Universal Group Ltd t/a Island View Shipping Co v the Fund Created by the Sale of the MV Maharani, Ex MV Claire A Tsavliris, and Another

• Jurisdiction: South Africa
• Judge: Thirion J, Bristowe J and Hugo J
• Judgment Date: 06 November 1989
• Citation: 1990 (2) SA 480 (N)
• Hearing Date: 05 June 1989
• Court: Natal Provincial Division

Thirion J:

The owner of the MV Claire A Tsavliris concluded a charter-party with Universal Group Ltd, trading as Island View Shipping Co (the charterer), for one time charter trip. The vessel came on hire on 26 February 1987 when it entered Durban Harbour.

In terms of clause 53 of the rider clauses forming part of the charter-party, the charterer was to take over and pay for the bunkers G (the fuel oil and diesel oil) on board the vessel at the inception of the charter-party. (I shall refer in more detail to this clause later on in this judgment.) For the purpose of giving effect to the provisions of this clause, marine surveyors conducted an on-hire survey of the vessel on the 26th to establish the exact quantity of the bunkers on board the H vessel at the time of delivery.

On 27 February 1987 the Banco do Brasil, the mortgagee of the vessel (and to whom I shall refer simply as the respondent), had it arrested in Durban Harbour in an action in rem instituted by it against the vessel, based on loans secured by the mortgage.

I Loading operations were commenced shortly after the vessel had arrived in Durban Harbour. When by 1 March 1987 it did not appear that the owner was in a position to have the arrest set aside or to obtain the release of the vessel, the charterer halted loading operations and informed the owner that it reserved the right to treat the charter-party as J frustrated or, alternatively, to hold the owner to be in breach.

Thirion J

A On 4 March 1987 the charterer remitted to the owner payment in respect of the bunkers on board the vessel on delivery as well as an initial hire payment.

In the first half of March 1987 the charterer engaged in negotiations with the respondent with a view to resolving the difficulties created by B the arrest of the vessel, but when these negotiations broke down the charterer informed the owner on 12 March 1987 that it was proceeding on the basis that the owner could not perform its obligations under the charter-party and that transshipment of the cargo on board the vessel would take place. The owner accepted this situation and on 13 March 1987 transshipment commenced. Transshipment of the cargo was completed on 23 C March 1987. On that day the charterer sent a telex to the owner's agent recording that in its view the charter-party was 'frustrated on 1 March 1987 by operation of law and came to an end', alternatively that it was terminated on 12 March 1987.

The vessel remained under arrest. While it was under arrest the diesel D oil which had formed part of the bunkers on board when the vessel came on hire was consumed in running the vessel's generators.

While the vessel was under arrest it had to run its generators in order to supply the vessel with electricity for lighting and for the necessary safety equipment on board and to comply with the port's safety E requirements. The quantity of diesel oil forming part of the bunkers on board on delivery, which was consumed for the purposes of the vessel's safety and maintenance while it was under arrest was estimated at 118,08 tonnes.

The fuel oil on board at the time of delivery was not consumed. Fuel oil is used to drive the vessel's main engines.

F Agreement was afterwards reached between the charterer and the respondent that the fuel oil on board would be sold separately from the vessel and that the proceeds of the sale of the fuel oil would be held as a separate fund pending the determination of the charterer's rights to the proceeds of the sale.

The Court subsequently ordered in terms of s 9 of the Admiralty G Jurisdiction Regulation Act 105 of 1983 (the Act) that the vessel be sold and that the proceeds of the sale be held as a fund in Court. The vessel was eventually sold in terms of the Court order. The fuel oil was sold separately and the proceeds of that sale are being held as a separate fund.

By an order of Court on 25 September 1987 a referee was appointed for H the purpose of receiving, considering and reporting to the Court on the claims filed against the fund constituted by the sale of the Claire A Tsavliris. Among the claims filed with the referee was a claim by the charterer in respect of the 118,08 tonnes of diesel oil consumed by the vessel for its maintenance while it was under arrest.

I Before the referee the charterer claimed that its claim in respect of the diesel oil was a claim in respect of expenses incurred to preserve the vessel or to procure its sale as provided in s 11(1)(a) of the Act, alternatively that it was a claim in respect of the supply of goods to the vessel for the employment or maintenance of the vessel, as provided in s 11(1)(c)(v) of the Act, and that therefore the claim ranks prior to J the respondent's claim,

Thirion J

A which is a claim in respect of a mortgage falling under s 11(1)(d). The referee reported that the charterer's claim is not one falling under either s 11(1)(a) or s 11(1)(c)(v).

The charterer applied to the Court a quo for a variation of the referee's recommendations so as to accord the charterer the priority for its claim contended for by it. The Court a quo (Galgut J), however, B rejected the charterer's contentions and confirmed the referee's recommendations.

The decision of the Court a quo is being challenged in this appeal by the charterer (the appellant).

There is also before this Court an application by the charterer (the applicant) for an order declaring that it was the owner of the fuel oil C which was on board the Claire A Tsavliris at the time of its arrest and that consequently it is entitled to have paid to it all the moneys in the fund (together with all interest accrued and accruing thereon) constituted by the sale of the fuel oil.

I shall in this judgment refer to the appellant in the appeal and the D applicant in the application simply as the appellant or the charterer.

The appellant reiterated in this Court the contentions advanced by it in the Court a quo, ie that it became the owner of the bunkers on 'delivery' of the vessel in terms of the charter-party; that it remained the owner of the fuel oil until the fuel oil was sold and that it remained the owner of the diesel oil until the diesel oil was consumed E in running the vessel's generators; that it is consequently entitled to be paid the fund created by the proceeds of the sale of the fuel oil and that in respect of the diesel oil it has a claim as provided in s 11(1)(a), alternatively s 11(1)(c)(v), of the Act against the fund created by the proceeds of the sale of the Claire A Tsavliris. F

On behalf of the respondent it was contended that appellant had at no time become the owner of the diesel oil or fuel oil and that in any event its claim in respect of the diesel oil was not a claim falling under either s 11(1)(a) or s 11(1)(c)(v) of the Act.

The charter-party here in question was a time charter. In interpreting G its provisions and in dealing with the issues raised in the appeal and the application, it is necessary to bear in mind that in terms of such a charter the owner of the vessel does not part with his possession of the vessel, but renders certain agreed services to the charterer; for the rendering of which the use of the vessel and the services of the master and crew are placed at the disposal of the charterer. The charterer is H entitled to give orders to the master, within the terms of the charter-party, as to the employment of the vessel, but the master and crew remain in the owner's employ and the navigation of the vessel remains the responsibility of the owner. That being the position, the use of terms in the charter-party such as 'hire', 'delivery' and I 'redelivery' is inapt and can be misleading. In Time Charters 2nd ed at 369, Wilford sums up the usual provisions in a time charter as follows:

'Under a time charter the owners provide services for the charterers with their ship, which they themselves officer and crew, for an agreed J period of time in exchange for periodic payments of hire.

Thirion J

A It is usual for the charterers to provide and pay for bunkers; but the officers and crew remain the servants of the owners, who retain responsibility for the navigation and general management of the ship. The owners do not part with possession of their ship.

In Port Line v Ben Line [1958] 1 Lloyd's Rep 290, Diplock J said that a charter on the New York Produce form was a "time charter, not one by B demise. It gave (the charterers) no right of property in or to possession of the vessel." This is emphasised in line 170 of the New York Produce form.

A time charter is not a lease nor a contract for the hire of the ship. It is rather a contract for the provision of services, which services the owners produce through their officers, crew and ship. This is so despite the contrary implication of certain key words used in most C standard forms of time charter, such as "let", "hire", "delivery" and "redelivery". As Lord Reid said in The London Explorer [1971] 1 Lloyd's Rep 523 at 526: "Under such a charter there is no hiring in the true sense. It is not disputed that throughout the chartered vessel remains in the possession of the owners, and the master and crew remain the owners' servants. What the charterer gets is a right to have the use of the vessel." '

D (See also The Madeleine [1967] 2 Lloyd's Rep 224 at 238. The time charter here in question was a charter on the New York Produce form.)

For an understanding of the contentions advanced in the Court a quo and repeated on appeal and in the application before this Court, it is necessary to set out certain of the clauses of the charter-party as well as certain of the rider clauses forming part of the charter-party. Those E of material relevance are the following:

Clause 1: That the owners shall provide and pay for all provisions, wages and consular shipping and discharging fees of the...