IN THE HIGH COURT OF SOUTH AFRICA CAPE PROVINCIAL DIVISION. Exercising its Admiralty Jurisdiction P & O NEDLLOYD LIMITED

Transcription

1 REPUBLIC OF SOUTH AFRICA IN THE HIGH COURT OF SOUTH AFRICA CAPE PROVINCIAL DIVISION Exercising its Admiralty Jurisdiction Case No: AC87/01 In the matter between: P & O NEDLLOYD LIMITED Applicant and UNITED AFRICAN LINES (PTY) LIMITED Respondent JUDGMENT DELIVERED ON 7 JULY 2003 SELIKOWITZ J:

2 SELIKOWITZ J: This is yet a further step in an ongoing dispute between the parties which has been aired before a number of Judges both in this division as also in the Durban and Coast Local Division of the High Court. The various applications have been heard pursuant to both the admiralty jurisdiction and the ordinary jurisdiction or, as it was referred to by Counsel, the parochial jurisdiction of the High Court. On this occasion the Court is exercising admiralty jurisdiction. The various proceedings decided to date do not appear to have brought the parties any closer to the determination of the real disputes and issues between them. On 25 May 2001 this Honourable Court granted an order in terms of section 5(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983 as amended ( the Admiralty Act ) authorising and directing the Sheriff for the district of Cape Town to arrest Respondent s right, title and interest in an to an order for costs made in Respondent s favour by the Durban and Coast Local Division of the High Court in Case No. 8547/2000. The case in question was part of the ongoing litigation between the parties. The purpose of the arrest was to provide security for a claim in reconvention which, Applicant intended to institute against Respondent in an action brought by Respondent in this Court (exercising parochial jurisdiction ) for recovery of R ,50 being charges allegedly owing by Applicant to Respondent in respect of the transport of containers. The claim in reconvention was for an amount of R The Sheriff for the district of Cape Town duly gave effect to the Order and arrested the costs order in question. On 9 October 2001 the Respondent brought an application for an Order that this Court s arrest be set aside with costs, including the costs of two counsel.

3 After a number of postponements the application to set aside the arrest was argued before me. Section 5(3)(a) of the Admiralty Act provides that: A court may in the exercise of its admiralty jurisdiction order the arrest of any property for the purpose of providing security for a claim which is or may be the subject of an arbitration or any proceedings contemplated, pending or proceeding, either in the Republic of elsewhere, and whether or not it is subject to the law of the Republic, if the person seeking the arrest has a claim enforceable by an action in personam against the owner of the property concerned or an action in rem against such property or which would be so enforceable but for any such arbitration or proceedings. It is now settled that an applicant for an arrest in terms of section 5(3) of the Admiralty Act is required to satisfy the court: (1)that it has a claim enforceable by an action in personam against the owner of the property arrested or an action in rem against such property; (2)that it has a prima facie case in respect of its claim which is prima facie enforceable in the nominated forum of its choice; and (3)that it has a genuine and reasonable need for security in respect of the claim. (See: Cargo Laden and Lately Laden on Board the MV Thalassini Avgi v MV Dimitris, 1989 (3) SA 820 (A) at 832I 833A; Bocimar NV v Kotor Overseas Shipping Limited, 1994 (2) SA 563 (A) at 578G 579E. In regard to the second of the above requirements an arrestor need show no more than that there is evidence which, if accepted, will establish its cause of action. (See: Bradbury Gretorex Co (Colonial) Limited v Standard Trading Co (Pty) Limited, 1953 (3) SA 529 (W) at 533C D; The MV Thalassini Avgi, (supra) at 831I J; Bocimar NV, (supra) at 579E.

4 The onus of establishing the requirement for an arrest in terms of section 5(3) is upon the party seeking the arrest order. Where the order has been obtained ex parte, as in the instant case, the original applicant retains that onus when Respondent applies to set aside the order. Furthermore, for the purpose of resisting an order to set aside the arrest, Applicant is entitled to rely, not only upon what is stated in its founding papers in the arrest application, but also upon the allegations contained in the answer to the application to set aside the order. As was said by Botha JA in The MV Thalassini Avgi (supra), at p.834: The incidence of the onus in such a situation is of importance in this case. In the Bradbury Gretorex case supra, it was pointed out by Steyn J at 531A - D that an applicant cannot by obtaining ex parte an order in his favour secure a more advantageous position than he would have been in if the other party had had an opportunity of putting counter-allegations before the Court; consequently, if the other party applies for the setting aside of the order, the original applicant retains the onus of satisfying the Court that he was entitled to it. That approach was applied, correctly in our view, in the context of applications for setting aside the arrest of a ship procured in terms of s 3(4) and (5) of the Act in Transgroup Shipping SA (Pty) Ltd v Owners of MV Kyoju Maru 1984 (4) SA 210 (D) at 214I and Transol Bunker BV v MV Andrico Unity and Others 1987 (3) SA 794 (C) at 799D, and it must apply equally to an order for arrest obtained ex parte in terms of s 5(3)(a). In the last mentioned case, Transol Bunker BV (supra ), Marais J held (at 799H) that in an application for the setting aside of an order of arrest the party who obtained the order may advance any ground to justify the arrest irrespective of whether or not he relied upon it initially in obtaining the order. We agree with this finding and, generally speaking, with the reasoning of the learned Judge in support of it (see at 799A 800D), and we would apply the finding to orders obtained under s 5(3)(a). One further observation should be made in regard to an application by the shipowner for setting aside such an order. While the party who obtained the order bears the same onus of justifying the granting of it as would have applied had the original application been opposed after notice to the shipowner, the latter, by the same token, remains burdened with the onus of proving any countervailing circumstances which he could have raised and proved in answer to the original application. (See also: Bocimar NV (supra) at 580I) In its application to set aside Applicant s arrest Respondent has raised three points in limine:

5 (1) When moving its application before this Honourable Court on 25 May 2001 Applicant breached its duty to make a full disclosure of all relevant facts which might be material in determining whether or not the arrest should have been granted. More particularly Applicant failed to disclose that there had been other proceedings between the parties in Durban in which proceedings Respondent had brought an application for certain Anton Piller type relief for the return of documentation which Applicant should properly have returned at an earlier stage and thereafter proceedings in which Respondent sought an order declaring Applicant and one of its employees to be in contempt of the court order. (2)Applicant s claim is not a maritime claim as described in the Admiralty Act and therefore is not a claim which is enforceable by this Court in the exercise of its Admiralty Jurisdiction. (3)Applicant has not demonstrated that it has a genuine and reasonable need for security. The Court heard detailed, extensive and erudite argument from Counsel in regard to the issues raised in the three points in limine as also on the merits of the application. The argument on the first point extended beyond the materiality of the facts which Respondent alleges should have been disclosed to include the exceptio res judicata and the doctrine of issue estoppel. The issues debated by counsel in respect of the second point involved detailed argument as to whether Applicant s claim in reconvention is a maritime claim as defined by the Admiralty Act. The claim is pleaded as a claim for recovery of monies allegedly paid in the bona fide, reasonable but mistaken belief that certain invoices rendered by Respondent to Applicant were due and payable. Applicant alleges that the invoices were fraudulently, alternatively negligently submitted and that Respondent is liable to repay the amounts paid. The alleged false invoices reflect charges for the transport of containers. Clearly the transport reflected on the false invoices did not occur leaving the question open as to whether Applicant s claim can

6 be characterised as a claim arising out of or relating to... any container or any agreement relating to any container as required by relevant portion of the definition of maritime claim in section 1(1)(i) of the Admiralty Act. The third point in limine examines whether on the evidence before the Court, Applicant has discharged the onus of establishing on a balance of probabilities that it has a genuine and reasonable need for security in respect of the claim it makes. At the time of the hearing Applicant had given notice of its intention to amend its claim in reconvention. The proposed amendments, which were opposed in line with the inevitable approach of both sides to every step taken in the dispute have the effect of increasing the quantum of Applicant s claim in reconvention to R1, 364, After careful consideration of the many detailed arguments made and an analysis of all the issues, I have reached the conclusion that the current matter can and ought to be disposed of by deciding the third point in limine. Prima facie proof is insufficient in order to prove that Applicant has a genuine and reasonable need for security in respect of the claim. (See: Bocimar NV (supra) at 580I) In The MV Thalassini Avgi (supra) at p.832f Botha JA observed that: An applicant for an order in terms of s 5(3)(a) must satisfy the Court that he needs security in respect of his claim. This requirement was fully discussed in the case of The MV Paz (supra ) by Friedman J at 268B C and by Didcott J at 269I 270B. In that case, the main proceedings had already been commenced and were pending in Hong Kong, and in view of the circumstances of that case particular aspects of the need to obtain security in a South African Court required to be emphasised (see eg per Friedman J at 268C E). The need for such emphasis does not arise in the present case where the main proceedings are yet in contemplation. Subject to that observation, however, we are, with respect, in general agreement with what was said in the MV Paz case on this

7 score. By way of summary it may perhaps be said that an applicant must satisfy the Court, in the words of Didcott J, 'that his need for security is both genuine and reasonable', a criterion which would embrace the further refinements mentioned in the judgments, such as that the applicant must explain that he is not bent on merely harassing the other side, and so forth. In Katagum Wholesale Commodities v The MV Paz, 1984 (3) SA 261 (N) at 268 B C, Friedman J said: In the first place, an applicant should make averments that will satisfy the Court prima facie that he has reasonable prospects of success in the main proceedings. In addition, as Mr Shaw candidly conceded, it must be expected of an applicant that he will say why he needs the assistance of a South African Court. Where, therefore, the application is one to obtain security for a claim sounding in money, it will be at least expected of an applicant that he allege and explain: (a) why he needs security; (b) that he has not already obtained security; and (c) that he cannot obtain such security in the other contemplated or pending arbitration or proceedings. And at 269I to 270B Didcott J added: It is a serious business to attach a ship. To stop or delay its departure from one of our ports, to interrupt its voyage for longer than the period it was due to remain, can have and usually has consequences which are commercially damaging to its owner or charterer, not to mention those who are relying upon its arrival at other ports to load or discharge cargo. Especially when the attachment is sought ex parte, as can be and almost always is done, the Court must therefore be given sufficient information to show that a measure with results so harmful to others is nevertheless necessary for the protection of the applicant's legitimate interests. It will therefore want to assure itself, for instance, that his claim in the main proceedings is apparently no spurious one, that he is not bent on merely harassing the other side in these or gaining a tactical advantage in relation to them, that his need for security is both genuine and reasonable, that no alternative and less disruptive opportunity for obtaining such has been or is likely to become available to him and, if one has already been lost, that this was not his fault or, I should rather say, not his fault to such a degree as to be fairly held against him. The Court must be told enough to put it at its ease on all these scores.

8 The circumstances of The MV Thalassini Avgi and The MV Paz involved the arrest of a ship. The remarks are clearly directed towards the potentially damaging consequences of the arrest of a ship. Here we are dealing with the arrest of an order for costs. The costs have been taxed and allowed at R58 841,74. The Admiralty Act, however, treats all arrests in terms of section 5(3) equally. The Admiralty Act imposes the same requirement for the arrest of a costs order as for the arrest of a ship. Furthermore there are potential difficulties which apply to the arrest of all assets whatever their nature and intrinsic value. Property arrested in terms of section 5(3) creates a preference. (Section 9). It may not vest in a liquidator if the defendant is wound up. (Section 10). It forms part of the ranking provided for claims (section 11(4)(f)). All of these consequences have potentially serious detrimental effects on the defendant and its other creditors. Our law has traditionally frowned upon an incola being required to furnish security and it is only since the Companies Act of 1926 that companies have been obliged to give security for costs and then only where there is credible evidence that there is reason to believe that it will be unable to satisfy the costs of an adverse judgment. (See: section 13 of Act No. 61 of 1973 for the current enactment). I am of the opinion that for an applicant to discharge the onus of establishing a genuine and reasonable need for security it must, in all cases, present evidence to satisfy the court, on a balance of probabilities, that there is a necessity for security which arises from established facts and circumstances. I turn to examine the evidence from which the court is asked to infer that Applicant has a genuine and reasonable need for security.

9 The founding affidavit for the ex parte application was made on Applicant s behalf by its attorney. In regard to Applicant s need for security he states: Applicant s need for security I respectfully submit that the Applicant has both a genuine and reasonable need for security in respect of its claim against the Respondent. The Applicant has caused a deeds office search to be carried out which has revealed that no immovable property is registered in the name of Respondent. (Para [35]) The Applicant has determined that the Respondent bank accounts [sic] with the ABC Branch of the Standard Bank of South Africa and with the Durban Central Branch of ABSA Bank. The Applicant intends to apply to the Durban and Coast Local Division of the High Court for an order for the arrest of the Respondent s right to claim payment of such funds as may stand to its credit in the aforesaid bank accounts as further security for its claim in terms of section 5(3) of the Act. At this stage, however, the Applicant has no knowledge as to what funds, if any, stand to the credit of the Respondent in this [sic] bank account. (Para [36]) In the light of the aforegoing, in my respectful submission, it is apparent that should the Applicant obtain judgment against Respondent, there is a real risk that it will be unable fully to execute such judgment in the event of its not obtaining security in respect of its claim. Para ([37]) Applicant accordingly submits that it has a genuine and reasonable need for security in respect of its claims against Respondent. (Para [38]). That is the sum total of the evidence in support of Applicant s genuine and reasonable need for security in the founding papers for the ex parte application. In Respondent s application to set aside the arrest, Mr Niemesh Singh, a director of Respondent makes the founding affidavit. He submits that Applicant has clearly failed to show that Respondent would be unable to pay this money should a judgment be entered against it.

10 He goes on to state that:... I aver that Respondent is possessed of assets sufficient to meet any judgment that the Applicant might obtain against it. Details of these assets are set out in Respondent s balance sheet, a copy of which is annexed hereto.... The so called balance sheet is a single unsigned sheet reflecting that Respondent s fixed assets as at 30 April 2001 were reflected as R ,14. Current Assets are R2, 842, with current liabilities of R1, 821, Applicant s answering affidavit is deposed to by Ms Silvia Manuela Testa, its risk manager for the Southern African region. She notes that Mr Singh did not deny that Respondent does not own immovable property. She then proceeds to analyse the so called balance sheet and submits that: apart from fixed assets described therein the only other asset of any substance which the Respondent appears to have as at 30 June 2001 is an amount of R2,6 Million allegedly due to it as accounts receivable. If its total current liabilities as at the aforementioned date of R1,8 million are taken into account, it would appear that there is indeed a significant risk that Respondent may have insufficient assets against which a judgment in an amount of R1,3 million together with interest and costs might be executed. Further, and in any event, there is nothing which would appear to preclude the Respondent from disposing of its assets before judgment should it develop the view that there is a risk that its claim will fail and the Applicant s claim in reconvention will succeed. Ms Testa concludes by asserting that Applicant has a genuine and reasonable need for security.

11 In Respondent s reply, Mr Singh attaches a report from its auditors, Ernst and Young. The attached document is on the letterhead of Ernst and Young but does not identify Respondent. Mr Singh says that it relates to Respondent and there is no basis upon which that can be doubted. The report reflects the position as at 31 October Respondent had debtors of R2, 927, Fixed assets at book value were R641, and stock is shown at R1, 976, Figures are also given for 30 April A comparison of the figures shows that Respondent s asset position improved during the six months ending October Debtors rose by R987, ; assets at book value were reduced by R110, as a result of depreciation only; stock value improved by R1, 185, Liabilities are not shown. Mr Wragge, who appeared or Applicant pointed to apparent discrepancies between certain of the figures on the balance sheet and on the Ernst and Young report. He also drew attention to the fact that Respondent describes itself as a transport broker whereas on a certificate which Mr Singh attaches to show that Respondent has a South African Bureau of Standards (SABS) accreditation, the business is described as the movement and logistical management of empty containers. This, he submitted was inconsistent with items of stock described on the Ernst and Young report as lime and Filtration and control valves. These factors, it was argued, show that the documents produced by Respondent are unreliable.

12 I do not agree. There are discrepancies. Without more detail as to the status of balance sheet and upon what basis it was drawn, I cannot speculate as to the reason. The discrepancies are, however, not material for present purposes. There is no reason why the SABS should not characterise Respondent s business or a part of it as the movement and logistical management of empty containers. Indeed, that description seems to correspond exactly with the services which Applicant says that Respondent undertook for it. The fact that Respondent owns stock that may appear to Applicant to be inappropriate for a purely transport broker is of no import. The stock remains an asset. There is no basis upon which to find that Respondent has deliberately sought to mislead the Court nor, in the circumstances, to draw an adverse inference from its failure to assist Applicant in discharging its onus. Furthermore, and in any event, if I were to disregard everything that Respondent has produced in support of its financial position; where would that leave Applicant?. It would have to fall back on the original evidence of its attorney in the ex parte application. The high point is a submission that it is apparent that Respondent will not be able to satisfy an adverse judgment. A submission which is based solely upon the fact that Respondent owns no immovable property and that it has two bank accounts in which the quantum of any funds is unknown to Applicant. Lord wright observed in Caswell v Powell Duffryn Associated Collieries Ltd, (1939) 3 All E R 722 at p. 733 that: Inference must be carefully distinguished from conjecture or speculation. There can be no inference unless there are objective facts from which to infer the other facts which it is sought to establish... But if there are no positive proved facts from which the inference can be made the method of inference fails and what is left is mere speculation or conjecture".

13 (See also: S v Naik 1969 (2) SA 231 (N)). Mr Wragge, referred to the judgment of Davis J in Lisnave Estaleiros Navais SA v Falcon Drilling Company Inc, (CPD Case No: AC 120/99, unreported judgment, delivered on 15 July 1999) and submitted that it was not only Respondent s present financial position that was relevant but also its future position. In Lisnave there was evidence of the respondents fluctuating financial fortunes. The court also found that [t]he shipping business is a notoriously volatile enterprise. In this case I have no such financial evidence and the circumstances do not persuade me that Respondent is engaged in a volatile enterprise. As noted Respondent s assets as at 31 October 2001 exceeded the assets as at 30 April A careful analysis of the evidence has led me to conclude that Applicant has adduced no facts whatsoever to justify an inference that it is in genuine and reasonable need of security. When regard is had to the totality of the evidence on record, the inference which commends itself tends to favour Respondent. Applicant has failed to discharge the onus of establishing that it has a genuine and reasonable need for security. The arrest must be set aside and, in the light of the findings above, it is unnecessary for me to opine upon any of the other questions raised. The most important of them will, no doubt, be more appropriately resolved when the Court is faced with Applicant s special plea which, asserting that Respondent s claim is also a maritime claim, seeks an order pursuant to section 7(2)(a) of the Admiralty Act so that both parties claims can be heard in the exercise of this Court s admiralty jurisdiction.

14 As to the costs; they should follow the result. Respondent sought an order for costs including the costs of two counsel. A number of complex legal issues were raised on the record and Respondent could not have been expected to nail its colours to the single issue which has, in fact, determined the outcome. The employment of two counsel was, in my view, justified. Mr Wragge made no submissions opposing the costs of two counsel. For the reasons stated, I make the following order: 1The ex parte order granted to Applicant by this Honourable Court under case number AC87/01 on 25 May 2001 is set aside; 2All arrests made pursuant to the aforesaid order are set aside; 3Applicant is ordered to pay the costs of this application including the costs of two counsel.... SELIKOWITZ J