NEWSFLASH – Judgment in Oceana Section 21 Challenge


On the 2nd of June 2011 the Honourable Judge Cleaver handed down judgment in the Western Cape High Court in the matter of Oceana Group Limited and one other vs The Minister of Agriculture, Forestry and Fisheries, and 3 others. Due to tight time constraints and the need for industry to be aware of this judgment, a more detailed unpacking of this decision will follow in the near future.

In brief, Oceana challenged the legality of the Section 21 Transfer Policy published by the Department on the 31st of July 2009, alternatively they challenged the legality of certain paragraphs contained in the transfer policy.

The core provision in the policy upon which Oceana based their case was in paragraph 2.9 which reads as follows: “for the purposes of a transfer of a commercial fishing right the level of transformation will be assessed on the basis of ownership and management control.”

Oceana’s case was that by referring only to “ownership and management control” in the transfer policy the Minister was ignoring the other elements of the BBBEE codes of good practice which the Minister was obliged to take in account.

In reaching its decision the court summarised the various provisions applying to the allocation of fishing rights as set out in the Marine Living Resources Act and in the General Policy for the allocation of fishing rights. Thereafter the court discussed in detail the relevant sections of the BBBEE Act/codes and in particular Section 10 thereof.

According to Oceana’s argument, the BBBEE codes of good practice were not in application at the time of allocation of the long term fishing rights but now had come into force and therefore the Minister was obliged to apply such codes in terms of Section 10.

Section 10 states that “every organ of State and Public Entity must take into account and, as far as is reasonably possible apply any relevant code of good practice…..”.

The Minister argued that in the case of the transfer of fishing fights it is not “reasonably possible” to apply the BBBEE codes and that if this was done it would lead to serious practical problems and may be detrimental to the transformation progress already achieved in the industry.

The Minister raised 4 main grounds to substantiate the argument that it would not “be reasonably” possible to apply the codes with regard to the transfer of fishing rights. The court in turn accepted these grounds as being applicable.

In summary the court’s reasoning was that to apply a different system of measuring transformation than that applied during the allocation of the same rights would in all probability undermine the long term rights process and the progress made to date with transformation. In addition it may create new and difficult practical problems. In this regard the Judge stated as follows: “it maybe that when new licences come to be issued again in due course, the fishing industry will have been sufficiently transformed to allow the codes to take pride of place, but time will tell.”

Of vital importance to industry is that the court clarified that the policy had to be applied flexibly by the Minister and each application for transfer would be judged on its own merits. Therefore issues such as jobs and sustained economic growth could be taken into account when decisions were made.

Other arguments were also dealt with in the judgment but this article deals with the main challenge and the court’s decision thereon.

In closing then, if one is contemplating a transfer of a right, the key focus should remain on the effect that the transfer will have on black ownership and management. If black ownership and management is being reduced then this will have to be counter balanced by submitting strong arguments on how other aspects of transformation will be promoted i.e. job creation, investment, corporate social investment, employment equity, etc.

The key issue now going forward is getting the Department to deal with Section 21 applications so that the industry can receive decisions; appeals can be logged if necessary and the process taken forward one way or another.



A brief commentary on the latest South African Admiralty Court Decisions


MT “FAIRMOUNT FUJI”

The Western Cape High Court, exercising its Admiralty Jurisdiction, recently handed down judgment in the matter of the Fairmount Fuji which was heard by Fourie J.

The matter involved the arrest of the motor tug, Fairmount Fuji in order to obtain security for a claim that the respondent intended to institute against second applicant in London Arbitration proceedings.

The First Applicant (Fairmount Offshore Support B.V.) is the owner of the vessel whilst the Second Applicant is Louis Dreyfus Lines S.A.S. (“LDL”) against whom the security was sought. The claim which arose was in respect of the motor vessel “Norman Voyager”, and thus the arrest of the Fairmount Fuji was obtained on the basis that she was an associated ship.

The Applicants launched an application in terms of section 5(2) of the Admiralty Jurisdiction Act in an attempt to set aside the deemed arrest of the vessel. The Applicants also sought to have the security that had already been furnished to the respondent returned for cancellation. In the alternative, if the deemed arrest was not set aside, the Applicants sought an order declaring that either the deemed arrest of the Fairmount Fuji be restricted to certain identified claims or; an order reducing the amount of security in order to cover only the justified claims or alternatively an order directing the respondent to furnish counter security for the costs of the London Arbitration proceedings. The set aside application was opposed by Respondents who further applied for an order that the security which had been furnished to them in order to procure the release of the Fairmount Fuji be increased.

The Applicants, in support of their application to have the deemed arrest set aside, essentially contended the following arguments in the alternative. The first contention was that the Respondent failed to make a full disclosure of all material facts that may have affected the granting of the arrest order or; the Respondent failed to make out a prima facie case in respect of one or more of its claims which are the subject of the arrest, alternatively the Respondent brought excessive claims and sought excessive security.

 Fourie J, in dismissing the application, found that there was no material non disclosure of information that, if disclosed, would have influenced the particular Judge’s decision to grant the arrest order. In respect of the second contention, Fourie J upheld the claims for Loss of Income based on misrepresentation, Lost Freight in respect of livestock shipments owing to the damage caused by the grounding of the vessel shortly before the charter was set to commence and lastly Loss of Passenger Revenue. In upholding the misrepresentation claim, Fourie J placed reliance on the fact that the respondent had accepted the representation made by applicant and further acknowledged that this showed the existence of a special relationship which further gave rise to a duty of care on the part of the Second Applicant.

The application launched by the Respondents to get increased security was dismissed and further the amount of security furnished by the Applicants was ordered to be reduced substantially.

The application on behalf the Second Applicant which sought to order the Respondent to furnish counter security for the costs of the London Arbitration was dismissed. Fourie J, in refusing the application, held that the First Applicant had failed to discharge the onus of proving that it has a genuine and reasonable need for security in light of the Respondents annual profit margin, financial status and standing within its industry.

The Applicant also called for security in light of the damages claim which they sought to bring against the Respondent for the arrest of the Fairmount Fuji without reasonable cause. In this respect, they relied on section 5(4) of the Admiralty Act. Fourie J in dismissing this call for security, held that applicant did not succeed in proving that the Respondent would be unable to satisfy any award made in respect of damages and further held that the Applicants had failed to make out a prima facie case for a damages claim in respect of the arrest being unreasonable or without cause. This contention was also accordingly dismissed.  

 

MV MSC GINA

The recent case of the motor vessel “MSC Gina” was heard in the Durban High Court by Wallis J. The case examined and further confirmed various aspects of the security arrest procedure which is one of the benchmark procedures in South African Admiralty Law. This procedure is well known as the procedure to obtain security in respect of a maritime claim which is being commenced in a foreign forum such as London Arbitration.

The application was brought by Mediterranean Shipping Company (“Applicant”) and the Respondent was Cape Town Iron & Steel Works (Pty) Ltd (“Respondent”). Section 5(3) of the Admiralty Act allows a court to “order the arrest of any property for the purposes of providing security for a claim…if the person seeking the arrest has a claim enforceable by an action in personam against the owner of the property concerned or an action in rem against such property…”. This wide reaching provision has however been narrowed down by the South African Courts by the implementation of certain requirements which necessitate the Applicant having to prove that it has either a claim which is enforceable by an action in rem against the property alternatively an action in personam against the owner of the property concerned.

MSC, however, proceeded with the security arrest without identifying the specific property which it sought to arrest but instead tried to obtain an order allowing the sheriff to arrest any such property which belonged to the Respondent. The justification for such an approach submitted by the Applicant was that the wording of the act was wide enough to allow this approach and thus no such proof of a link of ownership was necessary. 

Judge Wallis, however, cited and approved the Appeal case of Bocimar NV v Kotor Overseas Shipping Limited where Corbett CJ held that in an attachment to found or confirm jurisdiction the onus was on the Applicant to prove on a balance of probability that the property belongs to the Respondent and this applied also in respect of section 5(3) arrested property.  Therefore an Applicant in a security arrest procedure is required to prove on a balance of probabilities that the property which is to be arrested belongs to the Respondent. It was thus held by Wallis J that to grant the sheriff an order allowing him to arrest whatever property the Respondent owns would amount to the sheriff being given a licence to engage in a fishing expedition and further held that that such an interpretation was not contemplated in terms of section 5(3) of the Admiralty Jurisdiction Act.

In order for an Applicant to succeed in a security arrest procedure, it must prove on a balance of probabilities that the Respondent owns the specific property that is to be arrested. Any property, therefore, that is the potential target of a security arrest must be under ownership of the Respondent and further must be identified in the order sought.

MV CLEOPATRA DREAM

The Supreme Court of Appeal recently confirmed the judgment handed down in the Western Cape High Court in respect of the Cleopatra Dream.

The appeal essentially dealt with the voluntariness element which is required for a salvage operation. The central issue in this matter was whether an authority, which is acting within the scope of its employment in line with its common law or statutory duties, is entitled to claim for a salvage award.

The facts of the case revolved around whether or not Transnet Limited (the National Ports Authority) was entitled to claim salvage after coming to the assistance of the Cleopatra Dream in her time of distress. The vessel was, at the time, within the port limits and was further being piloted by an employee of Transnet who requested tug assistance after the vessel began drifting towards shallow water after she suffered engine breakdown. 

The Court a Quo held that Transnet was unable to claim a salvage award for its role in assisting the Cleopatra Dream due to the fact that Transnet had a statutory as well as a common law duty to assist a vessel in distress and therefore the voluntariness requirement for salvage operations was not satisfied.

The SCA upheld the court a quo judgment in that the service was rendered in terms of a pre existing obligation and duty to render assistance for property and life which is placed at risk. Therefore, where the services that are rendered are those which can be ordinarily expected by the claimant by virtue of the position in which they perform then it shall be barred from recovering an amount for salvage.

The SCA therefore upheld the fact that Transnet was acting in the scope of its duty and not voluntarily and thus no right to claim salvage existed.