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Associated ship arrest-vessel owners ordered to provide security to slot charterers for judgment obtained by slot charterers in Brazil – slot charterers qualifying as charterers for the purposes of associated ship arrest provisions in the AJRA

The facts

By a time charter party Kien Hung Shipping Co Ltd chartered the Andhika Loreto from its owners, Lady Loreto Shipping Inc.

Northern Endeavour Shipping assumed the rights and obligations of the owners under the charter party, renaming the vessel, the Northern Endeavour.

Kien Hung, Nippon Yusen Kabushiki Kaisha and CSAV concluded a slot-exchange agreement for the operation of a regular container service from the Far East to the East Coast of South America, via South Africa.

Kien Hung nominated the Northern Endeavour to undertake this service for a voyage from Pusan, South Korea, to Santos, Brazil, via various ports including Singapore and Durban.

At Singapore NYK loaded a number of containers on board the vessel in bay 22.

The vessel then sailed for Brazil. Near Cape Town the container stack in bay 22 collapsed and eleven containers were washed overboard and lost in storm.

Cargo underwriters, acting under rights of subrogation, instituted action against NYK in Brazil to recover the losses suffered. NYK was the carrier of the cargo under the bills of lading. NYK joined NES to the proceedings, claiming an indemnity.

The Brazilian court upheld both the cargo underwriters’ claim and NYK’s claim against NES. An appeal against that judgment failed. There was a further appeal pending before the highest court in Brazil.

 NES  aggrieved by this result sought to hold NYK responsible. They alleged that the reason for the collapse of the containers was improper stowage.

They contended that any amount they were ordered to pay NYK pursuant to the Brazilian judgment would constitute damages suffered in tort or delict, based on negligence.

They arrested the NYK Isabel, a vessel owned by Mercurius Shipping Pte Ltd, but controlled by its parent, NYK, as an associated ship, when she called at Durban. Security was furnished to secure the release of the vessel and there was then a deemed arrest in place in terms of s 3(10) of the Admiralty Jurisdiction Regulation Act 105 of 1983.

A writ of summons was served in the action and an appearance to defend delivered on behalf of both Mercurius and NYK. Particulars of claim were delivered as was a plea embodying a number of special pleas including one of res judicata.

NYK brought an application against NES claiming security for its claim in Brazil.

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