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2024
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[2024] ZAECQBHC 33
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MV Tai Harmony: Sure Success Steamship SA v MV Tai Harmony and Others (AC2764/2023) [2024] ZAECQBHC 33; 2024 (4) SA 640 (ECGq) (23 April 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE DIVISION – GQEBERHA)
(Exercising
its Admiralty Jurisdiction)
CASE
NO.: AC 2764/2023
Matter
heard on: 28
th
March 2024
Judgment
delivered on: 23
rd
April 2024
REPORTABLE
OF INTEREST TO OTHER
JUDGES
REVISED
DATE:
NAME
OF SHIP: MV ‘TAI HARMONY’
In
the matter between: -
SURE
SUCCESS STEAMSHIP
S.A.
Applicant
and
MV
‘TAI HARMONY’
First Respondent
TAI
HARMONY MARITIME
LIMITED
Second Respondent
PERFECT
BULK LIMITED
Third Respondent
JUDGMENT
ROSSI
AJ:
[1.]
This
is an application for an increase in security in terms of s 5(2)(d)
of the Admiralty Jurisdiction Regulation Act, 105 of 1983,
as amended
(the ‘
Admiralty Act
’
),
which application was launched on an urgent basis.
[2.]
The
Applicant seeks an order directing the Respondents to furnish
increased security in the amount of USD435 508.50 in respect
of
the latter’s claim for payment of bunkers, which forms the
subject matter of a London arbitration.
[3.]
It
is apposite at this stage to detail the history of the application.
Background
to the application
[4.]
On
19
th
May 2022 the Applicant, the registered owner of the MV ‘Ever
Success’ (‘
the
Ship Concerned
’)
and the Third Respondent (‘
PBL-Belize’
)
as charterer, concluded a Time Charter Party (the ‘
Charter
Party’
)
[1]
for a firm time charter period ‘
of
about 11 months / about 14 months’
[2]
in respect of the Ship Concerned.
[5.]
In
terms of clause 7 of the Charter Party, while the vessel is on hire,
the charterer shall provide and
pay
for all bunkers
[3]
except as otherwise agreed.
[6.]
Clause
23 provides that the charterer will not directly or indirectly
suffer, nor permit to be continued, any
lien
or encumbrance, which might have priority over the title and interest
of the owners in the vessel. The charterer undertakes
that
during the period of this Charter Party, they will not procure any
supplies or necessaries or services, including any port
expenses and
bunkers, on the credit of owners
or in the owner’s time.
[7.]
Provision
was also made in the Charter Party for payment by the charterer of
hire charges for the vessel.
[4]
[8.]
In
the event of a dispute arising from the Charter Party, clause 45
states that the contract would be governed by and construed
in
accordance with English Law and any disputes arising therefrom would
be referred to arbitration in London in accordance with
the
Arbitration Act 1996.
[9.]
The
London proceedings were issued in respect of the Applicant’s
claims for losses suffered arising out of PBL-Belize’s
breach
of its obligations in terms of the Charter Party,
inter
alia
, for the failure to pay hire
due and owing under the Charter Party as well as the breach of the
Charter Party in respect of claims
for unpaid bunkers. This
application concerns increased security for the latter.
[10.]
The
Ship Concerned was delivered to PBL-Belize on the 29
th
June 2022 and re-delivered to the Applicant on the 9
th
May 2023.
[11.]
A
dispute arose between the Applicant and PBL-Belize arising from
unpaid hire charges and relevant to this application, a bunker
stem
which occurred in Vizag, India on or about 31
st
December 2022 to 1
st
January 2023. The bunker stem comprised of the provision of
approximately 999.95 mt VLSFO.
[5]
[12.]
On
the 18
th
August 2023 the Applicant arrested the Tai Harmony as an Associated
Ship of the Ship Concerned, as security for claims which it
had
advanced in the London proceedings against PBL-Belize. The order
comprising a security arrest under s 5(3) of the Admiralty
Act (the
‘
arrest application’
)
was granted by Makaula J in this court, an aspect to which I return
later.
[13.]
The
MV Tai Harmony
[6]
is the First Respondent in the application, and its owner, the Second
Respondent. The First and Second Respondents oppose this
application
and are collectively referred to herein as the ‘
Respondents’.
PBL-Belize, although cited, has not entered the fray of this
litigation.
[14.]
At
the time of the arrest of the Associated Ship the unpaid bunker claim
had not crystalised as the Applicant had not yet suffered
any
quantifiable losses in respect of this claim. For that reason, the
quantum of security sought in the arrest application related
only to
the unpaid hire claim. In the founding affidavit in the arrest
application, the Applicant reserved its right to obtain
increased
security in respect of the unpaid bunker claim.
[15.]
On
the 22
nd
August 2023 security in respect of the unpaid hire claim was put up
by the Respondents by way of a Gard letter of undertaking,
so as to
procure the release of associated ship. Security in the amount not
exceeding USD876 000.84 was provided.
[16.]
On
the 18
th
September 2023 the Respondents brought an application to set aside
the arrest of the Tai Harmony on the grounds that the vessel
is not
an Associated Ship of the Ship Concerned.
[7]
This shall be referred to as the ‘
main
application’
,
which is set down for hearing in this court on 9
th
May 2024 and has informed the urgency of this application.
[17.]
I
now address the bunkers claim. The Applicant became aware of a
potential bunkers claim in April 2023, when it received a letter
of
demand from the contractual suppliers of the bunkers, Three Fifty
Markets Limited.
[18.]
In
this regard the contractual suppliers referred to clauses 3(c) and
4(c) of its General Terms and Conditions, which provides that
an
order for the outstanding bunkers are deemed to have emanated from
the Master of the vessel (being the Applicant), which in
turn has the
result of creating a primary
lien
on the vessel.
[19.]
On
the 7
th
November 2023 the Applicant received a further demand from attorneys
for the contractual suppliers calling upon the Applicant to
furnish
security for the contractual suppliers’ best reasonably
arguable claim in the amount of USD1 425 000. It was further
recorded
that as the Ship Concerned was imminently due to call at the Port
Elizabeth (Gqeberha) port on the 10
th
November 2023, if such security could not be agreed upon, an arrest
of the Ship Concerned would be considered.
[20.]
Despite
an initial protestation of liability, the Applicant in an effort to
mitigate its damages, and for commercial reasons, commenced
negotiation with the commercial suppliers relating to the provision
of security and/or settlement of the claim, so as to prevent
the
threatened arrest.
[21.]
In
parallel to this, the Applicant put PBL-Belize on notice that all
losses suffered by the Applicant arising out of the provision
of
security or settlement of the unpaid bunkers would be for the account
of PBL-Belize. The Applicant contended that PBL-Belize
was in
breach of the Charter Party insofar as it allowed a
lien
to be created over the Ship Concerned by its failure to pay for the
bunkers, and which exposed the Ship Concerned and the Applicant
to
threat of an arrest.
[22.]
In
response thereto, PBL-Belize denied liability for any losses on
several grounds. It contended
inter
alia
that it was not involved in the
bunker stem and that as a matter of English law, no
lien
could be created over the Ship Concerned arising out of time charter
/ sub-charterer.
[23.]
Ultimately
on 13
th
November 2023, a settlement was reached between the Applicant and the
contractual suppliers in the amount of USD350 000. The Applicant
again called upon PBL-Belize to indemnify it for the losses suffered.
No response was received.
[24.]
The
Applicant took steps to incorporate this further breach of the
Charter Party in its claim before the London Arbitration proceedings
against PBL-Belize and on 19
th
January 2024 sought leave to amend its claim submissions. The
proposed amended claim submissions forms part of the application
papers before me.
[25.]
This
brings me to the application for increased security. The Applicant
contends that the security already furnished is no longer
sufficient
given the settlement of the unpaid bunker claim. The Applicant seeks
increased security and relies on s 5(2)(d) of the
Admiralty Act.
[26.]
On
4
th
December 2023 the Applicant addressed a demand to the Respondents’
attorneys. The association between the Respondents and
PBL-Belize,
which is disputed, forms the subject matter of the main application.
In a response dated the 6
th
December 2023, the Respondents deny that they are liable for the
increased security. This will be addressed when dealing with the
merits of this application.
[27.]
Thereafter,
this urgent application was instituted. In support of urgency the
Applicant contended that due to the imminent enrolment
of the main
application, the parties having agreed timelines for the filing of
their heads of argument by the end of January /
middle of February,
it is axiomatic that this application must be heard prior to the main
application.
[8]
[28.]
The
Applicant obtained a directive for the enrolment of this urgent
application on truncated periods in accordance with the Eastern
Cape
Practice Directives
(‘Practice
Rule’)
12(a). The
directive issued on 2
nd
February 2024 reads as follows:
‘
Having
considered the certificate or urgency placed before me in the
abovementioned matter, I hereby issue the following direction(s)
with
regard to the hearing and further conduct of the matter:
1.
The
matter is certified as urgent.
2.
The
application shall be enrolled for hearing on the opposed roll on 28
March 2024.
3.
The
respondents must file answering affidavit(s), if any, on or before 23
February 2024.
4.
The
applicant must file replying affidavit, if any, on or before 8 March
2024.
5.
The
parties must exchange and file heads of argument at least 5 days
before 28 March 2024.’
[29.]
In
opposing this application, the Respondents have raised a deluge of
technical objections to the directive issued. These preliminary
aspects will be dealt with before I embark on the merits of its
opposition.
The
directive issued
a)
The
procedure adopted
[30.]
Mr
Cooke on behalf of the Respondents contended that Practice Rule
12(a)
[9]
and the procedure
adopted by the Applicant in calling it to court, offended the
Respondents’ rights to a fair hearing which
is entrenched by s
34 of the Constitution of the Republic of South Africa, 1996.
[31.]
I
commence this inquiry against the backdrop of Practice Rule 12,
[10]
which is replicated hereunder:
‘
(a)
In
all applications brought other than in the ordinary course in terms
of the Rules of Court, the legal practitioner who appears
for the
applicant must sign a
certificate of urgency which is to be
filed of record before the papers are placed before the Judge and in
which the reasons for
urgency are fully set out.
(b)
The
certificate of urgency shall
set out the grounds for urgency with sufficient particularity for the
question of urgency
to be
determined solely therefrom without perusing the application papers.
(c)
In
matters contemplated in Rule 12 (a) above, the registrar shall issue
the papers and shall place the matter on the roll of cases
as may be
provided for in the notice of motion commencing the application.
(d)
In
all urgent applications in which it is sought to enrol the matter
other than on a day normally reserved for the hearing of motion
court
matters:
(i)
The
practitioner who appears for the applicant must sign a certificate of
urgency which is to be filed of record before the application
papers
are placed before the Judge and in which the reasons for urgency are
fully set out. In this regard, sufficient particularity
is to be set
out in the certificate for the question of urgency to be determined
solely therefrom and without perusing the application
papers.
(ii)
The
certificate of urgency will be
placed before the Judge who will make a determination solely from
that certificate as to whether
or not the matter is sufficiently
urgent to be heard at any time other than the normal motion court
hours.
(iii)
Should
he/she determine that it is sufficiently urgent, he/she will then
give directions as to the time and place, when and where
the
application is to be heard.
(iv)
Should
he/she decide that the matter is not sufficiently urgent to be heard
on a day other than a normal motion court day he/she
shall record
same on the file whereupon the applicant may deal with the
application in accordance with Rule 12 (a) if so advised.’
[32.]
Urgent
applications require an Applicant to persuade the court that the
non-compliance with the rules, and the extent thereof, is
justified
on the grounds of urgency. The Applicant must demonstrate
inter
alia
that it will suffer real loss or damage were it to rely on the normal
procedure.
[11]
[33.]
Due
and proper consideration must be given to the degree of urgency
facing a litigant, and the deviation in the notice of motion
must be
tailored to meet such degree.
[12]
Lest it not be forgotten that the rules adopted by an Applicant in
such an instance must, as far as practicable, be in accordance
with
the existing rules as to procedure and time periods.
[13]
[34.]
In
the present matter the essence of the urgency is the imminent
enrolment of the main application and that this application for
increased security must be heard before it, failing which, the
Applicant will lose its sanction.
[35.]
Following
the directive, the notice of motion was issued, and the Respondents
were afforded a period of 13 court days to file their
answering
affidavits, which is two days short of the ordinary period provided
for in Uniform rule 6(5)(d)(ii).
[14]
A hearing date was allocated some six weeks away.
[36.]
The
Respondents contend that it was unfairly deprived of the opportunity
to address the Presiding Judge when seized with the certificate
of
urgency. In this regard the Respondents sought to draw parallels from
several cases where substantive orders were granted on
an
ex
parte
basis.
[15]
[37.]
Whilst
I have no difficulty in accepting the indispensable value of a fair
hearing in our judicial system, I am not persuaded that
in the
present matter, there has been any violation.
[38.]
A
directive issued by a Presiding Judge under Practice Rule 12(c)
merely directs the Registrar to issue the papers and enrol the
application for an urgent hearing. This is apparent from the wording
of the rule. A Presiding Judge seized with a certificate of
urgency
is only required to determine whether the matter should be enrolled
on a day other than an ordinary motion court day (Practice
Rule
12(d)). There is no requirement for any further order to be made.
Insofar as the directive included provisions relating the
filing of
answering and replying papers, such provisions were superfluous and
only serve to repeat what is already contained in
the notice of
motion.
[39.]
A
directive in no way finally disposes of the issue of urgency (or any
other issue) which is to be determined in due course by the
Judge
hearing the application on all the relevant facts and circumstances
including those put forward by a Respondent in due course.
[16]
The purpose of a certificate was explained in
January
v Standard Bank of South Africa,
[17]
which
‘
is
to enable the court called upon to deal with the matter to gather,
from a perusal of the certificate alone, why the matter is
to be
regarded as urgent. The certificate should also enable the judge to
decide – at least on a prima facie basis –
that the
matter is in fact urgent enough to warrant immediate attention…The
certificate is calculated to ensure efficiency
in the administration
of justice and to avoid an unnecessary waste of time in dealing with
matters which ought to be dealt with
other than in the ordinary
course.’
[40.]
The
Respondents have been afforded a fair hearing. The Respondents filed
a comprehensive answering affidavit detailing its opposition
at
length. Furthermore, the Respondents filed written heads of argument,
which argument was fully ventilated in this court. Accordingly,
all
the issues including that of urgency were adjudicated at the hearing,
and not when the directive was issued.
[41.]
I
accordingly find that there has been no violation of the Respondents’
rights to a fair hearing on the basis of the procedure
adopted.
(b)
The
urgency
[42.]
I
now turn to the contention that a case has not been made out for
urgency. As alluded to above, there are varying degrees of urgency.
I
can do no better than to repeat what was stated by Kroon J in
Caledon
Street Restaurants CC v D’Aviera:
[18]
‘
In
the assessment of the validity of a respondent's objection to the
procedure adopted by the applicant the following principles
are
applicable. It is incumbent on the applicant to persuade the court
that the non-compliance with the rules and the extent thereof
were
justified on the grounds of urgency. The intent of the rules is that
a modification thereof by the applicant is permissible
only in the
respects and to the extent that is necessary in the circumstances.
The applicant will have to demonstrate sufficient
real loss or damage
were he to be compelled to rely solely or substantially on the normal
procedure. The court is enjoined by rule
6(12) to dispose of an
urgent matter by procedures
"which
shall as far as practicable be in terms of these rules".
That
obligation must of necessity be discharged by way of the exercise of
a judicial discretion as to the attitude of the court
concerning
which deviations it will tolerate in a specific case. Practitioners
must accordingly again be reminded that the phrase
"which
shall as far as practicable be in terms of these rules"
must
not be treated as pro non scriptio. The mere existence of some
urgency cannot therefore necessarily justify an applicant
not using
Form 2(a) of the first schedule to the rules. If a deviation is to be
permitted, the extent thereof will depend on the
circumstances of the
case. The principle remains operative even if what the applicant is
seeking in the first instance, is merely
a rule nisi without
interim relief. A respondent is entitled to resist even the grant of
such relief. The applicant,
or more accurately, his legal advisors,
must carefully analyse the facts of each case to determine whether a
greater or lesser
degree of relaxation of the rules and the ordinary
practice of the court is merited and must in all respects responsibly
strike
a balance between the duty to obey rule 6(5)(a) and the
entitlement to deviate therefrom, bearing in mind that that
entitlement
and the extent thereof, are dependent upon, and are thus
limited by, the urgency which prevails.
The
degree of relaxation of the rules should not be greater than the
exigencies of the case demand (and it need hardly be added
these
exigencies must appear from the papers).
On the practical level it will follow that there must be a marked
degree of urgency before it is justifiable not to use Form 2(a).
It
may be that the time elements involved or other circumstances justify
dispensing with all prior notice to the respondent. In
such a case
Form 2 will suffice. Subject to that exception it appears that all
requirements of urgency can be met by using Form
2(a) with shortened
time periods or by another adaptation of the Form, eg advanced
nomination of a date for the hearing of the
matter, or omitting
notice to the registrar accompanied by changed wording where
necessary. Adjustment, not abandonment, of Form
2(a) is the method.’
[43.]
The
urgency lies in the imminent enrolment of the main application. The
main application is set down for hearing on 9
th
May 2024. This influences the hearing of this application as an
adjunct thereto. Had this application not proceeded by way of urgent
directive, and was heard in the normal course, it would have been
determined after the main application. In this sequence the Applicant
is deprived of the sanction of asking the court hearing the main
application for a dismissal if the increased security is not
furnished. In the result, I also do not find this application to be
premature.
[44.]
The
contention that the urgency is self-created similarly stands to be
rejected as it was the Respondents that launched the main
application, which has influenced the urgency of this application.
[45.]
I
am also of the view that the degree of relaxation of the rules was no
greater than the exigencies demanded by the case. The deviation,
which is minimal and effectively two days short of the ordinary
period, was appropriate and not overly burdensome in the
circumstances.
(c
Non-disclosures
in the certificate
[46.]
Mr
Cooke contended that there were material non-disclosures (which are
dealt with below) in the certificate of urgency. Parallels
were again
drawn to
ex
parte
proceedings,
where the utmost good faith is to be observed.
[19]
[47.]
What
a legal representative must observe in the preparation of a
certificate of urgency is contained in Practice Rule 12(b). The
role
of the certificate has been explained above.
[48.]
A
Presiding Judge when faced with a certificate of
urgency will make a prima facie determination as to whether
the application appears to be sufficiently urgent to be heard
on a
truncated basis. It has been said that this places a great deal of
trust in the submissions made by Applicant’s counsel,
without
the benefit of insight into the Respondent’s position.
[20]
[49.]
According
to the Respondents it should have been disclosed in the Applicant’s
certificate that it had disputed this court’s
jurisdiction.
Leaving aside that this is an aspect to be determined at the hearing
of the main application, it is also outside
of the ambit of Practice
Rule 12(a). In any event, and for purposes of this application, the
complaint of a lack of jurisdiction
stands to be rejected.
[50.]
This
court has already exercised its admiralty jurisdiction by reason of
the security arrest of the Associated Ship on 18
th
August 2023.
[21]
In terms of
this arrest the Respondents furnished security which was accepted by
the Applicant. It follows that until such arrest
is set aside this
court retains jurisdiction to order increased security.
[51.]
I
say so for another reason. As correctly submitted by Mr Fitzgerald SC
for the Applicant, the Respondents, being the Associated
Ship and the
owner respectively, effectively submitted to the jurisdiction of this
court when it filed a notice of intention to
defend these
proceedings, filed security to the satisfaction of the Applicant, and
launched an application for the setting aside
of the arrest (the main
application).
[22]
In
MV
Alina II (No 2) Transnet v Owner of Alina II
,
[23]
the Supreme Court of Appeal quoted with approval, the
ratio
in the
Mediterranean
Shipping
case:
‘
Anyone
who invokes the jurisdiction of this court for relief under the Act
must be taken – and can hardly be heard to contend
otherwise –
to have submitted to this jurisdiction…’
[24]
[52.]
In
invoking this court’s jurisdiction in the main application, the
Respondents subjected themselves to the powers of this
court to grant
relief under the provisions of the Admiralty Act
[25]
which includes relief in terms of s 5(2)(d).
[26]
[53.]
Accordingly,
I do not find that it was necessary to make such a disclosure in the
certificate. In any event, and in fairness to
the Respondents, their
objections to jurisdiction were indeed addressed in the founding
affidavit.
[54.]
The
Respondents further contend that it should have been disclosed in the
certificate that there was a delay of almost two months
before
approaching the court for a directive. From the outset it must be
said that the certificate and founding affidavit fail
to address in
any detail the events which took place following the last
correspondence on 6
th
December 2023 and the launching of the application on 2
nd
February 2024.
[27]
[55.]
The
reason for the delay is addressed in greater detail in reply. The
Respondents took umbrage and placed reliance on the general
rule
against a litigant supplementing its case in reply. This rule is of
course not absolute.
[28]
In
urgent applications, courts are commonly sympathetic to an Applicant
and often allow papers to be amplified in reply, subject
of course to
the right of a Respondent to file a further answering affidavit.
[29]
I hasten to add that the Respondents have not sought an opportunity
to file a further affidavit and, in any event, these aspects
in reply
are not entirely new, as the grounds for urgency were foreshadowed in
founding.
[56.]
Additionally,
in matters of this nature, an Applicant is also afforded a degree of
latitude by virtue of Admiralty Rule 9(3)(c)
[30]
which entitles litigants to adduce new matter in reply.
[31]
[57.]
Any
potential deficiencies in the certificate, and founding affidavit,
are tempered against the impending enrolment of the main
application
which influenced the aspect of urgency. This is canvassed in both the
certificate and founding affidavit. Allayed to
that is the fact that
the
dies
afforded to the Respondents to file its answer, were reasonable and
closely resembled the normal period afforded in terms of the
rules.
[58.]
Accordingly,
I do not find the complaint of non-disclosures to hold any merit.
[59.]
Lastly,
I turn to the objection that it should have been disclosed in the
certificate that the Applicant itself had initially disputed
the
unpaid bunker claims with the contractual suppliers. This aspect is
pertinently dealt with on affidavit. The Applicant explains
that
notwithstanding its initial stance, it ultimately resolved, for
commercial reasons and on a without prejudice basis, to settle
the
claim with the commercial suppliers. The settlement was significantly
less
[32]
than the amount
originally demanded.
[33]
[60.]
The
settlement of the unpaid bunker claims with the commercial suppliers
makes logical sense. As the Applicant explained, it was
at risk of
facing an
in rem
and an
in personam
claim. The Applicant’s vessel was at risk of an arrest in any
other jurisdiction which recognises a foreign maritime
lien
.
Such an arrest would have caused significant disruption to the
Applicant’s business. The settlement of the unpaid bunkers
claim also prevented the running up of accrued interest and costs.
[61.]
I
am satisfied that the Applicant acted fairly and appropriately in
mitigating its risk by settling the claim on favourable terms.
In
any event, the reasonableness of the settled amount, or whether it
was a bad debt, forms part of the London arbitration
and can be
determined in those proceedings.
[62.]
Accordingly,
and for the reasons set out above, I do not find there to be merit in
this further ground.
[63.]
A
parting remark stands to be made regarding the Respondents’
complaint of non-disclosures in the certificate. Had these
disclosures been made, I postulate that the Presiding Judge would
still have exercised the discretion to issue the directive, as
all
these aspects are more appropriately dealt with at adjudication stage
and not in a preliminary setting.
The
Merits
a)
Increased
security in terms of s 5(2)(d)
[64.]
Having
disposed of the preliminary skirmishes, I proceed to deal with the
substance of this application and the opposition thereto.
The
Respondents’ opposition to the merits is threefold:
[64.1.]
It
contends this court lacks jurisdiction (which has been dealt with in
part above).
[64.2.]
The
Applicant has failed to make out a prima facie case.
[64.3.]
There
is no association between PBL-Belize and the Respondents.
[65.]
The
Tai Harmony was arrested as an Associated Ship by order of this court
dated 18
th
August 2023. The basis for such an arrest is set out in
Silver
Star
.
[34]
The purpose of the associated-ship arrest provisions is to impose
liability for maritime claims where it belonged by virtue of
common
ownership or common control of vessels.
[35]
[66.]
The
Applicant alleges
[36]
that the
Tai Harmony is an Associated Ship, as there is a common controller of
the Respondents and PBL-Belize (the charterer of
the Ship Concerned).
[67.]
The
Respondents dispute that the Tai Harmony is an Associated Ship and
have sought to set aside the arrest. This is the subject
of the main
application.
[68.]
Section
5(2)(d) of the Admiralty Act provides that a court may in the
exercise of its admiralty jurisdiction order that, in addition
to
property already vested or attached, further property be arrested or
attached in order to provide additional security
for
any claim,
and order that such
security given be increased, reduced or discharged, subject to such
conditions as to the court appears just.
[69.]
In
order to establish a need for
additional
security,
[37]
an Applicant is
required to demonstrate that:
[69.1.]
Prima
facie, it has such a claim for additional security, which claim is
justiciable in this court; and
[69.2.]
On
a balance of probabilities, it has a genuine and reasonable need for
security.
[38]
[70.]
This
court is vested with a wide power, in its discretion, to order that
security be furnished for maritime claims.
[39]
This discretion falls to be exercised upon a consideration of all
relevant facts and circumstances.
[40]
The Admiralty Act is a special statute dealing with maritime matters
and is directed at meeting the needs of the shipping industry
in
enforcing maritime claims.
[41]
The breadth of these powers take into account the reality that
maritime defendants are mobile and transitory in their presence
in
any particular jurisdiction.
[42]
To address what has been described as the ‘
wandering
litigants of the world’
[43]
the Admiralty Act provides for wide-ranging powers of arrest, both
for the purpose of instituting actions in this country and to
enable
claimants to obtain security for proceedings in other
jurisdictions.
[44]
[71.]
It
matters not that the additional security sought by the Applicant is
in respect of the London arbitration, and not for proceedings
in this
court, as the section refers to ‘
any
claim’
which is wide enough to include the pending arbitration abroad.
[45]
In the result, the objection to jurisdiction must again fail.
b)
A
prima facie case
[72.]
An
Applicant for security under this section must establish that it may
be entitled in due course to an order for costs, or that
it has a
claim against the party from whom security is sought.
[46]
The existence of a claim need only be established on a prima facie
basis i.e., by producing evidence that, if accepted, shows the
existence of a cause of action.
[47]
The Applicant must also show on a prima facie basis that it will be
enforceable in the forum in respect of which security is sought.
[48]
[73.]
The
establishment of a prima facie case depends on both facts and law
[49]
and the starting point is the facts upon which the legal contentions
are based.
[50]
[74.]
In
determining whether this threshold has been met, Mr Fitzgerald SC for
the Applicant urged the court to apply the ‘
low-level
test’
[51]
as explained in
MT
Tigr: Owners of the MT Tigr v Transnet Ltd.
[52]
[75.]
It
is correct that this low-level test is used in applications for
attachment or arrest to found or confirm jurisdiction,
[53]
however, in the present matter, we are concerned with a security
arrest in terms of s 5(3) of the Admiralty Act.
[54]
[76.]
Whilst
the fact that the merits will be considered at a later stage is said
to provide justification for the low-level test in applications
to
found or confirm jurisdiction, it is not relevant to the
consideration of an application for a security arrest (and by parity
of reasoning, an
increase
in security) where an arrest is not aimed at establishing
jurisdiction but at obtaining final relief in the form of an order
that
security be provided for the outcome of proceedings in another
forum, usually in another jurisdiction.
[55]
[77.]
For
this reason, I found the low-level test not to be of application. The
next question then arises, how is the court in this instance
to
determine whether a prima facie case has been made?
[78.]
Guidance
is obtained in
Imperial
Marine Co v
MV
Pasquale Della Gatta
[56]
(‘MV
Pasquale’)
where Wallis JA explained that it is inappropriate for the court to
shut its eyes to admissible and relevant evidence that is not
and
cannot be disputed
[57]
and
‘
where
the applicant asks the court to draw factual inferences from the
evidence they must be inferences that can reasonably be drawn
from
it, even if they need not be the only possible inferences from that
evidence.’
[58]
If they are tenuous or far-reached the onus is not discharged.
Second, the drawing of inferences from the facts must be based on
the
proven facts and not matters of speculation.
[59]
[79.]
On
the facts, the Applicant seeks increased security for the bunker
claim. To this end, the Applicant has sought to amend its claim
submissions in the London arbitration.
[60]
[80.]
Plainly,
the security already furnished is insufficient as the bunker claim
had not yet crystallised and no quantifiable loss had
been incurred.
This fact is consistent with the timeline. The settlement of the
claim with the contractual suppliers took place
well after the
provision of security on 22
nd
August 2023.
[81.]
It
was for this reason that the Applicant expressly reserved its rights
in the arrest application to pursue this application for
increased
security if such loss materialised.
[82.]
At
the time the Respondents furnished security, it was aware that the
potential unpaid bunker claim may form part and parcel of
the London
arbitration proceedings, once that claim crystallised.
[61]
This is borne out of the express wording of the Gard letter of
undertaking dated 22
nd
August 2023.
[62]
As such I am
not persuaded that this was a stratagem by the Applicant to seek
increased security owing to deficiencies in the initial
claim.
[83.]
In
turning to the relevant provisions of the Charter Party, and at least
of a prima facie basis, I am satisfied that the Applicant
has
established that PBL-Belize improperly allowed a
lien
to be created over the Ship Concerned.
[63]
Moreover, it was an obligation on the charterer (being PBL-Belize) to
pay for all bunkers.
[64]
The
relevant clauses have been dealt with above.
[84.]
Again,
the Respondents attack this claim on several grounds. I have dealt
with the settlement of the claim, which I believe was
appropriate in
the circumstances.
[85.]
The
Respondents contend that PBL-Belize is not associated or related to
the Respondents. The difficulty with that submission is
that this
court has already found an association by virtue of the security
arrest.
[65]
Although there is
a setting aside application pending (the main application), the
association presently stands.
[86.]
The
Respondents contend that the bunkers were supplied to a third party,
AUM Scrap and Metals Waste Trading LLC, and not PBL-Belize.
Ultimately, the bunker stem took place at a time when PBL-Belize was
the charterer of the Ship Concerned in terms of the fixed
term
Charter Party. Insofar as PBL-Belize may have delegated the
performance of the bunker stem and payment thereof to a third
party,
this aspect is more appropriately dealt with in the London
proceedings. So too are the various challenges to the settlement
of
the bunkers claim.
[87.]
Accordingly,
I am satisfied that in line with the guidelines set out in
MV
Pasquale
,
there is sufficient evidence on the papers to establish on a prima
facie basis that the Applicant has a claim for increased security
against the Respondents.
[66]
[88.]
I
now turn to the second requirement contained in s 5(2)(d) of the
Admiralty Act.
[67]
(c)
A
genuine and reasonable need for security
[89.]
The
Applicant must show a genuine and reasonable need for security.
[68]
The question concerns whether there is a likelihood that an Applicant
for security will be paid if it is successful in obtaining
an order
for costs or in pursuing its claim.
[69]
[90.]
The
Applicant’s deponent makes the following allegations in its
founding affidavit
[70]
in
support of a genuine and reasonable need for increased security:
[90.1.]
PBL-Belize
is a special purpose vehicle incorporated in Belize, being a
jurisdiction with an opaque history.
[71]
[90.2.]
The
Applicant has requested the financial records of PBL-Belize which
have not been provided. The Applicant has no form of comfort
that
PBL-Belize’s financial position is such that it can satisfy an
arbitral award.
[90.3.]
Based
on a Seasearcher company report,
[72]
PBL-Belize is not a ship owning entity and has no identifiable
assets.
[90.4.]
Despite
several demands, PBL-Belize has failed to secure the Applicant’s
claim and/or the requested increased security.
[90.5.]
Despite
the arrest of Tai Harmony
,
PBL-Belize has failed to take any steps to procure the release of the
vessel.
[73]
[91.]
The
Respondents’ answer to these direct assertions are noticeably
thin. Other than to repeat that a lack of association forms
the
subject matter of the main application, the allegations are not
contradicted.
[92.]
The
aspect of the association will be determined at the main hearing. If
the Respondents are successful, their security will lapse.
[93.]
The
reasons advanced by the Applicant for the increased security, without
much dispute from the Respondents, appear to be plausible
and sound.
[94.]
As
explained above, the security already provided is insufficient. In
the absence of increased security, there appears to be little
prospect of the Applicant obtaining payment of its claims if
successful.
[95.]
I
do not believe that there is another forum that would be better
placed to determine this application, given that this court has
already ordered the arrest and will imminently hear the main
application.
[74]
Nor do I find
that an alternative or less disruptive route was available to the
Applicant in pursuing this relief.
[75]
It bears repeating that the Applicant’s request to PBL-Belize
and the Respondents for indemnification for this claim was
resisted.
[96.]
Accordingly,
and on a balance of probabilities, the Applicant is found to have
established the requirement of a genuine and reasonable
need for such
security.
[76]
[97.]
Beyond
these two requirements,
[77]
a
court should not be constrained by a formulaic approach to the
exercise of its discretion and is called upon to weigh up all
relevant factors and reach a conclusion which is in accordance with
the interests of justice.
[78]
[98.]
In
this regard, I have had regard to principles of judicial comity and
its role in an admiralty setting, as well as the prospects
of the
Applicant’s
claim before the London arbitration and the main application.
[79]
Weighing these factors, it seems to me that the overall interests of
justice point towards the granting of the relief
.
[80]
Quantum
[99.]
The
quantum sought by the Applicant is comprised of the following amounts
which are all motivated on affidavit:
[99.1.]
USD364 948.50
(the settlement figure plus legal costs incurred in dealing with and
reaching the settlement).
[81]
[99.2.]
USD38 060
(interest)
[82]
[99.3.]
USD32 500
(legal costs to be incurred in the London proceeding).
[83]
TOTAL
USD435 508.50.
[100.]
On
the papers before me, there is nothing to challenge the computation
and quantification of the claim. However, in argument, Mr
Cooke
contended that the quantum should be limited to the value of the
res
(being
the value of the Tai Harmony).
[84]
There is nothing before me on what this amount would be.
[101.]
In
any event, the approach in
The
Zlatni Piasatzi
[85]
is now interpreted subject to decision of
The
Alina II
,
[86]
wherein no mention is made of the quantum of security being subject
to such a limitation
.
The reason to my mind appears to be that s 5(3) of the Admiralty Act,
which presently governs the process, no longer contains such
a
limitation, as opposed to the position at the time of
The
Zlatni Piasatzi
.
[102.]
The
Applicant is entitled to sufficient security to cover the amount of
its claim, together with interest and costs on the basis
of its
‘
reasonably
arguable best case’.
[87]
Accordingly, and on the basis set out above, I am of the opinion that
the amount claimed by the Applicant is properly motivated
and
appropriate.
Costs
[103.]
Lastly,
on the aspect of costs, the notice of motion originally sought an
order that the Respondents pay the costs on an attorney
and client
scale. The present circumstances do not warrant a punitive award. Mr
Fitzgerald SC, on reflection and correctly in my
view, sought an
order that the costs of this application be in the cause of main
application. I consider this to be appropriate.
The
order
In
the result the following order will issue:
1.
The
security currently provided to and held by the Applicant in the Gard
Letter of Undertaking dated 22
nd
August 2023 (the ‘Gard LOU’) be increased by the amount
of USD435 508.50, as additional security for the Applicant’s
unpaid bunker claim against the Third Respondent, in terms of s
5(2)(d) of the Admiralty Jurisdiction Regulation Act, 105 of 1983
(the ‘top-up security’).
2.
The
top-up security shall be in the form of either:
2.1.
An
additional letter of undertaking in the amount of USD435 508.50
in respect of the unpaid bunker claim, issued in favour
of the
Applicant on the same terms as the Gard LOU; or
2.2.
A
new letter of undertaking in the increased amount of USD1 311 509.34
(being USD876 000.84 in respect of the unpaid
hire claim and
USD435 508.50 in respect of the unpaid bunker claim) on the same
terms as the Gard LOU, but will replace the
Gard LOU.
3.
The
Respondents are directed to furnish the top-up security to the
Applicant within 5 (five) court days of the grant of this order,
failing which the Applicant is granted leave, on notice to the
Respondents to approach this court on the same papers, duly
supplemented
for an order setting aside the Second Respondent’s
application to set aside the arrest of the Tai Harmony and/or such
further
and alternative relief as this court may be deem appropriate.
4.
The
costs of this application shall be costs in the cause of the setting
aside application.
T
ROSSI
ACTING
JUDGE OF THE HIGH COURT
Appearances:
For
the Applicant:
Mr Fitzgerald SC
Counsel for Applicant
Instructed by:
Chris Baker and
Associates
Millard Grange
Gqeberha
For
the First and Second
Respondents:
Mr Cooke
Counsel
for First and Second Respondents
Instructed
by:
Pagdens Attorneys
18 Castle Hill
Central
Gqeberha
[1]
A Charter Party is a document recording an agreement between a ship
owner and someone who rents all or part of a ship for a particular
voyage or a period of time.
[2]
In terms of clause 1 of the Charter Party ‘
about’
means ’
15
days more or less Charterers’ option.’
[3]
‘
Bunkers’
refers to marine fuel oil, marine diesel oil or marine gas oil
supplied to vessels for their propulsion. It is the general name
for
fuel used on vessels.
[4]
Clause 76 of the Charter Party.
[5]
Which
is an abbreviation for a very low form of sulfur fuel oil.
[6]
A bulk carrier which is flagged in Hong Kong.
[7]
Paragraph 7 of the arrest order of 18
th
August 2023 reads ‘
The
Respondents and any person who may provide security for the release
of the vessel from the arrest, shall bring any application
to vary
or set aside this order within a period of one calendar month from
the date upon which security is furnished or within
such period as
this Honourable Court may order on good cause shown, failing which
they shall not be entitled to apply or vary
or set aside the order.’
[8]
Objectively, this contention proved to be sound as an opposed date
for hearing, being 9
th
May 2024, was obtained in conjunction with the Registrar’s
office in early March 2024. At the time of deposing to the founding
affidavit on 29
th
January 2024, a date had not yet been allocated.
[9]
A notice in terms of Uniform rule 16A was placed at the offices of
the Registrar.
[10]
Practice Rule 12(a) in its current form was introduced by way of
Court Notice 1 of 2014, with effect from 9
th
June 2014. My own emphasis by way of
underlining
has
been added.
[11]
Voight
NO and another v EGH IP (Pty) Ltd and others
[2021] ZAECGHC 40
(‘Voight’)
par 11-12.
[12]
Voight
supra
par 15, quoting with approval
Nelson
Mandela Metropolitan Municipality v Greyvenouw CC and others
2004
(2) SA 81
(SE) par 37, 38 and 40.
[13]
Voight
supra
par 13.
[14]
The Respondents, who were already represented in the main
application, were not afforded the time period in terms of Uniform
rule 6(5)(b)(iii).
[15]
Such as in
Wijnen
v Mohamed
[2014] ZAWCHC 138
which dealt with an
ex
parte
order granted in terms of s 4(2) of the Prevention of Illegal
Eviction from and Unlawful Occupation of Land Act 19 of 1998;
Industrial
Development Corporation of South Africa Limited v Bokone Group of
Companies
[2023] ZAGPJHC 837 where a notarial deed was perfected.
[16]
Voight
supra
par 6. See also
Lumkwana
v Superintendent General, Department of Health, Eastern Cape and
another
[2022] ZAECBHC 2 par 19.
[17]
January
v Standard Bank of South Africa
[2010] ZAECGHC 6 par 40.
[18]
Caledon
Street Restaurants CC v D’Aviera
[1998] JOL 1832
(SE) at 7-9 (my own emphasis).
[19]
National
Director of Public Prosecutions v Basson and another
[2002] 2 All SA 255
(A) par 21.
[20]
Van
der Merwe and others v Nel NO and others
[2023] ZAECMKHC 40 par 23.
[21]
Paragraph 2 of the order Makaula J reads ‘
The
sheriff of the district of Port Elizabeth West covering jurisdiction
Ngqura/Port Elizabeth anchorage (the ‘sheriff’)
is
hereby authorised and directed to arrest the motor vessel ‘TAI
HARMONY’ (the ‘vessel’) in terms of
section 5(3)
of the Admiralty Jurisdiction Regulation Act 105 of 1983 (as
amended) (the ‘Admiralty Act’) for the
purpose of
providing security for claims that the Applicant has advanced in
London Proceedings against the Third Respondent in
the amount of
USD430 970.42 plus interest and costs (the ‘arbitration’).’
[22]
MV
Alina II (No 2) Transnet v Owner of MV Alina II
2011
(6) SA 206
(SCA) par 11 to 14.
[23]
Ibid
par 14.
[24]
Mediterranean
Shipping Co v Speedwell Shipping Co Ltd and another
1986 (4) SA 329
(D) at 334A.
[25]
The
NYK Isabel
2017 (1) SA 25
(SCA) par 50.
[26]
The present application for increased security.
[27]
Which coincides with the festive season and annual shut down.
[28]
Finishing
Touch 163 (Pty) Ltd v BHB Billiton Energy Coal South Africa
2013 (2) SA 204
(SCA) par 26.
[29]
Lagoon
Beach Hotel (Pty) Ltd v Lehane NO
2016 (3) SA 143
(SCA) par 16.
[30]
Admiralty Proceedings Rules, GN R571, 18
th
April 1997 (as amended).
[32]
The unpaid bunker claim was settled in the amount of USD350 000.
[33]
The demand as at 7
th
November 2023 was in the amount of USD760 000 which included
accrued interest in the amount of USD152 000.
[34]
MV
Silver Star: Owners of the MV Silver Star v Hilane Ltd
2015 (2) SA 331
(SCA)
(‘Silver
Star’)
par 14 and 16.
[35]
Silver
Star
supra
par 13.
[36]
In the arrest application and this application.
[37]
An arrest having already been made in terms of s 5(3)(a) of the
Admiralty Act.
[38]
The
NYK Isabel
supra
par 40 to 58. See also
World
Fuel Services (Singapore) Pte Ltd t/a World Fuel Services and
another v MV ‘Ainaftis’ and another
(‘MV
Ainaftis’)
[2020] ZAKZDHC 23 par 20.
[39]
The
NYK Isabel
supra
par 43.
[40]
The
NYK Isabel
supra par 43 with reference to the approach adopted in
Katagum
Wholesale Commodities Co Ltd v The MV Paz (‘The Paz’)
1984
(3) SA 261
(N) at 264A-C.
[41]
The
NYK Isabel
supra
par 44.
[42]
Ibid.
[43]
In the colourful expression of Didcott J in
The
Paz
at 263G-H.
[44]
The
NYK Isabel
supra
par 44.
[45]
The
NYK Isabel
supra
par 47.
[46]
The
NYK Isabel
supra
par 46.
[47]
Ibid
.
[48]
Ibid.
[49]
Imperial
Marine Co v MV Pasquale Della Gatta (‘MV Pasquale’)
[2012] 1 All SA 491
(SCA) par 19.
[50]
Ibid.
[51]
The test was given expression in
Bradbury
Gretorex Co (Colonial) v Standing Trading Co (Pty) Ltd
1953 (3) SA 529
(W) at 533D-E as follows, ‘
The
mere fact that such evidence is contradicted would not disentitle
the applicant to the remedy. Even when the probabilities
are against
him, the requirement would still be satisfied. It is only where it
is quite clear that he has no action, or cannot
succeed than an
attachment should be refused or discharged on the ground here in
question.’
[52]
MT
Tigr: Owners of the MT Tigr v Transnet Ltd
1998 (3) SA 861
(SCA) at 868B-H.
[53]
Hülse-Reutter
v and others v Gödde
[2002] 2 All SA 211
(SCA) par 12.
[54]
By order of Makaula J on 18
th
August 2023.
[55]
Imperial
Marine Co v
MV
Pasquale Della Gatta
[2012]
1 All SA 491
(SCA) par 23.
[56]
Ibid
par 23.
[57]
Ibid
par 24.
[58]
Ibid.
[59]
Ibid.
[60]
This proposed amended claim submission is an annexure to the
founding affidavit.
[61]
The Applicant contends that breaches of the Charter Party are valid
claims as a matter of English law. This allegation is not
directly
challenged by the Respondents.
[62]
The letter of undertaking by Gard Limited reads in part ‘…
for
breaches of the Charter Party for alleged failure to pay outstanding
hire as well as claims for a declaration and/or indemnity
in respect
of alleged breaches of the aforesaid Charter Party for allegedly
failing to pay for bunkers supplied to the vessel
and allegedly
improperly allowing a lien to be created over the vessel, which
claim remains subject to crystallization and in
terms of which the
right to obtain top-up security is strictly reserved.’
[63]
Clause 23 of the Charter Party reads ‘
The
charterers will not directly or indirectly suffer, nor permit to be
continued, any lien or encumbrance, which might have priority
over
the title and interest of the owners of the vessel. The
charterers undertake that during the period of this Charter
Party,
they will not procure any supplies or necessaries or services,
including any port expenses or bunkers, on the credit of
the Owners
or in the Owners’ time.’
[64]
Clause 7 of the Charter Party.
[65]
A security arrest having been ordered in terms of s 5(3) of the
Admiralty Act.
[66]
Or in the words of Wallis JA in
The
NYK Isabel
supra
par 59 the claim ‘
is
largely speculative or had limited prospects of success’.
[67]
Courts have been warned not to invert or conflate these two
independent inquiries, as they deal with separate issues. The latter
requirement being dependent on the former -
The
NYK Isabel
supra
par 54.
[68]
The
NYK Isabel
supra
par 46.
[69]
The
NYK Isabel
supra
par 54. Or put differently, the purpose of giving security is to
make available assets with which a judgment creditor can satisfy
a
judgment –
Zygos
Corporation v Salen Rederierna AB
(‘Zygos’)
1984 (4) 444 (CPD) at 461E.
[70]
Which averments are mirrored in the arrest application and
unchallenged by the Respondents in the main application.
[71]
According to the Applicant, very little information regarding the
ownership structure of PBL-Belize is available on publicly
available
sources. This is because Belize is a notoriously opaque registry in
terms of which ownership and management of any
company registered in
Belize is not publicly accessible.
[72]
Which report is attached to the application.
[73]
The order which effectively found the Tai Harmony to be an
Associated Ship of PBL-Belize is the subject-matter of the pending
main application.
[74]
The
NYK Isabel
supra
par 54.
[75]
The
NYK Isabel
supra
par 54.
[76]
In
MV
Ainaftis
supra
par
20.
[77]
Contained in s 5(2)(d) of the Admiralty Act.
[78]
The
NYK Isabel
supra
par 51.
[79]
Guidance was obtained from
The
NYK Isabel
supra
par 58 to 62.
[80]
The
NYK Isabel
supra
par 62.
[81]
This amount is claimed in the amended claim submissions.
[82]
This figures comprises of 5 per cent per annum on the capital
amount, compounded quarterly, over a period of 2 years.
[83]
Inclusive of the costs in preparing the claim submissions, reply and
defence to counterclaim submissions, witness evidence, case
management and general care and conduct, preparation for and
attending trial. The amount of USD32 500 is a 10 per cent
uplift of the aforesaid components set out in the previous estimate
of costs which is contained in the founding affidavit in the
arrest
application.
[84]
Prior to its amendment, Admiralty Rule 3(5)(a) read ‘…
any
person desiring to obtain the release of any property from arrest
may obtain such release with the consent of the person who
caused
the said arrest to be effected, or on giving security in a sum
representing the amount of the value of the relevant property
or the
amount of the plaintiff’s claim
whichever
is the lower
…’
(my
own emphasis).
[85]
The
Zlatni Piasatzi
1997 (2) AS 569 (C) at 575D-E.
[86]
MV
Alina II (No 2) Transnet v Owner of MV Alina II
2011
(6) SA 206
(SCA). See also G Hofmeyr
Admiralty
Jurisdiction Law and Practice in South Africa
(2012) 2
ed
at 226-227 and fn 85.
[87]
Zygos
supra
at 458C-D.