The registered owner of the MV Madiba 1, which was arrested by the plaintiff in respect of a maritime claim against the charterer by demise of the vessel, Meltt (Pty) Ltd (in liquidation) (Meltt), applied for leave to amend its plea in the action. The plaintiff opposed the defendant's application.

Held: The owner's application to amend is dismissed.

The vessel was arrested under of s 3(4)(b), read with s 1(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983 (the AJRA). Section 3(4) provides:

Without prejudice to any other remedy that may be available to a claimant or to the rules relating to the joinder of causes of action a maritime claim may be enforced by an action in rem – ...

(b) if the owner of the property to be arrested would be liable to the claimant in an action in personam in respect of the cause of action concerned.

Section 1(3) provides that '[f]or the purposes of an action in rem, a charterer by demise shall be deemed to be, or to have been, the owner of the ship for the period of the charter by demise'. The plaintiff relied on Meltt's deemed ownership of the vessel, in terms of s 1(3) of the AJRA, to arrest it for the purposes of the action in rem.

The owner denied that the vessel was on demise charter to Meltt at the time it was arrested. It sought to introduce, contingently, two special defences. The special defence based on s 1(3) of the AJRA argued that on 'a proper and sensible construction of the language of section 1(3) of the Admiralty Act, and having regard to its context, the reference to a charterer by demise in the subsection does not include a charterer by demise (in liquidation) in respect of which a winding up has commenced'.

Section 1(3) of the AJRA was inserted by s 10 of the Sea Transport Documents Act 65 of 2000, and came into effect on 20 June 2003. It is evident from the academic commentary and the reported cases that s 1(3) of the AJRA was, from the outset, not regarded as the most clearly expressed insertion. It was recognised that on a purely literal construction it could lead to consequences that it was most improbable that the legislature could ever have intended. John Hare, Shipping Law and Admiralty Jurisdiction in South Africa (2nd ed, 2009 Juta) notes:

It has the effect of extending the associated ship provisions to ships owned by demise charterers which, in itself, is not too radical a departure from the English deeming provisions which allow the arrest of a vessel in rem in a claim against her demise charterers, nor indeed from the 1952 Arrest Convention from which those powers derive. But the deeming provision does now extend the operation of the associated ship arrest in South African admiralty. The 'now' and 'then' analogy above has been extended to provide an arrest of chartered ships thus:

The associated ship would be now demise chartered by a company which is now controlled by a person who was then charterer of the guilty ship or controlled the company which then chartered the guilty ship when the maritime claim arose.

There is an alarming anomaly in the corollary to the new deeming provision however: it is arguable that if the demise charterer is deemed by s 1(3) to be the owner of the vessel, then the true legal owner is displaced for the duration of the demise charter. This would mean that no ordinary statutory right of arrest in rem (short of a maritime lien) could be brought against the ship, because the required personal ownership link between the debtor legal 'owner' and the ship cannot be established. Accordingly, while the vessel is on demise charter, the true owner's creditors would not be able to arrest the ship to enforce claims in rem against that true owner. This is both anomalous and inequitable. It could not have been the intention of the legislature in enacting the new deeming provision.

The new deeming provision would seem to have been an overkill: it would surely have been sufficient simply to provide, along with English practice, that an arrest in rem may be brought, in terms of s 3(4)(b), if the owner or the demise charterer of the vessel would be liable to the claimant in an action in personam. It is suggested that such an amendment would be enough to allow claims in rem against a charterer debtor's demise chartered ships, whether as direct claims or associated ship claims, and that s 1(3) is an unnecessary and unwanted extension that should be repealed. Unless and until this happens though, the simple arrest in rem is in some peril, however semantic. It is to be hoped that a court asked to interpret the new deeming provision would put a very restrictive meaning on it in a way that merely adds the debtor charterer as 'deemed owner' but does not remove the true owner debtor in its own right. To make such a fundamental change to the arrest procedure would surely have required specific words removing the true owner from the equation altogether.

Not everything that Professor Hare had to say about the import of s 1(3) has subsequently been endorsed (in particular, his remarks about the extension of the associated ship provisions), but his prayer that the subsection be given a limited and sensibly purposive meaning does thus far seem to have been answered by the courts.

Section 1(3) has been considered in three reported cases: The Pacific Yuan Geng 2011 (4) SA 461 (WCC); The Chenebourg 2011 (4) SA 467 (KZD); and The Rio Coroni SCOSA A111 (KZD), CH Offshore Ltd v PDV Marina SA [2013] ZAKZDHC 62 (5 November 2013)).

In the first case, this Court, adopting a purposive construction, rejected the submission of counsel for the arresting party in that case that the ordinary, literal meaning had to be accorded to the word 'owner' in s 1(3), with the effect that the associated ship provisions in ss 3(6) and 3(7) applied for the purpose of enforcing a maritime claim against a charter by demise. The Court instead agreed with the commentary in Hofmeyr, Admiralty Jurisdiction Law and Practice in South Africa (1st edn) p 74 that

[u]nless s 1(3) is restrictively construed to apply only to claims in rem against the ship concerned in respect of which the charterer is liable, the section has far reaching results. Thus on a literal construction, the real owner of the ship who charters it by demise runs the risk of it being arrested by reason of the charterer at some stage, possibly even before the conclusion of the charter, having attracted liability in respect of another ship, either owned or chartered by demise by the charterer. It seems unlikely that this was contemplated.

In The Chenebourg, Kruger J agreed with the restrictive and commercially sensible construction applied to s 1(3) in The Pacific Yuan Geng. The Judge added ([19]) that there was

a further aspect which requires consideration. If one adopts the literal meaning of s 1(3), a situation will arise whereby the owner of a demise-chartered vessel will find that its vessel is subject to arrest and possible sale in respect of debts incurred in relation to some other vessel with which the owner of the demise-chartered vessel has no connection at all. This may have constitutional implications in that it may be in conflict with the constitutional bar on the arbitrary deprivation of property.

The relevance of these two judgments is that they confirm, albeit indirectly, that s 1(3) of the AJRA must be construed with due regard to the apparently intended object of its enactment. They both recognised that the deeming provision could not properly be construed to treat a charterer by demise in all respects as if it were the real or actual owner, for to do so would lead to obviously unintended consequences.

It is interesting, however, that the construction accorded to s 1(3) in both these judgments attributed to it the same import as the far more clearly worded provisions of s 21(4) of the Senior Courts Act 1981 (UK), which was apparently enacted to give statutory force to art 3.4 of the International Convention Relating to the Arrest of Sea-going Ships 1952 (the Arrest Convention 1952). Article 3.4 of the Convention provides:

When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claim. The provisions of this paragraph shall apply to any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship.

Article 3.1.b of the Arrest Convention 1999 contains a similar provision.

Indeed, the owner described art 3.4 of the Arrest Convention 1952 as 'the genesis' of s 1(3) of the AJRA. The plaintiff shared that view. That characteristic might well serve as a subliminal indication in the judgments in The Pacific Yuan Geng and The Chenebourg of the intended object of the provision, for there is little doubt about the proper meaning of the English provision. In The Rio Coroni, Ploos van Amstel J noted that: (i) care must be taken in applying the provisions of s 1(3) in the context of the operation of unrelated legislation (in this case the Companies Act 1973); and (ii) s 1(3) does not affect the nature of the demise charterer's rights in the vessel.

Accepting that s 1(3) of the AJRA was introduced to bring South Africa's statutory regime into line with the forementioned provisions of the Arrest Conventions in like manner to legislation to equivalent effect introduced in other parts of the world, affords a contextual basis for interpreting it as having the same import as those provisions. There is nothing in the Act to suggest any intention by the legislature by means of s 1(3) to alter the juristic character of a demise charterer's rights in the chartered vessel. Thus, there is nothing in the Act to support the notion that the subsistence of a demise charterparty displaces the owner’s proprietary rights in the vessel while the contract is in place.

If one accepts that it was not the object of s 1(3) to alter the incidence of the real ownership of the vessel liable to be arrested in rem by virtue of it being chartered under a demise charterparty, nor to detract from the effect inter se of the contractual relationship between the owner and the charterer by demise, then the evident intention in the enactment of the provision becomes readily apparent. It is to render vessels chartered by demise liable to arrest in actions in rem in respect of maritime claims against the charterer whereas, before the introduction of s 1(3), the vessels would have been liable to arrest in actions in rem only in respect of maritime claims against the owner. In other words, s 1(3) results in the charterers by demise being regarded for the purposes of the institution of an action in rem as if they were the real owner, but only for the purpose of making the vessels chartered by them subject to arrest. It is therefore the property of the real owner, not that of the deemed owner, that is placed at risk of arrest by the provision.

This is a construction that would be consistent with an intention by the legislature to bring our law in the relevant respect into line with that which in 2000 prevailed widely internationally and continues to do so. The practical need for such legislation and the policy considerations that inform it were, with respect, succinctly and accurately summarised by Steven Chong J (as he then was) in the High Court of Singapore in The Chem Orchid [2015] SGHC 50, [2015] 2 Lloyd's Rep 666 [78] in explaining the introduction, in 2004, of an equivalent provision into the Singapore High Court (Admiralty Jurisdiction) Act:

[T]hird parties who provide services to or load cargo on vessels will often be unaware that the particular vessel is on bareboat charter. Previously, this placed them in an acutely vulnerable position because bareboat chartered vessels were insulated from arrest. Following legal reforms in many jurisdictions, this is no longer the case ... . The consultation paper prepared by the Attorney-General's Chambers which preceded the 2004 Amendment in Singapore noted that, although allowing a bareboat chartered vessel to be arrested might, at first blush, appear rather 'startling' as it effectively allowed recovery against the shipowner for the liabilities of the charterer, this was nevertheless internationally acceptable and, on the whole, desirable because 'an effective admiralty regime should not cast the burden of determining ownership or other relationship with the vessel on the person dealing with the vessel' ... . The legislative scheme in Singapore today - as it is the case across many leading maritime jurisdictions - therefore appears to have struck the balance in favour of third parties who can now deal with a vessel safe in the knowledge that, regardless of whether the party with whom they directly transact is the owner or bareboat charterer, they can arrest the vessel as security for their claims.

The reason for singling out charterers by demise in s 1(3) of the AJRA and its (often better worded) equivalents in other maritime jurisdictions is that the other types of charterparty do not provide for the transfer of possession and control of the vessel to the charterer, and thus third parties dealing with the vessel will, unlike the situation when it is chartered by demise, transact with the owner or its agent, and not the charterer.

Construed in this manner, s 1(3) of the AJRA enables maritime claim creditors of a vessel's demise charterer to arrest the property of an unrelated party (ie the real owner) to obtain security for their claims. With reference to the language of s 359(1)(b) of the Companies Act 1973, the arrest of the vessel does not result in the 'attachment' of or 'putting into force of execution' against the charterer’s property. It is the real owner's property that is arrested, and thereby rendered liable to be sold to provide a fund, not the charterer's.

The owner’s contemplated first special plea proceeds from a misdirected apprehension of the effect of s 1(3) of the AJRA. The pleaded facts do not support the owner’s intended reliance on s 359(1)(b) of the Companies Act 1973 for its intended allegation that the arrest of the vessel was void and its prayer that the action in rem should consequently be dismissed.

[For the unsuccessful application for leave to appeal, see Van Niekerk v The MV 'Madiba 1' [2022] ZAWCHC 152 (CMI1978).]