• Recent South African Admiralty Judgments
  • October 12, 2011
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • Security and founding jurisdiction

    Based on its Roman Dutch heritage, South African law permits a claimant who has an in personam claim against a foreign shipowner to attach the property of the foreign owner (a peregrinus) in order to found and confirm the jurisdiction of the local court. In doing so, the claimant is able to demand security before the release of the attachment for the full value of its claim, even if this would exceed the value of the attached property. In contrast South Africa’s in rem procedure which originates from English law, limits the security obtained in in rem proceedings to the value of the vessel.

    The question before the court was: can you secure your claim for more than the value of the property arrested by attaching that property to found and confirm jurisdiction? The SCA has said no - once property has been arrested in rem, it cannot be attached to found and confirm jurisdiction for an in personam claim once it is clear that the owner of the thing arrested has submitted to the jurisdiction of the court.

    Following this judgment, clients must plan their security strategy carefully in consultation with us and choose the appropriate procedure in the circumstances (time being your enemy) bearing in mind that the chosen procedure will have a direct bearing on the amount that can be secured.

    Establishing a prima facie case for a sec 5(3) security arrest

    After the decisions of The Dimitris 1989 (3) SA 820 (A) and The Bocimar 1994 (2) SA 563 (A), it became settled law that a claimant established a prima facie claim if it could produce evidence, which if accepted, would establish a cause of action. The only qualification was that the inference drawn from such evidence should be reasonable.

    In Imperial Marine Company v Pasquale della Gatta; Imperial Marine Company v Filippo Lembo [2011] ZASCA 131, 638/2010 (5 September 2011) the Supreme Court has extended this “formula” by clearly allowing the respondent the opportunity to attack the prima facie claim circumstances when the respondent can produce material and undisputed evidence that defeats the claimant’s prima facia case.

    Clients must place themselves in a position whereby their prima facia case is sustainable.  In proving its case the claimant will have to furnish the court with all evidence that is material and undisputed. Questions that one should ask are, “Is my prima facia case based on fact or mere speculation?”, “Are reasonable inferences being drawn from those facts?” and “Is my case in conflict with materially undisputed evidence?”

    Associated ship arrest

    Recently the Kwazulu-Natal High Court was faced with the issue of determining the control of the mt GC Guangzhou, the “target” ship. Grand China Shipping (“GCS”) was a charterer (and hence deemed owner) of the “guilty” ship, which was probably controlled by the “Mr Big” that the arresting parties were after.

    The essence of the recent judgment relates to the structures set up to control the “target” ship. This ship was owned by a company that was controlled by GC Tankers. The shares in GC Tankers were owned by four companies. Two companies, which owned 50% of the shares, were controlled by a company that also controlled GCS. But their 50% did not give them control of GC Tankers.

    Of the other two companies with shares in GC Tankers, there was a possibility than one, which had a 10% share, may also have been controlled by “Mr Big” but this was held not to be relevant, as the shareholders agreement required control to be exercised by 75% of the shareholders. The combination of the three companies possibly controlled by “Mr Big” would simply have not given him the necessary 75% control. 

    The judgment shows how dangerous speculation can be when trying to establish association, and the judge (who was a well known shipping counsel) has given some guidance as to when matters being dealt with by way of application should, or should not, be referred to oral evidence.

    Hopefully the judgment is of some use to those of you who walk in the bright light of shipping commercial/finance (rather than in the dark shadow of litigation) and are concerned with ownership structures and the protection of the “Mr Big's” of this world from the provisions of the South African legislation.