About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
1993
>>
[1993] ZASCA 79
|
|
National Iranian Oil Company v Banque Paribas (Suisse) SA and Another (265/91) [1993] ZASCA 79; 1993 (4) SA 1 (AD); [1993] 2 All SA 451 (A) (28 May 1993)
Case No 265/91
IN THE SUPREME COURT OF SOUTH
AFRICA (APPELLATE DIVISION)
In the matter between:
NATIONAL IRANIAN OIL
COMPANY
Appellant
and
BANQUE PARIBAS (SUISSE) SA
1st
Respondent
THE FUND, CREATED BY THE PROCEEDS
OF THE SALE OF THE S/T "BOS
ENERGY
"
HER OWNERS AND ANY PARTIES INTERESTED
IN HER
2nd Respondent
CORAM
: HOEXTER, E M GROSSKOPF, VIVIER, F H GROSSKOPF, JJA
et
HARMS, AJA
HEARD
: 6 May 1993
DELIVERED
:
2
JUDGMENT
E M GROSSKOPF, JA
This appeal concerns the priority of claims under section 11 of the Admiralty
Jurisdiction Regulation Act, no. 105 of 1983 ("the Act")
arising from the
following facts.
The MV Bos Energy ("the vessel") was arrested in Cape Town
on 19 December 1990, and again subsequently, at the instance of her creditors.
At the time of the various arrests she was chartered to the Golden Ivy Offshore
Corporation ("Golden Ivy"), a company incorporated
in Panama, which had in turn
sub-chartered her to the National Iranian Tanker Company ("Iranian Tanker"). The
latter company had
taken on a cargo of 1 601 461 barrels of Iranian heavy crude
oil valued at approximately US $32 million. The owner and consignor
of the cargo
was the appellant, the National Iranian Oil Company. The vessel was still laden
with this cargo when she was arrested.
3
As a result of the arrests several applications were made for
the sale of the vessel in terms of section 9 of the Act. Negotiations
between
the various creditors followed. It is not necessary to consider these events in
any detail. The outcome was that eventually
only one application for the sale of
the vessel came before the Cape Provincial Division. This was brought by the
Bangue Paribas
(Suisse) SA, the respondent in this appeal. The respondent had
claims falling into three categories against the vessel. I give the
amounts in
round figures. The first category consisted of claims for US $15 million in
respect of moneys lent and advanced, US $1,6
million in respect of monies
expended for goods supplied and rendered to the vessel, US $31000 in respect of
legal fees incurred
by the respondent, and claims for interest in respect of the
above amounts. In respect of this first category of claims the respondent
had
obtained default judgment against the vessel, her owners and any parties
interested in her. These claims were secured by
4
Maltese statutory ship mortgages over the vessel. The second
category of claims arose out of a guarantee given by the owners of the
vessel to
the respondent in respect of moneys advanced to associated companies. The amount
claimed in this regard was US $ 15,4 million
with interest. This claim also was
secured by a Maltese statutory ship mortgage. The third category consisted of
claims obtained
by cession from Acomarit Services Maritimes SA ("Acomarit").
These claims arose from management services provided by Acomarit in
respect of
four vessels which were associated ships of the vessel within the meaning of sec
3(6) and 3(7) of the Act. The claims
totalled US $285 906.
The respondent's
application was heard
ex parte
on 22 February 1991. A rule
nisi
was issued returnable on 11 March 1991, calling on interested parties to show
cause why an order should not be made authorising the
sale of the vessel in
accordance with the provisions laid down in the order. Attached to the rule
nisi
were the conditions of
5
sale. They included the following.
"7. The vessel is sold in terms of South African Law by virtue of the Judicial
Order for the sale free of all liens, encumbrances,
preferences or charges, and
all arrests and attachments effected before any such sale shall be discharged on
delivery of the vessel
to the purchaser.
27. Prospective purchasers' attention is drawn to the fact that there is
currently on board the vessel a quantity of approximately
219650 metric tons of
bulk crude oil.
28. The Registrar, the claimant, the auctioneer or any of their representatives
accepts no responsibility for any delay caused to
the vessel during either the
carriage or discharge of the cargo or negotiations with the purchaser or the
cargo owners with regard
to any of the terms of these Conditions of Sale or the
Order of Court."
On 6 March 1991 the appellant gave notice that,
as
the owner of the cargo of oil on the vessel, it
intended
objecting on the return day to the grant of an order in terms
of
the rule
nisi
. I need not set out the contents of the
affidavit filed
in support of the objection in any detail.
6
The appellant's grounds of objection were
succinctly
summarised as follows:
"8.1 that the Order makes no provision for
the
transshipment of the cargo prior to the sale of the vessel or indeed at all;
8.2 that the Order makes no provision for the costs of such transshipment being
accepted as a necessary expense to procure the sale
of the vessel and;
8.3 that the Order in similar vein makes no provision that the freight payable
for the onward carriage of the cargo (Cape Town to
Europe) being accepted as a
necessary cost of selling the vessel given,
inter alia
that the cargo
cannot be disposed of in South Africa due to trade restrictions between Iran and
South Africa."
The appellant accordingly asked for the
following
order:
"(a) that the Respondent vessel may only be sold by public auction in terms of S
9 of Act 105/1983 once the cargo comprising some
220175 m/tons of Iranian Heavy
Crude Oil has been removed from the
vessel;
(b) that the Owners of the
abovementioned cargo be and are hereby required to remove their cargo from the
vessel within 40 days of
the date of service upon them of the Order or within
such extended period as the Court may on good cause
7
allow;
(c) that the cost and expense of removing the cargo from Respondent vessel and
of on-carrying it to its original destination (Rotterdam)
shall be regarded as
costs and expenses incurred to procure the sale of Respondent vessel and in
respect of the distribution of the
proceeds of the sale, such costs and expenses
shall enjoy the ranking afforded by S 11 (l)(a) of Act
105/1983."
I shall have to refer again
later to the papers filed in support of and in opposition to the
objection.
On 8 March 1991 Golden Ivy also filed a notice of objection. Its
interest in the matter arose from the sub-charter of the vessel to
Iranian
Tanker. The vessel's failure to complete its voyage to Rotterdam would give rise
to a claim for damages by the owners of
the cargo (the appellant) against
Iranian Tanker with which the appellant had contracted under a bill of lading.
Iranian Tanker would
in turn be entitled to claim against Golden Ivy for breach
of its charter-party. It was accordingly in the interest of Golden Ivy
to reduce
the damages suffered by the appellant as
8
far as possible. It accordingly supported the
appellant's
objection, and asked for the same relief.
On the return day the matter came before van
den
Heever J. After hearing argument, she ruled that
the cost of
discharging the cargo was for the account of the owner of
the
cargo. Moreover she decided that "the rule should be
confirmed with a
suitable amendment to insert an order upon
the owners of the cargo to remove
that cargo from the vessel
within 30 days" and that clauses 27 and 28 of the
conditions
of sale should be amended accordingly. These changes
were
reflected in the order as follows. New paragraphs were added
reading:
"1,8.1 That the owner of the cargo of crude oil presently on board the
vessel, the National Iranian Oil Company, is hereby ordered
to remove from the
vessel on or before 11th April 1991 at its own cost the whole of the said cargo
of crude oil;
1.8.2 Should the owner of the cargo fail so to remove the said cargo of crude
oil the Sheriff is hereby authorised to remove such
cargo and to recover the
cost of doing so from the National Iranian Oil
9
Company. Should payment of such expenses not be made by the
National Iranian Oil Company within seven (7) days of written demand for
payment
delivered to the National Iranian Oil Company's Cape Town attorneys, Messrs
Field & Sims, the Sheriff shall be entitled
to cause the cargo to be sold
and to recover his costs, including the costs of such sale, from the proceeds of
the sale as a first
charge against such proceeds. The balance of the proceeds of
the sale is to be paid to Messrs Field & Sims."
Clauses 27 and 28 of the conditions of sale
were
amended to read:
"27. Prospective puchasers' attention is drawn to the fact that there is
currently on board the vessel a quantity of approximately
220 175 metric tons of
bulk crude oil and that the owner of the said cargo has been ordered by the
Court to remove such cargo from
the vessel at its own cost on or before 11th
April 1991.
28. The Registrar, the claimant, the auctioneer or any of their representatives
accept no responsibility for any delay caused to
the vessel by the discharge
from the vessel of the cargo presently on
board."
The objectors were ordered to pay the
respondent's
costs occasioned by the objections.
10
With the leave of the court
a quo
the appellant now
appeals against the above order. Its grounds of appeal may be summarised as
follows: (a) The court should have
held that the cost of transshipment of the
cargo and the freight payable for the onward carriage of the cargo from Cape
Town to Rotterdam
fell within the category of costs and expenses incurred to
procure the sale of the vehicle within the meaning of sec 11(1)(a) of
the
Act.
(b)
The court should have held
that the costs referred to in (a) above are part: of the expenses of justice
which arise when a vessel
is in
custodia legis
.
(c)
The court should have made an order of costs in the appellant's
favour.
The first question then is whether the cost
of transshipment of the cargo and the freight payable for its onward carriage
fall within
the terms of section 11(1)(a) of the Act. In this regard it should
be noted that a new sec 11 of the Act was substituted by Act no
87 of 1992.
However, the
11
old section was in force when the matter was heard in
the
court
a quo
, and it is common cause that no material
changes
were effected for present purposes by the new section. Save
where
I indicate otherwise I shall consequently deal with the
section as it was
prior to its substitution. Sec 11(1) then
read as follows:
"(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:
(a)
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;
(b)
claims to a
preference based on possession, whether by way of a right of retention or
otherwise;
(c)
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
12
injury, whether occurring on land or on water, directly
connected with the employment of the ship;
(iv) loss of or damage to property, whether occurring on land or on water,
resulting from delict and not capable of being based on
contract, directly
connected with the operation of the ship; (v) the repair of a ship or the supply
of goods or the rendering of
services to a ship for the employment or
maintenance thereof;
(vi) salvage, removal of wreck and contribution 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;
(e)
claims in respect of any maritime
lien not falling under any category mentioned in any of the preceding
paragraphs;
(f)
all other
claims."
Some further refinement of the order of
priority is provided in sec 11 (2) but nothing turns on it at present. The
practical effect
of the dispute between the
13
parties arises from the order of priority laid down by sec
11(1). If the appellant is correct in its contentions that the costs of
transshipment and onward carriage are costs and expenses incurred to procure the
vessel's sale pursuant to sub-sec (l)(a) its claim
would enjoy the very highest
priority, even above those, for instance, of a lien holder, a necessaries man or
a mortgagee. On the
other hand, if it did not fall under sub-sec (l)(a) it could
not rank any higher than as a part of the damages claimable by the appellant
or
Golden Ivy for breach of contract. Such a claim would fall under sub-sec (l)(f)
and effectively be at the end of the queue.
The question then is whether the costs of transshipment and onward carriage
of the cargo constitute "costs and expenses incurred to
... procure [the
vessel's] sale". At the outset Mr. van Schalkwyk, who appeared for the
appellant, conceded (rightly, in my view)
that the costs of the onward carriage
of the cargo to Rotterdam would not have
14
been incurred to procure the vessel's sale. He accordingly
limited his argument to the discharge costs of the cargo.
The expression "to
procure the sale" and its Afrikaans equivalents ("ten einde ... dit te verkoop"
in the unamended section and "om
die verkoop daarvan te bewerkstellig" in sec 11
(4) (a) as substituted in 1992) are not terms of art. They are ordinary
expressions
dealing with a practical matter. The sale of a vessel or other
property in terms of the Act necessarily requires the expenditure
of money.
Because such expenditure is incurred (usually by an officer of the court) to
realize the asset so that claimants may be
paid, it is the policy of the law
that it should be a first charge against the proceeds. If there is a dispute
whether a particular
expense is included the court will have to decide whether,
as a fact, the expense in question was incurred, or would be incurred,
to
procure the sale of the property. The question in every case is whether there is
a sufficient connection between the expense in
issue and the
15
sale of the property.
In the present case we are dealing
with the discharge costs of a cargo of oil. The cargo was not subject to the
arrest, and the appellant
was entitled to remove it at any time. If this was not
done before the sale, the vessel could, both from a legal and a practical
point
of view, be sold with the cargo on board. The cargo would, of course, remain the
property of the appellant, and the appellant
would have to make arrangements
with the purchaser for its discharge or further carriage. These are, however,
practical problems
between the purchaser and the cargo owner, and do not stand
in the way of the sale of the vessel. The discharge of the cargo consequently
does not appear
prima facie
to have been necessary to procure the sale of
the vessel.
What then is the basis of the appellant's case? The affidavit filed in
support of the notice of objection is completely uninformative
on this issue.
Its main burden is that the appellant's position as cargo owner would be
16
seriously prejudiced if the cargo were not discharged prior to
the sale and conveyed further to Rotterdam, and that the order does
not fully
set out the relevant facts for the benefit of potential purchasers. No reason is
given why the discharge of the cargo would
be necessary, or even desirable, to
procure a sale of the vessel.
In argument before us Mr. van Schalkwyk
contended that the vessel laden with the cargo was likely to fetch a lower price
that she
would if free of the cargo. The discharge of the cargo would
consequently lead to a higher price, and the costs of discharging the
cargo must
therefore be regarded as costs incurred to procure the sale of the vessel.
I
accept that there is no clear distinction between expenditure incurred to
procure a sale and expenditure designed to secure a higher
price. One thinks,
for instance, of matters such as advertising. A minimum of advertising might be
sufficient to attract one or two
persons who may be
17
interested in buying a vessel, but wider advertising may be
necessary to ensure that a reasonable price is obtained, whether by auction
or
private treaty. In the present case, however, the appellant is faced with the
problem that there is no evidence at all that the
discharge of the cargo is
likely to lead to a higher price. I assume that this would usually be so, but it
is not inconceivable that
a purchaser in the present case would prefer to buy
the vessel with the cargo on board, since he would then be in a strong position
to conclude an advantageous freight contract with the owner of the cargo.
But
what is in my view even more important is that the appellant has made no attempt
to compare the probable cost of discharging the
cargo with the probable increase
in price which could be achieved thereby. The appellant has emphasized in its
affidavit that the
task of discharging the oil would be difficult and expensive.
I cannot assume that it would nevertheless be worth while in order
to obtain a
higher
18
price for the vessel. This would depend on a comparison
between the costs of discharge and the higher price which the vessel was likely
to realize as a result of the discharge. I accept that there may conceivably be
cases where expenses to remove a cargo could be regarded
as having been
reasonably incurred to procure the sale of the vessel. This would, however, be
exceptional. In the present case the
facts show clearly that the discharge of
the cargo would provide a substantial benefit for the cargo owner, but there is
nothing
to indicate that it would result in a nett increase of the fund created
by the sale of the vessel. In these circumstances it could
clearly not be said
that, as a fact, the costs of discharging the cargo would amount to expenditure
incurred to procure the sale
of the vessel.
For the reasons I have given, I
accordingly conclude that in the present case the costs of discharging the cargo
from the vessel do
not fall under sec 11(1)(a) of the Act. I have reached this
conclusion simply on an
19
application of the terms of the section to the facts of this
case, but it is fortified if regard is had to English authorities.
In terms
of section 6(1) of the Act a court exercising its admiralty jurisdiction is to
apply English law ("the law which the High
Court of Justice of the United
Kingdom in the exercise of its admiralty jurisdiction would have applied" at the
commencement of the
Act) with regard to any matter in respect of which a court
of admiralty of the Republic referred to in the Colonial Courts of Admiralty
Act, 1890, of the United Kingdom had jurisdiction immediately before the
commencement of the Act (i e, 1 November 1983). See
Transol Bunker BV v MV
Andrico Unity and Others
1989 (4) SA 325
(A) at pp 334H to 335B and 339B to
340C. The application of English law is of course subject to South African
statute law on the
subject. See sec 6(2) of the Act. In the present case the
matter in issue is regulated by sec 11 of the Act, and to the extent of
its
application it
20
would supersede the English maritime law. However, the ranking
of maritime claims against a ship, and in particular, what expenses
are to be
included in the costs of procuring the judicial sale of a vessel, were clearly
matters in respect of which an admiralty
court had jurisdiction under the
Colonial Courts of Admiralty Act. See, in the latter regard, rules 144, 145 and
146 of the Rules
of the Vice-Admiralty Courts, which governed the procedure of
Colonial Courts of Admiralty in South Africa pursuant to sec. 16(3)
of the
Colonial Courts of Admiralty Act. If a common law context were required for the
interpretation of sec 11(1) this would accordingly
have to be found in the
English law.
The approach of English admiralty law to priorities is set out as follows in
Thomas,
Maritime Liens
, pp 234 to 235:
"There has to date been no attempt by the legislature, beyond giving a statutory
priority to the maritime lien of the life salvor
to lay down a precise scheme of
priorities. Nor has the judiciary been attracted by such an approach. On the
contrary, the Admiralty
and Appellate Courts have adopted a broad discretionary
approach with
21
rival claims ranked by reference to considerations of equity, public policy and
commercial expediency, with the ultimate aim of doing
that which is just in the
circumstances of each case. This is not however to suggest that the law is
capricious, erratic or unpredictable.
Arising from the 'value' framework within
which the Courts operate there have emerged various principles which are capable
of providing
reliable signposts to the likely attitude of the Courts. Such
indeed, on occasions, is the degree of predictability that many commentators
have been tempted to represent the operative principles as firm 'rules of
ranking'. Whilst this approach is understandable it would
appear not to be
strictly accurate, for such 'rules of ranking' are no more than visible
manifestations of an underlying equity,
policy or other consideration. Upon the
underlying equity, policy or other consideration being displaced, either for
want of substantiation
or from the competitiveness of a greater equity or
policy,so also the 'rule' becomes inoperative or inapplicable. In the realm of
priorities there would appear to be no immutable rules of law, but only a number
of guiding principles."
See also the
Transol
Bunker
case,
supra
, at p 344B-E.
At first blush the approach of
the English law differs so much from ours that it would not appear to afford any
guidance. However,
in practice there is considerable
22
common ground. Thus, although there is no statutory system of
priorities in English admiralty law, there is "an incontrovertible rule
of
practice" that the fees and expenses incurred by the Marshal arising from the
arrest, detention, appraisement and sale of the
res
and from the
preservation and good management thereof are a first charge on the fund in the
hands of the court (Thomas,
op cit
, p 259). This rule of practice has
accordingly achieved much the same result as sec 11(1) (a) of the Act. And in
that context the
English courts have had to decide how to deal with the
situation where an arrested vessel has a cargo on board which is not subject
to
an arrest.
Although this question arose in earlier cases there has been no
reasoned judgment on it until quite recently. The first case to be
considered is
The "Myrto"(
l978) 1 Lloyd's Rep 11 (CA). In that case the ship (the
Myrto) had been arrested by various creditors. There were a number of disputes
between the interested parties. On application to
23
court Brandon J ordered that many of these matters should
go
for trial. Pending trial he made an order for the sale of
the ship. Then
the question arose how the sale was to be
effected since the ship had 6000
tons of cargo on board. On
further application to Brandon J he ordered that
the
Admiralty Marshal make arrangements for discharging the
cargo, storing
it and putting it at the disposal of those
persons having title to possession
thereof. There were also a
number of ancillary orders. Of particular
importance for
present purposes was a paragraph in the order reading:
"That all expenses incurred by the Admiralty Marshal in acting under this order
shall form part of his expenses in executing the
Commission for Appraisement and
Sale."
This paragraph was challenged on appeal. The
Court of Appeal found it unnecessary to decide on its correctness, but held in
effect
that the question should be left open until the rights of the parties had
been ascertained.
The next case was
The Joqoo
[1981] 3 All ER 634
(QB). In that case the
ship was mortgaged. The mortgagees
24
claimed the principal sum due under the mortgage and later
arrested the ship in port. The court ordered the Admiralty Marshal to permit
the
cargo owners to discharge their cargo on their undertaking to pay the costs of
discharge. The cargo was discharged and the costs
of the discharge borne by the
cargo owners. Later the mortgagees obtained judgment against the shipowners and
in order to have the
judgment satisfied, the court ordered that the vessel be
sold. The sale realized less than the amount of the mortgagees' judgment
against
the shipowners. The cargo owners applied for a declaration that the costs of
discharging the cargo which they had borne should
rank equally with the
Marshal's charges and expenses in executing the commission of appraisement and
sale, and should therefore,
like the marshal's charges and expenses, be a first
charge on the proceeds of the sale of the ship and take priority over the
mortgagees'
judgment against the shipowners.
The court pointed out that the cargo owners had the
25
cargo discharged primarily for their own benefit. It
assumed
that one result of the discharge of the cargo was that when
the ship was subsequently sold by order of court, the price
paid was
higher than it would have been if the cargo had
still been on board. Even on
that assumption the cargo owners
had no claim against the mortgagees, because
there is no
principle of law which requires a person to contribute to
an
outlay merely because he has derived a material benefit from
it. Of course, in
The Jogoo
it was not contended that the
cargo
owners would have a direct claim against the
mortgagees, but the effect of
acceding to their application
would be that the expense of discharging the
cargo would come
out of the pockets of the mortgagees. In sum the court
held
(at p 640e):
"Such few cases as have been reported show that in England the Admiralty Court
has consistently taken the view that the cargo owners
must pay for removal of
their own cargo in the event of the contract of carriage not being completed by
the shipowners, and then
make a claim against the shipowners for the damage
which they have suffered. It seems to me that this is correct in principle. For
these reasons this motion by the cargo owners
must
26
fail."
This question again came before the court in
The
"Myrto" (No 2)
[1984] 2 Lloyd's
Rep 341 (QB). This case was a
sequel to
The "Myrto
" (
supra)
. I
need not go into details
about the history of the case subsequent to the
hearing in
the Court of Appeal to which I referred earlier. In
The
"Myrto" (No 2
) the court had to decide the question left open
by
the Court of Appeal. It formulated the question as follows
(at p 348):
"When the Court has ordered that a ship laden with cargo is to be appraised and
sold, is the expense involved in discharging the
cargo to be regarded as part of
the expenses of the Admiralty Marshal in selling the ship or should that expense
be borne by the
owners of the cargo which has been
discharged?"
In discussing this issue, Sheen J first
discussed the policy considerations which were applicable in the circumstances
of the case
before him. He also considered various American decisions, to which
I shall return later. His conclusion was (at p 351):
"I have already pointed out that on the special
27
facts of this case the cost of discharging the cargo has conferred a benefit
upon the owners of cargo and no benefit upon the mortgagees.
For that reason
alone the equities are all one way, and if it were merely a matter of exercising
a broad discretion I would unhesitatingly
order that the costs of discharging
cargo be borne rateably by the owners of that cargo."
However, Sheen J went further to deal with
the
general principle involved because, he said, "it
is highly
desirable that there should be a well-recognized rule
of
practice as to who is liable for the cost of discharging
cargo from a ship under arrest." His final conclusion was (at
p 352):,
"The more I have thought about this problem the more convinced I am that it is
desirable to maintain a uniform practice that when
a shipowner is unable to
perform a contract of carriage the owner of cargo laden in his ship is entitled
to take his cargo out of
that ship at his own expense or abandon the cargo. If
it is necessary for the Admiralty Marshal to supervise the discharge of the
cargo he is, in my judgment, entitled to recover the cost of discharging the
cargo from the owners of that cargo in proportion to
their interests. If the
cargo-owners abandon their cargo the Admiralty Marshal may sell it and recover
his expenses from the proceeds
of sale."
28
Now the decisions in
The Jogoo
(
supra
) and
The "Myrto" (No 2
) (
supra
) were both judgments of Sheen J sitting
as a single judge in the Queen's Bench Division (Admiralty Court). As such they
are not decisions
of the highest authority (cf the
Transol Bunker
case
(
supra
) at p 339 B -E). However, they were decided in accordance with
previous authorities and reflect the long-standing practice of the
English
admiralty courts. See
The Jogoo
(
supra
) at p 639g to 640a and the
authorities quoted in the Hong Kong case of
Dharamdas & Co (Nigeria) Ltd
and Another v The Owners of the Ship or Vessel "Minqren Development"
[1979]
Hong Kong LR 159
at p 161 to 163. In my view we can accept the principle laid
down in these cases as representing the law which the High Court of
Justice of
the United Kingdom in the exercise of its admiralty jurisdiction would have
applied to the facts of this case at the commencement
of the Act.
On behalf of the appellant we were referred to certain American cases, and in
particular to
The Emilia
29
[1963] AMC 1447.
In that case a United States District Court
held (at p 1449) that the presence of cargo aboard a ship had an adverse effect
on the
sale to the detriment of all parties who had an interest in the vessel.
The cargo was lawfully on board the vessel. The owner of
the vessel did not have
the right to order the removal of the cargo at the expense of the cargo owner.
The sale of the owner's interest
in the vessel could not serve to vest a greater
right than the owner had, nor could it impose an additional liability on the
cargo
owner. Where the cargo is discharged at the instance of the court, it is a
service furnished on authority of the court and should
be paid out of the
proceeds of the sale as an "expense of justice" i e, as an administrative
expense. The United States Court of
Appeals, Second Circuit, held (at p 1448)
that service rendered to a ship after arrest in aid of the discharge of the
cargo necessarily
enured to the benefit of a lienor since it contributed to the
creation of the fund available to him, and that the District Court
had
30
jurisdiction to make the order which it did.
It is clear,
therefore, that the American courts take a different view of the matter than the
English courts do. We were urged to
follow the American rather than the English
approach. Now, first of all, we must apply sec 11 of the Act, and that by itself
provides
an answer adverse to the appellant's case. The appellant's counsel
contended (albeit not with great conviction) that we should not
read sec 11 as
containing an immutable list of priorities. This court still had a residual
power, he said, to determine matters of
priority on a broad discretionary basis
like the English courts of admiralty. There seem to me to be two answers to this
contention.
First, the terms of sec 11 do not appear to allow any exceptions.
Sec 11(1) provides that claims "shall be paid in the following
order". The
Afrikaans version, which is the authoritative one, reads "Eise ... moet in die
volgende volgorde betaal word...". The
same peremptory language is retained in
the English version of the
31
substituted sec 11. Although the Afrikaans version is changed,
it remains equally peremptory: "Indien ... goed 'n fonds uitmaak...word
die
relevante eise... betaal in die volgorde voorgeskryf...". This language leaves
no room for the exercise of any discretion to
depart from the order of
priorities laid down in the section. This court has held that
sections 96
to
102
of the
Insolvency Act, no 24 of 1936
, lay down a closed system of priorities
(
Cooper NO en Andere v Die Meester en 'n Ander
1992 (3) SA 60
(A) at p 82
G-I). Although the language of the Act is not quite as emphatic as that of the
Insolvency Act, I
consider that it is clear enough to lead to the same result.
And in this regard it is pertinent to note that in certain cases the
Act
incorporates the provisions of the
Insolvency Act (see
Sec 11(2)(f) of the Act
prior to its substitution in 1992 and the substituted sec ll(5)(f)). The
legislature could hardly have intended
that the powers of the court would differ
depending on whether it applied the priorities laid down by the Act or those
grafted
32
onto the Act from the
Insolvency Act, i
e, that the court be
allowed a discretion in the former case which by clear language is denied it in
the latter.
I consider therefore that the language of
sec 11
excludes any
discretionary power on the part of the court. But, in any event, if the court
were to have retained a discretionary
power of the kind enjoyed by the English
admiralty courts, it would have had to exercise it in the manner employed by the
English
courts. The American authorities to which we were referred, were
considered by the English courts in the cases quoted above (see
The
"Myrto"
,
supra
(1978), at p 16 (Roskill LJ),
The Jogoo
,
supra
, at p 638 d - j, and
The "Myrto" (No 2)
,
supra
, at p
350 to 351. See also the
Minqren Development
case,
supra
, at p
163.) The consensus of these cases was that the American view was inconsonant
with the law of England. With this conclusion
I agree.
From what I have said it follows that the costs
of
33
discharging the cargo in the present case would not have
constituted costs or expenses incurred to procure the sale of the vessel
for the
purposes of sec 11(1)(a) of the Act, and that the American cases on this topic
should not be applied. This conclusion disposes
of the appellant's arguments a)
and b) set out above. What remains is its argument c) relating to costs in the
court
a quo
.
The appellant's counsel argued that, on the papers, there
was a dispute whether the appellant was entitled to remove the cargo of
oil
before the sale. The appellant wished to do so, but the respondent would not
permit this. This dispute was resolved in the appellant's
favour, so it is
contended, and the appellant's success in this regard should have been reflected
in the court's order as to costs.
In my view there are several answers to this
contention. In the first place, I do not agree that the appellant's right to
remove
the oil was questioned on the papers by the respondent. The respondent's
affidavit, properly read, says
34
no more than that the costs of discharging the oil was the
appellant's problem, and should not be ordered to rank as costs of procuring
the
sale of the vessel. In this respect the respondent was completely successful in
the court
a quo
. But, in any event, even if there was a dispute on the
papers concerning the appellant's right to remove the oil prior to the sale,
it
was an entirely subordinate one. The main issue between the parties related to
the ranking of the costs of discharging the cargo
and forwarding it to
Rotterdam. There is nothing on the papers to suggest that the respondent would
have objected to the appellant
removing the cargo if it proposed doing so at its
own expense. On the main issue the respondent was successful and was, in my
view,
correctly awarded the costs occasioned by the objection to the
confirmation of the rule
nisi
.
In the result the appeal is dismissed with costs, including the costs of two
counsel.
35
E M GROSSKOPF, JA