MV 'TARIK III' - Credit Europe Bank N.V. v The Fund Comprising the Proceeds of the Sale of the MV Tarik III and Others

The vessel MV Tarik III was subject to a bareboat charter between Garanti Finansal Kiralama A.S. (owner) and Caliskan Ic Ve Dis Ticaret Sanayi A.S. (charterer). Caliskan defaulted on payments. On 15 April 2014, Garanti sent a notice of termination requiring payment within 60 days, failing which the charter would terminate. On 24 April 2014, the parties concluded a revised payment plan. Credit Europe Bank N.V. (the appellant) arrested the vessel on 26 May 2014 in an in rem action based on claims against Caliskan, relying on the deeming provision in s 1(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983. The vessel was sold by judicial auction on 4 February 2015, creating a Fund. Various creditors (second to eighteenth respondents, referred to as the opposing suppliers) lodged claims against the Fund, also relying on the deeming provision. A referee recommended payment of the opposing suppliers' claims, which would rank ahead of the appellant's and exhaust the Fund. The appellant objected, arguing: (1) the bareboat charter had terminated on 15 June 2014, so the deeming provision did not apply to claims lodged thereafter; and (2) claimants must have arrested the vessel prior to sale to rely on the deeming provision.

• Whether the bareboat charter agreement had terminated on 15 June 2014 or remained extant at the time the opposing suppliers lodged their claims
• Who bears the onus of proving the existence or termination of the bareboat charter agreement in claims proceedings against a fund
• Whether a claimant against a fund must have arrested the vessel prior to its judicial sale in order to rely on the deeming provision in s 1(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983

Appeal dismissed with costs, including costs of two counsel. The claims of the opposing suppliers against the Fund were upheld.

The binding legal principles established are: (1) Where an agreement has been admitted or proved to exist by the parties to it, and a third party asserts that the agreement has terminated, the onus of proving termination rests on the party asserting it, as this constitutes a special defence and requires proof of a negative by the opposing party. (2) Under s 1(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983, when a vessel subject to a bareboat charter is sold pursuant to s 9 and a fund is constituted, that fund is deemed to be the property of the demise charterer (by virtue of ss 3(11)(a)(ii), 3(11)(b) and 1(3)) for purposes of claims based on the charterer's liability. (3) Once a court has ordered the sale of a vessel and made an order under s 10A(1) staying all proceedings and directing that claims be proved through a referee process, it is not necessary for a claimant to have arrested the vessel prior to its sale in order to lodge a claim against the fund constituted from the sale proceeds. Requiring such arrest would be a purposeless formality contrary to the Act's aims of expeditious and efficacious determination of claims.

Ponnan JA noted that it may not even be open to a party to an agreement to set aside the result of a validly performed agreement on the basis of formal non-compliance, much less a stranger to the agreement (citing Wilken v Kohler 1913 AD 135). The court also observed that where parties perform an agreement in the genuine belief it is legally binding, resorting to formal non-compliance defenses suggests opportunistic motives rather than genuine evidentiary concerns. Gorven JA in dissent stated that a referee functions as an "initial sorting agent" for claims, and that a claim remains merely a claim until pronounced upon by a court. Where claims are unchallenged, this operates as an informal admission, but disputed claims must be proved in the normal course with the claimant bearing the onus.

This case is significant for South African admiralty law as it: (1) clarifies the incidence of the onus of proof in relation to claims against funds constituted from judicial sales of vessels, particularly where the existence or termination of an underlying agreement (such as a bareboat charter) is disputed; (2) establishes that when parties to an agreement both accept its continued existence, a stranger to that agreement who seeks to assert its termination bears the onus of proving that termination; (3) confirms that claimants need not arrest a vessel prior to its judicial sale in order to lodge claims against the fund created from the sale proceeds, particularly where a court order has stayed proceedings and established a referee process for proving claims; (4) interprets the deeming provision in s 1(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983 in the context of claims against funds; and (5) demonstrates the application of the "purposeless technicality" principle in admiralty procedure.