No room for delay

SOUTH Africa's strategic geographic location makes its ports convenient and sometimes essential stopping points for repairs and the replenishing of bunkers and provisions. It is no coincidence that the Dutch East India Company decided to man the Cape as a victualling station for the Dutch merchants trading to the East Indies, establishing the first suppliers of necessaries at Cape Town in 1652.

The South African Admiralty Jurisdiction Regulation Act No 105 of 1983 empowers the high court to determine any maritime claim irrespective of where it arose, the flag of the ship concerned, or the residence, domicile, or nationality of its owner. A claim for the supply or rendering of necessary goods and services for the employment, maintenance, protection or preservation of a ship is a maritime claim as defined in the Act. Claims that may participate in a fund constituting the proceedings of the judicial sale of maritime property are listed in Section 11(4) of the Act, the order of their ranking furnished in Section 11(5). Section 11(4)(c) refers to a claim which arose not earlier than one year before the commencement of proceedings to enforce it, or before the submission of proof, and includes claims for necessaries.

Significantly, such claims rank ahead of the claim of a mortgagee. If, however, a claim referred to in Section 11(4)(c), subject to some exceptions, arose earlier than one year before the commencement of proceedings to enforce it, or before the submission of its proof, it is ranked after mortgagee claims.

In an appeal between Den Norske ASA, the applicant, and four necessaries claimants, the first to fourth respondents respectively, in the matter of the Forum Victory and The Fund Constituting the Proceeds of the Sale of the Forum Victory, the issue in question was whether, for the purposes of the section, a claim is to be regarded as having arisen when it comes into existence or when it becomes due and payable. The appellant maintained the former view, the respondents the latter.

The Forum Victory had been arrested in Durban harbour at the instance of a creditor. Further arrests followed, and the vessel and the bunkers were sold during February 1997 in pursuance of an order for its judicial sale. The proceeds constituted a fund, and a referee was appointed to investigate claims submitted against the fund. The mortgagee bank objected to the referee's recommendations on various grounds, one such ground being that the claims of various creditors, including those of the respondents whose claims would otherwise have fallen within the ambit of Section 11(4)(c), arose more than one year before the commencement of proceedings to enforce them or before submission of proof to the referee.

It was contended that these claims were not claims within the meaning of that section and had to be ranked at the back of the queue and, therefore, after the claim of the mortgagee. The size of the mortgagee's claim, however, was such that it would deplete the fund and defeat a recovery by the necessaries claimants. If the necessaries claims arose when they became due and payable, they would have arisen not earlier than one year before the commencement of proceedings, or before the submission of proof, and would trump the mortgagee claim. If, on the other hand, they arose when the work was done, the services supplied or the goods rendered, they would not have arisen within the one-year period referred to and would not constitute claims within the meaning of the section.

The court had elected to follow an earlier decision of the Durban and Coast Local Division rather than a more recent contrary decision of that division, holding that the claims referred to were claims which were due and enforceable, and not those which had merely come into existence.

It is necessary at this stage to examine Sub-section 10A(4)(a) of the Act, which provides that a claim which is subject to suspensive or a resolutive condition, or is otherwise not yet enforceable or is voidable, may be proved, where appropriate, on the basis of an estimate or valuation. But no distribution can be made in respect of it until such a claim has become enforceable or no longer voidable. The reference to the submission of proof of a claim in Section 11(4)(c) relates to the submission of claims to a referee as contemplated in Section 10A. This being so, the appeal court held 'there can be no doubt that a claim submitted to a referee may be one which falls within the ambit of Section 11(4)(c), but that it is apparent from Section 10A(4)(a) that a claim submitted to a referee need not yet be enforceable'. The appeal court held that it followed that a claim referred to in Section 11(4)(c) similarly need not be enforceable. Once it is accepted that a claim which is not yet enforceable can be one within the meaning of Section 11(4)(c), it seems that the construction most likely to have been intended by the legislature was that the expression 'a claim which arose' is to be understood as a reference to a claim which came into existence rather than to a claim which became enforceable. In other words, regardless of whether the claim was enforceable or not, the period of one year was intended to commence when the claim first came into existence.

Counsel for the respondent pointed out that certain anomalies could arise if the section was to be construed in the above matter. For example, if one of the respondents had been precluded from commencing proceedings because its claim had not been due on account of a delay caused by the death of a surveyor before making its final adjustment in respect of work done to the ship. The court found that in any system of ranking with cut-off dates and arbitrary rules, it is inevitable that situations will arise which appear anomalous and that in these circumstances 'there is little to be gained by attempting to construe Section 11 in the light of possible hard cases and what might seem fair or unfair from the point of view of a particular creditor or class of creditors.'

Necessaries claimants worldwide who seek to enforce their claims in South Africa would be well advised to take heed of this judgment and to act promptly in taking action against the debtor ship. There is no room for delay.