Yuryev Shipping Ltd and Anr v mv ‘Belnor’ - High Ct (Durban and Coast Local Div)(Theron J) - 7 June 2000

Arrest of associated ship - Extent of security to be provided in order to obtain release of vessel - Whether value unencumbered by mortgage or whether market value

The vessel Belnor was arrested in rem as an associated ship in order to provide security for the applicants’ claims in a London arbitration. The issue was the extent of the security to be provided by the respondent vessel, pursuant to section 5(2)(c) of the Admiralty Jurisdiction Regulation Act No 105 of 1983 in order to obtain the release of the Belnor. The respondent argued that this should be the unencumbered value of the vessel - in other words, the amount of money which would become available in the event that execution took place pursuant to any judgment or arbitration award in their favour. The respondent said that the vessel was encumbered by a mortgage with an outstanding amount owing of US $18 million, which was in excess of the value of the vessel, which it said was between US $16.5 million and US $17 million. The respondent argued that in the event of an execution, the applicants would not get anything from the sale of the vessel. Since the purpose of the security was to render the arbitration award effective, there was no practical benefit to the applicants in arresting the vessel since it was so encumbered that if it was sold there would be no proceeds to distribute after the mortgage had been paid. On that basis, the applicants would not be able to give effect to any award they might obtain.