Summit Industrial Corporation v Claimants Against the Fund Comprising the Proceeds of the Sale of the M.V "Jade Transporter" (2/87) [1987] ZASCA 2; [1987] 2 All SA 113 (A) (2 March 1987)

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[1987] ZASCA 2
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Summit Industrial Corporation v Claimants Against the Fund Comprising the Proceeds of the Sale of the M.V "Jade Transporter" (2/87) [1987] ZASCA 2; [1987] 2 All SA 113 (A) (2 March 1987)

IN
THE SUPREME COURT OF SOUTH
AFRICA
(
APPELLANT
DIVISION
)
In the
matter between:
SUMMIT
INDUSTRIAL
CORPORATION
appellant
and
CLAIANTS
AGAINST THE FUND C0MPR.I.S1NC THE PROCEEDS OF
THE
SALE OF THE m.v.
"JADE
TRANSPORTER"
respondents.
Coram
:
CORBETT, TRENGOVE, VILJOEN, GROSSKOPF, JJA, et NICHOLAS AJA.
Date
of Hearing
: 13 November 1986 and 16
February 1987
Date of Judgment
:
2 March 1987
J U D G M
E N T
CORBETT
JA
This
appeal,
from a
judgment of the Pull
Bench
of
the Natal
Provincial
Division (
per
HOWARD J,
MILNE
JP
/ and
2
and LEON
ADJP concurring), which has been reported (see
1985 (4) SA 133
(N)),
concerns bhe interpretation to be placed on sec. 11(8) of the
Admirally Jurisdiction Regulation Act 105 of 1983 ("the
Act").
According
to its long title Che object of the Act
is bo
provide for the vescing ot the powers of the admiralty courbs of the
Republic in the provincial and local divisions
of thc
Supreme Court of Soukh Africa, and for the extension
of bhose
powers; for the law to be applied by, and the pro-
cedure
applicable in, those divisions; for thc repeal of
the
Colonial Courbs of Admiralty Act 1890, of the United
Kingdom,
in so far as it applies in relabion to the Republic;
and to
incidental matters.
In
pursuance of bhis object the Act provides that each provincial and
local division of the Supreme Court shaii have jurisdicbion
(designated "admiralty jurisdiction") bo
/ hear
2
hear
and determine any maritime claim (sec 2(l) ). The term "maritime
claim" is defined in sec.
I
to
mean any one of twenty-six categories or claim, which are listed in
paras. (a) to (z) inclusive of the
definition.
These categories include -
(i) "any
claim in respect of a mortgage, hypothe-
cation,
right of retention or pledge of, or
charge on,
a ship" (para (c) );
(ii) "any
claim arising out of any agreement for or relating to the carriage of
goods in a ship" (para (h) );
(iii) "any
claim in respect of goods supplied or
services
rendered to a ship for the employment or maintenance thereof"
(para. (
l
) );
(iv) "any
claim in respect of the design, con-struction, repair or equipment of
any ship or any dock or harbour dues or any similar
/ dues"
4
dues" (para. (m) );
(v) "any claim by a master or member of
the crew of
a ship arising out of his employment"
(para (n) );
(vi) "any claim relating to any maritime
lien "
(para. (v) ).
In terms of sec. 3 a maritime claim may,
subject
to certain requirements, be enforced either by
an action
in
personam
or an action in
rem
.
In the case of an action
in personam the requirements are
jurisdictional. Thus
such an action can be instituted only against
certain clas-
ses of persons, delfined by reference to
specific grounds of
jurisdiction (sec. 3(2) ). One such class is a
person -
"whose property within the court's area of
jurisdiction has been attached to found or confirm jurisdiction".
In the case of an action in
rem
the
section provides that a maritime claim may be enforced by such an
action (which
/ is
5
is
instituted by the arrest within the court's area of
jurisdiction
of certain property) if either (a) the claim-
ant has a
maritime lien over the property to be arrested or
(b) the
owner of the property to be arrested would be liable
to the
claimant in an action in personam in respect of the
cause of
action concerned (sec 3(4) . The property which
may be
arrested in order to institute an action in
rem
con-
sists of —
"...
one or more of the following categories against or in respect of
which the claim lies:
The ship,
with or without its equip-ment; furniture, stores or bunkers;
the whole
or any paid of the equip-ment, furniture, stores or bunkers;
the whole
or any part of the cargo
the
freight" (Sec. 3(5) ).
The term
"maritime lien" is not defined in the Act, but its meaning
has been discussed in various judgments (see eg. E
uromarine
international of Mauren v The Ship Berg and Others
1984 (4) SA
647
(N), at p 652 F-ll;
Oriental Commerc
ial and
/
Shipping
6
Shipping
Co Ltd v M
V
Fidias
1986 (1) SA 714
(D);
SouLhern Steamship
Agency Inc and Another v M
V
Khalij
Sky
1986 (1) SA 485
(C); and the
judgment a
quo
,
as reported, at pp 141 G - 142 D). For the purposes of this case it
is not necessary to investigate the circumstances under which
a
claimanL acquires a maritime lien over property.
It will be
noted thab in terms of the provisions of sec. 3 thus far discussed an
action in rem requires the arrest of property "againsb
or in
respect of which Lhe claim lies". Prior to the passing of the
Act this was the only basis upon which an action in rcm
could be
instituted in khe courts of South Africa exercising admiralty
jurisdicbion. It was not, for example, permissilble to seek
to
institute an action in
rem
to enforce a claim arising in
respect of ship A by the arrest of ship B, even though the two ships
were owned by the same person
(see T
harros Shipping
C
orporation
SA
v Owner of the Ship "Golden Ocean"
19/2 (4) SA 316 (N);
/
Euromarine
7
Euromarine
Internat
ional case, supra, at p 658 H - 659 A) .
in this
connection, however, the Act introduced an important
innovation
in the form of the "associated ship" and enacted,
subject to
certain quaiifications which are not presently
relevant,
that an action in rem might be brought by the arrest
of an
associated ship instead of the ship in respect of which
the
maritime claim arose (sec. 3(6) ). And "associated ship"
was
defined to mean a ship, other than the ship in respect
of which
the maritime claim arose —
" (i)
owned by the person who was the owner of the ship concerned at the
time when the maritime claim arose;
or
(ii) owned
by a company in which the shares, when the maritime claim arose, were
controlled or owned by a person who then controlled
or owned the
shares in the company whieh owned the ship con-cerned". (Sec.
3(7)(a) ).
/These
8
These
provisions thus contemplate two categories of ship: the ship in
respect of which the maritime claim arose, referred to in sec.
3(7)(a) as "the ship concerned" - a convenient label - and
"the associated ship", linked with the ship concerned
by
common ownership or control, either directly, ie. where the same
person owns, and therefore controls, both ships (sec. 3(7)(a)(i)
) or
indirectly, ie. where the two ships are owned by companies the shares
in which are controlled or owned by the same person at
the time when
the maritime claim arose (sec. 3(7)(a)(ii) ). Sec. 3(7) does not
specifically deal with the position where a person
owns or controls
one ship directly and the other indirectly, but presumably (it is not
necessary to decide the point) the subsection
would be interpreted as
covering that situation and the one ship would be regarded as an
associated ship
vis
-a-
vis
the other. Associated ships
which are linked directly, ie. owned by the same person,
/ are
9
are often
referred to as "sister
ships";
and those which are
linked
indirectly, ie are owned
by
companies the shares
in which
are controlled or owned
by the
same person, are
often
called "group ships".
Sec. 9 of
the Act provides that a court may in the exercise of its admiralty
jurisdiction at any time order that any property which
has been
arrested in terms of the Act be sold and the proceeds thereof held as
"a fund in the court" or otherwise dealt
with. And sec. ll
makes detailed provisions with regard to the ranking of claims in
regard to a fund in the court. It is the interpretation
of sec. 11,
and more particularly subsec. (8) thereof, which has given rise to
the dispute in the present matter. But before turning
to this it is
necessary to recount the relevant facts.
The case
arises from the financial collapse of a group oF ship-owning
companies known as the Eddie Steamship
/ group
10
group. These companies are controlled and owned
by a Mr W H Eddie Hsu of Taiwan. Included in the group are Outer
Ocean Navigation
Corporabion Ltd, which owned,
in ter
alia,
m.v. E
merald Transporter;
Far Eastern Navigation Corporation
Ltd, which owned,
in ter
alia, m.v.
Jade Transporter
and m.v.
Iron Transporter
; and Eddie Steamship Co. Ltd, which
owned,
inter alia
, m,v.
Steel Transporter
.
On 22 June 1984 Gulf Oil Trading Company ("Gulf
Oil") 06 Delaware, USA,
made appilication to the Durban and Coast Local Division, in
the
exercise of its admirally ju-risdiction, for an order for the
attachment of m.v. Jade
Transporter
to found jurisdiction in an action in
personam
to recover the cost of fuel oil and
diesel oil (termed "bun-kers") and lubricating oil (termed
"lubes")
supplied
to certain vessels within the Eddie Steamship group (case number
4565/84). On the same day a
warrant
of
arrest
in
rem
was issued in favour of H
ollandsche
Bank-Unie M
V
/("HBU")
11
( "HBU"
) in respect of the m.v.
Jade
Transporter
as the first
step in an action in
rem
to recover amounts due in terms of a
mortgage of the vessel (case number 4570/84); and in pursuance of
this warrant a notice of arrest
was issued.
At this
time the m.v.
Jade Transporter
had ar-rived off Richards Bay,
Natal, in order to obtain bunkers at the Richards Bay terminal. The
vessel remained outside the territorial
limits, however, evidently in
order to evade service and execution of the attachment and arrest
orders already granted. This position
continued throughout June, July
and the early part of August. In August two further warrants of
arrest in
rem
in respect of various maritime claims were
issued: one in favour of Gulf Oil on 3 August 1984 (case number
5368/84) and one in favour
of Scallop Petroleum Company ("Scallop")
on 10 August 1984 (case number 5485/84). Eventually the m.v. Jade
Tra
nsporter was com-
/ pelled
12
pelled to enter territorial waters to bake on
gas oil and on 11 August 1984 service was effected simultaneously of
the warrants of
arrest in
rem
in cases 5368/84 (claimant Gulf
Oil) and 4570/84 (claimanL HBU) and the application to attach in case
no 4564/84 (claimant Gulf Oil).
Subsequently warrants of arrest in
rem
of the m.v.
Jade Transporter
to enforce various
maritime claims were issued in favour ot HBU in case number 5732/84,
in favour of appellant, Summit Indus-trial
Corporation ("Summit"),
in case number 5894/84 and in favour of the master and crew of the
vessel, in case number 5554/84.
Process in these cases, together with
that in case number 5485/84 (claimant Scallop), was served
simul-taneously on 3 September 1984.
In the meanwhile, on the
application of Gulf Oil, th
e Durban and
Coast Local
Division
, in the exercise of its
admiralty
jurisdiction, and evidently in terms of sec. 9 of the Act, had
ordered the sale ot the
m.v.
Jaec Transporter by public auction and had ordered
khat
after payment of
/ certain
13
certain
costs and expenses the balance be held as a fund in the court to be
dealt with in accordance with sec. 11 of the Act. The
sale took place
on 18 September 1984 and realised the sum of US $5 710 000,00 (R9 626
542,87).
On 28
September 1984 the Court (again the Durban and Coast Local Division)
appointed Mr. S R Cooper of Cape Town referee for the purpose
of
receiving, considering and reporting to the Court on all claims
against the fund constituted by the proceeds of the sale of the
m.v.
Jade Transporter
and ordered that all such claims be filed
with the referee. Mr Cooper duly carried out his mandate as referee
and on 3 Decembcr 1984
submitted a lengthy report to the Court
dealing with the various claims made upon the fund.
In his
report the referee differentiated between what he termed "a
direct claim", i.e. where the claim concerned arose in
respect
of the m.v.
Jade Transporter
/ and
14
and "an
associabed claim", ie where the claim concerned arose in respect
of a vessel other than the m.v.
Jade Transporter
, being a
vessel in respect of which the m.v. J
ade
Tran
sporter
was an associated ship. The direct claims recommended for acceptance
by the referee :included claims for outstanding salaries or
wages by
the master, officers and crew of the m.v.
Jade Transporter
;
claims arising from the supply of bunkers and lubes and other
requirements and services to the m.v. Jade Tr
ansporter
; and
claims arising from a loan secured by a mortgage bond over the m.v.
Jade T
ran
s
port
er. The associated claims recommended for
accep-tance included claims arising from the supply of bunkers, lubes
and other requirements
and services to ships in re-lation to which
the m.v.
Jad
e
Transporter
was an associated ship;
claims arising from bill of lading contracts for the carriage of
goods by ships in relation to which the
m.v.
Jade Tra
ns
port
er
was an associated ship; and claims arising
/ from ,.
15
from loans
secured by the mortgaging of ships in relation to which the m. v .
Jade T
ransp
orter was an associated ship . In the case of
Summit three classes of claims were recommended for acceptance by the
referee: (a) direct,
claims in respect of bunkers, lubes and other
related products and/or services supplied to the m.v.
Jade
Transporter
; (b) associated claims in respect of the supply of
bunkers to a sister ship, the m.v.
Iron Transporter
; and (c)
associated claims in res-pect of bunkers supplied to group ships.
Having
categorized and made his recommendations as to the acceptance of
claims, or portions thereof, the referee then proceeded in
his report
to deal with the ranking of such claims. Before setting out his
recommendations in this regard it is necessary to set
forth and
discuss to some extent the relevant provisions of the Act.
Subsec.
ll
deals
generally with the ranking of claims and subsections (1) and (8)
thereof read as follows:
/ "(1) Claims
16
"(1) Claims with regard to a fund in a
court in
terms of this Act or security given in respect
of property in connection with a maritime claim or the proceeds of
property sold pursuant
to an order or in the execution of a judgment,
of a court in terms of this Act shall be paid in the following order:
Claims in respect of costs and expenses
incurred to preserve the property or to procure its sale, and in
respect of the distribution
of the proceeds of the sale;
claims to a preference based on possession,
whether by way of a right of retention or otherwise;
claims which arose within one year before the
commencement of the proceedings, in respect of —
(i) 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; (ii) port, canal and other waterways dues and
pilotage dues;
(iii) loss of life or personal injury, whether
occurring on land or on water, directly connected with the employment
of the ship;
/ (iv) loss
17
(iv) loss
of or damage to property, whether occurring on land or on water,
resulting from delict and not capable of being based on
con-tract,
directly connected with the operation of the ship:
( v) the
repair of a ship or the supply of goods or the rendering of ser-vices
to a ship tor the employment or maintenance thereof;
(vi)
salvage, removal of wreck and con-tribution in respect of a general
average act or sacrifice:
(d) claims
in respect of mortgages, hypothecations,
rights of retention of,
and other charges
on, the
ship, effected in accordance with the law of the flag of the ship;
claims in
respect of any maritime lien not failing under any category
mentioned in any of the preceding paragraphs:
all other
claims.
(8) Where
the fund arises by reason of an action in
rem
against an
associated ship, the ranking of claims set out in this section shail,
notwithstaud-ing the provisions of section 3(6),
apply with
/ rcgard
18
regard to
claims in respect of the associated ship, and claims in respect of
the ship con-cerned shall be paid thereafter in the order
set out in
this section."
In the
E
uromarine International
case (
supra
, at
p 656 G)
NILNE JP stated thak the meaning of sec. 11(8) was
that —
"....notwithstanding
that s 3(6) gives the right to a marine claimant to bring an action
in rem by the arrest of an associated
ship instead of the ship in
respect of which the maritime claim arose, claims of the nature
described in ss (1) of s 11, which lie
against the associated ship,
are to he paid in preference to claims which lie against the
associated ship by reason of the provisions
of s 3(6). In other
words, claims which lie directly against the associated ship have
preference over claims for which it is, as
it were, vi-cariously
liable."
This
difterentiation in the ranking of claims has been described as giving
rise to two queues, the first queue
/which
19
which
enjoys priority over the second queue, consisting of the direct
claims against the vesscl and khe second queue consisting of
the
associated claims. To this extent bhe meaning and effect of sec.
11(8) are reasonably clear. What is not so clear is when the
subsection comes into operation and what its field of operation is.
In his
report the referee came to the conclusion that the system of queueing
applied only where the fund arose by reason of an action
in
rem
against an associated ship; that in this instance thc fund arose by
reason of an action in
personam
, viz thc action instituted by
Gulf Oil under case number 4564/84; that consequently sec. 11(8) had
no application; and that accordingly
all claims against, the fund
arising from the sale of the m . v .
Jade Transporter
had to
be "pooled" and ranked in accordance with the pro-visions
of sec. 11(1), read together with other relevant sub-sections
of sec.
11.
/ After
20
After the
submission of the referee's report HBU made application to the Durban
and Coast Local Division, in terms of sec. 11(4) of
the Act, for an
order authorising the Registrar of the Court to distribute the fund
in accordance with certain defined rankings.
The system of ranking
prayed for differed from that recommended by the referee. In
particular, HBU took issue with the interpretation
placed by the
referee on sec. 11 of the Act, contending that in the instant case
sec. 11(8) applied and that all direct claims in
respect of the m.v.
Jade Transporter had to be ranked and paid in priority to associated
claims. This application was opposed by
various claimants upon the
fund. The Court referred the matter for hearing by the Pull Court of
the Natal Provincial Division in
terms of sec. I,3(l)(b) of the
Supreme Court Act 59 of 1959.
It appears
that at about the same time various other ships in the Eddie
Steamship group had also been arrest-
/ ed
21
ed
and sold to create funds in the court. These included the m.v.
E
merald Transporter
and the m.v.
Steel Transporter
.
When the present matter came betore the P
ull
Court of the Natal Provincial Division the Court heard at the same
time an appeal against a judgment of the Durban and Coast Local
Division (per WiLSON J) relating to thc claims against the Fund
comprising the proceeds of the sale of the m.v. E
merald
Transporter
(see
Banque
Paribas v The Fund comprising Proceeds of Sale of the
M
V
Emerald
Transporter
1985 (2) SA 452
(D) ) and an application in terms of sec.
11(4) of the Act to settle the ranking of certain claims against the
fund comprising the
proceeds of the sale of the m.v.
Steel
Trans-
porter. Common to all these
matters was the proper inter-pretation to be placed on sec. 11(8) of
the Act,
The Pull
Bench came to the conclusion that a literal interpretation of sec.
11(8) would result in its applicability depending upon
(reported
judgment at p 139
/ D) —
22
D) —
"
the mere chance that the creditor at
whose
instance the ship is sold and the fund arises ("the selling
creditor") happens to have an associated ship claim rather
than
a direct claim in respect of the ship sold and institutes an action
in rem rather than an action
in
personam to enforce his
claim."
This, the
Court held, was an absurd result and one which
could
never have been intended by the Legislature.
Consequently
the Court considered itself justified in depart-
ing from
the literal meaning of the words of the statute.
The Court
further held that in order to give the subsection
efficacy
and avoid the absurd consequences of a literal inter-
pretation
it was necessary to imply, or read into, the opening
words of
the subsection ( and after the word "where") the
words "any
claim against". The opening words of the sub-
section
should thus be interpreted to mean —
/ "Where
23
"Where
any claim against the fund arises by
reason of an action in
rem
against an
associated ship "
(see
reported judgment at p 139 F-I).
Applying
this extended interpretation to the facts
of the
instant case the Court held that the referee's con-
struction
of sec 11(8) was incorrect; that the subsection
applied;
and that the direct claims in respect of the
m. v.
Jade
Tr
ansporter
should take precedence over the asso-
ciated
ship claims (see reported judgment p 145 D-F).
Accordingly
the Court made an order which included the follow-
ing
paragraph, numbered 3(a) (at p 146 J - 147 A):
"It
is declared that the claims of Gulf Oil Trading Co, Scallop Petroleum
Co and Summit Trading Industrial Corporation iu respect
of the supply
of goods to ships other than the mv Jade Transporter, in relation to
which the mv Jade Transporter was an associa-ted
ship as envisaged by
g 3(7)(a)(i) or (ii) of the Act, rank for payment in terms
/ of
24
of s 11(8)
of the Act after the direct claims
in respect
of the mv
Jade Transporte
r " .
Summit,
having obtained the necessary
leave f
rom
the Court a quo, now appeals against portion of this judgment and
order, viz. that portion which declares that the claims of Summit
in
respect of the supply of goods to
ships in
relation to which the
m.v
.
Jade Transporter
was
an associated ship by reason of the provisions of sec. 3(7)(a)(i) of
the Act rank for payment in terms of sec. 11(8) of the Act
after the
direct claims in respect of the vessel. In other words Summit, while
accepting the Court a quo's gene-ral interpretation
of sec. 11(8),
contends that an associated ship claim arising in respect of a sister
ship (ie. as de-fined in sec. 3(7)(a)(i)) should
be treated
differently
from
an associated ship claim arising in respect of a group
ship
(ie. as defined in sec. J(7)(a)(ii) ); and
that the sister ship claim should fall into the first queue, together
/ with
25
with the
direct claims, while the group ship claim falls into
thc second
queue. It accordingly asked (and here I refer
to
counsels heads of argument) that para. 3 (a) of the order
of the
Court be amended to include the following words at the
end
thereof:
"
unless such claim is a claim in
personam
against the owner of the mv Jade Transporter, in which event it shall
rank with the direct claims in respect of the mv
Jade Transport
er
under section 11(1)(f) of the Act."
At the
initial hearing of the appeal by this Court only Summit appeared.
During the course of the argument members of the Court expressed
reservations about the correctness of the Court a
quo
's
interpretation of sec. 11(8); and in addition the Court indicated
that the record did not sufficientiy evidence aud describe the
sequence of events leading up to the sale of them.v.Jade Transporter
/ and
26
and the
creation of the fund. Eventually at the request
of counsel
for Summit the matter was postponed in order
to enable
Summit to supplement the record and to provide
a
chronology of events; and to present argument on the
following
issues
(I
quote
from t
he
order):
"(a)
whether the interpretation by the Court a
quo
of Section 11(8)
of the Admiralty Jurisdiction Regulation Act No 105 of 1983 ("the
Act") in the manner reflected at pages
220 - 221 of the Appeal
Record is correct;
(b)
whether bhe interpretation by the Court a
quo
of Section 11(1)
(c)(v) of the Act in the manner reflected at page 227 of the Record
is correct;
and
generally on the matters raised in Appellant's Notice of Application
for Leave to Appeal."
It was
also directed that the order and copies of the
additional
documents be served upon the attorneys acting
for the
other interested creditors.
/ At
27
At the
resumed hearing this Court had before it the additional documentation
asked for and the chronology of events. Of the other
interested
creditors (ie. apart from Summit) only HBU appeared by counsel and
submitted argument. Counsel for HBU also supported
the Court a quo's
interpre-tation of sec. 11(8).
The first
question to be considered is the correct
interpretation
of sec. 11(8). The argument revolved mainly
around
the opening words, or
"preamble"
reading —
"Where
the fund arises by reason of an action in
rem
against an
associated ship
It was
argued by counsel for Summit (in support of the general submission
that, in interpreting the subsection, the Court should depart
from
the literal meaning)that a fund could not properly be described as
arising "by reason of an action in
rem
". In my view,
there is no substance
/ in
28
in this
argument. The phrase "by reason of" (Afrikaans "na
aanleiding van") indicates a causal relationship between
the
arising of the fund and an action in rem taken against an associated
ship (cf.
Commissioner for Inland Revenue v Wi-
dan,
1955 (1)
SA 226
(A) at pp 233-4;
Svenska Oljeslageri Aktiebol
aget v
Lewis B
erger & Sons Ltd
1960 (2) SA 601
(A), at p 611
A-B). It is true that the institution of an action in
rem
does
not, per se, give rise to a fund in the court. For a fund in the
court to be created the court must make an appropriate order
in terms
of sec. 9 for the sale of the ship and the holding of the proceeds of
the sale as such a fund; and in pursuance thereof
the sale must take
place and the proceeds duly hcld as a fund in the court. Plainly the
Legislature was aware of this and consequently
the words of the
preamble to sec. 11(8) must be interpreted as contemplating a chain
of causation consisting basically of (i) the
institution of an action
in
rem
by the arrest
/ of
29
of an
associated ship, (ii) an application to court an terms of sec. 9 for
the sale of the arrested ship and the holding of the proceeds
of the
sale as a fund in the court, (iii) an order of court granting the
application, (iv) the sale of the ship and (v) the holding
of the
proceeds of the sale as a fund in the court. Admittedly the precise
nature of the causal connection between links (i) and
(ii) is a
matter upon which the subsection is not clear. Ob-
viously if
the claimant who institutes the action in rem
referred
to
/in (i) applies to court for the sale of
the ship,
etc. in
terms of sec. 9, the causal connection is there.
But
suppose that the party at whose instance the ship is
sold has
instituted both an action in rem against the ship
as an
associated ship and either an action in rem or an
action in
personam
to enforce a direct claim in respect of
the ship?
One of these alternatives applies to the factual
situation
in the present matter, where Gulf Oil which applied
/ for
30
for the
sale of the ship had instibuted an action in
rem
against (and
arrested) the m.v. Jade
Transporter
as an as-sociated ship and
had also attached the vessel to found jurisdiction in an action in
personam
against the owner (though there is no evidence of the
institution of this action in
personam
). It may be that in
such a case the action in
rem
against the ship as an
associated ship would be regarded as a cause of the sale of the ship,
aibeit not the only cause, and that
this causal connection would be
sufficient to bring sec 11(8) into operation. As I shail later show,
however, it is not necessary
to decide the point in this appeal. I
might add that similar problems could arise where there are joint or
simultaneous applications
under sec. 9 by claimants having different
types of claims.
Admittedly
where applicants, under sec. 9 have only direct claims in
re
m
and/or claims in personam, it would seem that sec. 11(8) has no
application.
/ And
31
And it is
this consideration which is said to give rise to an absurdity
justifying a departure from the literal wording of the preamble
along
the lines indicated by the Court a
guo
The
general rule is that the words of a statute
must be
given their ordinary, grammatical meaning unless
to do so —
"......
would lead to absurdity so glaring
that it
could never have been contemplated
by the legislature, or where it
would lead
to a result contrary to the intention of
the
legislature, as shown by the context or
by such other
considerations as the Court
is justified in taking into account "
(
per
INNES CJ in
Venter v Rex
1907 TS 910
, at p 915).
In that
event the Court may depart from the ordinary effect of the words to
the extent necessary to remove the absurdity and give
effect to the
true intention of the legislature. (See also
Kbrahim v Minister of
the Interior
1977 (1) SA 665
(A), at p 678 and the authorities
there cited.) The
/
principle
32
principle
in
Venter
's case (
supra
) has generally been used in
order to cut down the wide meaning of the words employed by the
legislature, but in exceptional cases
it may also be permissible for
a court to expand the literal mean-ing of the words (see
Barkett v
SA National Trust & Assurance Co Ltd
1951 (2) SA 353
(A), at
p 363 A-F).
As has
been remarked in various judgments, it is dangerous to speculate on
the intention of the legislature (see eg. the reference
in
Savage
v CIR
1951 (4) SA 400
, at p 409 A) and the court should be
cautious about thus departing from the literal meaning of the words
of a statute (see remarks
of SOLOMON JA in
Dadoo Ltd and Others v
Krugers
-
dorp Municipal Council
1920 AD 530
, at p 554-5).
It should only do so whore the contrary legislative intent is clear
and indubitable (see
Du Plessis v Joubert
1968 (l) SA 585 (A),
at pp 594-5). Moreover, it is not the function ot the court to
supplement a statutory provision in order to
provide for
/ a
casus
33
a
casus omissus
(see
Walker v Carlton
H
otels
(SA) Ltd
1946 AU 321, at p 330;
Barkett
's
case,
supra
, at p 363 F-C).
I
do
not think bhat a departure from the
literal
meaning of the preamble to sec. 11(8) is
justified.
Giving
the words their literal meaning does not lead to any absurd-
ity
. It brings about a "queueing" in the very circumstances
obviously intended by the Legislature, ie.
where a fund in the court arises "by reason of (ie. in
the
manner indicated above) an action in
rem
against an associated ship. Counsel for Summit sought to argue
that
t
he
literal
interpretation gave sec. 11(8) "no
practical f
ield
of ope-ration". I have
difficulty
in accepting
thi
s.
And
I
notice,
too, that this assertion does not
accord
with the views expressed in Shaw, Admiralty
Jurisdiction
and P
ractice
in
South
Africa
at p 100. Analysis shows t
hat
the so-called absurdity lies not in the appl
ication
of sec. 11(8) within its stabed field of operation, but, in the fact
that
/ the
34
the
statute does not provide for the same system of queueing where a fund
arises in other circumstances,
such
as where the ship is sold in pursuance of an action in rem to enforce
a direct claim or an action in
personam
;
or indeed whenever there are associated claims against a fund. It may
well be that in this regard sec. 11(8) is deficient but, as
I
have shown, it is not the function of the
court to remedy a
casus omissus
.
If remedial action be needed, then that must be taken by
the
Legislature.
Furthermore,
I
have
difficulty
in accepting the interpretative modification of the preamble adopted
by the Court a
quo
and supported by counsel before us. Grammatically, it involves
substituting a new subject in the sentence con-stituting the
preamble.
Any
claim against the fund is sub-stituted For
the
fund
. This is a very
drastic
alteration
and
one which virtually rewrites the sentence and changes its sense.
Instead of having to determine how th
e
fund
/ arose
35
arose
one would, in applying the preamble in accordance with this
interpretation, have to enquire whether
there
were any claims against the fund which
arose from an action in
rem
against an associated ship.
I
know
of no precedent for so fundamental a change in a statutory provision
being wrought by a process of interpretation. In addition,
the
amended wording adopted by the Court a
quo
introduces the anomalous concept of a claim arising from an action in
rem. A claim would, in ordinary parlance, arise by reason of
one or
other of the transactions or events refer-red to in the definition of
maritime claim; and, with res-pect,
I
do
not find the explanation given in the judgment a
quo
(at p 140 A-B) entireiy convincing. And finally, as is conceded in
the judgment a
quo
(at p 140 D-F), the con-struction adopted by it does not apparently
render the sub-section applicable in all cases where the claims
against a fund include one or more associated ship claims and
conse-quently falls short of achieving what is conceivcd to be
/ the
36
the entire
object for which the subseckion was enacted.
For
these reasons
I
am
of the opinion that sec. 11(8) musb be interpreted in accordance with
the ordinary meaning of the language employed by the Legislature.
Ordinarily the next question would be whether, so interpreted, sec.
11(8) is applicable in the instant case. The Court a quo, on
its
interpretation, decided that the subsection did apply (thus rejecting
the view of the referee). It may well be that even on the
literal
interpretation prefer-red by me - and for reasons already adumbratcd
- sec. 11(8) would apply in this case. There is, however,
no appeal
against that part of para. 3(a) of the order of the Court a
quo
which declares that there should be two queues of claims; and
consequently this Court is not called upon to pronounce on the
correctness
of
that
decision. Nor is it necessary to
consider
what effect, if any, a statement in the supporting affidavit to Gulf
Oil's application for the sale
/ of
37
of the m.
v.
Jade Transporter
(to the effect that in the application
Gulf Oil was proceeding in terms of its action in
personam
against the owner of the m.v.
Jade Transporter
) has upon the
applicability of sec. 11(8).
What
this Court is required to deal wich, however, is the contention by
Summit that para. 3(a) should be amended by the addition of
the rider
quoted above, which in effect draws a distinction between claims
arising from actions in
rem
against sister ships and those against group ships and places the
former in the first queue and the latter in the second queue.
I
can find no foundation for such a
distinc-tion. The only substantive provisions in thc Act relating to
queueing are to be found in
sec. 11(8). Once it is established that
in terms of the preamble
the
subsection applies, then the subsection prescribes how the claims are
to be divided into (a) those "in respect of" the
associated
ship (which is the ship whose sale has created the fund) and (b)
those "in respect of" the ship concerned, and
/ ordains
38
ordains
that the claims falling under (a) shall have pre-cedence over those
falling under (b). It is clear to me that when sec. 11(8)
speaks of a
claim "in respect of" a particular ship, it means a claim
which arose in respect of that ship. Consequently
in allocating
claims to the two categories prescribed by sec. 11(8) the simple
enquiry is: did the claim arise in respect of the
associated ship or
the ship concerned?
A
simple example of the working of sec 11(8) may aid clarification.
Claimant
X
has a
maritime claim in respect of ship A (the ship concerned) for, say,
the supply of bunkers to the ship. To enforce his
claim
X
arrests and
institutes an action in
rem
against ship B, an asso-ciated ship
vis-
a
-vis
ship A.
X f
urthermore
applies for and obtains a court order under sec, 9
for
the sale of ship B and the creation of a fund in the court.
This
is done. Another claimant against the fund, Y, has a direct claim
/ in
39
in
respect of ship B derived from say, the supply of bunkers to ship B.
When the claims against the fund come to be ranked, sec. 11(8)
clearly applies and in terms thereof Y's claim falls into the first
queue and
X
' s
claim into the second queue. And it matters not whether ship A was a
sister ship
vis-a-vis
ship B, or merely a
group
ship.
This seems
to me to be the plain meaning of sec. 11(8). If this is not a
suitable or desirable result, then this is a further matter
which
might engage the atten-tion of the Legislature, if and when the Act
comes to be amended.
Accordingly
I
hold that
there
is no basis
for
the
amendment to the order of the
Court
a quo which
Summit
seeks to
achieve by this appeal;
and the
appeal by
Summit
must be
dismissed with costs.
HBU
appeared at the resumed hearing of the appeal
/ in
40
in
order to present argument with reference to issue (b) of the order of
this Court quoted above. This is the point dealt with in
the reported
judgment of the Court a
quo
at pages 141 B to 142
I.
Before
us the submission of coun-sel for HBU was that the Court a
quo
had correctly decided the point. Briefly, the point was as follows.
It had been argued on behalf of one of the parties in the Court
a
quo
that, when sec. 11(8) applies, claims falling under sec. 11(1)(c)(v)
- those of the "necessaries man" - rank in the first
queue,
irrespective of whether such claims are direct or associated ship
claims. The argument was founded on the use in sec. 11(1)(c)(v)
of
the indefinite article in the phrase "a ship", as opposed
to the definite
article
in the phrase "the ship" appearing in other paragraphs of
sec. 11(1). The Court a quo rejected this argument and held t
hat
associated ship claims of thc necessaries man fell into t
he
second
/ queue
41
queue.
I
agree, with
respect, with this conclusion and the reasoning of the Court a
quo
in support of it and do not find it necessary to elaborate thereon.
It follows that the submissions of counsel for HBU to us are
ac-cepted.
This
raises the question of the costs of HBU before this Court. HBU did
not obtain - and did not seek to obtain - any alteration to
the
judgment of the Court a quo. On the other hand, this Court did invite
submissions in regard to this question and it was clearly
in HBU's
interests that the judgment a
quo
on this issue be upheld. In all the circumstances
I
am of the view that HDU is entitled to the
costs of its appearance before this Court as against the Fund.
/ It is
42
It is
ordered as follows:
The
appeal of Summit Industrial Corporation is dismissed with costs.
It is
directed that for the purposes of sec. 11(7) of Act 105 of 1983 the
costs attendant upon the appearance by Hollandsche Bank-Unie
M
V
before this Court in this matter were costs reasonably
incurred in the enforcement of
the
claims of Hollandsche Bank-Unie M
V
against
the Fund comprising the proceeds of the sale of the
m.v.
Jade
Trans
por
ter
.
M M
Corbett.
TKENGOVE
JA)
VILJOEN
JA) CONCUR GROSSKOPF JA) CONCUR
NICHOLAS
AJA)