MV 'New Endeavor' and Others v Indian Oil Corporation Limited

Indian Oil Corporation Limited (respondent) concluded a voyage charterparty on 5 August 2020 with Porto Emporios Shipping Inc. (third appellant) for the carriage of 277,564 metric tonnes of crude oil on the MT 'New Diamond' to India. En route from Kuwait to India, the New Diamond caught fire, salvage services were rendered, a general average was declared, and the voyage was abandoned. Indian Oil transhipped its cargo to other vessels but suffered losses of approximately USD 70 million. Indian Oil pursued damages claims against Porto through arbitration in India. Indian Oil sought security by arresting the MV 'New Endeavor' (first appellant) as an associated ship of the New Diamond in terms of sections 3(6) and (7) of the Admiralty Jurisdiction Regulation Act 105 of 1983. The New Endeavor was owned by Elly Maritime SA (second appellant). An ex parte arrest order was granted on 30 May 2022, and an application for reconsideration of this order was dismissed by the KwaZulu-Natal High Court on 15 December 2022. The appellants appealed.

• Whether Indian Oil discharged the onus of establishing, on a balance of probabilities, the alleged association between the ship-owning companies of the New Endeavor and the New Diamond
• Whether the assertion of alternative sources of control (Adam Polemis alone or Adam Polemis together with his children) defeated the proof of a single repository of control required for association under the Act
• The proper interpretation and application of sections 3(6) and 3(7) of the Admiralty Jurisdiction Regulation Act 105 of 1983 concerning associated ships
• The standard and burden of proof required in applications for arrest of associated ships for security purposes under section 5(3) of the Act

The appeal was dismissed with costs, including costs consequent upon the employment of two counsel. The arrest of the MV 'New Endeavor' as an associated ship was upheld.

Where a maritime claimant seeks to arrest an associated ship for security purposes under sections 3(6) and 3(7) read with section 5(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983, the claimant bears the onus of proving association on a balance of probabilities. Association is established by proving that there is a single common repository of control over both the ship-owning company of the ship concerned and the ship-owning company of the associated ship at the statutorily relevant times. Control refers to actual ultimate control over the direction and policy of the company, not merely day-to-day management. The assertion of alternative sources of control does not defeat proof of association where the alternatives point to the same common source of control. Where a claimant presents prima facie evidence of association, including through hearsay evidence admissible under section 6(3) of the Act, and matters of control are peculiarly within the knowledge of the opposing party, less evidence is required from the claimant to discharge the onus. The failure of the party opposing arrest to provide countervailing evidence on matters within their peculiar knowledge is a relevant consideration in assessing whether the onus has been discharged on a balance of probabilities.

The Court made several non-binding observations: (1) The high court erred in its articulation of where the onus rested (paragraphs 6 and 37 of the high court judgment incorrectly suggested the onus shifted to the party opposing arrest), though this error did not affect the ultimate outcome. (2) Flags of convenience are very common in the shipping industry, with Panama and Liberia being the most common flags used for various purposes including lower taxes, avoiding strict regulations, and avoiding legal action through the use of nominee directors. (3) Family control is particularly prevalent in Greek shipping and may be sufficient to establish association where the operation of a fleet as a single entity managed by a single manager (often itself a family company) indicates a sufficient measure of common control. (4) The Act is intended to assist maritime claimants to enforce maritime claims, and its provisions should be given a generous interpretation consistent with this manifest purpose and with the constitutional right of access to courts in section 34 of the Constitution. (5) There is, however, a need for balance, and sections 5(2)(b) and (c) of the Act give courts the means to balance the interests of claimant and defendant by ordering counter-security and attaching conditions to orders of arrest in appropriate cases.

This judgment provides important guidance on the interpretation and application of the associated ship provisions in the Admiralty Jurisdiction Regulation Act 105 of 1983. It clarifies that: (1) the onus rests on the party seeking arrest to prove association on a balance of probabilities; (2) what is required is proof of a single common repository of control, not necessarily identification of specific natural persons; (3) control may be exercised through corporate vehicles and family structures; (4) pleading alternative sources of control does not defeat proof of association where the alternatives point to the same common source; (5) the concept of control refers to ultimate control over the direction and policy of ship-owning companies, not merely day-to-day management; (6) the failure of parties opposing arrest to provide countervailing evidence on matters within their peculiar knowledge is significant; (7) hearsay evidence including investigative reports and contemporaneous news articles is admissible under section 6(3) of the Act to prove control. The case demonstrates the courts' willingness to pierce through corporate structures and flags of convenience to identify true beneficial ownership and control in the shipping industry, consistent with the Act's purpose of making losses fall where they belong.