Authored by Nick Veldman and Adam Butler.
The Supreme Court of Appeal (SCA) has clarified the standard of proof required in arresting associated ships and the evidence that will meet this standard. Unrebutted hearsay evidence can in certain instances be sufficient proof to establish ship ownership on the balance of probabilities.
When a claimant has a maritime claim against a ship, South African admiralty law permits a claimant to arrest an associated ship instead of the ship against which the claim arose. The requirement of association is satisfied where both vessels are ultimately controlled by the same person. The regime is useful because maritime claims are often against single-purpose shell companies with no assets other than the ship. In those circumstances, claimants face serious difficulty in enforcing claims or obtaining security against the ship concerned, and the associated ship mechanism provides a significant alternative.
The dispute arose from an alleged breach of a charterparty. With arbitration pending in London and the shipowner being a shell company with no attachable assets, the charterer sought security by arresting an alleged associated ship in South Africa. To prove association, the charterer produced evidence that the head of a family-owned shipping group exercised indirect control over both ships' owners through a management company that the family controlled. Both vessels shared the same registered address, the same operations manager, the same fleet branding, and, per third-party database records, the same beneficial owner – though no direct evidence of this was available. The arrest was granted ex parte, that is, without the shipowner as a party before the court.
On reconsideration, the High Court set aside the arrest. It found that family connections alone were insufficient to establish control and that the database reports carried little or no weight. Importantly, in a reconsideration application, the shipowner need not put up its own evidence, but merely argues that, on the evidence already before the court, the arrest should not have been granted. On reconsideration, the High Court therefore found that the evidence already adduced was not sufficient to establish the association on a balance of probabilities.
On appeal, the SCA overturned the High Court’s reconsideration decision. Because the facts bearing on association (such as the ownership structures of the alleged associated companies) were exclusively within the shipowner’s knowledge, less evidence was required of the claimant to prove its case. The ship-owning companies were incorporated in the Marshall Islands, which does not require public disclosure of share registers, and the claimant had no means of independently verifying the ownership structure. The shipowner accordingly had to provide evidence to rebut the charterer’s case. In the absence of any positive evidence or case by the shipowner, while no adverse inference can be drawn, the SCA emphasised that there may be substantive evidential consequences because the arresting party has adduced evidence, and the shipowner none. If, therefore, the evidence from the arresting party establishes association on a balance of probabilities, and there is no countervailing evidence, the standard for an arrest is met.
Taking the evidence as a whole, the SCA found that the chain of control was established. The SCA confirmed that association must be proved on a balance of probabilities, not merely at face value. The point is that common control may be proved by the cumulative effect of credible circumstantial evidence, particularly where direct ownership records are not publicly available. In this case, where the evidence was uncontroverted and the relevant facts were exclusively within the shipowner’s knowledge, the charterer’s evidence was sufficient to meet the balance of probabilities standard.
These principles align with precedent, but this case remains noteworthy for the comparative lack of direct evidence on which the arrest was established. It is a warning to shipowners that in the absence of any positive case at all, even hearsay evidence may yet be sufficient to uphold an arrest.