South African decision
Following the collapse of Hanjin Shipping in August 2016, certain creditors undertook an extensive exercise of issuing protective writs in the various South African coastal divisions against the then Hanjin fleet of approximately 70 vessels, in the hope that one or more could be arrested on an associated ship basis when calling at a South African port.
The longstanding practice of issuing a protective writ is directed – for the most part – at preserving the claimant's right to arrest a vessel in rem, notwithstanding a subsequent change of ownership. The desired effect is thus to confer on the claimant a maritime lien over the property.
However, this matter did not come before the South African courts until the buyer of a former Hanjin vessel applied to the courts to have the writ set aside.
The root of the problem in a South African context lies in the apparent paradoxical Admiralty Jurisdiction Regulation Act provisions concerning the time of commencement of an admiralty action. Section 1(2)(a) of the act contemplates two possible circumstances without indicating which is applicable to the operation of a protective writ, stating that:
"an admiralty action shall for any relevant purpose commence -
- by the service of any process by which the action is instituted;
- by the issue of any process for the institution of an action in rem."
In the present case, counsel for the opposing sides raised a number of arguments in support of one of the two propositions set out above. In this regard, much of the focus was placed on the English case Monica S, which the judge described as a seminal case on the issue of whether a change of ownership after the issuance of a writ, but before its service or an arrest, defeats the statutory right of action in rem.
Monica S turned on the interpretation of the English Administration of Justice Act 1956 and the cases which preceded it. The relevant section of the 1956 act permits an action in rem if a ship is beneficially owned "at the time when the action is brought" by the person who is liable on the claim in an action in personam.
The argument which was put forward by the counsel for the defendant (but rejected by the court) was that although the action was properly brought, it was not properly continued after the transfer of ownership before the arrest. Having regard to the preceding cases, the English court concluded that:
- there was, in its view, no decision on the question; and
- the authorities which bear directly or indirectly on the question are conflicting.
The court concluded that the defendant had not made a case that, under the law in force before the 1956 act, a change of ownership after the issuance of a writ, but before its service or an arrest, defeated the statutory right in rem.
While it appears (at least on a plain interpretation of the relevant statutes) that the position in Monica S holds good in other Commonwealth jurisdictions, such as Singapore, Australia and Hong Kong, the judge in the present case expressed doubt as to whether this is the true position and was not persuaded that it is completely clear.
Upon further analysis, the judge expressed the view that – as regards the position in South Africa – there are good arguments for both propositions, but found that the matter was ultimately one of interpretation of the language of the legislation in question. For this reason, he could not be persuaded by Monica S, given that it is primarily a decision on the interpretation of the particular statute in England and, as such, is of limited value in deciding a South African statute with different wording.
This reasoning led the judge to consider and apply Section 3(4) of the South African act, which circumscribes the statutory basis of an action in rem. This provision requires the claimant to establish that the owner of the property – without any reference to timing – is liable to the claimant in an action in personam. In this context, where a creditor seeks to arrest property of a new owner to enforce a claim against the former owner, the requirement of personal liability of the new owner is not satisfied.
It follows that, at present, the enforceability of a writ of summons in rem is defeated by a change of ownership before service of the writ. The case has been appealed and it will be interesting to see how the matter develops upon further judicial scrutiny.
For further information on this topic please contact Jeremy Prain at Bowmans by telephone (+27 21 480 7800) or email ([email protected]). The Bowmans website can be accessed atwww.bowman.co.za.