Snow Delta sets the tone in South Africa

Bianca Bernardis-Larratt of Durban-based Adams & Adams looks at attachment of a time charterer's right, title and interest in the use and employment of a ship entering South African waters by

IN a judgment of a full bench of the Cape Provincial Division of the High Court it was held on appeal that a charterer's rights against owners exist in several places simultaneously and can consequently be capable of attachment by a creditor of the time charterer in any of those places.

The appeal essentially concerned the question of whether the rights of a charterer of a ship, in the terms of a time charter party, can be said to be 'property' which is located wherever the ship may be from time to time.

After debate on a number of procedural issues relating to the original interim order, which had been discharged, the court turned its attention to the central question of whether the rights of the charterer were capable of attachment in Cape Town. The court observed that rights in relation to contractual performance are classified as incorporeal. Obligations of a debtor are not classified as property, whereas the rights of the creditor related to that debt are classified as property. Obligations cannot be attached because they do not form part of the patrimony of the creditor, whereas rights can be attached because they form an asset in the estate of the creditor. Intangibles, by their nature, cannot have a physical locality but, for practical considerations, incorporeals are deemed to have a location in legal jurisprudence.

South African courts have long adopted the view that the situs of an incorporeal right is where the debtor resides. Corporeals have only one situs and, by analogy, the same ought to apply to incorporeals. The Supreme Court of Appeal (SCA) held that the flaw in the full court's approach could be demonstrated by reference to its consequences, being that if a personal right has the ability to exist in more than one place at a time, it would mean that it could be attached by more than one creditor and sold to more than one execution purchaser.

The SCA found that the full court had erred in that it had failed to distinguish between the personal right against the debtor and the vessel which was the subject matter of the agreement. It questioned whether the ship could have left the harbour after the attachment of the rights in personam, and if not, why not, since it had been made clear that personal rights can exist in more than one place at the same time. The SCA held that the full court had elevated an interest in an object to a right therein.

This judgment brings to an end the attachment of a charterer's right, title and interest in the use and employment of a ship entering South African waters. It returns the legal situation to the position where parties with claims against time charterers are limited to attachment of bunkers, containers or other property, within the jurisdiction of the court, in order to found jurisdiction for an in personam action. It is a disappointing judgment for the representatives of cargo interests and owners in respect of claims against charterers, and a victory for those acting on behalf of time charterers.

Whilst the decision may be in line with other jurisdictions, it is notable that it is the result of conservative judicial thinking, and is based on the appellant's argument only, the respondents having decided not to oppose the appeal.