Shipping Law: Co-ownership in Unregistered Vessels
Section 15 of the South African Ship Registration Act 58 of 1998 provides for ownership of shares in a South African ship by co-owners.
Registration of vessels on the SA Ship Register (as opposed to mere SAMSA certification) and the shares therein has various benefits, including a public recordal and prima facie proof of ownership in the vessel. It also allows the vessel to legally sail beyond the South African territorial waters as well as various other legal benefits and consequences.
However, the legal consequences of co-ownership in unregistered vessels are, as is the case with most other property in South Africa, determined in accordance with our common law:
The parties own the vessel in undivided shares, meaning that no owner is the sole owner of any particular portion of the vessel.
Parties may regulate their rights and duties by agreement between them, failing which the following common law principles will, inter alia, apply:
- Each owner is entitled to make reasonable use of the vessel. One owner cannot appropriate the vessel or any portion thereof for himself, or prevent another co-owner from using the vessel. The owners are not obliged to compensate their co-owners for their reasonable use of the vessel.
- The co-owners must share the profits from the vessel and are liable for the maintenance of the vessel pro rata their respective shares.
- A co-owner cannot be forced to remain an owner against his wishes. Every joint owner is at all times entitled to demand a termination of the joint ownership, unless a division had been otherwise agreed.
- A partition of co-ownership can take place voluntarily by agreement between the owners or by means of a Court Order.
- If the owners cannot agree on the partition of the co-ownership, a Court can be approached for the necessary order. The Court has a wide discretion to effect an equitable partition, but if it is impractical the Court can award the vessel to one co-owner on the basis that he must compensate the others for their shares, or that the vessel be sold by public auction and the proceeds shared among the owners.
For an arm’s length relationship between co-owners in respect of a vessel where owners may incur certain liabilities in terms of our shipping laws in lieu of their ownership per se, it is better to hold the vessel in a private company with limited liability of its shareholders generally.
Nonetheless, if the common law structure of joint ownership is to be adopted, it is imperative that the relationship between the co-owners be regulated by written agreement between them. Failing such agreement, unintended consequences may result from applicable common law principles.