Updated: 28 July 1998
DRAFT AMENDMENT TO SECTION 11 OF THE AJRA See also: Admiralty Jurisdiction Regulation Act Website note: This draft bill has been prepared as an initiative of the Marine Division of the Department of Transport. There has been considerable input from the SA Maritime Law Association and the shipping industry, though the decision to amend the ranking to promote the mortgagee is a policy decision taken by the Department. Within the MLA are widely diverging views on the relative ranking of the mortgagee, the ship repairer and the necessaries man. The amendments to the order of priorities are intended to complement the Ship's Registration Act, which the DoT is also promoting and which was gazetted on 24 July 1998 as Bill 77 of 1998. The Bill is likely to be passed this parliamentary session. The draft amendments to sec. 11 have yet to be published for comment in the gazette, but preliminary comments on the draft would be welcomed via shiplaw@law.uct.ac.za. We will pass all comment to the DoT. Note that there is an Explanatory Memorandum attached to the draft. The current draft results from input during the AGM of the SA MLA in April, when it was resolved to ask the Department to allow a three-month priority to ship repairers and necessaries suppliers over the claims of mortgagees. The draft was last updated on 27 July 1998.

REPUBLIC OF SOUTH AFRICA 

ADMIRALTY JURISDICTION REGULATION AMENDMENT BILL

(As introduced in the National Assembly)

[B - 99]

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GENERAL EXPLANATORY NOTE:

[ ] Words in bold type in square brackets indicate omissions from existing enactments.
Words underlined with a solid line indicate insertions in existing enactments.

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B I L L

To amend the provisions of the Admiralty Jurisdiction Regulation Act, 1983, relating to the ranking of claims; and to provide for related matters.

BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:—

Amendment of section 11 of Act 105 of 1983, as substituted by section 9 of Act 87 of 1992

        1. Section 11 of the Admiralty Jurisdiction Regulation Act, 1983 (Act No. 105 of 1983), is amended—

(a) by the substitution for paragraph (a) of subsection (1) of the following paragraph:

"(a) If property mentioned in section 3(5)(a) to (e) is sold in execution or constitutes a fund contemplated in section 3(11), the relevant maritime claims mentioned in subsection (2) shall be paid in [the order prescribed by] accordance with subsections (5) and (11).";

(b) by the substitution for subsections (4), (5) and (6) of the following subsections, respectively:

"(4) The claims mentioned in subsection (2) are the following, namely:

(a) a claim in respect of costs and expenses incurred to maintain, preserve or keep custody of the property in question or to procure its sale and in respect of the distribution of the proceeds of the sale;

(b) a claim which arose not earlier than one year before the commencement of proceedings to enforce it or before the submission of proof thereof and which is a claim—

(i) in respect of the salvage of the ship, removal of any wreck of the ship, and any contribution in respect of a general average act or sacrifice in connection with the ship;

(ii) in respect of wages and other sums due to, or payable in respect of, the master, officers and seamen of the ship in connection with their employment on the ship;

(iii) in respect of disbursements by the master of the ship;

(iv) in respect of loss of life or personal injury, whether occurring on land or on water, directly resulting from the operation of the ship;

(v) in respect of port, canal, other waterway and pilotage dues, and any charge, levy or related penalty imposed under the South African Maritime Safety Authority Act, 1998 (Act No. 5 of 1998), or the South African Maritime Safety Authority Levies Act, 1998 (Act No. 6 of 1998);

(vi) in respect of loss of or damage to property, whether occurring on land or on water, resulting from delict, and not giving rise to a cause of action based on contract, and directly resulting from the operation of the ship;

(bA) a claim which arose not earlier than 90 days before the commencement of proceeding to enforce it or before the submission of proof thereof and which is a claim in respect of the repair of the ship, or the supply of goods or the rendering of services to or in relation to the ship for the employment, maintenance, protection or preservation thereof;

(c) a claim in respect of any mortgage or hypothecation of, and any other charge on, the ship, effected or valid in accordance with the law of the flag of the ship;

(d) a claim which arose within the period referred to in paragraph (b) and which is a claim—

(i) in respect of the repair of the ship, or the supply of goods or the rendering of services to or in relation to the ship for the employment, maintenance, protection or preservation thereof, other than such a claim covered by paragraph (bA);

(ii) in respect of premiums owing under any policy of marine insurance with regard to the ship or the liability of any person arising from the operation of the ship;

(iii) by any body of persons, whether corporate or not, in respect of contributions with regard to the protection and indemnity of its members against a liability mentioned in subparagraph (ii);

(e) a claim in respect of any maritime lien on the ship not covered by any of the preceding paragraphs;

(f) any other maritime claim.

(5) The claims mentioned in subsection (4) shall rank in accordance with the following rules, namely:

(a) claims shall rank in the order in which they are set forth in subsection (4): Provided that where a claimant would, under the law of insolvency, be entitled to a preference by reason of a pledge or a right of retention, the relevant claim shall rank before any other claim, except—

(i) any claim mentioned in paragraph (a) of subsection (4);

(ii) any claim in respect of the salvage of the ship which arose within the period referred to in paragraph (b) of subsection (4); and

(iii) any claim in respect of any other maritime lien on the ship which arose before the claimant became entitled to such preference and which would otherwise have ranked before the relevant claim;

(b) any claim mentioned in any paragraph or subparagraph of subsection (4) shall rank pari passu with any other claim mentioned in the same paragraph or subparagraph, irrespective of when such claims arose, save that—

(i) claims mentioned in paragraph (b)(i) of subsection (4) shall, among themselves, rank in the inverse order in which they arose;

(ii) claims mentioned in paragraph (c) of subsection (4) shall, among themselves, rank according to the law of the flag of the ship;

(iii) claims mentioned in paragraph (f) of subsection (4) shall be paid in the order in which they would be paid and enjoy the same preference they would if they were claims in insolvency;

(iv) where, by reason of the operation of the proviso in paragraph (a) of this subsection, the relevant claim ranks in priority to certain claims mentioned in any paragraph or subparagraph of subsection (4) but not in priority to other claims mentioned in the same paragraph or subparagraph, the higher ranking claims shall rank pari passu among themselves and the lower ranking claims shall rank pari passu among themselves.

(6) For the purposes of subsections (4) and (5), a claim in connection with salvage or the removal of wreck shall be deemed to have arisen when the salvage operation or the removal of the wreck, as the case may be, terminated, and a claim in connection with contribution in respect of general average, when the general average act occurred.";

(c) by the substitution for paragraphs (a) and (b) of subsection (11) of the following paragraphs, respectively:

"(a) all claims which fall under paragraphs (b) to [(e)] (f) of subsection (4) and which arose in respect of a ship in relation to which the ship giving rise to the fund is such an associated ship as is contemplated in section 3(7)(a)(i), shall rank immediately after claims which fall under the said paragraphs and which arose directly in respect of the ship giving rise to the fund concerned [and after any claims which fall under paragraph (f) of subsection (4) and which arose from, or are related directly to, the operation of (including the carriage of goods in) the ship giving rise to the fund concerned];

(b) all claims which fall under paragraphs (b) to [(e)] (f) of subsection (4) and which arose in respect of a ship in relation to which the ship giving rise to the fund is such an associated ship as is contemplated in section 3(7)(a)(ii) or (iii), shall rank immediately after any claims mentioned in paragraph (a) of this subsection [or, if there are no such claims, immediately after claims which fall under the said paragraphs and which arose directly in respect of the ship giving rise to the fund concerned];";

(d) by the insertion after paragraph (b) of subsection (11) of the following paragraph:

"(bA) any claims which fall under paragraph (f) of subsection (4) and which are not covered by paragraph (a) or (b) of this subsection shall rank immediately after any claims mentioned in the said paragraph (b);";

(e) by the substitution for paragraph (c) of subsection (11) of the following paragraph:

"(c) the provisions of subsections (5) and (9) shall apply with regard to any claim mentioned in paragraph (a), [or] (b) or (bA)."; and

(f) by the substitution for subsection (13) of the following subsection:

"(13) Any balance remaining after the claims mentioned in [paragraphs (a) to (e) of] subsection (4) [and the claims mentioned in subsection (11)] have been paid, shall be paid over to any trustee, liquidator or judicial manager who, but for the provisions of section 10, would have been entitled thereto or otherwise to any other person entitled thereto.".

Short title

2.   This Act is called the Admiralty Jurisdiction Regulation Amendment Act, 1999.

MEMORANDUM ON THE OBJECTS OF THE ADMIRALTY JURISDICTION REGULATION AMENDMENT BILL

1. The Admiralty Jurisdiction Regulation Amendment Bill amends the Admiralty Jurisdiction Regulation Act, 1983 (Act No. 105 of 1983). Its objectives are to enhance the security afforded by ship mortgages, hypothecs and like charges, and to adjust and simplify the ranking of certain other maritime claims.

2. The Bill adjusts the ranking of claims against the fund constituted by the sale of property mentioned in section 3(5)(a) to (e) of the principal Act, and effects consequential amendments to related provisions. The adjustment of the ranking in respect of mortgages, hypothecs and like charges seeks to enhance their security. The resultant ranking reflects the following principal changes:

(a) Claims in respect costs and expenses to preserve the property, etc., are extended to cover also costs and expenses incurred to maintain or keep custody of the property;

(b) claims in respect of salvage, wreck removal and general average are subjected to the "one year" rule and rank after the claims mentioned in (a);

(c) claims in respect of masters’ disbursements are included as a separate category of one-year claims, ranking after claims arising out of the employment of masters, officers and seamen; and both categories of claim rank in that order after the claims mentioned in (b);

(d) one-year claims in respect of loss of life and personal injury rank after the claims mentioned in (c) and before the remaining one-year claims;

(e) claims in respect of repairs and supplies rank before claims in respect of mortgages, hypothecs and like charges, provided they are enforced or proved within 90 days, otherwise claims in respect of mortgages, hypothecs and like charges rank before claims in respect of repairs and supplies, marine insurance premiums, etc., mutual protection and indemnity contributions, and other maritime liens and maritime claims;

(f) claims in respect of which claimants would, under the law of insolvency, be entitled to a preference by reason of a pledge or a right of retention are treated as an exception to the general rule that claims rank in the order in which they are set forth, ranking before all other claims, except claims mentioned in (a), one-year salvage claims and other prior and otherwise higher-ranking maritime liens.

3.   The ranking of claims is simplified by the abolition of the exceptional treatment of "(f) claims" mentioned in subsection (4) of the principal Act. This has two results:

(a) All (f) claims are paid out of the fund, along with the other claims mentioned in subsection (4), before any balance is handed over in accordance with section 11(13) of the principal Act; and

(b) the distinction between direct (f) claims and other direct claims is removed in cases where the fund is constituted by the sale of an associated ship. The resultant queues are then as follows: direct (a) to (f) claims; ownership associated (b) to (f) claims; control associated (b) to (f) claims; and, lastly, any (f) claims not covered by the aforementioned queues.

4.   The Bill should be dealt with in accordance with section 75 of the Constitution of the Republic of South Africa, 1996.

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