The decision whether to proceed by way of an arrest with an action in rem or by way of an attachment with an action in personam is often a difficult one, sometimes made easier in South Africa by the fact that the full value of the arrestor’s claim must be secured in the case of an attachment, whereas the security required to be lodged in response to an action in rem is limited to the value of the res.
It has always been assumed that South African admiralty law recognises these two forms of procedure, and that there is no prohibition on a claimant having recourse to both in order to recover its claims. South African lawyers have been keenly awaiting the outcome of a matter that was argued before the Supreme Court of Appeal last month in which this issue was central.
That Court has now confirmed an earlier decision of the Cape Town High Court which denied the local port authority’s attempt to obtain security in excess of the value of the vessel by seeking an attachment (and thereby commencing an action in personam) in respect of claims that it had already sought to enforce against the vessel by way of actions in rem.
The judgment of the Honourable Mr Justice Wallis was handed down in the matter of Transnet Ltd versus The Owner of the Alina II on 15 September 2011.
The Alina II is a bulk carrier that loaded a cargo of iron ore fines at Saldanha Bay near Cape Town during October 2009. Upon completion of loading, it became immediately apparent that she was structurally damaged. The owners of the cargo interdicted her from departing in a laden condition, her cargo was transhipped and she eventually sailed on 27 March 2010.
Transnet, the port authority responsible for the operation of the iron ore terminal at Saldanha Bay, caused the vessel to be arrested in two actions in rem on 13 January 2010 with a view to recovering damages it said it had suffered as a result of the vessel’s prolonged stay and consequent occupation of the load berth.
When the vessel was subsequently arrested by companies within the Kumba mining group for claims in excess of USD 275 million, the vessel owner’s attorneys wrote to all parties having actual or potential claims against the vessel to advise that any security provided to enable the vessel to depart would be without prejudice to the owner’s right to apply for its reduction in due course to the value of the vessel, or to substitute it with security to cover all the claims against the vessel, to the value of the vessel.
This precipitated an ex parte application made by Transnet on 23 March 2010 for the attachment of the vessel, believing that if it attached the vessel to commence an action in personam against its owner, the vessel could only be released against the provision of security for the full amount of Transnet’s claims. The application was brought ex parte to forestall a submission to jurisdiction which would have rendered an attachment impermissible. On the eve of the vessel’s departure, a P&I Club letter was established in respect of the full amount of Transnet’s claims and in respect of both the in rem and in personam actions.
The owner resisted confirmation of the attachment order. It did so on the basis that the attachment constituted an abuse of the process of court, and on the ground that an attachment was impermissible because, prior to the grant of that order, the owner had submitted to the court’s jurisdiction. It said it had done this both by way of an express submission to jurisdiction in a separate P&I Club letter relating to potential pollution and wreck removal claims that had been given to Transnet, and because it had entered an appearance to defend the in rem actions and had taken further procedural steps in those actions.
Whilst there was considerable debate at the hearing about the true nature of the in rem action in South African admiralty law, the matter was decided against Transnet on the basis of the ordinary principles applied by the South African courts in regard to submission to jurisdiction. The court found that the conduct of the owner in defending the in rem actions unequivocally proclaimed its willingness to submit to the judgment of the South African court on the issues raised by Transnet: its entry of appearance to defend was not qualified or limited in any way and there was nothing in it to suggest that the owner was defending the action for any purpose other than to dispute the claims on their merits. The owner’s subsequent conduct confirmed this.
In arriving at this conclusion it became unnecessary to express any final view on the decision in The Dictator and its application in South African law, or on the nature of the action in rem, or indeed whether there may be circumstances in which a party may enter appearance to defend an action in rem on terms that might avoid a submission to the court’s jurisdiction in respect of that person’s personal liability on the claim. Importantly, the Court of Appeal assumed, without deciding, that the Admiralty Jurisdiction Regulation Act 105/1983 recognises two forms of procedure, namely the action in rem and the action in personam, and that it indeed contains no prohibition on a person having resort to both in order to recover its claims.
The judgment will give guidance to arrestors and owners alike in advancing and responding to claims against vessels.