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[2014] ZASCA 194
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Owners of the MV Silver Star v Hilane Limited (82/2014) [2014] ZASCA 194; [2015] 1 All SA 410 (SCA); 2015 (2) SA 331 (SCA) (28 November 2014)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
no: 82/2014
REPORTABLE
In
the matter between:
THE
OWNERS OF THE MV SILVER
STAR
.......................................................................
Appellant
and
HILANE
LIMITED
...............................................................................................................
Respondent
Neutral
citation:
MV Silver Star: Owners of
MV Silver Star v Hilane Ltd
(82/2014)[2014]
ZASCA 194 (28 November 2014)
Coram:
PONNAN, WALLIS, PILLAY and ZONDI JJA and GORVEN
AJA
Heard
:
18 NOVEMBER 2014
Delivered
:
28 NOVEMBER 2014
Summary:
Associated ship arrest – claim on
indemnities and a foreign arbitration award – whether an
associated ship arrest permissible
– proof of association.
ORDER
On
appeal from:
Eastern Cape High Court,
Port Elizabeth (Eksteen J sitting as court of first instance):
The
appeal is dismissed with costs, such costs to include the costs of
two counsel, where two counsel were employed.
JUDGMENT
Wallis
JA (Ponnan, Pillay and Zondi JJA and Gorven AJA concurring)
[1]
The respondent, Hilane Ltd (Hilane) was the
owner of the
Sheng Mu
.
On 6 July 2011 it concluded a voyage charterparty on the Gencon form
with Phiniqia International Shipping LLC (Phiniqia), for
the carriage
of a cargo of coking coal from Bandar Abbas, Iran to Vizag, India.
Arising from that charterparty it has claims against
Phiniqia. It has
pursued those claims by way of the arrest on 12 August 2013 in Port
Elizabeth of the
Silver Star
as
an associated ship in relation to the
Sheng
Mu
, in terms of s 3(6), read with
s 3(7), of the Admiralty Jurisdiction Regulation Act 105 of 1983
(the Act). An application
by the registered owners of the
Silver
Star
, a Hong Kong company called Action
Partner Limited (Action Partner), for the release of the vessel was
dismissed by Eksteen J in
the Eastern Cape Local Division, Port
Elizabeth. Leave to appeal was refused by the high court but granted
on petition by this
Court.
[2]
Action
Partner raises two legal issues on the basis of which it contends
that an associated ship arrest is impermissible in respect
of the
claims advanced by Hilane. In addition it contends that Hilane has
failed on the facts to establish the association on the
necessary
balance of probabilities.
[1]
This judgment deals with the two legal issues and that of my
brother Ponnan JA, with which I agree, with the question of
association on the facts.
[3]
The charterparty concluded between Hilane
and Phiniqia provided that it was to be governed by and construed in
accordance with English
law. It contained the conventional clause
providing for the master to sign bills of lading as presented without
prejudice to the
terms of the charterparty and, in certain
circumstances, for the owner’s agents to sign bills of lading
on behalf of owners.
These obligations were varied to some degree by
the provisions of clauses 38 and 46 of the rider clauses which
provided as follows:
‘
CLAUSE
38
OWNERS AGREE FOR
CHARTERERS TO ISSUE 2
ND
SET OF BILLS OF LADING IN DUBAI
AGAINST CHRS SIMPLE L.O.I. & CHARTERERS UNDERTAKE TO SURRENDER
THE FIRST SET OF ORIGINAL BILLS
OF LADING ISSUED AT LOADPORT TO
OWNERS WITHIN 21 DAYS. IF REQUIRED OWNERS AGREE TO ISSUE BS/L SHOWING
LOADPORT “MIDDLE EAST
PORT” OR “PERSIAN GULF PORT”
OR “RAS ALKHAIMAH” INSTEAD OF ACTUAL LOADPORT “BANDAR
ABBAS”.
CLAUSE 46
CHARTERERS
WILL ENDEAVOUR THEIR BEST TO ENSURE THAT ORIGINAL BILLS OF LADING ARE
MADE AVAILABLE AT DISPORT ON OR BEFORE VESSEL'S
ARRIVAL TO DISCHARGE.
HOWEVER IF ORIGINAL BILLS OF LADING ARE NOT AVAILABLE THEN
OWNERS/MASTER AGREE TO DISCHARGE/DELIVER THE CARGO
TO RECEIVERS
AGAINST CHARTERERS SIMPLE LETTER OF INDEMNITY IN OWNERS STANDARD
PANDI CLUB WORDING DULY SIGNED BY CHARTERERS ONLY.’
[4]
As was perhaps to be expected, it was the
operation of these clauses that gave rise to the disputes between
Hilane and Phiniqia.
Tradeline LLC (Tradeline), a company associated
with Phiniqia, purchased the coking coal that was to be carried on
the
Sheng Mu
from Golden Waves FZC (Golden Waves). On 17 July 2011 a first set of
bills of lading was issued showing Golden Waves as the shipper,
the
loadport as ‘Persian Gulf Port’ and the notify parties as
Tradeline and Fairway Trading Company (Pty) Ltd of Chennai,
India.
The following day, Tradeline, on behalf of Phiniqia, indicated that
Phiniqia required a second set of bills of lading to
be issued in
Dubai as agreed under rider clause 38. These were to show the
loadport as Ras Al Khaimah in the United Arab Emirates.
In addition
they were now to identify Tradeline as the shipper and the notify
parties as Gupta Coal India Limited and IDBI Bank
Limited, both of
Nagpur, India.
[5]
In terms of clause 38 the second set of
bills could only be issued against a letter of indemnity (LOI) given
to Hilane by Phiniqia.
Accordingly Phiniqia executed an LOI in favour
of Hilane indemnifying it in respect of any liability, loss, expenses
or damage
of whatsoever nature that Hilane might sustain by reason of
having issued two sets of bills of lading in accordance with
Phiniqia's
request. The LOI also provided that if the
Sheng
Mu
or any other property belonging to
Hilane should be arrested or detained, or such an arrest or detention
be threatened, by reason
of issuing two sets of bills of lading,
Phiniqia undertook to provide immediately on demand such bail or
other security as might
be required to prevent such arrest or
detention or to secure the release of the vessel or such other
property and to indemnify
Hilane in respect of any loss, damage or
expenses, including but not limited to interest and attorneys’
fees caused by such
arrest or detention ‘whether or not the
same may be justified’.
[6]
Once the second set of bills of lading had
been issued and the LOI furnished to Hilane’s agents, Hilane
asked for the cancellation
and return of the first set of bills of
lading. This it was plainly entitled to do. On 21 July 2011
Tradeline, acting as Phiniqia’s
agents, advised that:
‘
We
shall in due course send you original first of bs/l and the original
c/p duly executed by courier to your office.’
It
did not fulfil this undertaking. This was the first source of
problems because Golden Waves remained in possession of the first
bill.
[7]
Shortly before the vessel was due to arrive
at Vizag on 27 July 2011, Tradeline indicated to Hilane that the
original bills of lading
might not be available upon arrival. In
accordance with rider clause 46 it requested the owners to provide it
with the format of
a further LOI for the discharge of the cargo in
the absence of the bills of lading. That LOI was furnished and
executed on behalf
of Phiniqia on 27 July 2011. Its terms were
similar to those of the earlier LOI, save that the indemnity was
against any liability,
loss, damage or expense of whatsoever nature
sustained by reason of delivering the cargo in accordance with
Phiniqia’s request
without delivery up of the bills of lading.
It contained a provision that once the original bills of lading came
into Phiniqia’s
possession it would deliver them to Hilane,
whereafter its liability under the LOI would cease.
[8]
Golden
Waves remained in possession of the first bill of lading. On 25
August 2011 its agents wrote to Hilane stating that they
were the
shipper of the cargo and asking for confirmation that it was still
being held to Golden Waves’ order. According
to Golden Waves it
had not been paid for the coal. Hilane in turn passed this message to
Phiniqia, but Golden Waves’ claims
were not resolved. On 8
November 2011 London solicitors acting for Golden Waves sent Hilane a
letter of demand for the unpaid price
of the coal in an amount
slightly in excess of AED 8 million.
[2]
When there was no response to this demand Golden Waves caused the
Sheng
Mu
to be arrested on 5 January 2012 in Napier, New Zealand. Hilane
demanded that Phiniqia fulfil its obligations under the two LOIs
and
reinforced their demand with an order of the High Court in England,
but Phiniqia did not respond. Eventually Hilane had to
procure a
guarantee from its own bankers to secure the release of the
Sheng
Mu
from arrest.
[9]
In consequence of these events Hilane
contended that Phiniqia was obliged to indemnify it against the claim
by Golden Waves and
for the damages it said that it suffered in
consequence of the arrest of the
Sheng
Mu
in New Zealand. It referred a
dispute in this regard to arbitration in London in accordance with
the provisions of the charterparty
and obtained an award in its
favour. The relevant terms of that award were as follows:
‘
I
FIND AND HOLD that Owners [Hilane] are entitled to the relief claimed
namely:-
(i)
An Indemnity in respect of Golden Waves’
Arbitration Claim should Owners be liable for the same together with
an indemnity
in respect of costs incurred by Owners (and for those
which Owners may become liable to Golden Waves) in the Golden Waves
Arbitration
Claim;
(ii)
The Arrest Losses;
(iii)
The Further Losses;
(iv)
Interest on any such losses, calculated at
the rate of 5 per cent per annum compounded with three monthly rests
running from the
dates such losses were incurred until the date of
payment by Charterers.
(v)
Costs; and
(vi)
Such further or other relief as may be
necessary or appropriate.’
[10]
Hilane now seeks to enforce its claims in
an action
in rem
in South Africa brought against the
Silver
Star
as an associated ship in relation
to the
Sheng Mu
.
In formulating its claim it assesses its liability to Golden Waves in
an amount of AED 8 279 253.48; the arrest losses
as
USD 913 456.70; and its claims in respect of further losses
and costs, in various lesser sums. In total it claimed
judgment for
USD 3,8 million together with interest and costs. We were
informed from the bar that, although a monetary value
has been placed
on the Golden Waves claim, no arbitration award has yet been made in
favour of Golden Waves although it is anticipated
that an award will
be made shortly. Leaving aside the merits of these claims, Action
Partner contends that Hilane is not entitled
in law to invoke the
associated ship arrest provisions in order to pursue them against the
Silver Star
.
[11]
In order to appreciate the legal points
raised by Action Partner it is necessary to look at the statutory
framework in relation
to maritime claims and associated ships.
Section 1 of the Act defines an admiralty action as meaning
proceedings for the enforcement
of a maritime claim. The material
portion for present purposes of the definition of maritime claim in
s 1 of the Act reads
as follows:
‘“
maritime
claim
” means any claim for,
arising out of or relating to —
(h)
the carriage of goods in a ship, or any agreement
for or relating to such carriage;
(j)
any charterparty or the use, hire, employment or
operation of a ship, whether such claim arises out of any agreement
or otherwise;
(aa)
any judgment or arbitration award relating to a
maritime claim, whether given or made in the Republic or elsewhere;
(ff)
any contribution, indemnity or damages with regard
to or arising out of any claim in respect of any matter mentioned
above …’
[12]
The relevant provisions of s 3 of the
Act governing the commencement of actions in rem and the ability to
pursue a maritime
claim by way of an action in rem against an
associated ship are the following:
‘
(4)
Without prejudice to any other remedy that may be available to a
claimant or to the rules relating to the joinder of causes
of action
a maritime claim may be enforced by an action
in
rem
—
(a)
if the claimant has a maritime lien over the
property to be arrested; or
(b)
if the owner of the property to be arrested would
be liable to the claimant in an action
in
personam
in respect of the cause of
action concerned.
(6) An action
in
rem
, other than an action in respect of a maritime claim referred
to in paragraph (d) of the definition of “maritime claim”,
may be brought by the arrest of an associated ship instead of the
ship in respect of which the maritime claim arose.
(7)
(a)
For
the purposes of subsection (6) an associated ship means a ship, other
than the ship in respect of which the maritime claim
arose—
(i) owned, at the
time when the action is commenced, by the person who was the owner of
the ship concerned at the time when the
maritime claim arose; or
(ii) owned, at the
time when the action is commenced, by a person who controlled the
company which owned the ship concerned when
the maritime claim arose;
or;
(iii) owned, at the
time when the action is commenced, by a company which is controlled
by a person who owned the ship concerned,
or controlled the company
which owned the ship concerned, when the maritime claim arose.
(b)
For
the purposes of paragraph (a)—
(i) ships shall be
deemed to be owned by the same persons if the majority in number of,
or of voting rights in respect of, or the
greater part, in value, of,
the shares in the ships are owned by the same persons;
(ii) a person shall
be deemed to control a company if he has power, directly or
indirectly, to control the company;
(iii) a company
includes any other juristic person and any body of persons,
irrespective of whether or not any interest therein
consists of
shares.
(c)
If
at any time a ship was the subject of a charter-party the charterer
or subcharterer, as the case may be, shall for the purposes
of
subsection (6) and this subsection be deemed to be the owner of
the ship concerned in respect of any relevant maritime
claim for
which the charterer or the subcharterer, and not the owner, is
alleged to be liable.’
[13]
The
background to the introduction of the associated ship arrest
provisions was the international trend for ship owners to register
all the vessels in a particular fleet in separate companies each
owning a single vessel.
[3]
This
rendered the recovery of maritime debts more difficult. Although the
Arrest Convention of 1952
[4]
made provision for the arrest not only of the particular ship in
respect of which a maritime claim had arisen, but also the arrest
of
another ship owned by the same owner as the ship in respect of which
the maritime claim had arisen, that was ineffective when
the vessels
were owned by separate ‘one ship’ companies. As the
principal author of the Act put it to this court in
the
Berg
,
[5]
in order to make liability for a maritime claim or the loss arising
from such a claim to fall where it belonged by virtue of common
ownership of ships or common control of ship-owning companies, the
associated ship provisions were devised and incorporated in
the Act.
[14]
An associated ship arrest can be sought in
the following circumstances. There must be a ship in respect of which
a maritime claim
has arisen. This is referred to as the ship
concerned. Then there must be another ship – the associated
ship – that
satisfies the requirements of s 3(7)
(a)
of the Act, in that it is either in the
same ownership as the ship concerned, or where both ships are owned
by companies, as is
ordinarily the case, control of the company
owning the ship concerned at the time the claim arose must be the
same as control of
the company that owns the associated ship at the
time of its arrest.
[15]
This was a perfectly satisfactory structure
so long as the maritime claim against the ship concerned was a claim
that gave rise
to a maritime lien or was a claim that arose against
the owner of that ship. However, in many maritime situations, the
claims arising
in respect of a ship might not fall into either
category because they were claims that lay in personam against the
charterer of
the vessel. For example, in many charterparties, the
charterer was responsible for providing bunkers to the vessel, but
when bunker
suppliers remained unpaid they could not arrest the
vessel itself. Nor could they arrest as an associated ship a vessel
owned by
the charterer, or a company controlled by the charterer,
because there was no commonality of ownership or control between the
ship
concerned and the putative associated ship.
[16]
The problem was addressed by the deeming
provision in s 3(7)
(c)
of
the Act. Under it the charterer or sub-charterer of a vessel who is
personally liable in respect of a maritime claim is deemed,
for the
purposes of association alone, to be the owner of the chartered
vessel. It was suggested to us that this provision is extremely
wide
and might catch within its net any person who had at any time been
the charterer of the ship concerned. But that is incorrect.
For the
purposes of determining whether an association exists the question is
who is the owner of the ship concerned at the time
the maritime claim
arose. That is clear from the language of the various sub-sections of
s 3(7)
(a)
.
All that the deeming provision does is to place a charterer or
sub-charterer of a vessel who incurs, but does not pay, a debt
arising from its having been the charterer of the vessel, in the same
position as the owner of the vessel would be if the owner
incurred
the same debt and did not pay it.
[17]
It
was submitted to us that this provision must be narrowly construed in
order not to fall foul of the constitutional guarantee
against
arbitrary deprivation of property.
[6]
However, no narrow reading of the section was proffered. I am
conscious of the obligation of courts when construing a statute to
do
so in a way that promotes the spirit, purport and objects of the Bill
of Rights, but in the absence of any suggested alternative
reading of
s 3(7)
(c)
of
the Act that issue does not arise. Counsel stressed that there was no
challenge to the constitutionality of the section. That
being so
effect must be given to the provisions of the section and they are
clear in deeming the charterer against which a maritime
claim arises
in the course of the charter to be the owner of the vessel. They do
this in order to enable an unpaid creditor to
pursue recovery of the
claim by way of an associated ship arrest if that is possible.
[18]
The
deeming provision places the unpaid creditor in the same situation
vis-à-vis
a defaulting charterer as it is in respect of a defaulting owner. It
follows that any constitutional attack on associated ship
arrests in
relation to charterers under s 25 of the Constitution must also
be an attack on associated ship arrests in relation
to owners. In
other words it must be an attack on the entire institution of the
associated ship. Elsewhere, and in a different
capacity, I have
expressed the view that such a challenge could be raised but should
not succeed.
[7]
As we are
not confronted in this case with a constitutional challenge to the
institution of the associated ship it is unnecessary
for me to
address the correctness of those academic views, which, after proper
argument on an appropriate occasion, I may have
to recant or
modify.
[8]
[19]
Turning then to the legal issues that were
raised in the heads of argument, the first was based on the
proposition that the claims
being advanced by Hilane against the
Silver Star
were claims that arose from the arbitration award it obtained against
Phiniqia in London. As this was an English award governed
by English
law, it was submitted that its effect was to extinguish the
underlying claims on which the award was based and to replace
those
claims with a claim based on the award itself. Building on that
foundation Action Partner contended that the claim was no
longer one
that related to the
Sheng Mu
and accordingly that there was no longer a ‘ship concerned’
the existence of which is the foundation for an associated
ship
arrest, because the associated ship is arrested ‘instead of the
ship concerned’.
[20]
I
accept for present purposes, because Hilane did not challenge the
proposition, that the starting point for determining whether
a ship
may be arrested as an associated ship must be the existence of a
maritime claim against or in respect of a particular ship.
That
appears to follow from the requirement that the associated ship is
arrested instead of the ship concerned, and thereafter
the action in
rem is pursued against it instead of the ship concerned.
[9]
If the maritime claim did not give rise to a maritime lien against a
particular vessel, and an in personam claim did not
arise ‘in
respect of’ a particular ship, there could be no action
in
rem
against
a particular ship because the requirements of s 3(5) of the Act
could not be satisfied. In that event there would be
no ship
concerned and there could be no arrest of an associated ship.
[21]
It
is the next leg of the argument that is problematic. It depends upon
the proposition that, because an English arbitration award
extinguishes the underlying claim on which the award was based, it is
not made in respect of a particular ship and therefore there
can be
no ship concerned for the purposes of an associated ship arrest. In
the first place it is by no means clear to me that an
arbitration
award of the nature of the present award would in English law be
regarded as extinguishing the claim or claims on which
the award was
based. Both the cases and the leading textbooks express the position
rather more cautiously than that. In
Russell
on Arbitration
,
[10]
it is said that:
‘
[T]he
award itself creates new rights between the parties in most cases
superseding their previous rights in relation to the matters
referred.’
Similarly
in giving the judgment of the Board in
F.
J. Bloemen Pty Ltd v Council of the City of Gold Coast
,
[11]
Lord Pearson said that the award of an arbitrator cannot be viewed in
isolation from the submission under which it was made and
referred to
the distinction between ‘an award which merely establishes and
measures a liability under a contract and so does
not create a fresh
cause of action and an award of damages which supersedes the
liability under the contract and creates a fresh
cause of action’.
[22]
Those
statements do not suggest that the English law governing the effect
of an arbitration award inevitably has the absolute consequences
for
which Action Partner argued. Indeed they are, to the ears of a South
African lawyer, redolent of the statements in this Court
concerning
these matters. Thus in the
Yu
Long Shan
,
[12]
Marais JA described a claim based on an arbitration award as an
entirely derivative cause of action. And in
Swadif
(Pty) Ltd v Dyke NO
[13]
this Court approved the following statement by Fannin J
[14]
of the status of an arbitration award:
‘
It
does seem to me to be a somewhat artificial view of the position to
regard a judgment as, in all circumstances, having the effect
of a
novation. In some cases, of course, it does have precisely that
effect, where, for example, a plaintiff obtains a judgment
for
cancellation of a contract and for damages. Thus, in this case, had
the judgment been one declaring the contract between the
parties to
have been at an end, with an order that the defendant return the
vehicle to the plaintiff and pay the defendant a sum
of money, it
could quite realistically be said that the judgment wholly replaced
and thus novated the contractual rights and liabilities
of the
parties
inter se
.
But in a case like the present, where the only purpose of the
judgment is to enable the plaintiff to enforce certain rights, by
means of execution if need be, without in any way affecting other
rights arising out of the contract, it seems more realistic to
regard
the judgment not as novating the former, but as strengthening or
reinforcing them. The right of action will have been replaced
by a
right to execute, but the enforceable right remains the same.’
[23]
Even if the submission by Action Partner
were correct I do not think that it would assist it. In
F.
J. Bloemen Pty Ltd v Council of the City of Gold Coast
the
Privy Council was faced with a very similar submission that, because
an arbitration award had been made in respect of the contractor’s
claims, it could not be said that the amounts due under the award
were amounts payable in terms of the contract. This was for the
purposes of a clause in the contract that provided for interest to be
paid on all money payable to the contractor thereunder. The
Board
rejected this submission on the basis that the award could not be
severed from the underlying submission to arbitration embodied
in the
contract, and hence the amounts payable under the award could fairly
be said to be amounts payable under the contract. It
seems to me
similarly that where an arbitration award is made in terms of an
arbitration clause in a charterparty relating to a
particular ship,
the award cannot be severed from its source and it remains one in
respect of that particular ship.
[24]
When
regard is had to the relevant definitions of maritime claim that are
applicable in this case, it merely reinforces that view.
Any judgment
or arbitration award ‘relating to a maritime claim’ is
itself a maritime claim. In this case the maritime
claims that
underlie the award arise from a charterparty dispute and any claim
for, arising out of or relating to a charterparty
is a maritime
claim.
[15]
The words ‘for,
arising out of or relating to’ predicate a relationship between
the claim and the maritime topic sufficiently
intimate to impart to
the claim a maritime character of a sort rendering it appropriate for
the claim to be adjudicated in accordance
with maritime law.
[16]
An arbitration award on such a claim itself has a sufficient maritime
character to render it a maritime claim. Where the underlying
maritime claim lies against or in respect of a ship it does not seem
an undue use of language to say that the arbitration award
in respect
of that claim is likewise a claim in respect of the same ship.
[25]
Some very considerable oddities arise if
this is not the case. Take the case of a claim by a charterer for
damages arising from
a breach of a performance warranty under a
charterparty. The claim is a maritime claim against the owner of the
vessel. It clearly
arises in respect of the chartered vessel. The
claim is therefore one that could be pursued by way of an action
in
rem
against that vessel. The effect of
Action Partner’s contention is that, if the charterparty
contains an arbitration clause
and the dispute is referred to
arbitration, the award could not be enforced by an action in rem
against the vessel, because it
could not be said to be a claim in
respect of the vessel. So the result of the charterer complying with
its contractual obligations
and proceeding to arbitrate would be to
forfeit the right to proceed in rem against the vessel. That would be
a strange result
when the Act says specifically that the award itself
is a maritime claim. It has that status even if it is a South African
award
and enforceable in terms of the
Arbitration Act 42 of 1965
.
[26]
The consequence of this argument being
upheld would be that no claim on a judgment or arbitration award
could be pursued by an action
in rem. That would be a very
far-reaching result, as it would deprive claimants with a maritime
claim arising in respect of a vessel
and capable of being pursued by
an action
in rem
of
that advantage, after they had fortified their claim with a judgment
or arbitration award. It could lead to claimants contending
in terms
of
s 7(1)
of the Act that they should not be compelled to pursue
arbitration, as they would thereby be deprived of a legitimate
juridical
advantage. That would be undesirable.
[27]
Action
Partner relied on two English cases,
The
Beldis
[17]
and
The
“Bumbesti”
[18]
in support of its contentions. Both cases dealt with arbitration
awards made under charterparties. In
The
Beldis
the question was whether a claim under an award was a claim ‘arising
out of any agreement made in relation to the use or
hire of any ship’
so as to give the County Court admiralty jurisdiction to deal with
it. The Court of Appeal held that it
was not, because the action was
one upon the award itself and not the charterparty. The court pointed
out that all that had to
be proved by the claimant was that matters
had been submitted to an arbitrator and that an award had been
made.
[19]
The claim was one on
the award not the charterparty. In arriving at this conclusion the
court was influenced by the history of
the extension of admiralty
jurisdiction in England, commencing with the Admiralty Courts Acts of
1840 and 1861, and held that the
definition of the extended claims
was undertaken in ‘precise, plain and carefully guarded
terms’.
[20]
[28]
The decision in
The
“Bumbesti”
took the matter
no further. Once again the contention was that the court had
jurisdiction to hear a claim based on an arbitration
award under a
charterparty because it was a ‘claim arising out of any
agreement relating to the carriage of goods in a ship
or to the use
or hire of a ship’. The contention was rejected both as a
matter of construction, having regard to the history
of this
expression in earlier legislation, and because the judge held himself
bound by the decision in
The Beldis
.
[29]
The
English cases are by no means unanimous in this regard. Sheen J, the
admiralty judge, expressed a contrary view in
The
St Anna
.
[21]
Relying on
dicta
in
both the Court of Appeal and the House of Lords he held that there
was no reason not to give the words in the statute their ordinary
meaning or to constrain them in the light of the history of similar
expressions in earlier statutes. He held that an action on
an
arbitration award is an action to enforce the contract contained in
the contract embodying the submission to arbitration, in
that case
the charterparty, and therefore the claim was one arising out of an
agreement for the use and hire of a ship. He added
that he was
pleased to reach that result because it enabled the court to do
justice ‘in a way which would be denied to it
if creditors
could not bring proceedings in rem merely because they faithfully
honoured their agreement to submit to arbitration
a dispute which is
clearly within the Admiralty jurisdiction’.
[22]
That sentiment echoes my own.
[30]
For
two reasons it is unnecessary for me to reconcile this difference of
opinion. The first is that the English statutes defining
the ambit of
admiralty jurisdiction under consideration in those cases, as is
still the position in terms of the Senior Courts
Act 1981,
[23]
contained no provision corresponding to the express inclusion, as
maritime claims under the Act, of claims on judgments and arbitration
awards relating to maritime claims. Those cases were therefore
dealing with a different issue. The second is that it is plain that
the inclusion of this section in the Act was done deliberately in
order to overcome the decision in
The
Beldis
.
[24]
In those circumstances the English cases that Action Partner relied
on are unhelpful, even if its contentions as to their effect
are
correct.
[31]At
the end of the day the issue is not one as to the effect in English
law of an arbitral award, but one as to the proper construction
of
the relevant provisions of the Act. That is a question to be
determined by a conventional process of statutory interpretation
in
terms of South African law. Foreign law will only enter into the
picture if the court needs to determine the nature of a particular
claim in order to decide whether it comes within the scope of one of
the defined maritime claims. Nor can there be resort to the
provisions of s 6 of the Act, because those provisions only
apply to fix the law applicable in the adjudication of claims
(‘in
the exercise of its admiralty jurisdiction’), after the prior
question whether the court has jurisdiction has
been resolved. The
statutory rules governing the bringing of an action to enforce a
maritime claim embody the jurisdictional aspect
of the enforcement of
maritime claims.
[25]
[32]
The first issue thus resolves itself into
the question whether, on a proper interpretation of the Act, a claim
in respect of an
arbitration award relating to a maritime claim is a
claim in respect of the ship in respect of which the original
maritime claim
lay. Any practical person engaged in the maritime
world would answer ‘of course it is’ to that question.
Their answer
would not change if they were told that under the
arbitral law the award extinguished the original claim. That is in my
view clearly
the correct position and it disposes of Action Partner’s
first argument. Hilane’s maritime claims under the charterparty
arose in respect of the
Sheng Mu
and
Phiniqia, which was liable in respect of those claims, was deemed to
be its owner for the purpose of an associated ship arrest.
Had no
arbitral award existed to fortify Hilane’s claims it could have
arrested an associated ship in relation to the
Sheng
Mu
on the basis that the latter was
‘the ship concerned’. The fact that it has pursued its
claims by way of arbitration
does not alter the situation. The award
is one in respect of the
Sheng Mu
,
which is the ship concerned for the purpose of an associated ship
arrest.
[33]
The second point is related to the argument
about the constitutional implications of construing the deeming
provision in s 3(7)
(c)
too
broadly. Action Partner submitted that insofar as the deeming
provision operated in respect of claims against Action Partner
as
charterer, those claims should be limited to ‘only those claims
which relate to the core of the charterparty, and should
exclude
ancillary agreements such as the indemnities’. This prompted an
argument from Hilane that its claims were monetary
claims arising not
from the two LOIs but from the charterparty itself. I do not think it
necessary to resolve this issue, which
can more properly be canvassed
at the trial, because in my view these claims, even if technically
arising in terms of the LOIs,
are nonetheless claims against Phiniqia
as charterer and relate to the core of the charterparty.
[34]
This
was a voyage charterparty for the carriage of a consignment of coking
coal from the port of loading to a port of discharge.
It was
accordingly a contract of affreightment, that is, a contract for the
carriage of goods by sea.
[26]
The central obligations assumed by Hilane as carrier under that
contract were therefore to load the cargo, issue bills of lading,
carry the cargo and deliver it to the holder of those bills of
lading. The problems between Hilane and Golden Waves arose because
Phiniqia exercised its right to have a second set of bills of lading
issued to replace the original bills, and then did not surrender
the
original bills. They were compounded when it asked that the cargo be
discharged without production of the original bills of
lading.
[35]
In each case Phiniqia was exercising a
right that it had under the rider clauses of the charterparty. In
return for the exercise
of those rights it was obliged to furnish the
LOIs. The first LOI dealt with the issue of bills of lading, a
central feature of
any contract of affreightment. It starts by saying
that ‘we, the undersigned, the Charterers’ request the
issue of
a second set of bills of lading on altered terms and goes on
to say ‘we hereby guarantee as follows’. Whether or not
the LOI constitutes an agreement separate from the charterparty, it
was furnished by Phiniqia pursuant to its contractual obligations
under the charterparty and in its capacity as charterer of the
vessel.
[36]
The second LOI is in the same category. It
arose from the request that the cargo be discharged – the last
act by the carrier
on completion of the voyage – without
production of the original bills of lading. Once again the
charterparty required that
acting on the request meant that the
charterer had to furnish an LOI, and Phiniqia did so. In both
instances it was exercising
its rights under the charterparty and in
return performing its reciprocal obligations under the charterparty.
Its liability as
charterer cannot be separated from its liability
under the LOIs. Hilane’s claims relate to the core of the
charterparty.
Accordingly, even on the construction contended for by
Action Partner, Hilane’s claims lay against Phiniqia as
charterer.
[37]
It follows that both legal points raised by
Action Partner must fail. Accordingly, and subject to proof of
association, an arrest
of the
Silver
Star
at the instance of Hilane was
permissible. For the reasons set out in the judgment of Ponnan JA, I
agree that association was established
on the requisite balance of
probabilities. I accordingly agree with him that the appeal should be
dismissed with costs, such costs
to include those consequent upon the
employment of two counsel where two counsel were employed.
M
J D WALLIS
JUDGE
OF APPEAL
Ponnan
JA (Wallis, Pillay and Zondi JJA and Gorven AJA concurring)
[38]
I have had the benefit of considering the judgment of my colleague
Wallis JA. I share his views and the conclusions reached
by him in
regard to the first two issues on appeal. The issue that remains for
decision in this appeal, to which I now turn, is
whether on the facts
the requisite association has been established.
[39]
It is well settled that Hilane bears the onus of demonstrating that
the arrest was justified and this includes proving the
alleged
association on a balance of probabilities (
Cargo
Laden and Lately Laden on Board The MV
Thalassini AVGI v MV Dimitris
1989 (3) SA 820
(A) at 834F-G;
Bocimar
NV v Kotor Overseas Shipping Ltd
[1994] ZASCA 5
;
1994
(2) SA 563
(A) at 581B-E). But, as Wallis observes (at 292):
‘
The
task of proving the association is complicated by the relative
inaccessibility of the key information required to demonstrate
the
identity of the person or persons who control the two ship-owning
companies . . . In the circumstances an applicant for arrest
is
confronted with the heavy burden of proving a disputed matter on a
balance of probabilities on the papers when it has no direct
access
to the relevant information and may well be confronted with the
withholding of information, disingenuousness and downright
dishonesty.’
In
view of that difficulty the fact that the response to an allegation
that there is an association between two vessels is untruthful,
evasive and economical on detail will be a relevant factor in
determining whether the applicant has discharged the onus of proof
resting on it.
[40]
The purpose of the Act is to make the loss fall where it belongs by
reason of ownership, and in the case of a company, ownership
or
control of the shares (
The Berg
at 712A). And, as Marais JA
pointed out (albeit in a minority judgment) in
MV Heavy Metal:
Belfry Marine Ltd v Palm Base Maritime SDN BHD
1999 (3) SA 1083
(SCA) (
The Heavy Metal
) para 4:
‘
The
way in which this was done was, first, by describing in s 3(7)
(a)
(i),
(ii) and (iii) the circumstances in which ships were to be regarded
as associated and, secondly, by enacting certain deeming
provisions
in s 3(7)
(b)
(i),
(ii) and (iii) which are obviously designed not only to defeat
defensive stratagems which shipowners might deliberately deploy
to
ward off potential arrests of associated ships by disguising their
ownership or their control of such ships, but also to allow
it to be
shown even in a case where no such motive existed where power of
control
really
lay.’
Those
sections require that in relation to both the ship concerned and the
associated ship a ‘person’ must be identified
who
‘controls’ (or controlled) the companies in question. The
level of control required is that the person must control
the overall
destiny of the company (
The Kadirga 5
(No 1) J A Chapman & Co Ltd v Kadirga Denizcilik ve Ticaret AS
SCOSA C12 (N) at C14E).
In his
consideration of the concept of control as employed in the Act
in
The Heavy Metal
para
8
, Smalberger JA writing for the majority
(Nienaber
JA and Melunsky AJA concurring) expressed himself thus:
‘
The
subsection [3(7)(
b
)(ii)] elaborates upon and refines the
concept of control by that person. Control is expressed in terms of
power. If the person
concerned has power, directly or indirectly, to
control the company he/she shall be deemed (“geag . . . word”)
to control
the company. “Power” is not circumscribed in
the Act. It can be the power to manage the operations of the company
or
it can be the power to determine its direction and fate. Where
these two functions happen to vest in different hands, it is
the
latter which, in my view, the Legislature had in mind when referring
to “power” and hence to “control”.’
According
to Wallis (at 187) the process of comparison that follows upon this
identification is intended to be a simple one. He
adds:
‘
The
maritime claimant identifies the party who controls the company that
owned the ship concerned and identifies the party who controls
the
company that owns the associated ship that it seeks to arrest. The
result of those exercises is then compared. If they correspond,
in
the sense that the same person or persons control both companies,
then the requisite association is established. If they are
not the
same then the association is not established.’
[41]
It was not in dispute that Phiniqia is owned or controlled by
Tradeline, a limited liability company incorporated according
to the
laws of the United Arab Emirates. The evidence showed that Phiniqia,
Tradeline and Stellar Shipping Co LLC were all under
the common
control of the principal shareholder being a Mr Majid Al Ghurair as
part of a group of companies, active in various
fields and bearing
his name. The crux of the factual dispute therefore related to the
ownership or control of the
Silver Star
. In the founding
affidavit dated 14 August 2013 filed in support of the application to
set aside the arrest, Mr Norton, Action
Partner’s attorney,
appears to have relied principally on information furnished to him by
Captain AK Rathee, who was said
to be the Chief Executive Officer of
Stellar Ocean Transport LLC (Stellar Ocean), which managed all the
vessels operated by Stellar
Shipping as well as the
Silver Star
.
He annexed to his affidavit Action Partner’s certificate of
incorporation dated 23 June 2009, which reflected Mr Ahamed
Mubarak
Habeeb as the sole registered shareholder and both him and Mr
Mujeebur Rahman Habeeb as its Directors. Mr Norton stated:
‘
14.
I confirm that I
have further been advised by Captain AK Rathee that Mr Habeeb has
confirmed to him that he is not a nominee shareholder
and holds the
shares for his personal account and that Tradeline LLC does not own
or control the applicant in any sense.’
[42]
Both Captain Rathee and Mr Habeeb deposed to confirmatory affidavits
on behalf of the appellant. Captain Rathee
stated:
‘
6
Furthermore, I
confirm that I am personally aware of the facts relating to the
purchase of the mv “Silver Star” by Mr
Habeeb as SOT
[Stellar Ocean] handled that transaction for him as managers of the
vessel.
7
I am, therefore,
aware of the fact that Mr Habeeb was offered and accepted Action
Partner Limited as a vehicle to own the mv “Silver
Star”
and that he personally paid the margin for the vessel out of his
funds partially held by him and partially held by
SOT and that SOT
then arranged for him the transfer of the vessel to Action Partner
Limited, the balance of the purchase price
being funded by the
mortgagee bank.
8
I can also confirm
that I have personal knowledge of the fact that Mr Habeeb is
certainly no nominee and SOT trades the “Silver
Star” for
the account of Action Partner Limited which I know to be controlled
by Mr Habeeb and no one else.’
Mr Habeeb added:
‘
7
…
I
confirm that:
7.1
I am the sole shareholder of Action
Partner Limited, being the owners of the mv “Silver
Star”;
7.2
I hold those shares for my own account and not as a nominee;
7.3
Tradeline LLC does not own or control Action Partner Limited. I do.
. . .
I also confirm that
by agreement between the applicant and Stellar Ocean Transport LLC,
the latter are the technical and commercial
managers of the “Silver
Star”.’
In
other words the only evidence tendered in response to the evidence of
association was silent about the business or trading activities
of
the
Silver Star
,
a matter of considerable importance as later emerged.
[43]
Mr Cunningham, Hilane’s attorney of record, who deposed to the
answering affidavit on its behalf, demonstrated that this
explanation
was by no means a complete picture of the relationship between the
different companies. He stated:
‘
10.
I annex hereto … copies of reports compiled by Lloyd`s List
Intelligence on Action Partner and the vessel [
Silver
Star
] as well as copies of reports by
Sea-Web … both of which are known to be reputable sources of
maritime intelligence, on
Stellar Shipping Co LLC (“Stellar
Shipping”), Action Partner and Tradeline.
11. It is evident
from these reports that: -
11.1. Stellar
Shipping is the operator of the vessel;
11.2. Stellar
Shipping is a subsidiary of Tradeline;
11.3. Stellar Ocean
Transport LLC (“Stellar Ocean”) is a subsidiary of
Tradeline;
11.4. Stellar Ocean
is the ship manager and beneficial owner of the vessel;
11.5. the vessel is
group owned by Tradeline.
11.6. Habeeb is the
vice chairman of Tradeline
12. I attach hereto
… a copy of a Bill of Sale dated
7 June 2011
wherein
Stellar Shipping purported to sell the vessel to Action Partner for
the sum of US$49,800,000.00.
13. In terms of a
mortgage agreement entered into between Action Partner, as owner of
the vessel and Emirates NDB Bank, as mortgagee,
on
18 October 2011
… the actual borrower in terms of the facility agreement dated
6 September 2011, entered into in accordance with the mortgage,
was
Stellar Shipping.
14. The amount
advanced to Stellar Shipping in accordance with the facility (loan)
agreement (usually used to pay the purchase price
for the vessel in
part or in full) was US$40,600, 00.00. The source of the balance of
the purchase price of US$9,200,00.00 for
the purchase of the vessel
is unknown.
15. The Applicant
has submitted that as at the date of the arrest, the sole shareholder
(and thus beneficial owner of all of the
shares) in Action Partner
was Habeeb.
16. Habeeb acquired
the shares on 8 June 2011 … the day after the signature of the
Bill of Sale and delivery of the vessel
to Action Partner.
17. If these
contentions are to be accepted, Habeeb must have acquired the
shareholding by payment of the value of the vessel, given
that
Stellar Shipping borrowed the funds to pay the majority of the
purchase price (some USD50 million).
…
19. Moreover, Habeeb
is the vice chairman of Tradeline. This is apparent from the SeaWeb
report to which I refer hereunder.
20. Given this
association, and the fact that Tradeline is a holding company of both
Stellar Shipping and Stellar Ocean, and that,
indeed, Habeeb is also
a “partner” of Phiniqia – which it is common cause
is owned and or controlled by Tradeline
- and further that Tradeline,
again according to SeaWeb is the “Group Owner” of the
vessel, it is significant that
Habeeb did not disclose his close
contact and association with Tradeline and the other entities owned
or controlled by the latter.
This is more surprising given that the
SeaWeb report to which I refer to above expressly states that the
vessel is “group
owned” by Tradeline.
…
25. In addition to
the above, I attach hereto … a judgment in
Stellar
Shipping Co LLC v Hudson Shipping Lines
[2010] EWHC 2985
(Comm)
dated 18 November 2012, wherein it is recorded,
inter
alia
, that:
“
The
shipping division of Tradeline was spun off as an independent
identity and Stellar Shipping Co LLC was incorporated in 1999
to
supplement the trading activities with an initial fleet of eight dry
bulkers”
26. I also attach
hereto . . . company profiles from the Dubai Chamber of Commerce for
Tradeline and Stellar Shipping respectively.
It is evident from these
reports that:
26.1. Habeeb holds a
25% share in Tradeline and is described as a “Partner”;
26.2. Majid Saif
Ahmad Al Ghurair (“MSA Al Ghurair”) holds a 51% share in
Tradeline and is described as a “Managing
Partner”;
26.3. Habeeb holds a
19% share in Stellar Shipping and is described as a “Managing
Partner”;
26.4. MSA Al Ghurair
holds a 51% share in Stellar Shipping and is also described as a
“Managing Partner”.
27. MSA Al Ghurair
is the owner and/or controller of the Al Ghurair group of companies,
of which,
inter alia
, Tradeline is a party.
28. In the
circumstances, I submit that despite the assertions of Captain AK
Rathee (“Rathee”) in regard to Habeeb`s
alleged claim
that he is the sole share holder of Action Partner (for his own
account) it is clear that the owner of the vessel,
Action Partner,
and, indeed, Stellar Shipping and Stellar Ocean, are owned and/or
controlled by Tradeline and its majority shareholder,
MSA Al Ghurair.
29.
The Respondent`s claims are therefore enforceable against the mv
“Silver Star” as the deemed owner of the mv “Sheng
Mu” was Phiniqia which was ultimately owned or controlled by
Tradeline at the time the claim arose and which also ultimately
owns
or controls the mv “Silver Star” as contemplated in
subsections 3(6) and (7) of the Act.’
[44]
Ms Pitman, Mr Norton’s colleague, deposed to the replying
affidavit on behalf of the appellant on 16 August 2013. Like
Mr
Norton, she relied primarily on information furnished to her by
Captain Rathee. She stated:
‘
19
Also in 2008 Mr
Habeeb decided to start his own Ship Management Company, being
Stellar Ocean Transport LLC (“SOT”).
The use of the name
“Stellar” in the United Arab Emirates is quite popular
and, therefore, common and there are numerous
companies with
“Stellar” as part of their name.
20
In the United Arab
Emirates it is necessary for any local company to be sponsored by a
local citizen who must own at least 51% of
the shares. Consequently,
although the company was started and managed by Mr Habeeb it was
necessary for a local sponsor to be
found who held 51% of the shares
in the company.
21
I have been advised
that this shareholding is not nominal and that the local citizen must
hold such shares for his own account,
which is, indeed, what occurred
in the case of this company. The sponsor was Mr Ahmad Salam Ahamd
Darwish, who is entirely unrelated
to the Al- Ghurair family.
Consequently, Mr Habeeb took a shareholding of 23% in the company
which he managed, which he held until
he sold his interest in the
company on (date).
…
25
In any event Mr
Habeeb is, as a shareholder in the group, aware of the fact that
Tradelines LLC (“Tradelines”), Stellar
Shipping LLC
(“Stellar Shipping”) and Phiniqia International Shipping
LLC (“Phiniqia”) are and always have
been controlled as
to 51% of shareholding by Mr Majid Saif Ahmed Al-Ghurair. It is
incorrect to characterise Tradelines as a holding
company. It is not.
Mr Al-Ghurair independently controls all three companies through his
51% shareholding in each.
…
27
In or about 2008
Tradelines, Phiniqia and Stellar Shipping were badly affected by the
economic downturn.
28
Stellar Shipping
then had a number of new-buildings on order from various shipyards.
The “Silver Star” was one such
vessel on order by Stellar
Shipping, her price being around US$50m.
29
Stellar Shipping had
arranged a loan of US$40,6m from Emirates NDB Bank, the remaining
roughly US$9.5m being payable by it to the
yard.
30
It was no longer in
a financial position to pay the US$9.5m and offered the vessel to its
shareholders
31
Mr Habeeb, who then
owned the “Mega Star” through a special purpose vehicle,
believed that purchasing a sister vessel
would bring economy of
management and profitability and decided to purchase the vessel
personally. Both vessels were specifically
suited for the Indonesian-
Indian coal business with their 80,000 DWT cranes and gears.
…
41
Indeed, in this
particular case, as I have indicated, with regard to paragraph 11.1,
Stellar Shipping has nothing whatsoever to
do with the vessel. It
sold the vessel on to Action Partner Limited and the vessel is
commercially managed and, thus, operated
by SOT.
42
With regard to
paragraph 11.2, Stellar Shipping is not a subsidiary of Tradeline
although Mr Al-Ghurair is the 51% shareholder in
both companies.
…
46
With regard to
paragraph 11.6, it is admitted that Mr Habeeb is the Vice Chairman of
Tradeline. He was conferred this honour as
a minority shareholder in
the company and because of his status. This, however, has nothing
whatsoever to do with his personal
investment in Action Partner
Limited in respect of the vessel.
47
The sale referred to
in paragraph 12 was not a purported sale but an actual sale, as
documented by the Bill of Sale.
48
With
regard to paragraph 13, it is very well known that mortgagee banks go
to some lengths to ensure that if a group company is
taking a loan
the main companies of the group stand as guarantors for that loan.
Yet the loan documentation does not mention Tradeline,
Stellar
Shipping or Phiniqia. This in itself is, it is submitted, a telling
fact that such companies are not related to Action
Partner Limited.
49
Mr Cunningham avers
that the actual borrower was Stellar Shipping. That is not the case.
The facility Letters were, indeed, concluded
between Stellar Shipping
and the Bank. However, before the loan was granted Stellar Shipping
encountered financial difficulties
and could not continue with the
transaction. It was at that point that Mr Habeeb agreed to step in
and buy the vessel from Stellar
Shipping, which he did in terms of
the relevant deed of sale.
50
With regard to
paragraph 14, the amount was advanced not to Stellar Shipping but to
Action Partner Limited. The source of the balance
has already been
dealt with.
…
52
With
regard to paragraph 16, there was an administrative delay in the
transfer of the shares the day after the sale. In fact, the
shares
were supposed to have been transferred before the sale. However,
nothing turned on this and the shares were subsequently
transferred
as they were supposed to be.’
[45] On 21 August
2013 Mr Norton deposed to yet a further affidavit to respond to the
obvious difficulties facing Action Partner
arising from this
material. He attached a draft affidavit by Captain Rathee, in which
the latter stated:
‘
11
I went through the
affidavit and advised that the facts contained therein were correct
and could be deposed. The affidavit was subsequently
deposed by Ms
Pitman and filed.
…
15
In re-reading it,
there are, indeed, a number of inaccuracies. In the circumstances it
is as well that I identify and correct them
and also identify which
information I provided to ENS as being within my personal knowledge
and which was provided to me by Mr
Habeeb as only being within his
personal knowledge.
…
17
The facts contained
in paragraph 19 were provided by me and the paragraph is not quite
correct in that I meant to refer to the use
of the word “Stellar”
worldwide, not just in the United Arab Emirates.
…
19
Paragraph 20 was
provided to me for verification in the form that it was finally
deposed and I confirmed it but it is also incorrect
in that it is
possible to have a citizen of the United Arab Emirates sponsor a
company by holding a 51% shareholding for a fee
without any active
participation, financial or otherwise in respect thereof.
20
In the case of SOT I
am personally aware of the fact that Mr Ahmad Salam Ahamd Darwish is
such a sponsor and that the company was
until 24 September 2012
controlled by Mr Habeeb.
…
23
Paragraph 34 is not
quite correct in that Mr Habeeb has subsequently reminded me that the
owning company of the “Majestic
Star” was controlled by
his brother, Mr Mujeebur Rahman Habeeb, as sole shareholder, and the
vessel was beneficially owned
by him, not Mr Habeeb. However, by
arrangement with his brother the proceeds from the sale of that
vessel were used to part pay
the difference between the loan amount
provided by the bank and the sale price for the purchase of the mv
“Silver Star”.
…
28
Paragraph 45 is
within my personal knowledge in that I am fully aware of the
transaction in terms of which Mr Habeeb took the vessel
through
Action Partner Limited. Tradeline does, however, continue to be a
corporate guarantor of the obligations of Stellar Shipping
as
borrower on the loan but neither are guarantors of the obligations of
Action Partner Limited`s performance under the ship`s
mortgage.
…
30
I
am afraid that paragraphs 48 and 49 are incorrect. I understood this
paragraph to be making the point that neither Tradeline nor
Stellar
Shipping were guarantors of Action Partner Limited`s commitment under
the ship`s mortgage agreement. Clearly a cursory
read of paragraph
(b) of the Preamble to the Mortgage at page 117 of the papers makes
it clear that Stellar Shipping is the borrower
from the bank. I
believed that ENS had grasped this point and I believe that I was
reading these paragraphs as if this point had
been understood and was
being confirmed, not the opposite, as I subsequently understand to be
the case.
31
In fact, as is clear
from the Facility Letter that has been provided to the respondent as
a consequence of its request for it, Stellar
Shipping remains the
borrower and there are, indeed, corporate and personal guarantees in
place from Tradelines and the Stellar
Shipping shareholders. The
guarantees are for the performance of Stellar Shipping, not Action
Partner Limited for its commitments
in terms of the mortgage
agreement.
32
With regard to
paragraph 50, this is correct in the sense that the monies were
advanced for the purchase of the “Silver Star”
by Action
Partner Limited. However, it was advanced in terms of a loan to
Stellar Shipping.
33
The facts in
paragraphs 52, 54, 60 and 61 are within my personal knowledge and are
correct.
…
36
I
now understand from ENS that the fact that Stellar Shipping remains
borrower in respect of the loan for the purchaser of the “Silver
Star” and that Trade Line and the shareholders of Stellar
Shipping have provided guarantees in respect of the loan is to
be
construed on the documents as a recognition that the only position of
Stellar Shipping is that it remains on paper liable to
pay the Bank
whereas Action Partners Ltd is actually the true payor.’
[46]
No doubt the dispute of fact raised by the affidavits has to be
approached in line with what was stated in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634E-635C. However, a court will not necessarily be
hamstrung in its determination of a matter such as this by a party’s
denial of facts on affidavit, particularly where, as here, there
appears to be a wealth of circumstantial and other evidence pointing
to association. Mr Norton’s affidavit had done little to
refute the information presented by Mr Cunningham, much of
which was
in fact undisputed.
[47]
The Sea-Web report annexed to Mr Cunningham’s affidavit: (a)
describes Stellar Ocean and Stellar Shipping as subsidiaries
of
Tradeline; (b) describes Tradeline as being the group owner and
Stellar Ocean as being the ship manager of the following five
vessels, namely the Diamond Star, Emerald Star, Mega Star, Ruby Star
and Silver Star; (c) reflects the year of build of the
Silver
Star
as 2011, its shipbuilder as Cosco
and its operator as Stellar Shipping; and (d) lists Tradeline`s
address as ‘[c]are of Stellar
Ocean Transport LLC, Suite 4008,
4
th
Floor, Al Rigga Business Centre …’ and its corporate
office bearers as: Mr Majid Saif Al Ghurair – Chairman;
Mr
Ahmed Hussain Lafir – Managing Director; Mr A.M. Habeeb –
Vice Chairman; and Mr Raman Madhok – Chief Executive.
The Dubai
Chamber Company Profile lists Tradeline’s shareholders and
their respective shareholding as follows: Mr Al Ghurair
– 51%;
Mr AM Habeeb - 25%; and Mr Lafir – 24%. It also reflects the
shareholders and their respective shareholding
in Stellar Shipping as
follows: Mr Al Ghurair – 51%; Mr AM Habeeb – 19%; Mr
Lafir – 15% and Ahmed Ahmad Iqbal
– 15%. The appellant
does not appear to dispute the respective shareholdings of Mr A
Ghurair and AM Habeeb in Tradeline and
Stellar Shipping. Nor does it
dispute that Mr Al Ghurair is the controller of the Al Ghurair group
of companies, of which,
inter alia
,
Tradeline is a part. In effect most of this material was undisputed.
It showed common control of a group of shipping companies
and common
operation of the fleet including the
Silver
Star
.
[48]
It seems that Tradeline`s shipping division was spun off as an
independent entity and Stellar Shipping incorporated in 1999.
By 2006
it appears that Stellar Shipping was already operating its own fleet
and had in fact ordered two new vessels from Cosco
(Dalian) Shipyard
Co Ltd (Cosco). On 21 October 2010 Cosco wrote to Stellar Shipping
with reference to the ship building contract
for the construction of
the
Silver Star
dated 6 December 2006. That letter, which was
marked for the attention of Captain Rathee, informed Stellar Shipping
that it was
in default of its contractual obligations and notified it
that Cosco was cancelling the contract. Ten days later Mr Lafir wrote
to Mr Habeeb on a Tradeline letterhead as follows:
‘
We
refer to our meeting yesterday in the matter of Vessel M.V. Silver
Star. We are thankful to you for your decision to purchase
this
Vessel and helped us to deal with our problem with Cosco Shipyard.
We have discussed
this matter with Emirates bank and I am pleased to confirm that in
principal the bank, Trade Line LLC and Stellar
Shipping Co, (LLC) are
agreeable to extend the loan facility to you. However we need your
confirmation to following conditions:
(1) You will pay
full margin money for this Vessel USD 10 Million (Exact amount to be
ascertained upon delivery of the Vessel).
These funds to be arranged
by you with your own independent arrangement.
(2) The bank loan
facility is extended to you against your share holding in Trade Line
LLC, Stellar Shipping Co. (LLC), Phiniqia
International Shipping
L.L.C and any other Company of Al Ghurair.
…’
[49]
Captain Rathee relied on that letter, which
he said recorded the terms upon which Mr Habeeb ‘took over the
transaction’
from Stellar Shipping in respect of the
Silver
Star
. However, less than a week later
on 6 November 2010, Stellar Ocean instructed the National Bank of Abu
Dhabi to transfer USD 5
million to Stellar Shipping. The email
address on the Stellar Ocean letterhead bearing that instruction is
the same as that of
Stellar Shipping. What is more, under the caption
‘payment details’ Stellar Ocean stated ‘transfer to
sister
concern’. That hardly indicated that these were
transactions at arm’s length. A peculiar feature of the events
after
this letter was written was that Stellar Shipping continued to
act as if Mr Habeeb had not taken over the vessel. Thus it negotiated
with the bank in regard to the loan to pay the purchase price and
there are no official bank documents reflecting the revised
arrangement.
[49]
On 7 June 2011 a Bill of Sale was purportedly signed by Mr Lafir on
behalf of Stellar Shipping in respect of the sale of the
Silver
Star
to Action Partner ‘in
consideration of the sum of US$ 49,800,000.00 paid to us’. No
evidence was tendered of a payment
as reflected in the Bill of Sale.
It was apparently signed in the presence of Captain Rathee, who it
will be recalled was described
in Mr Norton’s founding
affidavit as the CEO of Stellar Ocean. That Bill of Sale reflects
Captain Rathee’s address
and the address of Stellar Shipping as
the same address given for Stellar Ocean in the Standard Ship
Management Agreement (the
Shipman) allegedly concluded on 16 May 2011
between Action Partner and Stellar Ocean in respect of the
Silver
Star
for a period of five years
commencing on 17 June 2011. Mr Habeeb evidently signed the Shipman on
behalf of the appellant and Mr
Ihsan Habeeb signed on behalf of
Stellar Ocean. One would imagine that there must have been two bills
of sale – one from
Cosco to Stellar Shipping and a second from
the latter to Action Partner. The former has never been produced, nor
have we been
shown anything to explain on what basis Cosco reversed
its decision to cancel the shipbuilding contract. Most importantly,
if Action
Partner was now the purchaser, why would that not be
reflected in the arrangements with Cosco? The inference is that
Stellar Shipping
remained the purchaser of the vessel from Cosco.
[50]
Apart from the deed of sale there was little to suggest that Action
Partner had purchased the
Silver Star
as
a transaction independent of Stellar Shipping and any suggestion of
independence was dealt a heavy blow when the financing of
the
purchase came to be revealed. It showed that Stellar Shipping, and
not Action Partner, borrowed the money to effect the purchase.
On 18
October 2011 a First Preferred Ship Mortgage was registered over the
Silver Star
in favour of Emirates Bank. It recorded that Emirates Bank had made
available to Stellar Shipping medium term loan facilities in
the
amount of USD 40 600 000 and that Action Partner as the owner of the
Silver Star
had agreed to secure the liability of Stellar Shipping by granting
the Bank a first preferred ship mortgage over the vessel. That
document recorded Action Partner’s address for the purposes of
notices and the like as ‘4008, Rigga Business Centre’
and
its PO Box address as ‘82692’. The former is indeed the
address for Stellar Ocean and the latter for Stellar Shipping.
Notices were to be marked for the attention of ‘Mr Anil Kumar
Rathee’.
[51]
In terms of a facility amendment letter dated 6 September 2011
addressed to Stellar Shipping, Emirates Bank recorded that the
interest on the loan advanced to the latter would be debited
quarterly to the ‘[c]all account of M/s Action Partner Limited
(0514389287701)’ and ‘[t]he principal amount …
[would] be repaid semi annually by debiting the current account
of
M/s Action Partner Limited’. We were not told on what basis
Stellar Shipping could agree to repay its debts from Action
Partner’s
funds. The inference is that there was a close relationship between
them in which Stellar Shipping was the dominant
party. The appellant
had thus undertaken to repay the loan amount (described in the
document as one ‘[t]o part finance purchase
of a marine vessel
from Cosco’ – which could only have been the
Silver
Star
) advanced by Emirates Bank to
Stellar Shipping plus the interest on that amount. Action Partner’s
obligation in that regard
was to endure until 25 March 2020.
[52]
Moreover the facility amendment letter recorded that Stellar Shipping
had irrevocably and unconditionally undertaken the following:
‘
-
To deposit all charter income of marine vessel – Silver Star in
the Call Account No. 0514389287701 of M/s. Action Partner
Limited,
Hong Kong.
- To accelerate the
repayment in case the marine vessel name “Silver Star”
generates adequate revenues.
- To indemnify the
Bank against any pollution or environmental liability as may arise in
connection with the operation of the marine
vessel.
- The Bank reserves
the right to accelerate the repayment incase the marine vessel
generates adequate revenues.
…
* Authorize to debit
your account in case of non-availability of funds in M/s. Action
Partner Limited, Hong Kong account.’
The
effect of these provisions was that Action Partner could enjoy no
benefit from the trading operations of the
Silver
Star
until the loan was discharged, and
under the mortgage it was precluded from selling the vessel. Its
‘ownership’ was
accordingly purely nominal and not
beneficial and its commercial operations were for the purpose of
discharging Stellar Shipping’s
liability to the bank, a
liability for which Mr Habeeb was personally liable. And as
conditions precedent for the ‘continued
availability of
facilities, [Stellar Shipping] agreed to sign, execute and deliver’
inter alia guarantees from Action Partner,
Tradeline, Mr Lafir, Mr Al
Ghurair and Mr Habeeb to the satisfaction of the bank.
[53]
When one examines the response to this powerful array of evidence
pointing in the direction of commonality of control one
is struck by
the evasiveness that permeates it. Captain Rathee, the common thread
on the documentary evidence between Stellar Ocean,
Stellar Shipping
and Action Partner, simply fails to properly explain how the factual
inaccuracies and inconsistencies occurred
in the latter’s
version. To once again borrow from Marais JA (
The Heavy Metal
para
21):
‘
I
do not think that a litigant in motion proceedings who resorts to
this kind of response in the face of a powerful circumstantial
showing that, on the probabilities, whoever ultimately had the power
to control the company which owned the guilty ship also has
the power
to control the company which owns the ship sought to be arrested as
an associated ship can shelter behind the principles
laid down
in the case of
Plascon-Evans Paints Ltd
.
In a few words, such an approach should not be regarded as giving
rise to a genuine dispute of fact.’
In
that, the majority (at 1107J-1108G) were at one with Marais JA.
[54]
If Stellar Shipping and Action Partner were truly independent
entities, as Captain Rathee suggests, there would appear to be
no
reasonable commercial rationale for the former to agree to sell the
vessel to the latter whilst at the same time retaining liability
to
the bank for the loan and indemnifying it in respect of any pollution
or environmental liabilities arising from the operation
of the
vessel. Moreover, had the vessel been sold pursuant to an arm’s
length transaction, how, it must be asked, could Stellar
Shipping
undertake to deposit all charter income from the vessel into Action
Partner’s call account or assign the latter’s
rights to
revenue generated from the
Silver Star
to the bank? It thus seems not just highly improbable, but plainly
inconceivable, that Stellar Shipping and Action Partner would
have
acted as they did had the relationship been anything other than one
between closely related companies. Action Partner has
striven to
create the impression that Stellar Ocean Transport has nothing
whatsoever to do with Stellar Shipping, which appears
manifestly not
to be the case. In addition when the
Silver
Star
was arrested, whilst in the
process of loading a cargo of manganese ore at Port Elizabeth, she
was under a time charter to Oldendorff
GmbH & Co KG of Luebeck.
That charterparty dated 26 July 2013 describes Stellar Ocean as the
owners of the vessel. It thus
seems to me that the welter of other
evidence adduced, which points ineluctably to commonality of control,
must perforce trump
Captain Rathee’s denial (albeit a denial
under oath).
[55]
It follows that the association has been proved on a balance of
probabilities. In the result the appeal must fail and it is
accordingly dismissed with costs, such costs to include those
consequent upon the employment of two counsel where two counsel were
employed
_____________
V
PONNAN
JUDGE
OF APPEAL
Appearances
For appellant: D A
Gordon SC (with him S Pudifin-Jones)
Instructed by:
Edward Nathan
Sonnenbergs, Durban
Honey
Attorneys, Bloemfontein
For
respondent: M J Fitzgerald SC (with him J D Mackenzie)
Instructed
by:
Bowman
Gilfillan, Cape Town
Matsepes,
Bloemfontein.
[1]
Bocimar
NV v Kotor Overseas Shipping Ltd
[1994] ZASCA 5
;
1994 (2) SA 563
(A) at 581B-C.
[2]
AED is an abbreviation for Arab Emirate Dirham. The amount is
approximately equivalent to USD 3 million.
[3]
The trend is traced in MJD Wallis
The
Associated Ship and South African Admiralty Jurisdiction
(2010) at 41-43.
[4]
International Convention Relating to the Arrest of Sea-Going Ships
concluded in Brussels on 10 May 1952.
[5]
Euromarine
International of Mauren v The Ship Berg and Others
1986
(2) SA 700
(A) at 712A-B.
[6]
Section 25 of the Constitution.
[7]
The
Associated Ship and South African Admiralty Jurisdiction
at 268-281.
[8]
MSC
Gina:
Mediterranean
Shipping Co SA v Cape Town Iron and Steel Works
2011 (2) SA 547
(KZD) para 19.
[9]
The topic is discussed in
The
Associated Ship and South African Admiralty Jurisdiction
at 153-155.
[10]
D
Sutton
and J Gill,
Russell
on Arbitration
(22
ed, 2003) para 6-190.
[11]
F.
J. Bloemen Pty Ltd v Council of the City of Gold Coast
1973
AC 115
at 126.
[12]
MV
Yu Long Shan: Drybulk SA v MV Yu Long Shan
1998
(1) SA 646
(SCA) at 653F-H.
[13]
Swadif
(Pty) Ltd v Dyke NO
1978
(1) SA 928
(A) at 942C-E.
[14]
In
Trust
Bank of Africa Ltd v Dhooma
1970
(3) SA 304
(N) at 310A-C.
[15]
They may also be claims arising in respect of the carriage of goods
in a ship or an agreement for such carriage.
[16]
Peros
v Rose
1990
(1) SA 420
(N) at 424F-426A.
[17]
The
Beldis
[1936]
P 51.
[18]
The
“Bumbesti”
[1999]
2 Lloyd’s Rep 481 [Q.B. (Adm. Ct.)].
[19]
C/f
MV
Ivory Tirupati: MV Ivory Tirupati and Another v Badan Urusan
Logistik (aka Bulog)
2003
(3) SA 104
(SCA) para 32.
[20]
Per Scott LJ at 82.
[21]
The
St Anna
[1983]
2 All ER 691 (QBD).
[22]
At 696h.
[23]
The relevant provisions appear in Appendix 2 to Nigel Meeson and
John A Kimbell
Admiralty
Jurisdiction and Practice
(4
ed, 2011) at 527-529.
[24]
D
J Shaw QC
Admiralty
Jurisdiction and Practice in South Africa
(1987)
at 23-24.
[25]
D C Jackson
Enforcement
of Maritime Claims
(4
ed, 2005) at 1.
[26]
Stewart C Boyd CBE QC
et
al
Scrutton
on Charterparties and Bills of Lading
(21
ed, 2008) articles 1 and 3. The conclusion in
Montelindo
Compania Naviera SA v Bank of Lisbon and SA Ltd
1969 (2) SA 127
(W) at 137H-138A and 138E-H that a time or voyage
chartertparty is a lease is incorrect.