Aside from the errors in assessment, the performance review letters themselves raise a number of queries regarding the methodology utilised in determining the “mean” averages in the various sectors as well as the right holder rankings. It is apparent on a brief perusal of the performance review letters that right holders who performed best in a particular sector were ranked at number 1 out of the population for the sector while right holders who performed the worst in a sector, for example with a 0 value, were ranked in the middle of the sector population. This of course suggests that there were members of the population who performed more poorly, which is patently impossible where the right holders scored 0 points. What do you have to score to rank near the bottom of the population if a score of 0 does not place you at the bottom?

Given the disappointing nature of the content of the performance review letters and the issues regarding questionable methodology in the determination of means and right holder rankings, the question that now stands to be answered is this:

What rights do right holders have to force DAFF to correct their performance review letters?

If one has regard to the view of DAFF it is quite apparent from the first page of the performance review letters that the Department and the Minister have a strong view in this regard:

“… the Department and the Minister will not entertain any appeals against the results of the performance reviews under section 80 of the Marine Living Resources Act, 1998 (Act 18 of 1998) (“the MLRA”). The results of the performance reviews are not “decisions” taken in terms of the MLRA. The results mainly reflect an assessment by the Department, which in certain instances may result in steps being taken against the right holder in section 28 of the MLRA for the revocation, suspension, cancellation, alteration or reduction of the right”.

So, in the absence of a right of appeal to the Minister to correct the performance review letters, what process has been put in place to protect right holders interests? The answer appears on the last page of the performance review letters where it states that where right holders are dissatisfied with the results of the performance reviews they are advised to send written objections to the DDG. Right holders are then informed that:

“…The Department will file all written objections along with the results of the individual Right Holder but will not engage in any further analysis or communication regarding objections received.”

In other words the objections will be received and, apparently, stored separately from the performance review letters which are presumably stored on a database for future reference. This, of course, means that right holders are fully reliant on DAFF’s ability to safely store both the data and the written objections in separate areas for an extensive period of time and thereafter to be able to access both data and hard copy objections at a later date and to read the performance review letters in conjunction with the hard copy objections which have been archived. This may not satisfy right holders that their objections will be noted in the future let alone read.

The fact of the matter is that the term “decision” is not defined in the MLRA and in order for right holders to accept the view of DAFF they will have to look a little further. The applicable legislation regarding administrative action of this nature is the Promotion of Administrative Justice Act (“PAJA”). In this Act the term “decision” is defined and covers a wide range of activities relating to decision making including actions taken preparatory to the making of a decision. Whether or not right holders agree that no decisions have been taken in the compilation of the performance review letters (Does ranking right holders constitute a decision? Does advising right holders that their performance is above or below average constitute a decision? Does advising right holders that their explanations/submission of information is unsatisfactory constitute a decision?), the real question is if the performance review letters are utilised by future decision makers when allocating rights/quantum, does the performance review process constitute work done in preparation of a decision?

DAFF has already gone on record that it cannot preclude future delegated authorities or the Minister from relying on the performance review letters when future rights allocations or allocations of quantum are made. Given the fact that these performance review letters may well be utilised by future delegated authorities and/or the Minister in determining which right holders should be allocated rights and what quantum/effort should be allocated, is it not critical that the performance review letters reflect an accurate picture?

One thing that is clear is that in terms of Regulation 5 of the MLRA, right holders have 30 days to submit their appeal once they have received their decision. It would appear that the performance review letters, which are dated 22 December, were circulated to right holders on or about 23 December 2011. Unfortunately for right holders this would suggest that the expiry date of the 30 day period, assuming right holders have actually received their performance review letters, was Friday, 20 January 2012. However, owing to the fact that not all the necessary information has been supplied by DAFF to enable right holders to determine whether they need to appeal, it can be persuasively argued that right holders have not yet been provided all the information constituting a “decision” as envisaged in Regulation 5. In short DAFF has not supplied any of the data or methodology regarding the calculation of the sector means or the right holder rankings. In order for right holders to determine if they have been properly “assessed” they will need to check this data and re-perform the calculations to determine whether they have been correctly assessed as being above or below the mean or whether the right holder rankings are correct. This information has been requested from DAFF by numerous individual right holders and industry associations and to date has not been forth coming. Accordingly, some right holders and industry associations might hold the view that the 30 day period prescribed in Regulation 5 of the MLRA has not yet commenced running.

Whatever your view or opinion on the matter, we would strongly recommend that you carefully peruse your performance review letter in conjunction with your performance review RFI (Request for Information) form. Any errors that appear should be communicated to DAFF immediately as an objection, as envisaged in the performance review letters, and as an appeal under section 80 of the MLRA. We would strongly recommend that right holders reserve all their rights to supplement their objection/appeals at a later date and to force the Minister if necessary to decide the appeals. We also strongly recommend that you reserve the right to do this at any stage up to and including the allocation of future long term rights, in order to avoid DAFF and the Minister relying on the fact that too much time has passed between the provision of the right holders performance review letters and the use thereof in the allocation of future long term rights.

One would hope that sanity would prevail at DAFF and that the sheer volume of errors in the performance review letters will count against them ever being utilised by the Minister or a future delegated authority in any decision process. However, until such time as such an undertaking is given by the Minister and/or DAFF we recommend that right holders protect their interests and act.

_________________________________________________________________________

In this entry:

1. Marine Resources

2. Admiralty Jurisdiction and Shipping

3. Commercial

4. Conclusion

________________________________________________________________________________

1.         Marine Resources

• Small Scale Fisheries Policy:

As a result of an Equality Court Judgment which prescribed that interim relief should be granted to certain small scale fishers, and that a small scale policy should make provision for such fishers in the future, the Department of Agriculture Forestry and Fisheries (DAFF) commenced with the drafting and work shopping of a smalls scale fisheries policy. Much of the work shopping has occurred at Nedlac level.

The main issues appear to be the extent of application of the policy, what will constitute communities in terms of the policy, which fisheries will be affected and how will the policy affect the existing commercial fisheries including the limited commercial rights holders.

It is expected that once finalized the small scale policy will affect the new general policy and sector specific policies which will have to be published prior to future commercial fishing rights allocations.

• Performance Reviews

The Performance Review process has not been finalized in that the results of the performance reviews in the main commercial clusters have not been released to rights holders. The reasons for the delay in the release of such results vary with some speculating that it is merely an administrative delay and others yet speculating that the results will not support any future policy changes from the Minister or the Department and hence are being relooked at.

In our view the results should have an effect on future policies and future rights allocation processes. In fact in the Performance Review process it was stipulated that the results would be utilised by the Department for future reference in rights allocation processes.

• Future Rights Allocations

At the end of 2013 existing rights in a number of sectors are up for reallocation and accordingly a new general commercial fisheries policy and sector specific policies will have to be finalized prior to these allocations. As mentioned previously it is our view that the small scale policy will have an effect on the future general policy and sector policies.

• Marine Living Resources Act / Amendments

It is also envisaged that with the finalization of the new small scale policy will also come amendments to the Marine Living Resources Act (MLRA) particularly relating to Section 14 and the Minister’s power to determine the allocation of the TAC / TAE to different sectors. However it is also envisaged that other amendments may occur e.g. relating to the Consultative Advisory Forum and other administrative processes under the Act.

In our view the CAF is an important legislative provision under the MLRA which is not being complied with by the Minister who has been in breach thereof for many years. This leads to the issue of co-management of the fisheries by the Department and industry. A new level of co-management should be achieved with organizations such as Fish SA (representing all the main sector associations) having an important role to play in advising the Minister. Preferably such consultation should happen through the utilization of the CAF provisions in the Act.

A recent example of excellent co-operation between the Department and industry was the amendment of the permit conditions in the hake sector, hopefully this will lead the way for the review of permit conditions in all of the other sectors.

• Compliance

On the compliance side it would appear that this year there was a firm focus on fish processing establishments and ensuring that each establishment had a valid permit throughout the year. The Department extends this need for a permit to “fish and chips shops” and so it is important that fish retailers who process fish in any way have their permits in order.

• Section 21 transfers of rights

After some pressure put on the Department through court proceedings, there seems to have been some progress on the determination of fishing rights transfers. There is still a backlog however. Of concern is that there appears to be no set order in which the applications are being dealt with. The result is that some applications lodged 3 years ago are undecided and applications lodged 3 months ago are decided. This is unfair administrative action in our view and certainly challengeable.

In 2012 it will be interesting to see what the Supreme Court of Appeal decides in respect of the Foodcor and Oceana sect 21 challenges. The State successfully defended these challenges in the Cape High Court.

2.         Admiralty Jurisdiction and Shipping:

• Maritime Law Association of South Africa

Peter Edwards serves on the executive committee of the Maritime Law Association of South Africa and informs us that the MLASA annual conference was recently held in August 2011 in the Drakensburg. One of the main items on the agenda at the conference was the amendment of the Admiralty Jurisdiction Regulation Act (AJRA). After considerable work had been done at sub-committee level a final list of proposed amendments to the AJRA was agreed upon for submission to the Department of Justice. If passed these amendments should clear up certain ambiguities and uncertainties which are present in the AJRA and have given rise to issues in practice.

The MLASA Conference was again very well attended with both local and foreign delegates. The 2012 Conference is planned for St Helena Bay on the West Coast. More details will follow once booking arrangements have been finalized.

• Marine Insurance

On the Marine Insurance side the Appeal Court judgment of the “Mieke” has again sparked interest in the drafting of a South African Marine Insurance Act which will stand apart from the current Short Term Insurance Act. Inter alia, a new Marine Insurance Act for South Africa will mean that we will not rely solely on the English Marine Insurance Act which is often incorporated into Marine Policies covering insured interests within South Africa.

• Main Admiralty Judgments throughout 2011

MV “Cleopatra Dream”

The Supreme Court of Appeal dealt with the elements required for a salvage claim and in particular “voluntariness”.

MV “MSC Gina”

Dealt with the various elements required to be present in a security arrest application.

MT “Fairmount Fuji”

Dealt with the requirements in respect of security and counter security applications.

MV “Alina II”

Dealt with the issue as to whether there can be actions in personam and in rem in respect of the same cause of action.

MV “Explorer”

The Namibian Appeal Court dealt with the Old English Vice Admiralty Rules which are still applicable in Namibia and in particular relating to the admiralty claims of equipping a vessel or supplying necessaries to a vessel.

It is hoped that 2012 will be the year when Namibia promulgates its own Admiralty Jurisdiction legislation which is up to date with modern trends and conventions as the Old Vice Admiralty rules from the 1800’s are very outdated. Certainly with Walvis Bay becoming a very busy port for Namibia it would bode well for the country to have up to date admiralty / shipping legislation.

• Port Regulator

The creation of the office of the Port Regulator in our view has thus far been successful in that objective decisions have been taken and importantly not all in favour of the port.

• Sheriffs’ of Cape Town

We have been informed that in future there will be a number of Sheriffs for the district of Cape Town and from an admiralty point of view the Sheriff who has jurisdiction of the Port of Cape Town will be a different Sheriff from the Sheriff who will have jurisdiction over vessels which are at anchorage. As such arrest papers which have to be served on vessels at anchorage will have to be served by two different Sheriffs, one to serve on the vessel and one to serve on the Port Captain. It will be interesting to see which Sheriff will have to take responsibility for the preservation of the vessel particularly in circumstances where the vessel is originally arrested at anchorage and thereafter berths in the port.

3.         Commercial  

• New Companies Act

The new Companies Act is currently in play and many seminars and conferences have been held regarding the implications of this Act. It is important for practitioners and those in business alike to familiarize themselves with the provisions of the new Act, and in particular to establish where the main changes are from the previous Act. Of importance for instance is the fact that within a two year period Memoranda of Incorporation must be filed for all companies. Our firm has developed a comprehensive presentation on the new Companies Act which will be offered to clients in the New Year.

• Drafting of Agreements

Agreements which are drafted should take into account the provisions of the new Companies Act as well as the provisions of the Consumer Protection Act. In addition there is a substantive move towards the use of plain and clear language in agreements which is referred to in both the Consumer Protection Act and New Companies Act.

Having said this, it is also our view that going forward simple “one page” agreements are not the order of the day but rather more comprehensive agreements which are clear and deal with each aspect of the commercial relationship with specific provisions for issues such as breach of contract and dispute resolution to name but a few.

4.         Conclusion

In conclusion the professional and support staff at Dawson Edwards & Associates wishes its clients, colleagues and service providers a relaxing and enjoyable Christmas period and a successful 2012!

We trust you will find the content of this entry of interest and welcome any queries or comments.

Best regards

PETER EDWARDS

MANAGING DIRECTOR

DAWSON EDWARDS AND ASSOCIATES

www.dawsons.co.za

(Please note that our office closes from 22 December 2011 to 3 January 2012. For urgent matters please contact Alistair Downing on 082 648 7261)

Attached is a copy of the speech made by the firm’s managing director Peter Edwards as well as a few photographs of the event.

The firm would like to thank its clients and service providers who attended the celebration and who have supported us over the years.

 1.         WELCOME

Let me start by firstly thanking all of you for taking the time to be here and to share this occasion with us.

I realize that many of you here are competitors but for this evening if you would take the gloves off and leave any weapons at the door.

Having said that, although we have had the venue swept for Competition Commission bugs, it is not advisable to get too close to each other and in particular to discuss beach prices, voorskots, agterskots and the like.

2.            FIRM’S HISTORY

As far as the history of our firm goes, relative to some of the other Cape firms, at 15 years old we are still in my view a young firm.

We originated from the firm Field & Co. started by the late Roger Field about 30 years ago.

Field & Co. was the first boutique firm of maritime attorneys, which dealt exclusively with matters of a maritime nature.

In 1996 Field & Co. was approached by the then firm of Muller Gruss Attorneys with a takeover proposal. At this stage Peter Dawson was now a director in Field & Co. Roger Field elected to join Muller Gruss but Peter Dawson decided to start a new firm and continue with the concept of an exclusive maritime practice.

This was the birth of our firm which started trading as Dawson & Associates in what can only be described  “sweat shop offices” in Spin Street, Cape Town.

3.         LANDMARKS ALONG THE WAY

The following constitute landmarks in the firm’s voyage:

• Myself joining the firm at the beginning of 1998;
• The firm buying its own offices in Gardens where we still continue to practice from;
• Peter Dawson leaving the firm to immigrate to New Zealand at the end of 2001, and the practice changing its  name to “Dawson, Edwards & Associates”;
• Alistair Downing, my fellow director, joining the firm in 2003 to start his articles
• Grant Clark, my fellow director rejoining the firm in 2004 as a professional assistant having left the firm at the end of 1997 when he finished his articles.

4.         ETHOS

What is the ethos of our firm? Our ethos is reflected in the firm’s logo being the lighthouse.This venue is appropriate in that a few meters from where I am standing is the base of the second oldest lighthouse built in South Africa, being the Mouille Point lighthouse and not far down the road the Green Point light house being the oldest light house in the country.

When Peter Dawson started the firm his goal was to be a lighthouse for his clients in order to help them navigate their businesses through the stormy seas of commerce. At the same time he wanted to maintain the integrity and independence of the firm so that it would be visible in the maritime and legal landscape as an upstanding firm and a leader in its field.

I believe we have maintained this ethos of independence and excellence since the firm’s inception. The three directors of the firm being Grant, Alistair and myself own and manage the firm and are involved in its day to day running. We do not compete amongst ourselves for clients, billing or work in order to reach fee targets set by higher powers. We do not strive to build our own individual empires within the firm.

Our prime focus is to provide clients with the best solution to their brief and to add value from our in depth knowledge and experience accumulated from years of involvement in our specialized fields. This we enjoy doing with passion.

In turn our independence allows for thinking out of the box and providing alternative solutions.

We strive to stay lean and mean and abreast of developments in our industry and the industries of our clients. In a London survey of South African maritime firms we were once described as a firm which punches above its weight.

At this juncture Grant has asked me to mention a particular example of value adding to clients. This related to our involvement in the Longterm Fishing Rights Appeals and Review Process where our intricate understanding of the allocation system and points scoring mechanism allowed us to claw back millions of rands worth of fish for clients.

Maintaining the firms exclusivity and independence has not always been easy, with take over approaches having been made to us over the years, all of which we have turned down.

5.         WORK MAKEUP

Although our ethos over the years has remained steady the makeup of our workload has changed significantly. Originally the firms focus was on shipping and admiralty litigation.

This has evolved over the years and along with the usual admiralty and shipping litigation we now do large amounts of commercial, fisheries and environmental work.

6.            THANK YOU

 We are grateful to many for the enjoyable years that our firm has had in practice.

Our first thank you must go of course to you our clients who have supported us over the years. We aim to continue adding value where we can to your businesses.

Internally we must thank our own support staff who are equally passionate about the firm and the services we provide. Your commitment and loyalty over the years is truly valued.

As regards my fellow directors Grant and Alistair, it has been a privilege working with you over the years and I look forward to the years ahead. There is a seemless co-operation between us, with each of us adding their special ingredient to the smooth running of the firm.

On my behalf and on behalf of the other directors I must also thank our wives and families for their support and patience over the years. Law is a consuming passion and in our field urgent arrests and applications on weekends or public holidays are common occurrences.

We also have our service providers to thank, and in particular Grant Thornton our auditors who have always provided a professional service.

7.         LOOKING FORWARD

When doing business in South Africa we always seem to be in exciting and challenging times.

Looking forward in our industry we see the following issues:

• Maintaining South Africa’s standard of legal expertise both at judicial level and in practice. Rule of law from our perspective is key to stability in this country;
• Making our ports more attractive to foreign vessels. This in our view will depend on the cost structures of the port and its efficiency. From the government’s perspective there is a new maritime policy in place and the challenge will be the implementation and achievement of the goals set out in this policy;
• Environmental issues will become more and more prevalent and the sophisticated environmental legislation which this country has in passed will be key to maintaining the bio-diversity of this country and the sharing of its natural resources amongst competing users. The proposed nuclear power plant at Thyspunt off the East Coast opposite prime fishing grounds is a clear example of this issue;
• As regards the fishing industry the usual issues remain. Efficient fisheries management, new ministerial policies and in particular the small scale policy and how it will relate to the current commercial sector, the transfers of  rights, future rights allocations, amendments to current legislation, the implementation of black economic empowerment ;
• On the commercial side, one should not underestimate the effect of the New Companies Act, the Consumer Protection Act and the increasing application of Competition legislation.

8.            CONCLUSION

In conclusion, may I thank all the staff at my office for the organizing of this event together with the Hotel School, and once again thank you to all of you for sharing this event with us.

We wish you plain sailing and full steam ahead over the years to come.

Please enjoy the rest of the evening and be careful not to drink and drive – if you elect to drink and drive Alistair should have some of his cards to hand out.

Thank You.

Historically, there is a common practice within the fishing industry that skippers on fishing vessels act as independent contractors whilst rendering their service to the vessel owner. As a result of this it has been assumed that between skipper and owner the relationship is not that of an employer/employee.

There have been several arbitration decisions in respect of skippers which have reached the conclusion that they are not employees based on factors which include, inter alia, the complete control that skippers have over their crews whilst at sea, the determination of their own incomes which is usually on a commission basis, and further that their day to day activities are not controlled by the vessel owners.

There has, however, been a recent judgment handed down by the Labour Court which has held that a skipper employed by a vessel owner was in fact an employee in terms of the Labour Relations Act, and furthermore his dismissal by the vessel owner constituted an unfair dismissal and accordingly a referral in accordance with section 191(2A) of the LRA was lodged.   

1. Applicable laws

By virtue of section 355 of the Merchant Shipping Act of 1951, the Labour Relations Act of 1956 applies to seamen which in turn facilitates the referral of an unfair dismissal to the Commission for Conciliation, Mediation & Arbitration (CCMA) should the skipper constitute an ‘employee’ as defined in section 213 of the Labour Relations Act. The definition of “employee” contained therein is:

(a)   Any person, excluding an independent contractor, who works for another person or for the state and who receives, or is entitled to receive any remuneration and;

(b)    Any other person who in any manner assists in carrying on or conducting the business of an employer, and “employed” and “employment” have meanings corresponding to that of ‘employee’.

1. The tests formulated by the Courts

There has been much litigation on the distinction between an independent contractor and an employee and the courts have formulated several tests in order to make the distinction. These include, the ‘control test’ which considers the extent of control that the purported employer exercises over the employee, the ‘organisational test’ which enquires into whether the employee forms an integral part of the business and the ‘dominant impression test’ which determines whether the dominant impression is one of an employment contract or that of an independent contractor.

The three criteria that have emerged as primary determinants of whether or not there is an employment relationship are the following:

• The degree of control exercised by the employer over the employee;
• The degree to which the employer’s position forms an integral part of the employer’s organization; 
• The extent to which the employee is economically dependent on the employer.

1. Recent Labour Court Judgment

In the recent Labour Court Judgment in the matter of J & J Freeze Trust v The Statutory Council for the Squid and Related Fisheries of South Africa, handed down by the Honorable Molahlehi J, it was held that the skipper of a fishing vessel was in fact an employee and not an independent contractor. The facts of the case were that the skipper skippered a vessel for a period of about a year. The relationship between him and the owners of the vessel soured and he was relieved of his duties. The skipper then referred the matter (under the premise of an unfair dismissal) to the Statutory Council for the Squid and Related Fisheries of South Africa whereupon the vessel owner took exception to the referral based on the fact that the Council did not have jurisdiction as the skipper was not an employee but an independent contractor. The matter was thereafter referred to an arbitrator who found that the Council did have jurisdiction to hear the alleged unfair dismissal. The applicant then appealed the decision of the arbitrator at the Labour Court where Molahlehi J confirmed the findings of the arbitrator and concluded that the skipper was an employee and had been unfairly dismissed.

The parties had entered into a written contract of employment, but the court held that the written agreement between the parties was insufficient on its own to determine the true nature of the relationship between the parties. Molahlehi J considered the contract in light of the de facto circumstances and other facts associated with the provisions contained in the agreement. The following factors were taken into consideration:

• The contract of employment clearly categorized the skipper as an employee;
• His duties as skipper were clearly defined in his contract of employment;
• The employment contract provided for a three month probationary period, after which the skipper was to be employed on a permanent basis;
• The skipper’s income, although his earnings were on a commission basis, was effected through a salary advice which further categorized the skipper as an employee;
• The contract made provision for a three month termination period which in turn meant that the skipper was not able to gain employment on another vessel as and how he wished;
• The skipper was not able to dock the vessel when and how he desired (he required the permission of the shore skipper first);
• The written agreement further made the skipper an integral part of the business which in turn made him economically dependent on the vessel owners;
• The vessel owner had confirmed the status of the skipper as an employee with an estate agent when the skipper was looking to purchase a house;
• The skipper had been hired to manage the crew and not to catch the fish; the crew was responsible for catching the fish.

Although there had been several earlier decisions that found skippers to be independent contractors, the assessment of what the de facto relationship is will depend primarily on the facts and merits of each individual case. The applicant in this case sought to argue that the following factors gave an indication that the skipper was an independent contractor:

• It did not deduct UIF from the salary of the skipper;
• It had no control over him whilst he was at sea;
• The skipper was responsible for employing his own crew;
• He determined the amount of money he received for each fishing trip;
• His tax liability was determined in terms of a tax directive;
• He was at liberty to work on any other vessel of his choice.

Molahlehi J having considered the above factors as well as the various tests, held that despite the written provisions in the agreement which pointed towards an independent contractor, the factual implementation of the provisions gave the distinct impression that an employer/employee relationship did in fact exist.

1. Conclusion

What is clear now is that each case is assessed on its individual merits and that the courts will not simply accept the written terms of an agreement in order to determine the relationship between the skipper and the owner. The contract between the parties cannot change the factual basis of the relationship. Therefore the circumstances and working conditions of the skipper must also be examined in order to determine whether there is in fact an employee/employer relationship.  

This case should serve as a warning to vessel owners who hire skippers to operate their vessels under the guise that they are independent contractors whilst at the same time enjoying certain rights that are available to employers.

Therefore, “Independent Contractor Agreements” with skippers must be carefully drafted and the implementation thereof in practice must reflect the contractual relationship identified in the agreement.     

______________________________________________________________________________

It is with pride that the board of directors and staff at Dawson Edwards and Associates announce that as of the 1^st of October 2011 the firm has been practicing for 15 years. A birthday celebration is being planned and will be announced to clients, colleagues and acquaintances shortly.

As some of you may remember, our firm was conceived when the boutique maritime firm of Field and Sims disbanded and Peter Dawson an attorney at that firm, decided to start his own firm in October 1996. The firm originally rented offices on the corner of Spin and Plein street in the centre of Cape Town until March 2000 when we purchased our offices in the leafy and historic suburb of Gardens where we have been practicing from ever since.

Key to our firms success is its key focus on maritime and related commercial matters. A noticeable recent development in the firms practice is the increase in the number of environmental issues being dealt with which may be due to an increase in the competing users of our marine resources.

Despite much activity with the takeovers and mergers of law firms throughout South Africa including maritime practices, Dawsons has resisted the temptation (and proposals) to become part of larger corporate practices. Throughout its years the firm has prided itself on being able to service small, medium and corporate clients both local and international. The independence and specilisation of our firm allows us the flexibility to continue servicing such a varied client base. Hence the decision to maintain the identity and profile of the firm which has been our formula for success over the past 15 years.

Our independence and profile in turn has also allowed us to be involved with a wider range of clients and interests in the maritime sector giving our practitioners a broader and fulfilling experience in matters of the sea.

We would like to take this opportunity to again thank all those who have been clients of our firm over the years and who have supported our practice. Thank you also to our suppliers and service providers and of course our colleagues in the legal fraternity.

As with many industries in South Africa the legal profession faces its own challenges but we are of the view that the profession still has a solid core of attorneys, advocates and judges who carry out their practices ethically, professionally and efficiently and who take pride in contributing towards the great legal system which this country still has intact.

Since the submission of comments by interested and affected parties in early November 2010 there has been little progress in the development of the proposed policy for the Small-Scale Fisheries sector. In a hearing before the portfolio committee in early February 2011 the acting DDG for the Department of Agriculture, Forestry and Fisheries (“DAFF”) indicated that it was an intention of the Department to commence a limited roll out of the policy in June 2011. Needless to say this has not occurred as the Nedlac process has not yet been finalised. In the middle of September 2011 an amended draft policy was circulated to the various constituencies within Nedlac and it is this document that will be debated and discussed by the Nedlac task team in order to provide Nedlac with a report on the proposed policy. At this stage the task team has only just begun its series of meetings in order to debate the proposed policy but the proposed time line is that the matter be finalised before the end of 2011. DAFF still remains committed to implementing the policy at the beginning of 2012, this, however, appears unlikely as not only must the policy first be finalised but thereafter an implementation plan needs to be developed and the Marine Living Resources Act needs to be amended to include references to the new Small-Scale Fisheries sector in order that TAC / TAE can be allocated to this fishery. It appears that there is still a long road ahead before the policy is implemented.

Foodcor Matter

As reported in previous newsletters, Foodcor was unsuccessful in its application to the Western Cape High Court to challenge the lawfulness of certain paragraphs of the rights transfer policy which relate to the applicability of Section 21 of the MLRA to the transfer of shares in fishing rights holding companies.

Justice Griesel dismissed Foodcor’s application on the 6^th of December 2010. Foodcor are appealing such judgment to the Supreme Court of Appeal and heads of argument have recently been filed by both parties.

In terms of paragraph 6.2 and 6.3 of the transfer policy, ministerial approval under Section 21 of the MLRA is also required for share sale transactions which result in a change of control of a rights holder, or the rights holder not being as transformed as at the date of allocation of the right.

Foodcor argue that the requirements of the ministerial approval in paragraphs 6.2 and 6.3 of the transfer policy are unlawful on 3 bases:

• The said paragraphs are ultra vires section 21 of the MLRA, in that bona fida share sales do not result in the transfer of commercial fishing rights;
• The said paragraphs are unlawfully vague, in that

a) no criteria are provided to determine when the need for ministerial approval is triggered; and

b) once the requirement for authorization is triggered, no criteria are provided to assist applicants seeking approval; and

• The said paragraphs are irrational, with regard to the application and consequences.

The State argues that share transfers which lead to a change in control in the rights holding company require the consent of the Minister on the following bases:

• On a proper interpretation of Section 21 (2) of the MLRA, such transactions constitute a transfer of a commercial fishing right, and require the consent of the Minister. The transfer policy sets out the guidelines which the Minister will apply in exercising her discretion as to whether to grant such consent.
• In any event compliance with the transfer policy is a condition subject to which permits are issued. The validity of the permit conditions have not been challenged by Foodcor.
• There is no merit in the complaints that paragraphs 6.2 and 6.3 of the transfer policy are either vague or irrational.

A date for appeal hearing has yet to be set. We will keep a close watch on this matter as it will have a profound effect on the fishing industry and in particular rights holders.

Oceana Matter

Oceana also challenged the legality of the transfer policy (31^st of July 2009) or alternatively certain paragraphs of such policy. There application was also dismissed by the Western Cape High Court in terms of a judgment handed down by Justice Cleave on the 2^nd of June 2011. The core provision of the transfer policy upon which Oceana based there challenge is contained in paragraph 2.9 which stated that “for the purposes of a transfer of a commercial fishing right the level of transformation would be assessed on the basis of ownership and management control.”

Oceana argues inter alia, that by referring only to ownership and management control in the transfer policy the Minister has ignored other elements of the B-BBEE Act codes of good practice which they submit the Minister is obliged to take into account. The Minister argues inter alia that Section 10 of the B-BBEE Act provides that the codes of good practice can be applied but only where reasonably possible. The Minister sets out a number of reasons why in the application of the B-BBEE codes for purposes of the transfer of rights would not be reasonably possible.

Leave to appeal this judgment has been given to Oceana and the record of appeal has recently been finalized. Heads of argument on both sides are expected shortly.

This is another matter on which we will keep a close eye, as it may also have a great impact on the industry.

Over the years there has been uncertainty about whether a company’s failure to comply with the requirements of Section 228 of the Companies Act (which is now succeed by Section 112 read with 115 of the new Act) can be override the Turquand Rule. The Supreme Court of Appeal has now held that the Turquand Rule cannot remedy long compliance with these formalities of the Companies Act.

Therefore where a company is disposing of its sole asset or the majority of its assets there must be a prior special resolution of its shareholders in place as provided for in terms of the aforesaid sections of the New Companies Act.

For more on this issue, we refer you to an article as included in the Law Society’s monthly De Rebus Magazine (September issue) which discusses this case and the topic in general.

On the 20th of September 2011 Peter Edwards of our firm acting on behalf of the National Council of SPCA’s of South Africa, the World Society for the Protection of Animals and Seal Alert SA attended a stakeholders meeting called by the Constitutional Ombudsman of Namibia relating to Namibia’s controversial seal harvest. The meeting was called pursuant to our firm (on behalf of its clients) submitting a formal complaint to the Ombudsman to investigate various aspects of the harvest. The Ombudsman has now commenced an investigation and the stakeholders meeting forms part of such investigation.

The main thrust of the arguments presented related to whether or not the harvesting regulations were sufficient for the humane killing of the seals and whether or not these regulations were in fact being properly implemented by the sealers and the rights holders. Submissions based on video footage were that the regulations were not being complied with and were in any event inadequate in light of international standards of humane killing of animals. This in turn lead to breaches of the Namibian Animal Protection Act – the same legislation applicable in South Africa.

Internationally there are bans on the import of seal products into the United States of America and now recently into the European Union. The main reason for the bans is the inhumane and cruel manner in which the seals are slaughtered which has been confirmed by scientific studies.

The Ombudsman is now in possession of voluminous presentations and scientific papers which he has undertaken to review as part of his investigation. The results of his findings will be of interest particularly in light of the fact that South Africa after a commission of enquiry in the 1990’s have since stopped the harvesting of seals.

The Alina II

 The long awaited Supreme Court of Appeal Judgement in the matter of Transnet Ltd v The Owner of the Alina II was handed down on the 15^th September 2011 by the Honourable Justice Wallis. The matter was on appeal from the Western Cape High Court where Griesel J denied an attempt by the local port authority to obtain security in excess of the value of the vessel by way of an action in personam in respect of claims which it had already instituted by way of an action in rem. 

In January 2010, Transnet caused the Alina II to be arrested in two actions in rem with a view to recovering damages suffered in consequence of the vessel’s occupation at a berth in Saldanha Bay for a period of time. In March 2010, the vessel was again arrested in an action by four companies in the Kumba Mining Group which amounted to claims of nearly $275 million. Following this, the attorney representing the owner of the vessel sent an email to all parties having actual or potential claims against the vessel advising that any security to be provided to allow for the departure of the vessel would be provided on a without prejudice basis to the owner’s rights to apply for reduction of security and/or substitute it for security to cover all the claims against the vessel.

This ultimately resulted in an ex parte application by Transnet for an attachment of the vessel with a view to commencing an action in personam against the vessel’s owner. The reasoning behind such a move was the understanding that if it attached the vessel to commence an action in personam against the owner the vessel could only be released against the provision of security for the full amount of Transnet’s claims. The application was launched ex parte in order to anticipate a possible submission to jurisdiction which would render the attachment impossible. In light of this, the vessel’s P & I club provided a Letter of Undertaking for the full amount in respect of Transnet’s in rem and in personam actions. The vessel was therefore allowed to sail, however, the owner opposed the confirmation of the attachment order.

The opposition was based on essentially two aspects: the first was that there had been an abuse of process of the court and the second was that the attachment was impermissible because prior to the grant of the order the owner had submitted to the court’s jurisdiction and such submission precluded an attachment of the vessel. The second contention was based on 3 grounds: (1) there has been an express submission to jurisdiction in a Letter of Undertaking relating to potential pollution and wreck removal which was given to Transnet; (2) it relied on its having entered appearance to defend the in rem actions and the procedural steps it had taken pursuant thereto; (3) whilst the sheriff served the attachment order, he did not attach the vessel and there was a clear submission to the jurisdiction immediately the owner learned of the existence of the order.

In the judgment of the Western Cape High Court, Griesel J upheld both the abuse of process and the submission to the jurisdiction arguments based on the fact that the submission was embodied in the LOU. Appeal Court Judge Wallis J examined the fundamental principles of jurisdiction in terms of South African Law and he came to the conclusion that the conduct of the owner in entering an appearance to defend the in rem action unequivocally proclaimed their willingness to submit to the judgment of the South African Court on the claims raised by Transnet. Further he emphasized the fact that their entry of appearance was not qualified or limited in any way and further there was nothing to suggest that the owner was defending the action for any other purpose other than to dispute the claims on their merits. In conclusion it was held that based on the ordinary principles applied by our courts in regard to submission to jurisdiction the owners submitted themselves to the jurisdiction of the South African court in relation to these claims.

In reaching his conclusion, the Honourable Wallis J held it unnecessary to express any final view on the correctness of the decision taken in The Dictator or its application in South African Law. Further he held it unnecessary to decide whether there are circumstances in which a party may enter appearance to defend an action in rem on such terms as to avoid submitting to the court’s jurisdiction in respect of that person’s personal liability on the claim. Notably the Supreme Court of Appeal assumed, without deciding, that the Admiralty Jurisdiction Regulation Act of 1983 recognised two procedures, namely the action in rem and the action in personam and further that there are no prohibitions on a person having resort to both in order to recover its claims. Wallis J held that the owner of the Alina II had submitted to the court’s jurisdiction in respect of the claims by Transet prior to the order for attachment being obtained. The appeal was dismissed with costs.

The MT ‘GC Gaungzhou’

A recent judgment was handed down by the Honourable Mr Ploos van Amstel in the Durban High Court in the matter of China National Chartering Co Ltd v the MT GC Gaungzhou on 2 September 2011.

The MT GC Gaungzhou was arrested in July 2011 pursuant to a number of applications brought in this court. The orders were sought in terms of section 5(3) of the Admiralty Jurisdiction Regulation Act in order to obtain security for claims brought by the applicants in arbitration proceedings in London.  The MT GC Gaungzhou was not the vessel in respect of which the applicant’s claim arose but it was arrested on the basis that it and the subject vessel of the claims were associated ships as contemplated in section 3(7) of the AJRA.

The claim arose out of a charterparty that was entered into between the applicant and Grand China Shipping (Honk Kong) which related to the MV Global Commander. A time charter for a voyage from Australia to China carrying bulk iron was agreed. Further to this, a voyage charter between the applicant and Seawin Chartering Ltd was entered into, after which two further sub charters were concluded. The main charter agreement was terminated prior to the voyage being undertaken and the issue of damages and repayment of hire was to be the issue to be dealt with at the London arbitration proceedings.

The only issue in contention in this matter was whether it had been shown that the vessel under arrest and the MV Global Commander were in fact associated ships as required in terms of the AJRA. Section 3(7) of AJRA defines an associated ship as ‘a ship, other than the ship in respect of which the maritime claim arose, which is owned by a company which is controlled by a person who controlled the company which owned the ship concerned when the maritime claim arose. A further subsection of section 7 states that a person shall be deemed to control a company if he has power, directly or indirectly to control the company. Van Amstel made reference to the earlier judgment by his brother, Smallberger JA in the matter of the MV Heavy Metal: Belfry Marine Ltd v Palm Base Maritime SDN BHD where he made the distinction between direct and indirect power stating that indirect power can only refer to the person who de facto yields power through and over someone else whereas direct power can only be someone who yields direct power vis-à-vis the company and the outside world and who in the eyes of the law controls the shareholding and further the direction and fate of the company. It was common cause in this case that the second respondent, GC Gaungzhou PTE LTD (who was the owner of the vessel) was wholly owned by GC tankers Pte Ltd. There were various shareholders in GC Tankers Pte Ltd of which two, Grand Columbia Shipping Ltd and Grand Mississippi Shipping Ltd held 25% each. These two companies were in turn wholly owned by Mega Bulk Holdings Co Ltd of which it and Grand China Shipping (the owner of the MV Global Commander) are subsidiaries of Grand China Logistics Holding Co Ltd, a company in the HNA Group which is recognised as the largest Chinese conglomerate in the aviation, shipping and other industries. As a result of this, the parties approached this matter on the basis that the HNA Group controls the company which owns the MV Global Commander and further controls two companies which collectively own 50% of the company which owns the MT “GC Guangzhou”

The applicants’ contention that the ships are associated was based on the averment that the HNA Group probably controls Hainin America which is another shareholder of GC Tankers Pte Ltd with a shareholding of 10% which according to the applicants puts the total shareholding at 60%. The applicants relied on various factors for the proposition that the HNA Group probably controls Hainin America, which were:

(1)          A subsidiary of the HNA Group, Pacific American Corp, was previously known as Hainin America Co Ltd. It was registered in New York in June 1991

(2)          That name is virtually identical to the name of Hainin America Ltd which was incorporated in June 1994.

(3)          One of the shareholders in Hainin America is the chairman and chief executive of Pacific American Corp

(4)          If HNA controls 60% of the shareholding in GC Tankers then it controls the board of directors as four votes constitute a majority

(5)          GC Tankers is referred in a web site relating to companies in the HNA Group as a subsidiary of Grand China Logistics. This would be an accurate description if the 10% held by Hainin America is held by it for the HNA group as beneficial owner.

The Respondents, however, denied that Hainin America is controlled by the HNA Group stating that it is a privately owned investment. The Respondents further argued that even if the HNA Group did control 60% (which would make applicants contention correct), HNA would still not have power to control GC Tankers because of the written provisions of the shareholders agreement. Clause 5.2 of the shareholders agreement requires that the company shall not without the prior resolution and consent of 75% of the votes of shareholders at a general meeting take any of the actions listed in that clause which include, inter alia, purchasing any vessel, chartering any vessel for a period exceeding five years, merging with or acquiring shares in another company. Clause 6 further states that all decisions are taken by a majority vote.

Van Amstel J, agreed with counsel for the respondents in that the purported 60% is not enough to control the company in line with the principles of section 3(7) as the shareholders agreement requires control of 75% to control the company. Van Amstel then examined the issue of whether Center Securities, another shareholder of GC Tankers Pte Ltd who holds a shareholding of 40%, was controlled by the HNA Group. After examination and consideration of the same factors used to determine whether there was control in respect of Hainin America, Van Amstel J found that most of them did not apply. The final conclusion reached by the Honourable judge was that the papers did not make out a proper case for the conclusion that the HNA Group controls the 40% in GC Tankers Pte Ltd held by Center Securities. Further the judge felt it unnecessary to refer the matter to oral evidence as requested by the applicants. Van Amstel found that the vessels were not associated ships and therefore the arrest was set aside.