Summary of the latest South African Shipping Judgments

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 15th 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.

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