Summit Industrial Corporation v Claimants Against the Fund Comprising the Proceeds of the Sale of the MV Jade Transporter

• Jurisdiction: South Africa
• Judge: Corbett JA, Trengove JA, Viljoen JA, Grosskopf JA and Nicholas AJA
• Judgment Date: 02 March 1987
• Citation: 1987 (2) SA 583 (A)
• Court: Appellate Division

Corbett JA:

This appeal, from a judgment of the Full Bench of F the Natal Provincial Division (per Howard J, Milne JP and Leon ADJP concurring), which has been reported (see Gulf Oil Trading Co and Others v The Fund comprising the Proceeds of the Sale of the MV Emerald Transporter; Irving Trust Co v Gulf Oil Trading Co and Others ; Gulf Oil Trading Co and Others v The Fund G Comprising the Proceeds of the Sale of the MV Jade Transporter 1985 (4) SA 133 (N)), concerns the interpretation to be placed on s 11(8) of the Admiralty jurisdiction Regulation Act 105 of 1983 ('the Act').

According to its long title the object of the Act is to provide for the vesting of the powers of the Admiralty Courts of the Republic in the Provincial and Local Divisions of the Supreme H Court of South Africa, and for the extension of those powers; for the law to be applied by, and the procedure applicable in, those Divisions; for the repeal of the Colonial Courts of Admiralty Act 1890 of the United Kingdom, in so far as it applies in relation to the Republic; and for incidental matters.

In pursuance of this object the Act provides that each I Provincial and Local Division of the Supreme Court shall have jurisdiction (designated 'admiralty jurisdiction') to hear and determine any maritime claim (s 2(1)). The term 'maritime claim' is defined in s 1 to mean any one of 26 categories of claim, which are listed in paras (a) to (z) inclusive of the definition. These categories include:

(i)

J 'any claim in respect of a mortgage, hypothecation, right of retention or pledge of, or charge on, a ship'

Corbett JA

A (para (c));

(ii)

'any claim arising out of any agreement for or relating to the carriage of goods in a ship'

(para (h));

(iii)

'any claim in respect of goods supplied or services rendered to a ship for the employment or maintenance B thereof'

(para (l));

(iv)

'any claim in respect of the design, construction, repair or equipment of any ship or any dock or harbour dues or any similar dues'

(para (m));

(v)

'any claim by a master or member of the crew of a ship C arising out of his employment'

(para (n));

(vi)

'any claim relating to any maritime lien...'

(para (v)).

In terms of s 3 a maritime claim may, subject to certain D requirements, be enforced either by an action in personam or an action in rem. In the case of an action in personam the requirements are jurisdictional. Thus, such an action can be instituted only against certain classes of persons, defined by reference to specific grounds of jurisdiction (s 3(2)). One such class is a person -

'whose property within the Court's E area of jurisdiction has been attached to found or confirm jurisdiction'.

In the case of an action in rem the section provides that a maritime claim may be enforced by such an action (which is instituted by the arrest within the Court's area of jurisdiction of certain property) if either (a) the claimant F has a maritime lien over the property to be arrested or (b) the owner of the property to be arrested would be liable to the claimant in an action in personam in respect of the cause of action concerned (s 3(4)). The property which may be arrested in order to institute an action in rem consists of -

'... one or more of the following categories against or in respect G of which the claim lies:

(a)

the ship, with or without its equipment, furniture, stores or bunkers;

(b)

the whole or any part of the equipment, furniture, stores or bunkers;

(c)

the whole or any part of the cargo;

(d)

the freight'.

(Section 3(5).) The term 'maritime lien' is not defined in the H Act, but its meaning has been discussed in various judgments (see eg Euromarine International of Mauren v The Ship Berg and Others 1984 (4) SA 647 (N) at 652F - H; Oriental Commercial and Shipping Co Ltd v MV Fidias 1986 (1) SA 714 (D); Southern Steamship Agency Inc and Another v MV Khalij Sky 1986 (1) SA 485 (C) I ; and the judgment a quo, as reported, at 141G - 142D). For the purposes of this case it is not necessary to investigate the circumstances under which a claimant acquires a maritime lien over property.

It will be noted that in terms of the provisions of s 3 thus far discussed an action in rem requires the arrest of property 'against or in respect of which the claim lies'. Prior to the J passing of the Act this was the only

Corbett JA

A basis upon which an action in rem could be instituted in the Courts of South Africa exercising admiralty jurisdiction. It was not, for example, permissible to seek to institute an action in rem to enforce a claim arising in respect of ship A by the arrest of ship B, even though the two ships were owned B by the same person (see Tharros Shipping Corporation SA v Owner of the Ship Golden Ocean 1972 (4) SA 316 (N); Euromarine International case supra at 658H - 659A). In this connection, however, the Act introduced an important innovation in the form of the 'associated ship' and enacted, subject to certain qualifications which are not presently relevant, that an action in rem might be brought by the arrest of an associated ship C instead of the ship in respect of which the maritime claim arose (s 3(6)). And 'associated ship' was defined to mean a ship, other than the ship in respect of which the maritime claim arose -

'(i)

owned by the person who was the owner of the ship concerned at the time when the maritime claim arose;

or

(ii)

owned by a company in which the shares, when the D maritime claim arose, were controlled or owned by a person who then controlled or owned the shares in the company which owned the ship concerned'.

(Section 3(7)(a).)

These provisions thus contemplate two categories of ship: the ship in respect of which the maritime claim arose, referred to E in s 3(7)(a) as 'the ship concerned' - a convenient label - and 'the associated ship', linked with the ship concerned by common ownership or control, either directly, ie where the same person owns, and therefore controls, both ships (s 3(7)(a)(i)) or indirectly, ie where the two ships are owned by companies the shares in which are controlled or owned by the same person at the time when the maritime claim arose (s F 3(7)(a)(ii)). Section 3(7) does not specifically deal with the position where a person owns or controls one ship directly and the other indirectly, but presumably (it is not necessary to decide the point) the subsection would be interpreted as covering that situation and the one ship would be regarded as an associated ship vis-à-vis the other. Associated ships which G are linked directly, ie owned by the same person, are often referred to as 'sister ships'; and those which are linked indirectly, ie are owned by companies the shares in which are controlled or owned by the same person, are often called 'group ships'.

Section 9 of the Act provides that a Court may in the exercise of its admiralty jurisdiction at any time order that any property which has been arrested in terms of the Act be sold H and the proceeds thereof held as 'a fund in the Court' or otherwise dealt with. And s 11 makes detailed provisions with regard to the ranking of claims in regard to a fund in the Court. It is the interpretation of s 11, and more particularly ss (8) thereof, which has given rise to the dispute in the present matter. But before turning to this it is necessary to recount the relevant facts.

I The case arises from the financial collapse of a group of ship-owning companies known as the Eddie Steamship group. These companies are controlled and owned by a Mr W H Eddie Hsu of Taiwan. Included in the group are Outer Ocean Navigation Corporation Ltd, which owned, inter alia, MV Emerald Transporter ; Far Eastern Navigation Corporation Ltd, which owned, inter alia, MV Jade Transporter and MV Iron Transporter ; J and Eddie Steamship Co Ltd, which owned, inter alia, MV Steel Transporter.

Corbett JA

On 22 June 1984 Gulf Oil Trading Company ('Gulf Oil') of A Delaware, USA, made application to the Durban and Coast Local Division, in the exercise of its admiralty jurisdiction, for an order for the attachment of MV Jade Transporter to found jurisdiction in an action in personam to recover the cost of fuel oil and diesel oil (termed 'bunkers') and lubricating oil (termed 'lubes') supplied to certain vessels within the Eddie B B Steamship group (case 4565/84). On the same day a warrant of arrest in rem was issued in favour of Hollandsche Bank-Unie NV ('HBU') in respect of the MV Jade Transporter as the first step in an action in rem to recover amounts due in terms of a mortgage of the vessel (case 4570/84); and in pursuance of this warrant a notice of arrest was issued.

At this time the MV Jade Transporter had arrived off Richards C Bay, Natal, in order to obtain bunkers at the Richards Bay terminal. The vessel remained outside the territorial limits, however, evidently in order to evade service and execution of the attachment and arrest orders already granted. This position continued throughout June, July and the early part of August. D In August two further warrants of arrest in rem in respect of various maritime claims were issued: one in favour of Gulf Oil on 3 August 1984 (case 5368/84) and one in favour of Scallop Petroleum Company ('Scallop') on 10 August 1984 (case 5485/84). Eventually the MV Jade Transporter was compelled to enter territorial waters to take on gas oil and on 11 August 1984 service was effected simultaneously of the warrants of arrest E in rem in cases 5368/84 (claimant Gulf Oil) and 4570/84 (claimant HBU) and the application to attach in case 4564/84 (claimant Gulf Oil). Subsequently warrants of arrest in rem of the MV Jade Transporter to enforce various maritime claims were issued in favour of HBU in case 5732/84, in favour of appellant, Summit Industrial Corporation ('Summit'), in case F 5894/84...