South Africa: Security Arrests – Security to be Established to Obtain Release

(Sea Venture Volume 19)

Yuryev Shipping Limited and Ilchenko Shipping Limited arrested the mv ''Belnor'' as an associated ship of AS Belfri, who owed them hire, for security for London arbitration proceedings.

The owners of the mv ''Belnor'' applied for an order that the vessel be released on the basis that the security arrest provisions in South Africa amount to arrests in rem, that, as such, all that is required to be put up by way of security is security to the value of the vessel and that as the vessel was mortgaged to more than her sale value there was no value in her and she should therefore be free to sail.

The court found that on the facts of this case the arrest was one in rem.

Counsel for the arresting creditors argued that in the light of the judgement in "The Indian Endurance" (No 2) : Republic of India & Another v India Steamship Co Ltd¹ an action in rem is converted to one in personam on service of the writ and, consequently, the security that must be established to procure her release is security to the value of the claim and not to the value of the property.

The court found that it did not have to decide this point. It turned to an examination of the relevant rule of court relating to actions in rem, being Rule 4(7), which reads-

''… a release warrant shall be issued only:-

(i) with the consent of the person who caused the arrest to be effected; or

(ii) on the giving of security in a sum representing the value of the property or the amount of the claims of the person who has caused the arrest to be effected.''

It found that the rule could only be interpreted to mean security sufficient to meet the full claim.

It further found that ''value'' in the rule does not mean unencumbered value.

The arrest was sustained.

Mts ''Mekhanik Yuryev'' and ''Mekhanik Ilchenko'': Yuryev Shipping Limited and Ilchenko Shipping Limited v mv ''Belnor'' (unreported judgement, Durban & Coast Local Division of the High Court of South Africa, Case No A140/2000, 7 June 2000).

With thanks to Tony Norton of Garlicke & Bousfield Inc, Durban, for preparing this article.

¹(1997) 4 All ER 380 at 391