in accordance with English D law. It contained the conventional clause providing for the master to sign bills of lading as presented without prejudice to the terms of the charterparty and, in certain circumstances, for the owner's agents to sign bills of lading on behalf of the owner. These obligations were varied to some degree by the provisions of clauses 38 and 46 of the rider clauses E which provided as follows:

'Clause 38

Owners agree for charterers to issue 2nd set of bills of lading in Dubai against charterers' simple LOI & charterers undertake to surrender the first set of original bills of lading issued at loadport to owners within F 21 days. If required owners agree to issue bs/l showing loadport Middle East Port or Persian Gulf Port or Ras Al Khaimah instead of actual loadport Bandar Abbas.

. . .

Clause 46

G Charterers will endeavour their best to ensure that original bills of lading are made available at disport on or before vessel's arrival to discharge. However, if original bills of lading are not available then owners/master agree to discharge/deliver the cargo to receivers against charterers simple letter of indemnity in owners Standard Pandi Club wording duly signed by charterers only.'

H [4] As was perhaps to be expected, it was the operation of these clauses that gave rise to the disputes between Hilane and Phiniqia. Tradeline LLC (Tradeline), a company associated with Phiniqia, purchased the coking coal that was to be carried on the Sheng Mu from Golden Waves FZC (Golden Waves). On 17 July 2011 a first set of bills of lading was issued I showing Golden Waves as the shipper, the loadport as 'Persian Gulf Port' and the notify parties as Tradeline and Fairway Trading Co (Pty) Ltd of Chennai, India. The following day Tradeline, on behalf of Phiniqia, indicated that Phiniqia required a second set of bills of lading to be

Wallis JA (Ponnan JA, Pillay JA, Zondi JA and Gorven AJA concurring)

issued in Dubai as agreed under rider clause 38. These were to show the A loadport as Ras Al Khaimah in the United Arab Emirates. In addition they were now to identify Tradeline as the shipper and the notify parties as Gupta Coal India Ltd and IDBI Bank Ltd, both of Nagpur, India.

[5] In terms of clause 38 the second set of bills could only be issued B against a letter of indemnity (LOI) given to Hilane by Phiniqia. Accordingly Phiniqia executed an LOI in favour of Hilane indemnifying it in respect of any liability, loss, expenses or damage of whatsoever nature that Hilane might sustain by reason of having issued two sets of bills of lading in accordance with Phiniqia's request. The LOI also provided that if the Sheng Mu or any other property belonging to Hilane should be C arrested or detained, or such an arrest or detention be threatened, by reason of issuing two sets of bills of lading, Phiniqia undertook to provide immediately on demand such bail or other security as might be required to prevent such arrest or detention, or to secure the release of the vessel or such other property, and to indemnify Hilane in respect of any loss, damage or expenses, including but not limited to interest and attorneys' D fees caused by such arrest or detention 'whether or not the same may be justified'.

[6] Once the second set of bills of lading had been issued and the LOI furnished to Hilane's agents, Hilane asked for the cancellation and return of the first set of bills of lading. This it was plainly entitled to do. E On 21 July 2011 Tradeline, acting as Phiniqia's agents, advised that:

'We shall in due course send you original first of bs/l and the original c/p duly executed by courier to your office.'

It did not fulfil this undertaking. This was the first source of problems because Golden Waves remained in possession of the first bill. F

[7] Shortly before the vessel was due to arrive at Vizag on 27 July 2011 Tradeline indicated to Hilane that the original bills of lading might not be available upon arrival. In accordance with rider clause 46 it requested the owners to provide it with the format of a further LOI for the discharge of the cargo in the absence of the bills of lading. That LOI was G furnished and executed on behalf of Phiniqia on 27 July 2011. Its terms were similar to those of the earlier LOI, save that the indemnity was against any liability, loss, damage or expense of whatsoever nature sustained by reason of delivering the cargo in accordance with Phiniqia's request without delivery up of the bills of lading. It contained a provision H that once the original bills of lading came into Phiniqia's possession it would deliver them to Hilane, whereafter its liability under the LOI would cease.

[8] Golden Waves remained in possession of the first bill of lading. On 25 August 2011 its agents wrote to Hilane stating that they were the I shipper of the cargo and asking for confirmation that it was still being held to Golden Waves' order. According to Golden Waves it had not been paid for the coal. Hilane in turn passed this message to Phiniqia, but Golden Waves' claims were not resolved. On 8 November 2011 London solicitors acting for Golden Waves sent Hilane a letter of demand for the unpaid price of the coal in an amount slightly in excess J

Wallis JA (Ponnan JA, Pillay JA, Zondi JA and Gorven AJA concurring)

A of AED 8 million. [2] When there was no response to this demand Golden Waves caused the Sheng Mu to be arrested on 5 January 2012 in Napier, New Zealand. Hilane demanded that Phiniqia fulfil its obligations under the two LOIs and reinforced their demand with an order of the high court in England, but Phiniqia did not respond. Eventually Hilane had to B procure a guarantee from its own bankers to secure the release of the Sheng Mu from arrest.

[9] In consequence of these events Hilane contended that Phiniqia was obliged to indemnify it against the claim by Golden Waves and for the damages it said that it suffered in consequence of the arrest of the Sheng Mu C in New Zealand. It referred a dispute in this regard to arbitration in London in accordance with the provisions of the charterparty and obtained an award in its favour. The relevant terms of that award were as follows:

'I find and hold that owners [Hilane] are entitled to the relief claimed namely:

(i)

D An Indemnity in respect of Golden Waves' arbitration claim should owners be liable for the same together with an indemnity in respect of costs incurred by owners (and for those which owners may become liable to Golden Waves) in the Golden Waves arbitration claim.

(ii)

The arrest losses.

(iii)

E The further losses.

(iv)

Interest on any such losses, calculated at the rate of 5% per annum compounded with three monthly rests running from the dates such losses were incurred until the date of payment by Charterers.

(v)

Costs.

(vi)

Such further or other relief as may be necessary or appropriate.'

F [10] Hilane now seeks to enforce its claims in an action in rem in South Africa brought against the Silver Star as an associated ship in relation to the Sheng Mu. In formulating its claim it assesses its liability to Golden Waves in an amount of AED 8 279 253,48; the arrest losses as USD 913 456,70; and its claims in respect of further losses and costs, in G various lesser sums. In total it claimed judgment for USD 3,8 million together with interest and costs. We were informed from the bar that, although a monetary value has been placed on the Golden Waves claim, no arbitration award has yet been made in favour of Golden Waves although it is anticipated that an award will be made shortly. Leaving aside the merits of these claims, Action Partner contends that Hilane is H not entitled in law to invoke the associated ship arrest provisions in order to pursue them against the Silver Star.

[11] In order to appreciate the legal points raised by Action Partner it is necessary to look at the statutory framework in relation to maritime claims and associated ships. Section 1 of the Act defines an admiralty I action as meaning proceedings for the enforcement of a maritime claim. The material portion for present purposes of the definition of maritime claim in s 1 of the Act reads as follows:

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