Brief Summary

Admiralty Jurisdiction — Arrest of property — Dispute over rights to funds in bank accounts — Applicants, trustees in liquidation, sought to arrest funds for security of claims against Afgri Marketing — Afgri Operations claimed rights to funds based on alleged cession — Court considered regularity of interpleader proceedings initiated by Sheriff — Applicants sought to set aside interpleader proceedings, asserting that the arrest order provided sufficient security for their claims — Court held that interpleader proceedings were irregular as they conflicted with the arrest order aimed at securing the applicants' claims.

Comprehensive Summary

Summary of Judgment

1. Introduction

These proceedings in the Gauteng Local Division, Johannesburg, were brought in the High Court exercising its admiralty jurisdiction. The dispute concerned the regularity and competence of interpleader proceedings initiated by the Sheriff in relation to monies held in two bank accounts at Absa Bank Limited, and the competing asserted rights of different parties to those monies.

The applicants were the Trustees for the time being of three entities within the Copenship group (each in liquidation), being successors under Danish law to Copenship A/S following a demerger and subsequent bankruptcies. The first respondent was Afgri Grain Marketing (Pty) Ltd (“Afgri Marketing”), the account holder. The second respondent was Afgri Operations (Pty) Ltd (“Afgri Operations”), described as Afgri Marketing’s holding company and sole shareholder. The third respondent was the Sheriff, Sandton South (cited through a representative), and the fourth and fifth respondents were Absa Bank Limited and the Registrar of the High Court.

Procedurally, the matter arose against the backdrop of an earlier ex parte arrest order granted under section 5(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983 (“AJR Act”), which authorised the Sheriff to arrest Afgri Marketing’s “right, title and interest” in monies held (and, if necessary, future monies to be deposited) in specified Absa accounts, for purposes of providing security for claims the applicants pursued against Afgri Marketing in London arbitration proceedings.

After Afgri Marketing unsuccessfully sought reconsideration of the ex parte order, it obtained leave to appeal. While the appeal process unfolded, Afgri Operations asserted that the monies in the accounts belonged to it by virtue of an alleged arrangement amounting to a cession, and it asked the Sheriff to commence interpleader proceedings. The Sheriff then issued an interpleader notice under Uniform Rule 58. The applicants responded by launching the present main application seeking to set aside the interpleader proceedings as irregular under Admiralty Rule 20 read with section 5(2)(a) of the AJR Act. Afgri Operations filed a conditional counter-application for interim interdictory relief, to operate only if the interpleader proceedings were found to be irregular.

After argument had been heard but before this judgment was delivered, the Supreme Court of Appeal upheld Afgri Marketing’s appeal and set aside the section 5(3) arrest order. That development rendered the present disputes academic in the sense that any order would have no practical effect on the parties’ substantive positions. The court nevertheless considered whether, in the interests of justice, it should still determine the main application and, in any event, it had to determine the outstanding issue of costs.

2. Material Facts

The core factual setting concerned monies held in two Absa bank accounts in the name of Afgri Marketing. The applicants had instituted arbitration proceedings in London against Afgri Marketing for substantial sums (principal, interest, and costs), and they sought security in South Africa for those claims.

On 21 February 2018, the applicants obtained an ex parte order authorising the arrest, in terms of section 5(3) of the AJR Act, of Afgri Marketing’s “right, title and interest” in and to the monies held in the accounts, and if necessary also “future monies” to be deposited to Afgri Marketing’s credit. The order permitted interested parties to apply to vary or discharge it on short notice.

Afgri Marketing sought urgent reconsideration under Uniform Rule 6(12)(c) and filed an answering affidavit. In that affidavit it referred to what it described as a “sweeping arrangement” applicable to the accounts: cleared funds standing to Afgri Marketing’s credit were allegedly transferred automatically to Afgri Operations on a daily basis, in settlement of loan indebtedness. The reconsideration application was dismissed by Weiner J. Subsequently, leave to appeal was granted, and issues about whether Afgri Marketing or Afgri Operations held “right, title and interest” in the monies became contentious in related proceedings.

Afgri Operations was not a party to the original arrest proceedings, although it was found (on the confirmation of its counsel) to have been aware of them throughout. Instead of using the mechanism in the arrest order permitting interested parties to seek variation or discharge, Afgri Operations, through the same attorneys as Afgri Marketing, wrote to the Sheriff on 26 June 2018 asserting that Afgri Marketing had ceded its right, title and interest in the account monies to Afgri Operations, and requesting the Sheriff to institute interpleader proceedings. The applicants, once aware, disputed that interpleader was competent in this context and contended that Weiner J had already determined issues of ownership.

On 4 September 2018, the Sheriff commenced interpleader proceedings under Uniform Rule 58, recording that the applicants contended that Afgri Marketing’s right, title and interest in the monies was susceptible to arrest under the Mashile J order, while Afgri Operations contended that it held the right, title and interest, and therefore the monies were not susceptible to arrest.

The applicants’ main application sought to set aside the interpleader proceedings as irregular. By agreement, the interpleader proceedings were stayed pending determination of the main application. Afgri Operations opposed and filed a conditional counter-application seeking interim interdictory protection over the monies pending an action it had instituted, but only if the court were to find the interpleader proceedings irregular.

After the matter was argued and judgment reserved, the Supreme Court of Appeal set aside the underlying section 5(3) arrest order, primarily on the basis that the applicants failed to establish a genuine and reasonable need for security. Both parties accepted that this rendered the present applications moot, though they differed on whether the court should nevertheless determine the issues and how costs should be dealt with.

3. Legal Issues

The court was required to determine, first, whether it should exercise its discretion to decide questions that had become academic (moot) due to the setting aside of the underlying arrest order. This involved a value judgment guided by the interests of justice, including whether any order could have a practical effect and whether issues of broader importance warranted determination.

On the merits of the main application (despite mootness), the central legal questions were framed as issues of law and the application of law to the procedural facts. The court distilled three principal questions.

The first question was whether it was competent for the applicants to attack the regularity of the Sheriff-initiated interpleader proceedings by an application under Admiralty Rule 20(2) (irregular proceedings and non-compliance), or whether they were obliged instead to participate in the interpleader process and raise the point via Uniform Rule 58(6)(d) (dismissal where interpleader is not a proper matter).

The second question was whether the jurisdictional requirements for interpleader were present, specifically whether a sheriff may competently trigger Uniform Rule 58 interpleader proceedings when implementing a section 5(3) AJR Act arrest order that arrests property as security, rather than attaching property for execution, and where a third party asserts an adverse claim to the arrested property.

The third question was whether the alleged non-joinder of Afgri Marketing in the interpleader proceedings rendered those proceedings fatally defective on the facts as presented.

The conditional counter-application raised separate interim-interdict issues, but it only became relevant if the interpleader proceedings were found to be irregular. Given the court’s conclusion on the main application, it found it unnecessary to determine the counter-application.

4. Court’s Reasoning

The court addressed mootness first. It applied Constitutional Court authority on mootness and the principle that courts should avoid giving advisory opinions on abstract propositions. At the same time, it recognised the established discretion to determine moot issues where the interests of justice require it, including where a decision may have practical effect beyond the immediate parties or where outstanding costs issues require consideration linked to the merits.

The court accepted that, following the Supreme Court of Appeal’s setting aside of the section 5(3) arrest order, any decision on the interpleader dispute would have no practical effect on the parties’ substantive positions, and the matter was academic. It nevertheless held that it remained necessary to have regard to the merits when deciding costs, and it considered whether a determination would serve broader interests. It concluded that it was in the interests of justice to decide the main application because the key question was a discrete point of law of importance (particularly for the Sheriff’s office), the remaining issues were readily determinable on the papers, and a decision would provide clarity where interpleader proceedings had apparently not been withdrawn.

On the first merits issue, the court considered Admiralty Rule 20(2), which permits the court to make just orders where there have been irregular proceedings or non-compliance with rules or court orders. It referred to authority allowing interpleader proceedings to be set aside under the ordinary civil procedure rules (including by analogy to Uniform Rule 30) where the jurisdictional requirements for interpleader are absent. It found no reason why the same approach should not apply in admiralty proceedings. On that basis, if the matter were to be decided on the merits, the court would have found it competent for the applicants to proceed under Admiralty Rule 20(2) rather than being confined to raising the issue only within the interpleader process under Uniform Rule 58(6)(d).

On the second issue—the competence of the Sheriff to resort to interpleader following a security arrest—the court began by describing interpleader as an expeditious procedure enabling a person holding money or property in which they claim no interest to obtain a ruling where they face adverse competing claims. It recognised that, in execution contexts, it is well established that a sheriff may trigger interpleader, and it noted the jurisprudential rationale: a sheriff who attaches property may face adverse third-party claims, and interpleader serves as a safeguard in the discharge of the sheriff’s duties.

The applicants contended that the jurisdictional facts for interpleader were absent because, in their submission, they had made no “claim” to the monies; they asserted only a potential future entitlement dependent on success in the London arbitration. The court rejected that characterisation. It reasoned that the applicants did assert a claim in respect of the property in the form of a present right to hold the property as security under section 5(3), as authorised by the arrest order.

The court then compared the sheriff’s position under attachment in execution and under a section 5(3) arrest for security. It held that there was no material difference in principle relevant to interpleader. In both scenarios, the sheriff obtains control over the property pursuant to a court order, without acquiring ownership; in both scenarios, the sheriff has no personal interest in the property; and in both scenarios, the sheriff is exposed to conflicting claims about the property while implementing the court’s directive. Although Uniform Rule 58(1)’s final sentence expressly refers to property “attached in execution”, the court regarded that clause as clarifying the status of the sheriff and execution creditor in that specific instance, rather than confining the sheriff’s ability to proceed by interpleader only to execution matters. The court accepted that, logically, where property is arrested as security, the sheriff would similarly be the interpleader applicant and the party who obtained the arrest order would be a claimant under Rule 58.

On the third issue (non-joinder), the court focused on the facts recorded in the interpleader notice and the correspondence to the Sheriff. The Sheriff was faced with an adverse claim not from Afgri Marketing, but from Afgri Operations, and the Sheriff had been told that Afgri Marketing agreed with Afgri Operations’ position on the monies. On the papers before it, the court would therefore have resolved the non-joinder complaint in favour of Afgri Operations, finding no fatal defect on that basis.

The court also addressed additional contentions advanced by the applicants, noting that they were largely not germane to the narrow question of the regularity of the Sheriff’s initiation of interpleader. To the extent that an abuse of process allegation was pursued, the court held that such a case was not established on the evidence before it.

Having concluded that the interpleader initiation was not irregular, the court turned to costs. It acknowledged the general principle that costs follow the result, and that only Afgri Operations sought costs. It nevertheless exercised its discretion to depart from the ordinary course. It reasoned that, on the particular facts, Afgri Operations had unnecessarily generated costly parallel proceedings and resulting uncertainty by electing not to participate in the earlier arrest proceedings (despite awareness, the corporate relationship with Afgri Marketing, and shared legal representation) and instead pursuing its claim through interpleader triggered via a demand to the Sheriff. The court therefore ordered each party to pay its own costs.

Given the dismissal of the main application, the court held it was unnecessary to deal with the conditional counter-application.

5. Outcome and Relief

The court dismissed the application to set aside the interpleader proceedings commenced by the Sheriff under Uniform Rule 58 on 4 September 2018.

The court ordered that each party is to pay its own costs.

The conditional counter-application for interim interdictory relief was not determined because it was conditional upon the main application succeeding, which it did not.

Cases Cited

Afgri Grain Marketing (Pty) Ltd v Trustees for the time being of Copenship Bulkers A/S (in liquidation) and others (797/2018) [2019] ZASCA 67 (29 May 2019).

MV Orient Stride: Asiatic Shipping Services Inc v Elgina Marine Company Limited [2008] ZASCA 111; 2009 (1) SA 246 (SCA).

National Coalition for Gay and Lesbian Equality v Minister of Home Affairs 2000 (2) SA 1 (CC).

JT Publishing (Pty) Ltd and Another v Minister of Safety and Security and Others [1996] ZACC 23; 1997 (3) SA 514 (CC); 1996 (12) BCLR 1599 (CC).

President, Ordinary Court Martial, and Others v Freedom of Expression Institute and Others [1999] ZACC 10; 1999 (4) SA 682 (CC); 1999 (11) BCLR 1219 (CC).

Cape Town City v Aurecon SA (Pty) Ltd 2017 (4) SA 223 (CC).

Independent Electoral Commission v Langeberg Municipality 2001 (3) SA 925 (CC).

Minister of Justice and Correctional Services and others v Estate Late Stransham-Ford (Doctors for Life International NPC and others as amici curiae) [2017] 1 All SA 354 (SCA).

Bernstein v Visser 1934 CPD 270.

Weeks v Amalgamated Agencies Ltd 1920 AD 235.

Liquidators Union and Rhodesia Limited v Brown and Co 1922 AD 549.

Beazley v Magnum Estate Agents (Pty) Ltd and another 1976 (4) SA 94 (W).

Erasmus v Grunow en 'n Ander 1980 (2) SA 793 (O).

Thusi v Minister of Home Affairs and another and 71 other cases 2011 (2) SA 561 (KZP).

Pretoria Garrison Institutes v Danish Variety Products (Pty) Ltd 1948 (1) SA 839 (A).

Legislation Cited

Admiralty Jurisdiction Regulation Act 105 of 1983, section 5(3) and section 5(2)(a).

Superior Courts Act 10 of 2013, section 16.

Rules of Court Cited

Uniform Rules of Court, Rule 58.

Uniform Rules of Court, Rule 6(12)(c).

Admiralty Proceedings Rules (Rules Regulating the Conduct of the Admiralty Proceedings of the Several Provincial and Local Divisions of the Supreme Court of South Africa, GN R571 in GG 17926 of 18 April 1997), Rule 20(2), read with Rules 24 and 26.

Held

The court held that, notwithstanding the matter having become moot due to the Supreme Court of Appeal setting aside the underlying section 5(3) arrest order, it was in the interests of justice to determine the main application because it raised an important discrete legal question and because costs still required determination with reference to the merits.

On the merits, the court held that it was not irregular for the Sheriff to initiate interpleader proceedings under Uniform Rule 58 where the Sheriff was implementing a section 5(3) AJR Act arrest order for security and faced an adverse third-party claim to the arrested monies. The applicants’ attack on the interpleader as incompetent was therefore rejected.

The application to set aside the interpleader proceedings was dismissed. As to costs, despite the dismissal, the court ordered that each party should bear its own costs, primarily because it considered that Afgri Operations had contributed to unnecessary parallel proceedings and attendant expense by not asserting its position earlier within the arrest proceedings.

LEGAL PRINCIPLES

A matter that no longer presents a live controversy is moot and generally not justiciable, but a court retains a discretion to decide moot issues where the interests of justice so require, including where a decision has a practical effect beyond the immediate parties or where costs must be decided with reference to the merits.

Interpleader under Uniform Rule 58 is an expeditious procedural mechanism enabling a stakeholder with no substantive interest in the property or money (other than charges and costs) to obtain a judicial determination where faced with adverse competing claims.

Although interpleader is frequently encountered in the context of property attached in execution, the court accepted that a sheriff may similarly resort to interpleader where implementing a court order that arrests property as security under section 5(3) of the AJR Act, because in both contexts the sheriff is an officer holding control of property pursuant to a court order and may be exposed to conflicting claims.

In determining costs, the court reaffirmed that the ordinary approach is that costs follow the result, but costs remain discretionary and may be adjusted where a party’s conduct has unnecessarily generated procedural complexity, duplication, or expense, even where that party succeeds on the substantive procedural issue.

Trustees for the Time Being of Copenship Bulkers A/S and Others v Afrigrain Marketing (Pty) Limited and Others (18/668) [2019] ZAGPJHC 547; 2020 (4) SA 188 (GJ) (6 August 2019)