The Yu Long Shan Guangzhou Maritime Group Co v Dry Bulk SA

• Jurisdiction: South Africa
• Judge: Hurt J
• Judgment Date: 28 November 1995
• Docket Number: A369/95
• Hearing Date: 28 November 1995
• Counsel: G Lopes for the applicant C J Pammenter for the respondent
• Court: Durban and Coast Local Division

Hurt J:

The applicant in this application is the Guangzhou Maritime Group Company, a company which is incorporated in the Republic of China and which carries on business in Guangzhou City, China. It is referred to in the papers generally as 'Group Co', and I shall refer to it interchangeably as 'Group Co' or 'the applicant'.

The respondent is Dry Bulk SA, a Liberian company which has its registered office in Liberia, and plainly carries on business as a charterer J

Hurt J

of ships. It is referred to also in the papers interchangeably, but often by the name 'Dry A Bulk', and I shall refer to it either as 'Dry Bulk' or as 'the respondent'.

There is a third dramatis persona to which substantial reference is made, and that is the Guangzhou Zen Hua Shipping Company, which is also a company registered in the Peoples Republic of China and which, it appears from the papers, is owned by the B Ministry of Communications in China, which also 'owns' Group Co. I shall refer to the Guangzhou Zen Hua Shipping Co as 'Zen Hua'.

A great deal of detail has been put before me by way of affidavits in these proceedings, and also by way of a set of papers relating to proceedings in the United C Kingdom, which impinge to a considerable extent upon these proceedings. But, in the view which I take of this matter, most of this evidence is not directly pertinent to a decision of the application. I therefore consider it desirable to set out briefly a chronology of events which I think are pertinent to my decision.

On 17 May 1991 a charterparty on the NYPE form was concluded in terms of which D a ship, the Fei Xia Shan, was time-chartered to the respondent. In about November 1992 a dispute arose concerning the charter. The charter contained the common form of stipulation referring disputes to arbitration. It appeared from the charterparty that the disponent owner was Zen Hua. However, Zen Hua refused to recognise the E arbitration, contending that the charter agreement had been concluded without its authority and that there was accordingly no valid agreement between it and the respondent and, in particular, no agreement to arbitrate.

On 12 January 1994 Zen Hua applied to the Maritime Court in China for a declaratory order that the charter was invalid. I understand that recently this Court has ruled in F favour of Zen Hua and granted such a declarator.

On 10 June 1994 the arbitrator, to whom the respondent had referred the dispute on the charter, made an award of US $335 400, interest and costs against Zen Hua in Zen Hua's absence. G

On 23 June 1994 a ship called the Da Lua Shan was arrested in England at the instance of the respondent on the basis of the arbitration award. The arrest was based on an allegation that the applicant and Zen Hua were one and the same entity and that the applicant was the beneficial owner of the Da Lua Shan.

On 5 July 1994 Zen Hua applied to the English High Court, Queen's Bench Division, H to have the arbitration award set aside. I understand that these proceedings are still pending.

On 18 July 1994 the applicant applied to the Queen's Bench Division, Admiralty, to have the writ pursuant to which the Da Lua Shan had been arrested set aside. I

On 27 January 1995 Clarke J in the Queen's Bench Division granted an order setting aside the writ of summons and releasing the security filed for the release of the Da Lua Shan. The respondent was ordered to pay the costs of the application. In reaching his conclusion Clarke J recorded that Dry Bulk, the respondent, had accepted that Group Co and Zen Hua were different legal entities. J

Hurt J

On 28 June 1995 a summons in rem was issued out of this Division against the vessel A Yu Long Shan. The cause of action on which this summons was based, the summons having been issued by the respondent, was that the arbitrator in the proceedings in England had made a final award against Zen Hua; that Zen Hua was deemed to be the owner of the vessel Fei Xia Shan; that Group Co and Zen Hua were both owned and B controlled by the Ministry of Communications in China; that the Yu Long Shan was therefore under common control with the Fei Xia Shan and was an associated ship within the meaning of that expression as used in s 3 of the Admiralty Jurisdiction Regulation Act 105 of 1983.

On a date which is not given in the papers before me, but which was probably 10 July C 1995, it appears that a letter of undertaking was tendered by Group Co's attorneys to Dry Bulk's attorneys for security for the release of the Yu Long Shan. This letter of undertaking was in similar terms to that in response to which the Da Lua Shan had been previously released in England. The tender of this letter was, however, rejected by the respondent who, as I understand the papers, insisted that an undertaking be D given which made specific reference to South African law.

On 13 July 1995 a letter of undertaking or form of guarantee acceptable to the respondent was provided and the Yu Long Shan was released from arrest. E

The applicant before me contends that it has claims against the respondent arising out of these events and that it intends to lodge a counterclaim in case No A235/95, which is the case number under which the Yu Long Shan was arrested.

Its alleged counterclaims are the following: F

1.

A claim for US $129 000 for damages resulting from the detention under arrest of the Yu Long Shan without there being 'reasonable and probable cause' as contemplated in s 5(4) of the Admiralty Jurisdiction Regulation Act, to which I shall hereinafter refer simply as 'the Act'. This claim appears to be based on the period after 28 June 1995, during which the ship was under G arrest and unable to ply her trade as she would have done in the ordinary course after completing cargo movements in Richards Bay. There is what I think may be described as an alternative claim for damages, resulting from the respondent's refusal to accept the first letter of undertaking tendered as security for the release of the ship. This alternative claim is fixed at US $40 000, being four completed days at a loss rate of US $10 000 per day. H

2.

A claim for payment of the costs pursuant to the order of the Queen's Bench Division under which the writ in respect of the Da Lua Shan was set aside. The amount of these costs is assessed at the moment at US $79 350, but it is common cause that the applicant has not yet taxed a bill pursuant to the order I which it obtained.

3.

The costs of suit in case No A235/95. I shall deal with this 'claim' later.

This application is an application as contemplated in s 5(2)(b) or s 5(2)(c) of the Act for an order directing the respondent to furnish J

Hurt J

security for the above three 'claims' in a total amount of US $347 620. This amount is A compiled as set out in annexure L at p 50 of the papers. It appears to include claims for prospective interest, apparently on the basis that the claims will only be adjudicated in about 1997. I will comment on this aspect of the matter later as well.

The respondent has resisted the applicant's demands for security, contending, firstly, B that there is simply no basis for an order for security in the circumstances and, secondly, that the applicant does not have any basis in law for the claims which it alleges it will make against the respondent in the action under case No A235/95.

Because they were the subject of considerable debate before me, it is necessary first C to consider the legal aspects of the type of order sought, and the approach which the Court should adopt in relation to this type of application.

Section 5(2)(b) and (c) are in the following terms:

'A Court may in the exercise of its admiralty jurisdiction -

(a)

. . . D

(b)

order any person to give security for costs or for any claim;

(c)

order that any arrest or attachment made or to be made or that anything done or to be done in terms of this Act or any order of the Court be subject to such conditions as to the Court appears just, whether as to the furnishing of security or the liability for costs, expenses, loss or damage caused or likely to be caused, or otherwise; E

. . . .'

There are no explicit or specific guidelines in the Act as to the circumstances in which the Court should be inclined to order the provision of security, nor was I referred to any...