Protective writs are safe for now 

April 10, 2018

In conflict with a Western Cape High Court decision, the KwaZulu-Natal High Court has held that the issue of a summons protects a claimant against a change of ownership of the ship. This provides some relief to creditors who rely on proceedings such as these to arrest ships that call in South African ports.

In order to institute in rem proceedings in terms of the Admiralty Jurisdiction Regulation Act, 1983, one needs to show that the owner of the vessel would be liable to the claimant in an action in personam in respect of the cause of action concerned.

The Act further provides that a ship other than the guilty ship may be arrested as an associated ship if, at the time the action is commenced, one of the various requirements in terms of section 3(7) of the Act is met.

In a recent judgment of the Western Cape High Court, it was found that the Act was to be interpreted to mean that an action was commenced when the arrest was effected.

The result of this interpretation was that the ownership of the ship was relevant at the time of effecting an arrest and any change in ownership of a ship after the issue of a summons, but before effecting an arrest, would preclude a valid arrest. This would mean that creditors who had issued protective writs would be unable to arrest ships which had since been sold to third parties.

However, in the most recent judgment of Seaspan HoldCo 1 Ltd and two others versus MS Mare Tracer Schiffahrts GMBH & Co, KG and one other (Seaspan Judgement) of the  KwaZulu-Natal High court, a different approach was taken, confirming the principles set out in a 1967 English case, the “Monica S”, which had previously been followed in South Africa.

The commencement of an action was the issue of summons, creating a statutory lien over the ship. Any subsequent change of ownership would not prevent the ship being arrested once in South African territorial waters.

In touching on the possible constitutional argument that to interpret the Act in this way amounted to an arbitrary deprivation of property in contravention of section 25 of the Constitution, 1996, the KwaZulu-Natal judgement pointed out that writ searches were common practice among potential ship purchasers and, as this information was publically available, there was nothing preventing a ship purchaser from establishing if a ship was at risk of arrest in South Africa before purchasing it.

It is likely this judgement will be taken on appeal and, if it is, the Appeal Court decision will be binding on all South African courts.

Although this issue has not been finally decided, and there are now two conflicting decisions of different High Courts, the Seaspan Judgment is a relief for maritime claimants around the world who rely on the arrest-friendly provisions of our Act to allay their fears of landing up with empty pockets.

Kirsten Mullins is a corporate and commercial lawyer based at Norton Rose Fulbright in Cape Town. She focuses on mergers and acquisitions and related work, commercial agreements and admiralty matters.

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