In 2002, Kien Hung, Nippon Yusen Kabushiki Kaisha (NYK Line) and CSAV (which played no part in this case), concluded a slot exchange agreement for the operation of a regular container service from the Far East to the East Coast of South America via South Africa. The weekly round trip service was to be known as Supergex. Each line would nominate vessels for the service and would in respect of those vessels be the ship operator. The other lines would charter slots on the vessels so nominated in agreed proportions. These charters would be governed by the terms of a standard slot charter agreement. Each line would, however, issue its own bills of lading in respect of cargo booked on a vessel, and would be the principal carrier in respect of such cargo.

On 22 February 2003, Kien Hung nominated the Northern Endeavour to undertake this service for a voyage between Pusan (now known as Busan), South Korea, to Santos, Brazil, via various ports including Singapore and Durban. At Singapore, NYK Lines loaded a number of containers on board the Northern Endeavour in bay 22. When the vessel arrived in Durban, there was a request (the nature of which is disputed) that these containers be restowed. It is alleged by Northern Endeavour Shipping Pte Ltd, owners of the Northern Endeavour (NES), that NYK Line refused this request.

Off the Cape of Good Hope the Northern Endeavour encountered a fierce storm with force 10 or 11 winds, heavy seas and waves of up to 9 metres high. In the storm, the container stack in bay 22 collapsed. Eleven containers were washed overboard and lost, and the cargo in a number of other containers in that bay was damaged.  

Cargo underwriters, acting under rights of subrogation, instituted action against NYK Line in Brazil to recover losses suffered as a result of these events (recalling that NYK Line had issued the bills of lading and was the carrier under those bills of lading). NYK Line joined NES to the proceedings, claiming an indemnity in the event of it being liable to the cargo underwriters.

The Brazilian court ruled in favour of the cargo underwriters, and NYK in its indemnity claim against NES (in the same amount as it had been held liable to pay the cargo underwriters). 

NES was aggrieved by this result as it held NYK Line liable for the losses that were suffered. NES alleged that the reason for the collapse of the containers stacked in bay 22 was the improper stowage by NYK Line.

NES further alleged that it was entitled to recover damages from NYK Line in an action in tort or delict, based on negligence. To this end, it caused the NYK Isabel, a vessel owned by Mercurius Shipping Pte Ltd, but controlled by its parent NYK Line, to be arrested as an associated ship in January 2013 when it called in Durban. Security was furnished by NYK Line to NES, and the NYK Isabel was released.

In the continuation of the NYK Isabel arrest proceedings, NYK Line in turn asked for security from NES in respect of its indemnity claim against NES in Brazil.

The original arrest of NYK Isabel was premised on the fact that a slot charterer is a charterer for the purposes of s 3(7)(c) of the Admiralty Jurisdiction Regulation 105 of 1983 (the South African legislation).

Held: As to the preliminary issue, the Supreme Court held that a slot charterer was considered a charterer for the purposes of the South African legislation.

The Court reasoned as follows:

1. When the South African legislation was first passed, the wording was drawn from art 3.4 of the Arrest Convention 1952. This made clear that a claimant could arrest a ship in the ownership of the demise charterer (where the demise charterer instead of the registered owner was liable for the maritime claim).
2. However, in the case of claims arising in respect of time or voyage chartered vessels, where the claim arose against the charterer and not the owner, the associated ship arrest provisions in South Africa were not available to assist the claimant.
3. These perceived problems were addressed by way of the 1992 amendment to s 3(7)(c) of the South African legislation, where the reference to demise charterer was deleted, and it became clear that the associated ship arrest provisions in the South African legislation extended to both time and voyage charterers.
4. The question therefore was whether the South African legislation extended to other forms of charterparty, such as slot charters.

The Court considered various Commonwealth authorities, 

1. Noting that in The 'Tychy' [1999] 2 Lloyd’s Rep 11 (CA) ([18]-[22]) the English Court had opined that a slot charter was simply an example of a voyage charter of part of a ship; the High Court of Australia had included slot charterers in the category of charterer (Laemthong International Lines Co Ltd v BPS Shipping [1997] HCA 55 (CMI706); and in Canada a slot charter was described as a type of time charter (Canada Moon Shipping Co Ltd and Another v Companhia Siderurgica Paulista-Cosipa and Another 2012 FCA 284 [53]).
2. Further, in the field of limitation, the right to limit under the Limitation Convention 1976 (LLMC 1976) is given to a charterer of the vessel. In MSC Napoli [2009] 1 Lloyds’ Rep 246 ([17]), the English Court concluded that the right extended to slot charterers.
3. The South African Court should construe ‘charterer’, so far as possible, in a manner which is consistent with the commercial understanding of its meaning.
4. Slot charters have evolved as the container revolution in maritime transport has evolved. They meet a commercial need, and are in daily use in maritime trade. While it is the case that a slot charterer does not charter the entire vessel, there is nothing which should operate to preclude slot charterers from being characterised as charterers.
5. For the above reasons, the Court was satisfied that NYK Line was a charterer of the Northern Endeavour for the purposes of s 3(7)(c) of the South African legislation. It follows that it was not open to NYK Line to set aside the arrest of the NYK Isabel as defective on this ground.

As to the grant of security sought by NYK Line, the South African Court confirmed there were two requirements:

(1) the prima facie existence of a claim needs to be established; and

(2) the applicant must show a genuine and reasonable need for security.

Once these were met, the grant of security was in the court’s discretion. The Supreme Court held that it was not helpful to try and establish further guidelines for the exercise of the Court’s discretion under ss 5(2)(b) and (c) of the South African legislation. All relevant factors must be weighed and a conclusion reached that is in accordance with the interests of justice.

In the present case, the Supreme Court held that NYK Line has established it had a claim against NES (the indemnity claim in Brazil) and a genuine and reasonable need for security.

It also held that it would be appropriate to exercise discretion in favour of granting the security on the basis that:

1. In doing so it would be assisting a court of one of South Africa’s close trading partners and fellow member of the BRICS group of trading nations to enforce its judgment, and judicial comity points in favour of assisting in its enforcement.
2. NES invoked the jurisdiction of the South African Court in order to obtain security for its claim against NYK Line and it cannot complain if NYK Line makes use of the same jurisdiction for the same purpose.
3. Where the merits of a claim and counterclaim are on the fact of it reasonably balanced, considerations of fairness suggest that either both parties should have security or neither.
4. NES did not point to any policy or equity reasons to suggest that it would be unjust for it to be required to provide such security.
5. The provisions of the slot exchange agreement and the slot charter party also favour NYK Line’s case.

Weighing all these factors, the Supreme Court held that the overall interests of justice pointed in favour of the grant of an order that NES provide security to NYK Line for its claim in Brazil.