Parent company guarantee held to be maritime claim
15 Mar 2016
In Kuehne & Nagel (Pty) Ltd v Moncada Energy Group, the Gauteng Division of the High Court (Johannesburg) recently highlighted the far-reaching scope of South African admiralty jurisdiction.
Kuehne & Nagel (K&N) sought to bring an action for a claim under a guarantee given by Italian company Moncada Energy Group on behalf of its South African subsidiary, CMSA.
The document in question guaranteed CMSA’s performance in terms of a forwarding services agreement concluded with K&N for freight forwarding and related services for the shipping of photovoltaic panels from Europe for a solar farm project in South Africa.
When a dispute over fees arose in terms of the forwarding services agreement, K&N decided to proceed under the guarantee. Given that the wording of the guarantee simply stated that disputes should be submitted exclusively to “the Court in South Africa” without specifying the applicable court, K&N sought to commence an action in the jurisdiction of the court where the document had been addressed and delivered. In response, Moncada argued, among other things, that the Johannesburg court lacked jurisdiction to hear the matter because the claim under the guarantee was a ‘maritime claim’.
Apart from limited exceptions, the courts in South Africa with admiralty jurisdiction are those which are adjacent to South African territorial waters (ie, excluding Johannesburg). Although it may seem that a parent company guarantee claim has no obvious connection to a maritime matter, the legislation provides that the term ‘maritime claim’ includes any claim for, arising out of or related to the remuneration of any person who acted as a forwarding agent.
The issue therefore turned on whether the guarantee claim ‘related to’ the forwarding services agreement. In his analysis of the matter, the judge paid close attention to the wording of the guarantee and the numerous references in the document to the underlying forwarding services agreement.
The judge applied the language in the guarantee to the words ‘relate to’ in the admiralty legislation and concluded that:
“the statutory enumeration of what is included in a ‘maritime claim’ is comprehensive. Matched with the wideness of ‘relating to’, it seems evident that the legislature was intent of casting the proverbial net wide. I suggest the reason for this and so the purpose for which the language was so cast, is that the legislature acknowledged that admiralty jurisdiction imports a specialised field of the law, and so as a matter of policy all issues that are connected with an admiralty issue should be decided by those courts that are seized with jurisdiction.”
This decision has important practical application in shipping commerce, given that parent company guarantees are widely used as a form of security for the performance of subsidiaries (particularly special purpose vehicles) in shipping contracts. Guarantees which are provided in the context of chartering, ship building and ship financing are good illustrations of this. As a result, this judgment should encourage claimants to arrest property owned by the guarantor in South Africa as security for foreign claims under guarantees, provided that the language of the guarantee is sufficiently closely connected to an underlying maritime claim as recognised in South Africa.(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)