The applicant made a claim against the MV Mega S (originally registered as MV Aksu in Türkiye) arising from the supply of bunkers sold to its then owners and delivered to the MV Mega S. The applicant had a favourable Turkish court order for the grant of pledge right of USD 298,000 on the MV Mega S, with 2% interest per month on the capital sum. The pledge was registered in the Türkiye ship registry. The applicant contended that a pledge right constituted a charge on the MV Mega S and its ranking as against the third respondent’s mortgage was to be determined according to the law of the flag of the MV Mega S ie Turkish law. The applicant relied on res judicata - the granting of the pledge right and registration thereof had been ordered by the Turkish courts and were, therefore, binding.

The mortgagee (third respondent) challenged this, relying on an article of the Turkish Commercial Code to argue that agreements made directly by the owner did not grant any lien. The Code follows the wording of art 2.5 of the International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages 1926 (MLM Convention 1926) to which Türkiye is a Contracting State: ‘Claims resulting from contracts entered into or acts done by the Master, acting within the scope of his authority, away from the vessel’s home port, where such contracts or acts are necessary for the preservation of the vessel or the continuation of its voyage, whether the Master is or is not at the same time owner of the vessel, and whether the claim is in his own or that of ship chandlers, and whether the claim is his own or that of ship chandlers, repairers, lenders, or other contractual creditors.’

The third respondent caused the arrest and sale of the MV Mega S in Denmark. The sale in execution was to Barrington Enterprises SA. This sale was not registered and the registration in Türkiye had not been cancelled. There was an affidavit by an independent expert on Danish law which stated that the title deed relating to the sale in execution in Denmark reflected that the auction was final and not open to appeal. This was according to the relevant section of the Danish Merchant Shipping Act, which is based on art 11 of the International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages 1967 (MLM Convention 1967).

The MV Mega S was then sold to Mega Navigation Ltd (a Maltese company). This sale was registered. Subsequently, the MV Mega S was traded again and arrested in Cape Town at the instance of the third respondent before being sold in execution in terms of an order of this court; it was sold to the highest bidder pursuant to an auction and the funds were paid to the first respondent. The second respondent was the referee appointed to receive, examine, consider and report to this court on the validity and ranking of claims against the first respondent.

The issue was whether the applicant had a claim ranking above the third respondent’s claim against the first respondent, which was established pursuant to the sale by judicial auction of the MV Mega S, notwithstanding that the vessel had, after the applicant’s claim had arisen, been sold by judicial sale in Denmark free from all charges, liens and other encumbrances.

Held: Application dismissed.

This was not a question of res judicata. There was no appearance on behalf of the vessel - the ship’s managers merely appeared and declared that the amount claimed by the applicant was correct.

The applicant had not established the validity of the pledge right. The agreement was not concluded by the master. Additionally, the applicant failed to establish that it had a valid claim recognised in South African law against the MV Mega S immediately prior to the judicial sale in Cape Town - maritime liens recognised under South African law did not include the claim of a bunker supplier.

If the applicant’s claim were valid against the fund in terms of the law of the flag of the MV Mega S, then the law of the flag of MV Mega S, when she was arrested and sold in Cape Town, was Maltese law.

The Mega S flew, and was clearly entitled to fly, the Maltese flag. It lost the right to fly the Turkish flag pursuant to the judicial sale in Denmark, giving valid title to Barrington Enterprises SA free of all charges, liens and encumbrances. Moreover, since the registration of the Mega S in the Maltese Registry was effected pursuant to a sale by judicial auction, it did not require a certificate of deletion from the Turkish Registry. Furthermore, since Mega Navigation was not a Turkish company, the Mega S would not be entitled to fly the Turkish flag.

The applicant was clearly given notice of the sale in Denmark - it was represented in the Danish proceedings, made no objection to the sale and failed to submit a claim against the fund created from the Danish sale, notwithstanding the opportunity to do so. Additionally, since all the formalities of publicity laid down by Danish law were complied with, liens recognised by art 9 of MLM Convention 1926, such as that claimed by the applicant, would cease to exist following a sale.