Shipping 2014: South Africa

New building contracts

When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass? Usually shipbuilding contracts are negotiated on standard forms such as the SAJ form produced by the Shipbuilders' Association of Japan and the AWES form produced by the Association of European Shipbuilders and Shiprepairers. South African law generally recognises freedom of contract and accordingly parties to a contract are entitled to vary the terms by agreement. However, the Ship Registration Act No. 58 of 1998 provides that a ship is 'transferred by registration of a bill of sale in the prescribed form' and, consequently, ownership can only be transferred at that time and in that manner if a vessel is to be registered. What formalities need to be complied with for the refund guarantee to be valid? There are no prescribed formalities for the validity of a refund guarantee. Care, however, should be taken to ensure that it is not structured as a suretyship, in which event the terms thereof must be embodied in a written document signed by or on behalf of the surety for it to be valid. Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so? The court has discretion as to whether to grant a mandatory interdict or not. There are three requisites for the grant of a final interdict, all of which must be present: first, a clear right on the part of the applicant; second, an injury actually committed or reasonably apprehended; and third, an absence of any other satisfactory remedy available to the applicant. Being a drastic remedy from the yard's point of view and in the court's discretion, the court will not, in general, grant an interdict when the applicant can obtain adequate redress in some other form of ordinary relief. For that reason it is unlikely to order the building of the vessel but would be more likely to order the delivery of an already completed vessel. Where the vessel is defective and damage results, would a claim lie in contract or under product liability against the shipbuilder at the suit of the shipowner; a purchaser from the original shipowner; or a third party that has sustained damage? Section 61 of the Consumer Protection Act, No. 68 of 2008 imposes, subject to certain exceptions, liability for harm caused by or as a result of any defect, failure, hazard or unsafe goods, irrespective of whether the harm resulted from any fault on the part of the producer, importer, distributor or retailer, as the case may be. If, in a particular case, more than one person is liable, their liability is joint and several. Product liability is also actionable under the South African equivalent of the tort of negligence (the lex Aquilia) and is subject to the principles of fault (intentional or negligent action or omission), causation and remoteness. In appropriate circumstances a purchaser from the original shipowner might be able to pursue a claim against a shipbuilder. A claim in contract would only be available to the original shipowner who contracted with the shipbuilder, unless its rights under the shipbuild contract were validly assigned to a third party. Ship registration and mortgages

What vessels are eligible for registration under the flag of your country? Is it possible to register vessels under construction under the flag of your country? The Ship Registration Act, No. 58 of 1998 provides for the registration of vessels on the South African Register. In terms of the Act, vessels under construction are precluded from being registered on the South African register. However, it is arguable that once the vessel is 'capable of navigation by water' it will then meet the definition of a 'ship' as provided by the Act and be entitled to be registered. Who may apply to register a ship in your jurisdiction? The Act lists the categories of ships that are entitled to be registered on the South African register. These are: South African-owned ships (either wholly-owned by a South African national or owned as an undivided whole by three or more joint owners of whom the majority in number are South African nationals, or of which the majority of the 64 shares are owned by South African nationals as part or co-owners 'in common'); small vessels, other than fishing vessels, that are: wholly-owned by South African residents or South African residents and South African nationals; or operated solely by South African residents or South African nationals or both such residents and such nationals; and ships on a bareboat charter to South African nationals. The Act defines a South African national as:

a citizen; a body corporate established with a place of business in South Africa; or a trust controlled by a majority of South African nationals as trustees for a majority of South African beneficiaries; or the South African government. What are the documentary requirements for registration? In terms of the Ship Registration Regulations of 2002, the following documents must be provided to the registrar: an application for registration of the ship, made in writing; a description of the ship in accordance with the regulations; a description of the ownership of the ship; a copy of the charter party where the registration is necessitated by the bareboat charter to a South African national; a document establishing ownership and nationality; a written notice containing the name and address of the registered agent of the ship. This must be signed by both the agent and the owner; and evidence that the ship has been marked accordingly. Is dual registration and flagging out possible and what is the procedure? The Ship Registration Act No. 58 of 1998 prohibits dual registration unless the ship is owned by a South African national and it was acquired in terms of a judicially sanctioned sale or is bareboat chartered to a South African national and the written consent of the primary register has been obtained. The minister is empowered by the Act to make the necessary regulations regarding flagging out. However, these regulations have not yet been drafted or promulgated. Who maintains the register of mortgages and what information does it contain? The Ship Registration Act No. 58 of 1998 established the South African Ship Registration Office which is operated and maintained by the registrar of ships who is responsible for the maintenance of the Ships Register, subject to the directions of the South African Maritime Safety Authority (SAMSA). The registrar is obliged to register all mortgages filed in the prescribed form and in the order of their lodgement. The details of the mortgage are entered by the registrar on the Ships Register. Where there is a prior registered mortgage, the registrar is required to obtain the prior registered mortgagee's written consent before registering a subsequent mortgage. Limitation of liability

What limitation regime applies? What claims can be limited? Which parties can limit their liability? South Africa is not a party to any of the Limitation Conventions. The South African tonnage limitation regime is embodied in sections 261 to 263 of the Merchant Act No. 57 of 1951. The provisions are modelled loosely on the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships 1957 as amended by the protocol amending that Convention of 1979. The persons entitled to limit their liability include the owner of a vessel, any charterer, any person interested in or in possession of such ship, and a manager or operator of such ship. The provisions apply to any kind of vessel used in navigation by water, however propelled or moved. In the event that the only damages incurred are for loss of life or personal injury, claims are limited to the rand equivalent of 206.67 special drawing rights (SDR) for each ton of the ship's tonnage. In the event that the only damages incurred are for loss of or damage to property, claims are limited to the rand equivalent of 66.67 SDR for each ton of the ship's tonnage. In the event that both types of damages are incurred, claims are limited to the rand equivalent of 206.67 SDR for each ton of the ship's tonnage with claims in respect of loss of life and personal injury ranking ahead of property claims to the extent of 140 SDR for each ton of the ship's tonnage and both types of loss of life and personal injury claims ranking equally with claims relating to property in respect of the balance of the fund. Limitation probably does not apply to liability for the cost of wreck removal. What is the procedure for establishing limitation? The court has a wide discretion to give such directions as it deems fit with regard to the procedure in any claim for limitation, including the staying of any other proceedings and the conditions for the consideration of any such claim, which may include a condition that such amount as the court may order be paid to abide the result of the consideration of the said claim, or that the claimant be required to admit liability for all or any claims made against him or her, or any other condition that the court deems fit. The appropriate method of dealing with limiting as against a number of claims appears to be by way of limitation action. Limitation may also be pleaded as a defence to a claim but this method of raising limitation will only establish the right to limit liability as against the claimant in that claim and not as against any other claimants. There is no need to establish a limitation fund when pleading limitation as a defence. In what circumstances can the limit be broken? Limitation can be broken in the event that the person seeking to limit is not able to show that the event that occurred was caused without its actual fault and privity. The South African courts have followed the later English decisions in holding that fault and privity on the part of management is sufficient to break limitation. The...