MV 'Tarik III' Credit Europe Bank N.V. v The Fund comprising the proceeds of the sale of the MV Tarik III and Others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: VM Ponnan JA, Zondi JA and TR Gorven JA and Makaula AJA and Chetty AJA
• Judgment Date: 13 October 2022
• Docket Number: 1294/2021
• Hearing Date: 22 August 2022
• Court: Supreme Court of Appeal
• Citation: 2022 JDR 2877 (SCA)

Ponnan JA (Zondi JA and Makaula and Chetty AJJA concurring)

[1]

This appeal relates to claims lodged by certain creditors against the first respondent, a fund (the Fund) constituted by the judicial sale of the motor vessel Tariq III (the vessel).

[2]

The appellant contends that the claims of the second to twelfth respondents that had been recommended for payment by a Referee ought to have been rejected by the court below, in which event the claims of the appellant would be the highest ranking claims against the Fund. The appellant accordingly sought an order that its claim be paid from the balance of the Fund.

[3]

The circumstances leading up to the litigation between the parties are briefly the following: In October 2007, Esperanza Ltd (Hong Kong) entered into a memorandum of agreement (MoA) with Herex Trading Ltd (Herex) in regard to the

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Ponnan JA (Zondi JA and Makaula and Chetty AJJA concurring)

sale of the vessel, which was then known as the mv 'Arisbe'. On 24 October 2007, Herex assigned its rights and obligations under the MoA to the seventeenth respondent, Garanti Finansal Kiralama A.S. (Garanti). And, in accordance with the terms of the MoA, ownership of the vessel passed to Garanti upon delivery thereof in January 2008.

[4]

On 31 October 2007, Garanti and Hazar Denizcilik Ic Ve Dis Ticaret (Hazar) concluded a bareboat charter [1] in respect of the vessel for a period of 50 months (the charterparty or agreement). On 14 February 2011, Garanti and Hazar extended the charterparty to 15 December 2015. With effect from 1 January 2014, the business of Hazar was effectively taken over by Caliskan Ic Ve Dis Ticaret Sanayi A.S. (Caliskan) and the former thereafter ceased to exist, with the consequence that Caliskan was substituted for Hazar as the bareboat charterer of the vessel and the agreement continued in the same form.

[5]

On 17 March 2014, Caliskan obtained a preliminary injunction from the 11th Commercial Court of Anadolu, Istanbul in terms of the Turkish Enforcement and Bankruptcy Code. The injunction afforded it, inter alia, protection from creditors for a period of one year from the date of the order. The period of the injunction was extended by the court and, as at 30 June 2016, Caliskan was still under bankruptcy protection. In terms of the preliminary injunction, various acts, 'including [the] issuance of bill[s] of exchange and withdrawal of money from the banking accounts of the company and all kinds of resolutions, transactions and dispositions' required the joint approval of the two named trustees.

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Ponnan JA (Zondi JA and Makaula and Chetty AJJA concurring)

[6]

On 15 April 2014, Garanti sent Caliskan a written notice under the agreement (the notice of termination) requiring payment of arrears in the amount of $789 790.68 within 60 days failing which, so it was asserted: the agreement would be terminated; the full outstanding debt of $9 906 376.68 accelerated; and, re- delivery of the vessel sought. Prior to the expiry of the 60-day period, on 24 April 2014, Garanti and Caliskan concluded what was styled a revised payment plan (the revised payment plan).

[7]

The vessel was arrested by the appellant, Credit Europe Bank N.V., a company carrying on business as a bank in Amsterdam, Netherlands, on two separate occasions, namely by way of an: (i) in rem arrest on 26 May 2014; and, (ii) arrest in terms of s 5(3)(a) of the Admiralty Jurisdiction Regulation Act 105 of 1983 (the Act), [2] pursuant to an order granted by the Kwazulu-Natal Division of the High Court, Durban, in the exercise of its Admiralty Jurisdiction (the high court).

[8]

In effecting the arrest of the vessel, the appellant relied on s 1(3) of the Act, which provides 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' [3] (the deeming provision). There were also various other claimants, but only two arrested the vessel, being the fifth respondent, Arkas Petrol

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Ponnan JA (Zondi JA and Makaula and Chetty AJJA concurring)

Urunleri Ve Ticaret (Arkas), on 19 November 2014 and the eighth respondent, KPI Bridge Oil Limited (KPI Bridge), on 17 December 2014.

[9]

On 23 June 2014, Caliskan brought an application to set aside the in rem arrest. However, its attorney of record withdrew on 4 August 2014 and it thereafter played no further role in the legal proceedings relating to the vessel. The vessel being very low on bunkers berthed in the port of Durban on 26 September 2014. On that day, the appellant commenced an application before the high court for the sale of the vessel. Despite opposition to the application by Garanti, the high court granted an order in terms of s 9 of the Act for the sale of the vessel on 5 December 2014. [4] Darryl Cooke, an Advocate at the Cape Bar, was appointed to act as a referee (the referee) in respect of the claims lodged against the Fund. The vessel was sold by judicial auction on 4 February 2015.

[10]

The appellant and the second to eighteenth respondents (including Garanti) lodged claims against the Fund. The claims lay against Caliskan and, as such, all of the claimants purported to rely on the deeming provision. The Referee delivered his report on 10 September 2015, in which he: (a) recommended payment of the appellant's damages and preservation claims; (b) recommended the rejection of Garanti's claims; (c) regarded the agreement as being extant at the time of the sale, and further concluded that, as such, all of the claimants (save for Garanti) were entitled to rely on the deeming provision in lodging their claims against the Fund;

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Ponnan JA (Zondi JA and Makaula and Chetty AJJA concurring)

and, (d) recommended, inter alia, the payment of the claims of the second to sixteenth respondents. Save for the claim of the twelfth respondent, which was subsequently withdrawn, and one of the claims advanced by the seventh respondent, all of the other claims that the Referee recommended be paid rank above the appellant's damages claim, and if paid, would exhaust the Fund.

[11]

In October 2015, the appellant commenced an application for the partial confirmation of the Referee's report. Relief was sought in two parts – A and B. The relief sought under Part A related to confirmation of the Referee's report in respect of the claims of the thirteenth, fourteenth, fifteenth and sixteenth respondents, and those of the appellant, and the payment out of the Fund of those claims ranking in terms of s 11(4)(a) (the preservation claims) and s 11(4)(b) of the Act. [5] The appellant also sought relief in relation to the legal costs. The relief sought in Part B was, inter alia, for the immediate payment of the appellant's damages claim from the Fund, subject to the retention of sufficient funds in the Fund to satisfy the payment of any legal costs outstanding pursuant to Part A of the order, and thereafter the payment of any residue left in the Fund to the appellant once those costs had been paid. In the alternative, the appellant sought an order that the second to twelfth respondents be directed to commence actions in rem against the Fund so as to prove their claims, and that the appellant be given leave to defend those claims on behalf of the Fund.

[12]

On 12 January 2016, the high court granted an order in relation to certain of the relief sought under Part A, including the recognition of the appellant's claims,

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Ponnan JA (Zondi JA and Makaula and Chetty AJJA concurring)

the payment of certain claims identified for immediate payment (which have been paid) and directed that the balance of the funds be retained in the Fund pending the determination of the application. The relief sought in Part B was opposed by Arkas, KPI Bridge and the tenth respondent, Monjasa DMCC (collectively referred to as the opposing suppliers), who are represented by the same attorneys, as well as by Garanti (who does not oppose this appeal).

[13]

The appellant contends that: first, each individual claimant against the Fund bears the onus of proving that its claim is valid and enforceable against the Fund, which in the present context includes proving the existence of the bareboat charter at the material times; and, second, it is necessary for a claimant in the position of the opposing suppliers to have arrested the vessel in rem in order to lodge a claim against the Fund arising from its reliance upon the deeming provision.

As to the first:

[14]

The appellant contends that the Referee erred in concluding that the agreement had not terminated and was still extant at the time of the sale and that the second to twelfth respondents could rely on the deeming provision in lodging their claims against the Fund. The appellant objected to various claims lodged against the Fund on the basis that the relevant claimants had not demonstrated on a balance of probabilities that the agreement was extant at the relevant times, being in the case of Arkas and KPI Bridge, the dates of their respective arrests of the vessel, and in the case of the other claimants, who had not arrested the vessel (and alternatively in the case of Arkas and KPI Bridge), at the time when the Fund was constituted in place of the vessel.

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Ponnan JA (Zondi JA and Makaula and Chetty AJJA concurring)

[15]

Neither the appellant, nor the opposing suppliers, have any personal knowledge of the dealings between Caliskan and Garanti. According to the opposing suppliers, that Caliskan was indeed the charterer of the vessel is apparent from the following: (a) The agreement was concluded on 31 October 2007 and, by a further agreement dated 14 February 2011, the period of the charterparty was extended until 15 December 2015 (being a date long after the sale of the vessel by...