15 years on, has the legal Pandora's Box yet to be sealed? : a critical analysis of the majority in the Heavy Metal case and determination of the correct interpretation of the concept of 'control' as it relates to associated ship arrests.

Abstract

In respect of company law, there are two main principles that govern it. The first principle is that a company is a juristic person, having a separate legal identity and thus existing separately from the individuals who stand behind the corporate veil and enjoy the benefits of the company. The second principle is that of limited liability. Collectively, these two principles aim to promote capital investment whilst limiting the liability of potential investors. In the maritime industry however, these two principles serve an entirely different purpose. Ship-owners form ‘one-ship’ companies where each vessel within the same fleet is registered under the name of a different shipping company. Hence due to the separate legal identity of companies, claimants could only proceed against the guilty ship. In 1983 South Africa enacted its reform legislation by introducing the Admiralty Jurisdiction Regulation Act with the aim to provide consistency and certainty within the legal sphere of the maritime industry. In doing so, the legislature saw the opportunity to remedy the mischief created by ‘one-ship’ companies by introducing the associated ship provisions which based the central enquiry in such arrests on ‘common-control’ rather than ‘common ownership’. Thus, the purpose of the provision was to provide claimants with a mechanism to penetrate complex corporate structures so as to locate and hold the true debtor in a maritime dispute liable.

The general understanding therefore in associated ship cases was that the provisions concerned themselves with the ultimate or actual control of a shipping company. The leading case in interpreting the term ‘control’ is the Heavy Metal wherein the SCA adopted a restrictive and narrow understanding of ‘control’ which centralised the enquiry on the registered shareholder of a ship-owing company and in doing so, allowed for the existence of two repositories of control. It therefore allowed an association to be formed on the basis that the companies in question shared a common majority nominee shareholder without considering the fact that such a person may hold the said shares for two different entities. In this manner, the judiciary opened a ‘legal Pandora’s box’ in the sense that it created confusion and uncertainty in respect of the meaning to be acquainted to the term ‘control’. This dissertation will trace the background and history of the associated ship provisions so as to determine its nature, scope and underlying purpose. It will also conduct an investigation of the provisions and the relevant case law in order to determine what is meant by the term ‘control’. Lastly the dissertation will determine the correctness of the Heavy Metal case and its legal impact on courts applying its ratio.