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[2015] ZAKZDHC 32
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LBH Mozambique Limitada v Fund Consisting of the Proceeds of the Sale of the Cargo of 4,904.78 Tons of Chromite Ore Concentrates Lately Laden on Board and Another (A16/2014) [2015] ZAKZDHC 32 (25 March 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
Case
no: A16/2014
Date:
25 March 2015
REPORTABLE
Name
of ship: MV ‘DA QING XIA’
In
the matter between:
LBH
MOZAMBIQUE
LIMITADA
..................................................................................
APPLICANT
And
THE
FUND CONSISTING OF THE PROCEEDS OF
THE
SALE OF THE CARGO OF 4,904.78 TONS OF CHROMITE
ORE
CONCENTRATES LATELY LADEN ON BOARD
THE
MV ‘RED
FIN’
......................................................................................................
RESPONDENT
CHINA
CONSTRUCTION
BANK
..................................................
INTERVENING
RESPONDENT
CORPORATION
Judgment
PLOOS VAN AMSTEL
J
[1]
This matter concerns the distribution of a fund as contemplated in
section 9(2) of the Admiralty Jurisdiction Regulation Act
[1]
pursuant to the sale of a cargo of chromite ore concentrates. The
cargo was attached by the applicant
[2]
in order to found or confirm jurisdiction for the purpose of an
action
in
personam
.
No security was put up to secure its release and on 4 April 2014 this
court directed that it be sold. It also appointed a referee
to
receive, examine and report to the court on the validity and ranking
of claims in respect of the fund. The cargo was sold by
private
tender for a sum of USD 721002.
[2]
Four claims were lodged with the referee. The claimants were the
applicant (LBH Mozambique Limitada), the intervening respondent
(China Construction Bank Corporation), Oldendorff Carriers GmbH and
Mushtaq Oosman, the liquidator of Metalmin Metals & Minerals
Ltd,
who owned the cargo. Metalmin is a company based in Mauritius and a
peregrinus of this country.
[3]
The referee recommended that the claims of the applicant and
Oldendorff Carriers be accepted, and made a recommendation with
regard to their ranking
[3]
.
These recommendations are not challenged by anyone. He recommended
that the claim by the liquidator not be accepted as he is in
terms of
the Act
[4]
entitled to the balance after all the claims have been paid, and did
not have to claim against the fund. This recommendation is
also not
challenged by anyone.
[4]
On 1 September 2014 this court made an order, by consent, confirming
the undisputed part of the referee’s report and directing
that
one of the applicant’s claims and that of Oldendorff Carriers
be paid from the fund, together with interest and certain
costs. The
applicant’s remaining claim is not in issue but has not been
paid because the issue regarding the claim by China
Construction Bank
Corporation has to be resolved first. For the sake of brevity I shall
refer to it as ‘the bank’.
[5]
The referee recommended that the claim by the bank be disallowed on
the ground that it is not a maritime claim as defined in
the Act. He
concluded that the claim was otherwise in order and properly
documented. The only issue before me is therefore whether
this claim
is a maritime claim. If it is, then it ranks under section 11(4) (f),
which is the same ranking as the applicant’s
remaining claim.
[6]
The bank’s claim is for a sum of USD 18 628 810 in
respect of banking facilities granted to Metalmin to finance
its
trade in commodities. Part of this money was used to purchase the
cargo which was attached and sold. The nature of the bank’s
claim against Metalmin is not such that it falls within the
definition of a maritime claim in section 1(1) of the Act. The only
basis on which the bank contends that its claim against the fund is a
maritime claim is section 1(1) (x) of the definition, which
refers to
‘any claim for, arising out of or relating to the distribution
of a fund or any portion of a fund held or to be
held by, or in
accordance with the directions of, any court in the exercise of its
admiralty jurisdiction, or any officer of any
court exercising such
jurisdiction’. In other words, the bank contends that its claim
is a maritime claim by virtue of the
fact that it is a claim for a
share of the fund. It accepts that, but for the existence of the
fund, it would not have been a maritime
claim which could have been
enforced under the admiralty jurisdiction of this court.
[7]
Counsel for the bank relied on the judgment of Thirion J in
Continental
Illinois Bank National and Trust Co of Chicago v Greek Seaman’s
Pension Fund
[5]
as authority for the proposition that any claim for, arising out of
or relating to the distribution of a fund is a maritime claim
in
terms of section 1(1) (x). The problem which confronted Thirion J was
the following. The Greek Seamen’s Pension Fund lodged
a claim
with the referee in respect of contributions due in respect of the
master and crew of the vessel to various funds operated
by the
claimant, which amounts it was obligatory for the shipowner to pay
and, in regard to a portion thereof, to deduct from wages.
Section
11(1)
[6]
provided that claims
with regard to a fund ‘shall be paid in the following order’,
which, in terms of subsection (1)
(c) (i), included ‘wages and
other sums due to or payable in respect of the master, officers
and other members of the
ship’s complement, in connection with
their employment on the ship’. Although the claim fell within
the wording of
section 11(1) (c) (i), the applicant (who opposed the
confirmation of the recommendation made by the referee) argued that
it was
not a maritime claim as defined in section 1 and therefore
could not be entertained in the distribution of the fund. The
respondent
contended that its claim for a share of the fund fell
within section 1(1) (ii) (u) of the definition, which read ‘any
claim
with regard to the distribution of a fund or any portion of a
fund paid or to be paid into or to or held or to be held by a court
in the exercise of its admiralty jurisdiction or an officer of such a
court’. At 529D Thirion J said ‘I find it difficult
to
think of any matter in respect of which para (u) would serve to
confer Admiralty jurisdiction on the Court unless it be that
contended for by counsel’. At 529G-H he said the following:
‘The conclusion to which I come is that a maritime claim
as
defined in para (u) includes any claim which with regard to the
distribution of a fund in terms of s 9 is made for a share of
the
money in the fund and in respect of which the claimant would on proof
of his claim be entitled to participate in the distribution
of the
fund. In my view therefore respondent’s claim is a maritime
claim under para (u) of s 1(1) (ii) of the Act’.
He in other
words held that although the claim was not a maritime claim in its
own right, it qualified as one when it was lodged
against the fund.
[8]
The Act was substantially amended on 1 July 1992.
[7]
Some new provisions were introduced which are relevant to a fund and
its distribution, while others were amended and are now different
from what they were when
Continental
Illinois Bank
was
decided.
[9]
The answer to the bank’s contention must be sought in the
proper interpretation of the Act as it reads today. I must endeavour
to attribute a meaning to the relevant provisions, having regard to
the language used, and the context and purpose of the Act as
a
whole.
[8]
[10]
The purpose 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 High Court, for the extension of those powers, and
for the law to be applied by and the procedure applicable
in, those
divisions.
[9]
In Hofmeyr’s
Admiralty
Jurisdiction, Law and Practice in South Africa,
[10]
the learned author says the following: ‘The Act, and more
particularly a series of amendments to the Act, have served to
expand
the boundaries of admiralty jurisdiction further than other
jurisdictions which have inherited the philosophy of English
admiralty law. This enthusiasm to extend the scope of admiralty
jurisdiction must not, it is submitted, be allowed to result in
the
abrogation of principle and the inclusion of claims which do not
properly fall within the purview of admiralty proceedings.
If the
boundaries of jurisdiction are stretched too far, well-recognised
principle will be diluted and the rationale for a separate
admiralty
jurisdiction will be undermined’.
[11]
The High Court deals with maritime claims in the exercise of its
admiralty jurisdiction and with claims which are not maritime
claims
in its ordinary civil jurisdiction. If the bank wished to institute
an action against Metalmin in this country for payment
of its claim,
it would have had to do so in the ordinary civil jurisdiction as its
claim is not a maritime claim as defined in
the Act.
[12]
A fund can arise in more than one way. When property which has been
arrested in terms of the Act is sold pursuant to an order
by the
court, the proceeds shall, in terms of section 9(2), constitute a
fund. Section 8(2) provides that the same applies to property
which
has been attached to found or confirm jurisdiction, as if it had been
arrested in an action
in
rem
.
And section 3(11) (a) provides for a fund consisting of any security
or undertaking given in terms of subsection (10) (a),
[11]
or the proceeds of the sale of any property mentioned in subsection
(5) (a) to (e), either in terms of any order made in terms
of section
9, or in execution or otherwise.
[13]
Section 3(11) (b) in turn provides that a fund shall, for all
purposes, be deemed to be the property sold or the property in
respect of which the security or an undertaking has been given. The
fund in other words takes the place of the property which had
been
attached or arrested. The question then arises why a claimant who was
not entitled to proceed against such property in admiralty
should be
entitled to share in the fund which took its place.
[14]
Section 11(1) (b) provides that property other than property
mentioned in section 3(5) (a) to (e) may, in respect of a maritime
claim, be sold in execution, and the proceeds thereof distributed, in
the ordinary manner. No fund is then created in terms of
the Act.
[15]
The Act does not specify who may claim a share in the distribution of
a fund. It does however specify the claims which shall
be paid and
the order in which they shall be paid.
[12]
In
The
Kingston
[13]
Bristowe J said section 11(1), as it read then, merely described the
order in which claims were to rank. He said one had to look
elsewhere
to ascertain what sort of claims came into consideration at all. This
seems to me to apply also to the amended section
11(1), having regard
to the last category in the prescribed order, which is ‘any
other maritime claim’.
[14]
[16]
In the present context two of the amendments to section 11 are
significant. Before 1992 subsection (1) provided that ‘
Claims
with regard to a fund in a court in terms of this Act… shall
be paid in the following order…’ Section 11(1)
(a) now
provides that the ‘
relevant maritime claims
’ shall
be paid in the order prescribed by subsections (5) and (11). The
second amendment relates to the order in which claims
are to be paid.
Before 1992 the preferent claims were listed in section 11(1) (a) to
(e) and were followed in subsection (f) by
‘all other claims”.
The preferent claims are now listed in section 11(4) (a) to (e) and
are followed in subsection
(f) by ‘any other maritime claim’.
This seems to me to mean that in order to share in the fund a claim
has to be a
maritime claim in its own right, and not merely on the
basis that it is a claim against the fund.
[17]
A new provision which was introduced in 1992 is section 10A (2) (a).
This sub-section provides that if a court makes
an order referring
all claims against a fund to a referee then all proceedings in
respect of claims which are capable of proof
for participation in the
distribution of the fund shall be stayed and any such claim shall be
proved only in accordance with such
order. The wording suggests to me
that some claims are entitled to participate in the fund and some are
not. It seems to me that
the only sensible distinction is that the
provision applies to claims which can be brought under the Act. In
other words, it has
to be a maritime claim vis-a vis the debtor. Were
it otherwise all non-maritime claims against the owner of the
property which
had been sold will be stayed and shall be proved only
in accordance with the order, irrespective of whether the plaintiff
concerned
intended to claim a contribution from the fund. This will
include, for example, a claim based on an overdraft or a delict such
as defamation. Such a result seems to me to be absurd.
[18]
The effect of section 10 is that property arrested in respect of a
maritime claim, security given in respect of it, or the
proceeds of
its sale in the present context, shall not, except as provided in
section 11(13), vest in a trustee in insolvency and
shall not form
part of the assets to be administered by a liquidator. Nor shall any
proceedings in respect thereof, or the claim
in respect of which that
property was arrested, be stayed by reason of the sequestration or
liquidation of the owner. This protection
is afforded to persons who
have maritime claims which can be brought under the Act. It is not
available in the ordinary civil jurisdiction.
It is difficult to see
on what basis such protection should be extended to a non-maritime
claimant who wishes to share in a fund.
[19]
Counsel for the applicant pointed out certain anomalies which would
exist if a non-maritime claim
[15]
could share in the fund. It would rank under s 11(4) (f), pari passu
with maritime claims. In terms of s 11(11) it would rank above
some
associated ship claims (which are maritime claims) and in terms of
section 11(13) it would be paid before the balance is paid
to the
trustee or liquidator of the owner’s insolvent estate.
[20]
The question remains what the purpose of the definition in section
1(1) (x) is. Why is a claim relating to the distribution
of a fund
classified as a maritime claim? Counsel for the bank submitted that
the purpose could not have been to give the court
admiralty
jurisdiction with regard to the distribution of a fund as it already
has that power in terms of sections 5(2) and 10A
(1). He submitted
that the purpose of the subsection is to make any claim relating to
the distribution of a fund a maritime claim,
whether or not it is a
maritime claim in its own right. This was the argument in
Continental
Illinois Bank
.
[21]
Counsel for the applicant submitted that such a construction is not
compatible with the current wording of the Act. He suggested
that the
purpose of the definition in s 1(1) (x) may be to enable a party who
does not have a maritime claim and does not seek
to share in the
fund, for example a bank who holds the proceeds of the sale or the
security, to approach the court for a declarator
with regard to the
distribution of the fund, or directions with regard to its
obligations. I am not certain that the purpose of
the subsection is
as suggested by counsel for the applicant. It may be, but the
suggested purpose may also be merely the fruit
of counsel’s
ingenuity.
[22]
I am nevertheless of the view, in the light of the matters to which I
have referred, that it is not the purpose or effect of
section 1(1)
(x) to turn a non-maritime claim, which cannot be enforced under the
Act, into a maritime claim when it is lodged
against a fund.
[23]
In
The
Olympic Countess
[16]
it was pointed out that the definition of ‘maritime claim’
is a gateway provision into admiralty jurisdiction, and
its object is
to set the outer limits of jurisdiction; the claims listed are
accordingly couched in wide terms and may overlap.
[24]
The position may well be that the definition in subsection 1(1) (x)
is superfluous. The Act has been hailed as innovative and
designed to
give effect to the underlying philosophy of the admiralty, namely,
the avoidance of unnecessary formality and the promotion
of
expedition.
[17]
I accept that
this is so, but I should add that I am not aware that the Act has
ever been hailed as a model of clarity or draftsmanship.
While the
purpose of section 1(1) (x) is not clear, I am satisfied, having
regard to the Act as a whole and the amendments which
were introduced
in 1992, that the proper meaning of the subsection is not as
contended for by the bank. I conclude therefore that
the bank does
not have a maritime claim and is not entitled to share in the
distribution of the fund.
[25]
There is some support for the conclusion to which I have come. In
Erasmus
v Michael James (Pty) Ltd (t/a The Michael James Organisation) and
Others; (Standard Bank of SA Ltd Intervening); Erasmus,
Nel and
Standard Bank of SA Ltd Intervening:
Sashwood
(Pty) Ltd and Another v The Fund Constituting the Proceeds of the
First and Second Judicial Sales of the MV Nautilus
[18]
Scott
J said: ‘The claim which he seeks to recover…is a claim
arising out of the reconstruction of the vessel; it is
a maritime
claim and hence a claim which the Act contemplates will participate
in the fund created by the sale of the vessel’.
The clear
implication is that not all claims can participate in the fund –
it has to be a maritime claim. And Hofmeyr,
Admiralty
Jurisdiction, Law and Practice in South Africa,
[19]
says the 1992 amendments to the Act make it clear that only persons
who have maritime claims can participate in the distribution
of a
fund.
[26]
The order which I make is as follows:
(a)
The referee’s report dated 28 July
2014 is confirmed.
(b)
The registrar of this court is authorised
and directed to effect payment to the applicant from the Respondent
Fund (‘the fund’),
in accordance with the referee’s
recommendations, as follows:
(i)
payment of the amount of USD 277,331.10 in
respect of its claim for cargo agency services, such claim to rank in
terms of section
11(4) (f) of the Admiralty Jurisdiction Regulation
Act (“the Act”);
(ii)
payment of interest on the amount of USD
277,331.10 at the rate of 15.5% per annum from 22 March 2014 until
date of payment from
the fund, such interest to rank in accordance
with section 11(4) (f);
(iii)
payment of the applicant’s legal
costs of lodging the aforementioned claims, on a party and party
scale, as taxed or agreed,
such costs to rank in accordance with
section 11(4) (f).
(c)
Once the amounts set out in paragraph (b)
and the costs referred to in paragraph (d) have been paid in full,
the registrar is authorised
to pay the balance remaining in the fund,
if any, over to the duly appointed liquidator of the erstwhile owner
of the attached
cargo, Metalmin Metal and Minerals Limited.
(d)
Save as provided in paragraph (f)
hereunder, the applicant’s costs of this application, on the
scale of attorney and own client,
as taxed or agreed, shall be paid
by the fund, such costs to include the costs of two counsel.
(e)
The application by the intervening
respondent for a variation of the referee’s report and payment
of its claim from the fund
is dismissed.
(f)
The intervening respondent is ordered to
pay the costs of the application to intervene, the costs occasioned
by its opposition to
the application for confirmation of the
referee’s report and the costs of its application for payment
from the fund, including
the costs occasioned by the applicant’s
employment of two counsel.
PLOOS
VAN AMSTEL J
Appearances:
For
the Applicant :
Adv. S Mullins SC, with
Adv. L Mills
Instructed
by :
Bowman Gilfillan Inc.
Durban
For
the Intervening Respondent :
Adv. M
Fitzgerald SC
Instructed
by :
Edward Nathan Sonnenberg
Durban
Date
of Hearing :
13 March 2015
Date
of Judgment :
25 March 2015
[1]
Admiralty
Jurisdiction Regulation Act 105 of 1983.
[2]
In
terms of section 3(2) (b).
[3]
In
terms of section 11.
[4]
Section
11(13).
[5]
Continental
Illinois Bank National and Trust Co of Chicago v Greek Seaman’s
Pension Fund
1989 (2) SA 515 (D).
[6]
As
it read then.
[7]
By
the Admiralty Jurisdiction Regulation Amendment Act 87 of 1992.
[8]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593 (SCA)
[9]
See
the preamble to the Act.
[10]
2
nd
ed at 21.
[11]
Subject
to the proviso mentioned there.
[12]
Section
11(1) (a) – ‘…the relevant maritime claims
mentioned in subsection (2) shall be paid in the order prescribed
by
subsections (5) and (11)’.
[13]
MV
‘Kingston’ v Creditcorp Ltd
(1993) 14 ILJ 627 (D) at 633H.
[14]
Section
11(4) (f). When The
Kingston
was decided this category was described as ‘all other claims’.
[15]
The
suggestion being that in terms of s1(1) (x) it then becomes a
maritime claim when it is lodged against the fund.
[16]
MV
Olympic Countess: Fortis Bank (Nederland) NV v Orient Denizcilik
Turizm Sanayi VE Tricaret AS
2008
(1) SA 376
(SCA) at 381I.
[17]
Gys
Hofmeyr
Admiralty
Jurisdiction, Law and Practice in South Africa
,
2
nd
ed.
[18]
1994
(2) SA 528
(C) at 558E-F.
[19]
2
nd
ed at 288.