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[2013] ZAECPEHC 40
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The owners of the mv "Silver Star" v Hilane Limited (A2282/2013) [2013] ZAECPEHC 40 (28 August 2013)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE, PORT ELIZABETH
NOT
REPORTABLE
Case
No.: A2282/2013
Date
Heard: 22 August 2013
Date
Delivered: 28 August 2013
In
the matter between:
THE
OWNERS OF THE mv “SILVER
STAR”
Applicant
and
HILANE
LIMITED
Respondent
JUDGMENT
EKSTEEN
J:
[1]
A writ of summons
in rem
against the mv “Silver Star”
(herein referred to as “the vessel”) was issued by the
respondent herein on
12 August 2013. At the same time Plasket J
ordered that a warrant of arrest be issued in respect of the vessel.
The
vessel was duly arrested in the port of Port Elizabeth on the
same evening.
[2]
In the present application the applicant seeks an order that the
arrest of the vessel
be set aside, that the respondent provide
security for the applicant’s claim for damages against the
respondent for the wrongful
arrest of the vessel without reasonable
and probable cause and for leave to sue the respondent by edictal
citation.
[3]
The application was launched on 14 August 2013 as a matter of urgency
to be heard
on 16 August 2013. In the answering affidavit filed
on 16 August on behalf of the respondent the urgency of the matter is
not disputed. The deponent to the answering affidavit on behalf
of the respondent, Mr Cunningham of Attorneys Bowman Gilfillan
Incorporated, the respondent’s attorneys of record, declared
that due to the time constraints chosen by the applicant herein
the
answering affidavit had been prepared in great haste which was
compounded by logistical problems arising from the fact that
Attorneys Bowman Gilfillan were instructed by solicitors in London
who in turn represented clients in Hong Kong, each location
in a
different time zone. He accordingly reserved the right, if
necessary, to seek leave to supplement the opposing papers
in due
course, in the event that the application should not be finalised on
16 August 2013.
[4]
On 16 August, by agreement between the parties, the matter was
postponed to 22 August
2013 and the respondent agreed to provide
security in respect of the delay during which the vessel would be
detained and would
be off-hire. The respondent did not,
however, avail itself of the opportunity to file supplementary
papers.
[5]
The matter was argued before me on 22 August 2013. Although I
would have preferred
more time to consider the matter I am alive to
the urgency of the case and the considerable expense incurred as a
result of the
vessel being held in port. In the circumstances I
have considered it necessary to give preference to this judgment.
[6]
The writ of summons
in rem
issued as aforesaid records the
respondent’s claim against the applicant. The respondent
is a company incorporated
in Hong Kong which carries on business,
inter alia
, as the owner of the vessel mv “Sheng
Mu” (to which I shall refer as the “Sheng Mu”).
[7]
The vessel is, a bulk carrier with a Panamanian Flag IMO no. 9512214
and a gross tonnage
of 43 830. The registered owner of the
vessel is Action Partner Limited (herein referred as “Action
Partner”).
Action Partner, so it is alleged in the
summons, was owned and/or controlled by Trade Line LLC (herein
referred as “Trade
Line”), incorporated in the United
Arab Emirates. The claims of the respondent are alleged to have
arisen in respect
of the voyage charterparty entered into between it
and Trade Line, through its (Trade Line’s) subsidiary and
chartering arm
Phiniqia International Shipping LLC (herein referred
to as “Phiniqia”), on a GENCON 1994 form with additional
clauses,
of the Sheng Mu in order to carry a cargo of 15,271,531 MT
coking coal (“the cargo”) from Bandar Abbas, Iran to
Vizag,
India.
[8]
Prior thereto on 20 June 2011 Golden Waves FZC, UAE (herein referred
to as “Golden
Waves”) concluded an agreement of sale in
terms of which it agreed to sell the cargo to Trade Line.
The respondent’s
claim, it is alleged, arises in respect of the
charter of the vessel by Phiniqia and the breach by Phiniqia of its
obligations,
inter alia
, in terms of certain letters of
indemnity issued by Phiniqia to the respondent in respect of Bills of
Lading relating to the cargo
and its delivery. As a result of
the alleged breach a dispute arose between Trade Line and Golden
Waves. This in turn
gave rise to further disputes between the
respondent and Golden Waves and between the respondent and Phiniqia.
Golden Waves
instituted arbitration proceedings in London against the
respondent in respect of the latter’s alleged misdelivery of
the
cargo in terms of Bills of Lading issued and signed by the Master
of the vessel. Golden Waves caused the Sheng Mu to be arrested
in the Port of Napier, New Zealand, as security for the arbitration
which in turn caused the respondent to suffer further damages.
In order to enforce the indemnities furnished by Phiniqia to the
respondent in terms of the charterparty the respondent has
successfully
prosecuted arbitration proceedings in London against
Phiniqia pursuant to which it was directed that the respondent was
entitled
to the enforcement of its indemnities and to the payment of
its damages in the total amount of US$3 843 927,10.
[9]
The respondent now contends that the vessel is owned and/or
controlled by Trade Line,
which at the time that the plaintiff’s
claim arose, also owned and/or controlled Phiniqia, who, as the
charterer of the Sheng
Mu is deemed in terms of section 3(7)(c) of
the Admiralty Jurisdiction Regulation Act, 105 of 1983, (herein
referred to as “the
Act”) to be its owner. In the
circumstances it was alleged that the vessel is liable in terms of
section 3(6) and (7)
of the Act to be arrested in an action
in rem
as an associated ship to the Sheng Mu. In obtaining the warrant
for the arrest of the vessel a certificate was filed in accordance
with section 4(3) of the Act in which this contention was advanced,
although very little can be gleaned from it as to the factual
basis
underlying the conclusion.
[10]
In the present application two issues arise. Firstly the
applicant denies that the vessel
is an associated ship in respect of
the respondent’s claim and secondly, in any event, it is argued
that the respondent was
not entitled to proceed with an associated
ship arrest in the circumstances of the respondent’s claim.
No notice was
given in the papers filed of the foundation for this
contention of law.
[11]
I shall deal first with the legal issue. The legal argument
raised by Mr
Gordon
, on behalf of the applicant, raises
the question whether the associated ship provisions contained in
section 3(6) and (7) of the
Act can or do apply to a case where an
arbitration award is sought to be enforced.
[12]
The respondent’s alleged cause of action is summarised above.
It is the true owner
of the Sheng Mu. The respondent had a
claim against Phiniqia by virtue thereof that Phiniqia was the
charterer of the Sheng
Mu at the time that the respondent’s
alleged claim arose and is therefore deemed to have been the owner of
the Sheng Mu.
The dispute between the respondent and Phiniqia
has been subjected to arbitration and an award has been made.
[13]
Section 3(6) of the Act provides that 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 which the maritime claim arose”.
[14]
Once an award in arbitration has been made, so the argument goes, the
award itself creates a
new cause of action for the enforcement
thereof which replaces the original cause of action. On this
basis it is contended
that there can be no claim
in rem
against the vessel as the claim which the respondent’s seeks to
enforce does not arise in respect of the Sheng Mu or indeed
of any
ship, but rather it arises from an award made in arbitration as
against Phiniqia.
[15]
The argument is reliant heavily upon an English decision of the
Queen’s Bench Division
(Admiralty Court) in “
The
‘Bumbesti
”’, Lloyd’s Law Report
[1999] Vol. 2 p. 481.
[16]
In
The Bumbesti
the issue addressed was whether the
English Admiralty Court had jurisdiction
in rem
to hear and
determine a claim to enforce an arbitration award made by the
Constantza Court. The only basis for the court’s
in
rem
jurisdiction relied upon in this particular case by the
claimants is section 20(2) para (h) of the Supreme Court Act, 1981.
In terms of this provision of the Supreme Court Act the Admiralty
Court has jurisdiction to hear and determine “any 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 provision
is similar
to the provisions of section 1(1)(j) of the Act.
[17]
The Queen’s Bench held that in English law it is clear that if
a claim for damages is referred
to arbitration and the arbitration
award is made for the payment of damages this creates a new right of
action for the enforcement
of the award that replaces the original
cause of action. Hence it is argued that the claim which the
respondent may have
had against Phiniqia in respect of the Sheng Mu
has fallen away and is replaced by a claim against Phiniqia arising
from the arbitration
award.
[18]
I am not persuaded that the position is necessarily the same in South
African law. In
Swadif v Dyke NO
1978 (1) SA 928
(A) at 944G it was held that where the only purpose of the judgment
is to enable the creditor to enforce his right of payment “it
was realistic, and in accordance with the view of the Roman-Dutch
writers, to regard the judgment not as novating the obligation,
but
rather as strengthening or re-enforcing it”. The effect
thereof is that “the enforceable right remains the
same.”
[19]
This view was subsequently reconsidered in mv
Ivory Tirupati
and Another v Badan Urusan Logistik (aka BULOG)
2003 (3) SA
104
(A) where Farlam JA found himself unable to agree that the
enforceable right remains the same. He referred with approval
to the writings of Van der Keessel, as follows:
“
Having stated that it was clear
that a
novatio necessaria
takes place on
litis contestatio,
Van der Keessel
said that it was equally clear that it does not
terminate the antecedent obligation or those things that were
accessory to it,
such as pledges, sureties or interest.”
(See
mv
Ivory
supra
p. 115J-116A.)
[20]
Farlam JA then concluded that there is nothing unusual about an
obligation being confirmed or
re-enforced by the incurrence of
another obligation which is in effect an alternative to an antecedent
one, such as where a cheque
is given in payment of an existing debt
without any intention to novate the existing debt. (See mv
Ivory
supra
p.116C.) The position in the South African
law, he held, is that although the original cause of action may
survive in a re-enforced
and strengthened form, a judgment (or an
arbitration award) may also give rise to a new independent cause of
action enforceable
between the parties in another court. The
award therefore creates an alternative obligation which exists
alongside the original
one. On this basis alone I think that
the judgment in
The
Bumbesti
cannot
assist.
[21]
In
The
Bumbesti
Aikens J, having
discussed the issue and various previous decisions concluded as
follows:
‘
I have come to the conclusion
that the answer that I must give to this question is “no”.
I think that it is not
within the paragraph as a matter of
construction.’
It
turned, accordingly, on the construction of the particular section of
the English statute.
[22]
In considering whether an award in arbitration could be said to be a
claim “arising out
of an agreement relating to the use or hire
of a ship” he went on to hold that an agreement to refer
disputes to arbitration
is not, itself, an “agreement” in
relation to the use and hire of a ship. This, he said, is
because the arbitration
agreement, whether it is the individual
reference or the general agreement to refer, is a contract that is
distinct from the principle
contract, i.e. the bare boat charterparty
in that case. Whilst recognising that the agreement to refer
disputes which have
arisen out of a charterparty to arbitration are
disputes which are indirectly “in relation to the use or hire
of a ship”,
he concluded that they were not sufficiently direct
so as to fall within the ambit of the section under discussion.
[23]
As stated earlier it was only one section of the English Act which
was in issue at the time.
Unlike the English Act a “maritime
claim” as defined in the Act includes the provisions of section
1(1)(aa) which provides
for a claim arising out of or in relation to
“any judgment or arbitration award relating to a maritime
claim, whether given
or made in the Republic or elsewhere. Had
the English Act contained a similar provision the result in
The
Bumbesti
would clearly have been different. In any
event, whereas the arbitration award does not in South African law
extinguish the
underlying cause of action as set out earlier herein,
I am of the view that the arbitration award does arise “in
respect
of” the Sheng Mu as envisaged in section 3(6) of the
Act. That being so an action
in rem
against the vessel
may be brought in terms of section 3(6) of the Act. In all the
circumstances I am of the view that the
argument must fail.
[24]
I turn to consider whether the vessel is an associated ship to the
Sheng Mu in respect of the
respondent’s claim. Mr Norton,
an attorney of Edward Nathan Sonnenbergs (herein referred to as
“ENS”) deposed
to the founding affidavit on the strength
of information provided to him, predominantly one Captain Rathee, who
is described in
the papers as the CEO of Stellar Ocean Transport LLC
(herein referred to as “Stellar Ocean”), which concern
according
to Rathee is the technical and commercial managers of the
vessel.
[25]
Norton confirms that Action Partner is the registered owner of the
vessel. The applicant
takes the position that Action Partner is
a special purpose vehicle in which one Ahamed Mubarak Habeeb (herein
referred to as “Habeeb”)
is the sole shareholder.
Norton records that Rathee has advised that Habeeb has confirmed to
him that he is not a nominee
shareholder and that he holds the shares
for his own account. Habeeb, so it is contended, is accordingly
the beneficial owner
of the vessel and it is strenuously denied that
Trade Line owns or controls the applicant in any manner. In
support of these
averments Action Partner annexed the official
certificate of incorporation and its annual return to the papers.
[26]
Initially no confirmatory affidavit was filed either by Habeeb or by
Rathee, however, on 16 August,
albeit belatedly, both filed
confirmatory affidavits together with the applicant’s replying
affidavit. I shall revert
to these below.
[27]
The respondent set out the basis for its claim relating to the
association of the vessel fully,
for the first time, in its answering
affidavit. It accepts, as is apparent from the summons
in
rem
, that the registered owner of the vessel is Action Partner
and that Action Partner is a one ship owing a company. It
contends,
however, that the vessel is group owned by Trade Line.
Habeeb is the vice chairman of Trade Line. The respondent
records
that according to Lloyd’s List Intelligence on Action
Partner and the vessel and according to the reports by Sea-Web, both
of which were annexed to the papers, Stellar Ocean is the ship
manager and beneficial owner of the vessel and Stellar Shipping
is
the operator of the vessel. Both Stellar Ocean and Stellar
Shipping are, according to these sources, subsidiaries of Trade
Line.
[28]
Against this background the respondent contends that on 7 June 2011
Stellar Shipping, then the
owner of the vessel purported to sell the
vessel to Action Partner for US$49 800,00. A Bill of Sale
is annexed in support
hereof. Four months later, however, on 18
October 2011, Action Partner entered into a mortgage agreement with
Emirates NDB
Bank in terms of which it mortgaged the vessel in favour
of the bank as security for a loan in the amount of US$40 600 000,00
to Stellar Shipping. The amount was advanced to Stellar
Shipping, in accordance with the facility (loan) agreement, which
the
respondent contends is usually used to pay for the purchase price of
the vessel either in part or in full. The actual
borrower, as
is evident from the mortgage agreement, so the respondent contends,
was Stellar Shipping.
[29]
In respect of Habeeb’s position the respondent acknowledges
that he is the sole shareholder
in Action Partner. Respondent
contends, however, that Habeeb acquired the shares in Action Partner
on 8 June 2011, the day after
the signature of the Bill of Sale and
the delivery of the vessel to Action Partner. It is contended
therefore that in order
for Habeeb to have acquired the shareholding
he must have made payment to the value of the vessel given that
Stellar Shipping
had borrowed the funds to pay the majority of the
purchase price, approximately US$50 000 000,00.
Habeeb, it is
contended on the strength of a Linkedin profile
obtained, completed his schooling in 2004, graduated with a BCom
degree at Madras
University in 2007 and commenced work as a project
co-ordinator in 2008 after completion of a MBA at Anna University.
He
has subsequently been employed, so it is alleged, as a
relationship officer, business development manager, marketing
director and
coal trader since 2009 and has worked for Trade Line
facilitating “coal shipment successfully over the past five
years for
Trade Line LLC …”.
[30]
Reliant on the information obtained from the Lloyd’s List
Intelligence and the Sea-Web
Report, the circumstances of the
Emirates NDB Bank loan to Stellar and the alleged youthfulness of
Habeeb the respondent contends
that, in the absence of evidence as to
how Habeeb paid for the acquisition of shares in an entity owning a
vessel worth US$50 000 000,00
the probabilities are that he
holds the shares on behalf of Stellar Shipping and/or Trade Line and
that the purported sale of the
vessel to Action Partner is nothing
more than a simulated transaction to give the impression that the
vessel is no longer owned
by Stellar Shipping.
[31]
The respondent states, and it is not in dispute, that Habeeb holds a
25% share in Trade Line and is described in the
company profiles from
the Dubai Chamber of Commerce as a “partner”. One
Al Ghurair holds a 51% share in Trade
Line and is described in the
said profiles as “managing partner”. Habeeb holds a
19% share in Stellar Shipping
and is described as “managing
partner” in the said profiles. Al Ghurair holds a
51%share in Stellar Shipping
and is also described as a “managing
partner” in the said profiles.
[32]
In its replying papers the applicant paints a very different
picture. The replying affidavit
was deposed to Ms Pitman on the
strength of information passed to her by Habeeb and Rathee.
[33]
In respect of Habeeb the applicant admits his shareholding in Stellar
Shipping and Trade Line
as well as the position which he holds as
“vice chairman” in Trade Line. Habeeb, a Belgium
citizen, however,
is stated to be 60 years of age and a successful
businessman of many years standing with interests in diamond trading,
real estate,
construction, restaurant business and shipping. It
is accordingly denied that he fits the profile attributed to him by
the
respondent. In support hereof he has annexed a copy of his
Belgium passport which bears out his citizenship and age.
These
averments the respondent cannot dispute and they must be accepted.
[34]
His shipping interests are said to be varied. Some investments
are entirely his own and
others are through shareholding purchased in
the shipping vehicles of others. His investments in the Al
Ghurair Group fall
into the latter category.
[35]
In respect of Stellar Ocean it is alleged that Habeeb entered into
the shipping industry for
his own account in 2008. He decided
to start his own ship management company, being Stellar Ocean.
The use of the name
“Stellar”, it is contended, is quite
popular in the shipping industry around the world and so it is
suggested that
the similarity in name to Stellar Shipping is purely
coincidental.
[36]
Stellar Ocean was incorporated in the United Arab Emirates. In
accordance with the law
of this country it is necessary for any local
company to be sponsored by a citizen of the UAE who must own at least
51% of the
shares. In the circumstances it is stated that
although Stellar Ocean was started and managed by Habeeb it was
necessary
for a local sponsor to hold 51% of the shares in the
company. Such shareholding was not nominal and the local
citizen must
hold the shares for his own account which, it was
alleged, was indeed what occurred in the case of Stellar Ocean.
In the
case of Stellar Ocean one Ahmad Salam Ahamd Darwish was the
sponsor. Habeeb held a 23% shareholding in the company which he
managed,
until he sold his interests in the company. The
answering papers are silent as to when Habeeb is alleged to have sold
his
shares or to whom he had sold them. In a supplementary
replying affidavit, to which I shall revert later it is contended
that Habeeb sold his shares in Stellar Ocean in 2012. In the
supplementary affidavit, however, the confidentiality as to the
identity of the purchaser remains intact.
[37]
The interests of Habeeb in the Al Ghurair Group are admitted.
It is stated that Habeeb
is a shareholder in the group and is aware
of the fact that Trade Line, Stellar Shipping and Phiniqia are and
always have been
controlled as to 51% shareholding by Al Ghurair.
He denies, however, that Stellar Shipping and Phiniqia are
subsidiaries
of Trade Line and avers that Al Ghurair independently
controls all three companies through his shareholding.
[38]
In respect of the company structures the applicant contends that
Action Partner was a special
purpose vehicle which had previously
owned another vessel, the beneficial owner thereof was Abu Dhabi
National Leasing LCC.
The vessel had been sold and during 2011
the company was dormant. In these circumstances the dormant
company was offered
to Habeeb and the shares were duly transferred to
him on 8 June 2011 for no consideration. The applicant records
that it
was later established that the transfer of two of the three
shares in Action Partner had mistakenly not been transferred to him
on 8 June 2011 due to an administrative error which was subsequently
corrected on 25 November 2011. The company owned nothing
of
value other than the vessel which had been paid for, so it is
contended, by Habeeb.
[39]
Stellar Ocean, the applicant contends, is the commercial and
technical manager of the vessel
and is not a subsidiary of Trade
Line. Pitman states that since Habeeb had sold his shares in Stellar
Ocean there is no common
shareholding between Trade Line and Stellar
Ocean.
[40]
Stellar Shipping too, it is alleged, is not a subsidiary of Trade
Line although Mr Al Ghurair
is a 51% shareholder in both companies
and Stellar Shipping has nothing whatsoever to do with the vessel
which is operated by Stellar
Ocean. In the circumstances it is
denied that the vessel is group owned by Trade Line.
[41]
Turning to the sale of the vessel. The applicant contends that
there were two Bills of
Sale in respect of the vessel, one from the
shipyard to Stellar Shipping and one dated 7 June 2011, which was
annexed to the respondent’s
affidavit, from Stellar Shipping to
Action Partner. The applicant explains that during or about 2008
Trade Line, Phiniqia and Stellar
Shipping were badly affected by the
economic downturn. Stellar Shipping had a number of
new-buildings on order from various
shipyards. The vessel was
one such and her price being approximately US$50 000 000,00.
Stellar Shipping had
arranged a loan of US$40 600 000,00
from Emirates NDB Bank and the remaining amount of approximately
US$9 500 000,00
was payable by Stellar Shipping to the
shipyard. Stellar Shipping was no longer in a position to
honour its obligations and
to pay the US$9 500 000,00.
[42]
In these circumstances Habeeb resolved to purchase the vessel
personally. He arranged for
Stellar Ocean to pay the
US$9 500 000,00 margin to Stellar Shipping. The sale
was then concluded on 7 June 2011,
the shares in Action Partner, save
to the extent set out above, were transferred to Habeeb on 8 June
2011 and the vessel registered
in the name of Action Partner on 9
June 2011. The loan which had been arranged by Stellar
Shipping, so it is contended, was
duly granted and paid to Action
Partner and the mortgage registered in the name of Action Partner,
initially on 29 June 2011 and,
after the mortgage documents became
available, then on 19 September 2011. The applicant
categorically denies that Stellar
Shipping was the borrower.
The applicant contends that, although the facility letters were
concluded between Stellar Shipping
and the bank, before the loan was
granted Stellar Shipping encountered financial difficulties and could
not continue with the loan.
Habeeb agreed to step in and to buy
the vessel and the loan of US$40 600 000,00, was advanced
not to Stellar Shipping
but to Action Partner.
[43]
In order to bolster this claim it is alleged that 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. In the present case it is alleged
that the loan documentation does not mention Trade Line, Stellar
Shipping or Phiniqia.
This in itself, it is argued, is a
telling fact that such companies were not related to Action Partner.
[44]
I alluded earlier to the confirmatory affidavits filed by Habeeb and
Rathee. Habeeb in
his confirmatory affidavit confirms his
personal circumstances, his Belgium citizenship and his business
interests. He confirms
that he is the sole shareholder of
Action Partner and that he holds those shares for his own account and
not as nominee.
He states that Trade Line does not own or
control Action Partner and he confirms that Stellar Ocean is the
technical and commercial
manager of the vessel. Habeeb
specifically limits his confirmation to these issues and does not
confirm any facts relating
to the sale of the vessel or the
circumstances surrounding either the sale or the loan.
[45]
Rathee, for his part, confirms that the facts and allegations in the
affidavit filed by Ms Pitman
are correct and that he had conveyed
these to Norton. In particular he confirms that he is
personally aware of the facts
relating to the purchase of the vessel
by Habeeb as Stellar Ocean, he says, handled the transaction for
him. He continues
to record that he is aware of the fact that
Habeeb was offered and accepted Action Partner as a vessel to own the
vessel and that
he personally paid the margin for the vessel out of
his own funds. Stellar Ocean then arranged for him to transfer
the vessel
to Action Partner, the balance of the purchase price being
funded by the mortgagee bank.
[46]
Rathee continues to confirm that he had personal knowledge of the
fact that Habeeb is certainly
no nominee and that Stellar Ocean
trades the vessel. His confirmation of personal knowledge in
respect of the capacity in
which Habeeb holds the shares is, of
course, at variance with the averments made by Norton in the founding
affidavit to which I
have referred above. In that instance
Norton recorded that Rathee had advised him that Habeeb had informed
him that he holds
the shares in his personal capacity.
[47]
Following on in the replying papers the respondent called for
delivery of the facility letters
dated 26 July 2010 and 7 September
2010 respectively, which are referred to in the mortgage document
dated 18 October 2011.
These documents show conclusively that
the true borrower of the US$40 600 000,00 from Emirates NDB
Bank was indeed Stellar
Shipping. Moreover the documentation
reveals that Trade Line and the shareholders of Trade Line and
Stellar Shipping were
indeed required to stand as guarantors for the
loan. The documents were clearly destructive of the case
advanced in the replying
papers in respect of the loan and the
payment of the US$49 800 000 to Stellar Shipping as
reflected in the Bill of Sale
dated 7 June 2011.
[48]
These circumstances prompted the applicant to file a further
affidavit by Rathee. Rathee
confirms that he had provided the
information to ENS which was set out in the affidavit of Ms Pitman.
He states that some
of the information contained in the affidavit of
Ms Pitman fell within his own personal knowledge whilst others,
predominately
the information personal to Habeeb were provided to him
by Habeeb and relayed to ENS Attorneys.
[49]
After Ms Pitman’s affidavit had been drafted by ENS the
replying affidavit was forwarded
to him and he confirms that he went
through the affidavit and advised that the facts contained therein
were correct and could be
deposed. I pause to mention that
Rathee does contend that it occurred in some haste.
[50]
Rathee then proceeds to state that, on re-reading the replying
affidavit he noted a number of
“inaccuracies” which he
seeks to correct in his further affidavit. Significantly,
Rathee now seeks to deny that
he had intimated that Trade Line and
Stellar Shipping had not been required to stand as group guarantors
for the loan from Emirates
NDB Bank and he confirms that Stellar
Shipping was indeed the real borrower. I pause to mention that
Ms Pitman is a respected
officer of the court and I have no doubt
that her affidavit was prepared with meticulous care. In
seeking to explain the
error in his earlier instructions Rathee
records as follows:
“
I understood this paragraph to
be making the point that neither Trade Line 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 EMS had grasped this point and I believe
that I was reading these papers as if this point had been understood
and was being
confirmed, not the opposite, as I subsequently
understood to be the case.
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 Trade Line
and the Stellar Shipping
shareholders. The guarantees are for
the performance of Stellar Shipping, not Action Partner Limited for
its commitment in
terms of the mortgage agreement.”
[51]
The inescapable conclusion to be drawn from this is, of course, that
Stellar Shipping borrowed
an amount of US$40 600 000,00
from the bank in order to pay the purchase price of the vessel to
Cosco. Guarantees
were required in respect of the loan from
Trade Line and Stellar Shipping and their shareholders and Stellar
Shipping remains liable
to the bank in respect of the loan.
[52]
Realising this difficulty Rathee set out a very different case in the
supplementary affidavit.
He confirms, as emerges from the
original facility letter from the bank that the vessel was to be
owned by Stellar Shipping and
was to be registered in the name of
Stellar Shipping. The guarantees were required from Trade Line
and the shareholders of
Trade Line and Stellar Shipping, including
Habeeb, and the original facility letter was signed for Stellar
Shipping by Al Ghurair,
the majority shareholder in Stellar Shipping.
[53]
Rathee re-iterates the negative effects which Stellar Shipping had
encountered as a result of
the economic downturn and states that
Stellar Shipping had failed to make payments due under its contract
with the shipyard in
respect of the purchase of the vessel. The
shipyard accordingly cancelled the agreement on 21 October 2010.
A copy
of the letter of cancellation is annexed. Astoundingly,
the letter is addressed to Stellar Shipping Company: Attention
Captain
AK Rathee. Rathee’s association with Stellar
Shipping remains unexplained. In any event, he proceeds to
record
that Cosco later agreed to continue in the contract.
[54]
He states that Emirates NDB Bank called upon Stellar Shipping to pay
the margin monies which
Stellar Shipping was unable to do.
Stellar Shipping accordingly approached the shareholders to ascertain
whether any of them
would be prepared to take over the transaction
against payment of the margin monies. The reason for doing so
was, that Stellar
Shipping calculated that if the transaction was not
pursued it was at risk of losing in the region of US$15 000 000,00
in damages to the yard. It was for that reason, it is alleged,
that Stellar Shipping was prepared to continue to act as borrower
to
facilitate the continuation of the existing facility agreement for
the benefit of a third party and the guarantors were prepared
to
continue to act in that capacity for the same purpose. Habeeb
then took over the transaction. The terms upon which
Habeeb did
so are alleged to be those set out in a letter which is annexed to
his supplementary affidavit. Rathee’s
states that Habeeb
agreed to these terms. The letter referred to purports to be a
letter from Trade Line to Habeeb.
It confirms that in principle
Emirates NDB Bank, Trade Line and Stellar Shipping were agreeable to
extend the loan facility to
Habeeb. It was necessary however
for Habeeb to confirm a number of pre-conditions set out in the
letter, including that he
would indemnify Trade Line, Stellar
Shipping and the shareholders of any liability associated with the
finance of the vessel.
Habeeb has filed no confirmatory
affidavit in respect of these terms and it is not alleged that such
an indemnity was forthcoming.
[55]
In any event, Rathee continues to state that Habeeb then made
arrangements to pay the margin
of US$9 500 000,00 to the
shipyard. He did so by arrangement with Habeeb’s brother,
Mujeerbur Rahman Habeeb
by using the proceeds of the sale of the mv
“Majestic Star” a vessel owned by a company known as
Stellar Mini Bunkers
Hong Kong Limited. The sole shareholder of
this company was Habeeb’s brother. The payment was
arranged by Stellar
Ocean who as manager of the mv “Majestic
Star” then controlled those funds on behalf of Stellar Mini
Bunkers Hong Kong
Limited to Stellar Shipping. The balance of
the margin, Rathee states, was paid by Stellar Ocean to Stellar
Shipping from
funds that were owed by Stellar Ocean to Habeeb as a
shareholder. In support of this contention he annexes a copy of
a document
which had not been provided previously and which he
contends proves this payment. The document is on a letterhead
of Stellar
Ocean dated 6
November 2010. It is addressed to National Bank of Abu
Dhabi
and requests the transfer of the amount of US$5 000 000,00
to Stellar Shipping. It is signed on behalf of
Stellar Ocean by
Habeeb. In respect of payment details the document records:
“
Transfer to sister
concern”
[56]
Rathee now denies that this inscription conveys that Stellar Ocean
and Stellar Shipping were
commonly controlled. He states that
the terminology was chosen merely because Habeeb was a common
shareholder in the two
companies at the time. Habeeb, however,
is silent in this regard.
[57]
No explanation is tendered for why Habeeb has not made a confirmatory
affidavit in respect of
these events and, as earlier alluded to, the
applicant has not taken the court into its confidence in respect of
who Habeeb had
alienated his shares in Stellar Ocean to.
[58]
In this regard there is a further aspect which arises from Rathee’s
supplementary statement.
Rathee states that he erred in his
original instructions to Ms Pitman and that he was incorrect in
suggesting that it was not possible
to have a citizen of the United
Arab Emirates sponsor a company by holding 51% shareholding for a
fee, without any participation,
financial or otherwise in respect of
the company. In the case of Stellar Ocean, he now states that
Darwish was indeed such
a sponsor and confirms that the company was,
until 24 September 2012 controlled by Habeeb. The 51%
shareholding which Darwish
held in the company, on my understanding
of this allegation, was accordingly held as a nominee. Habeeb
controlled the majority
shareholding in Stellar Ocean up until 2012.
This being so the purchaser of Habeeb’s shareholding would have
obtained
control of Stellar Shipping.
[59]
It is trite that a dispute of fact on issues which arise in motion
proceedings are 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 634H-635C. There Corbett JA, as he then
was, stated:
“
It is
correct that, where in proceedings on notice of motion disputes of
fact have arisen on the affidavits, a final order, whether
it be an
interdict or some other form of relief, may be granted if those facts
averred in the applicant's affidavits which have
been admitted by the
respondent, together with the facts alleged by the respondent,
justify such an order. The power of the
Court to give such final
relief on the papers before it is, however, not confined to such a
situation. In certain instances the
denial by respondent of a fact
alleged by the applicant may not be such as to raise a real, genuine
or
bona fide
dispute of fact … If in such a case
the respondent has not availed himself of his right to apply
for the deponents
concerned to be called for cross-examination under
Rule 6 (5)
(g)
of the Uniform Rules of Court …
and the Court is satisfied as to the inherent credibility of the
applicant's factual
averment, it may proceed on the basis of the
correctness thereof and include this fact among those upon
which it determines
whether the applicant is entitled to the final
relief which he seeks … Moreover, there may be exceptions to
this general
rule, as, for example, where the allegations or denials
of the respondent are so far-fetched or clearly untenable that
the
Court is justified in rejecting them merely on the papers …”
[60]
In
Bradbury Gretorex Co. (Colonial) Ltd v Standard Trading
Company (Pty)
Ltd
1953 (3) SA 529
(W) at 531A-D
Steyn J pointed out that an applicant cannot by obtaining
ex parte
an order in his favour secure a more advantageous position than he
would have been in if the other party had had an opportunity
of
putting counter allegations before the court;
consequently, if the other party applies for setting aside the order,
the original applicant retains the onus of satisfying the court that
he was entitled to it. This approach, in a matter such
as the
present, was approved in the Appellate Division of the Supreme Court
(as it then was) in the matter of
Cargo Laden on Board the mv
Thalassini Avgi v mv Dimitris
1989 (3) SA 820
(A). In
argument before me counsel were correctly in agreement that for
purposes of the application of the approach set out
in
Plascon-Evans
Paints
supra
, the respondent, who retains the onus to
establish his entitlement to the arrest of the vessel, should be
regarded as the applicant.
[61]
Adopting this approach the following which emerges from the affidavit
on behalf of the applicant
must be accepted. Firstly, Al
Ghurair owns 51% of the shareholding in Trade Line, Stellar Shipping
and Phiniqia. Al
Ghurair accordingly controls these companies.
Habeeb is the vice chairman of Trade Line and is a shareholder in the
group
of companies owned by Al Ghurair. Stellar Ocean is the
technical and commercial manager of the vessel.
[62]
On the version of the applicant Habeeb owned the majority
shareholding in Stellar Ocean (23%
in his own name and 51% via
Darwish) until he sold his shareholding on 24 September 2012.
Habeeb accordingly controlled Stellar
Ocean until September 2012.
[63]
The reports of Sea-Web and Lloyd’s List Intelligence upon which
the respondent relies reflects
Stellar Ocean currently to be a
subsidiary of Trade Line. This the applicant denies and states
that since Habeeb sold his
shareholding in Stellar Ocean there has
been no common shareholding between Stellar Ocean and Trade Line.
I think that the
two features of this denial are of particular
significance. Firstly Habeeb, although he made a confirmatory
affidavit which
was filed together with the replying affidavit limits
his confirmation to particular issues and astutely avoids
confirmation of
any of the averments made in respect of his
shareholding Stellar Ocean. The second significant feature
hereof is that the
applicant refrains from taking the court into its
confidence in respect of the identity of the purchaser of Habeeb’s
shareholding.
This is clearly a matter which falls within the
knowledge of Habeeb. In the absence of this information I do
not think that
the denial can raise a genuine dispute of fact.
The application accordingly falls to be decided on an acceptance that
Stellar
Ocean is a subsidiary of Trade Line.
[64]
The association between Stellar Shipping and Stellar Ocean emerges
further from certain of the
annexures annexed to the supplementary
affidavit provided by Rathee. I have alluded above to the
letter from Cosco Shipyard
Co. Ltd which purports to cancel the
agreement for the construction of the vessel. It was addressed
to Stellar Shipping Company
for attention Captain Rathee. This
association between Rathee, the CEO of Stellar Ocean, and Stellar
Shipping is not explained
by Rathee at all. In addition the
explanation for the description of Stellar Shipping as a “sister
concern” of
Stellar Ocean in a document signed by Habeeb, which
I have referred to above is, in the absence of a confirmatory
affidavit by
Habeeb not convincing. I think it is clearly
untenable.
[65]
On a consideration of all these matters I think that the dispute
arising in respect of the control
of Stellar Ocean, to the extent
that it might be material, is not a real, genuine or
bona fide
dispute of fact as was envisaged in
Plascon-Evans Paints
supra
.
[66]
In the answering affidavit the respondent took the position that
Habeeb holds the shares in Action
Partner as a nominee on behalf of
Stellar Shipping and/or Trade Line and in addition that the purported
sale of the vessel by Stellar
Shipping to Action Partner is nothing
more than a simulated transaction in order to give the impression
that the vessel is no longer
owned by Stellar Shipping. In the
event that the sale was a simulated transaction, then it follows as a
matter of logic that
the vessel remains the property of Stellar
Shipping which is part of the group of companies owned and/or
controlled ultimately
by Al Ghurair. By virtue of the conclusion to
which I have come in respect of the sale I do not think that it is
necessary to address
the question of the capacity in which Habeeb may
hold the shares.
[67]
It is not in dispute that the construction of the vessel was
commissioned by Stellar Shipping
from Cosco Shipyard in China.
A Bill of Sale was concluded between Stellar Shipping and Cosco.
Thereafter, a second
Bill of Sale was concluded between Stellar
Shipping and Action Partner, dated 7 June 2011. The actual
terms upon which the
vessel was sold by Stellar Shipping to Action
Partner have not been disclosed. The Bill of Sale records only
that Stellar
Shipping acknowledges that it transfers 100% of the
shares in the vessel to Action Partner for an amount of
US$49 800 000,00
which it records has been paid by Action
Partner and received by Stellar Shipping. Pitman, in the
replying affidavit records
that the only asset which Action Partner
had in June 2008 was the vessel which had been paid for by Habeeb.
The applicant’s
case was clearly that the full purchase price
was paid to Stellar Shipping and that Action Partner had obtained
US$40 600 000,00
on loan from Emirates NDB Bank.
[68]
On the evidence which emerges from the affidavits it cannot be
gainsaid that Habeeb caused the
margin amount of US$9 500 000,00
to paid to Cosco. In the replying affidavits it is contended
that the loan which
had been arranged by Stellar with Emirates NDB
Bank was then advanced to Action Partner and Action Partner was the
actual borrower
of the amount. This accounts for the remaining
US$40 600 000,00 which was allegedly paid to Stellar
Shipping.
It was categorically and firmly denied that Stellar
Shipping remained the actual borrower.
[69]
The mortgage documentation, which was signed on 18 October 2012, some
months after the Bill of
Sale, read together with the facility
letters referred to in the mortgage bond and which were not
forthcoming before respondent
called for them, show unequivocally
that this is not true.
[70]
In terms of the mortgage bond Action Partner agreed to secure the
liability of Stellar Shipping
to the mortgagee. The mortgage
provided that in the event of a breach of the loan agreement by
Stellar Shipping the vessel
could be sold in order to liquidate the
outstanding indebtedness of Stellar Shipping. It further
provided that the secured
indebtedness shall at the election of the
mortgagee become immediately due and payable if one of the events of
defaults mentioned
in the loan agreement occurs.
[71]
On this basis it is argued, and I think correctly, that it is clear
that Action Partner put up
its alleged vessel as security for the
loan indebtedness of Stellar Shipping. Clearly the
US$40 600 000,00 borrowed
under the loan agreement was
utilised by Stellar Shipping to pay Cosco Shipyard for the purchase
of the vessel.
[72]
As recorded earlier Habeeb caused the margin amount to be paid.
In order to do so it required
the sale of a vessel owned by his
brother. On the replying papers, however, no explanation can be
given as to how the remaining
amount of approximately
US$40 000 000,00 which was allegedly paid to Stellar
Shipping, as recorded in the Bill of Sale,
was paid.
[73]
After the facility letters came to light it became clear that the
version relating to the loan
agreement which had been firmly advanced
by the applicant in the replying papers was simply not true.
The endeavour of Rathee
to explain the reason for his incorrect
instructions is, in my view, untenable and Habeeb has refrained from
providing any confirmation
in respect of the events relating to the
loan agreement, the facility letters or the mortgage bond,
notwithstanding that he personally
signed the mortgage bond and
provided a personal guarantee in respect thereof. Once it is
accepted, as I think that it must
be, that the loan from the Emirates
NBD Bank was utilised to pay Cosco Shipping then the conclusion is
inescapable that the Bill
of Sale dated 7 June 2011, which records
and confirms that the purchase price of US$49 800 000,00
has been paid by Action
Partners to Stellar Shipping, must be a
simulation.
[74]
In all the circumstances I do not think that there is a genuine, or
bona fide
dispute of fact about the validity of the purported
sale and in the premises I conclude that the vessel remains the
property of
Stellar Shipping, which, it common cause, falls within
the companies owned by and/or controlled by Trade Line or Al
Ghurair.
The vessel is accordingly an associated ship in
respect of the respondent’s claim.
[75]
I turn to consider the relief sought in respect of security for the
alleged wrongful arrest of
the vessel. The onus in this regard
rests upon the applicant and, applying the test set out in
Plascon-Evans Paints
, to which I have referred earlier,
the averments made by the applicant and which have been admitted by
the respondent together
with the facts alleged by the respondent
should be considered.
[76]
I think that it follows from the conclusions to which I have come
above that the applicant has
not made out a case upon which it can be
held that the arrest of the vessel at the instance of the respondent
was without reasonable
and probable cause.
[77]
No argument was presented to me in respect of the relief sought
relating to edictal citation
and I shall accordingly make no finding
in that regard.
[78]
In the result I make the following order:
1.
The application to set aside the arrest of the mv “Silver Star”
is
dismissed.
2.
The application for security in respect of a claim for damages
against the respondent
for the arrest of the mv “Silver Star”
without reasonable and probable cause is dismissed.
3.
The security provided by the respondent in respect of the
postponement on 16
August 2013 is to be released to the respondent.
4.
The applicant is to pay the respondent’s costs occasioned by
the application.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For Applicant:
Adv D A Gordon SC instructed by
Edward Nathan Sonnenbergs c/o Pagdens Attorneys, Port
Elizabeth
For Respondent:
Adv M J Fitzgerald SC instructed
by Bowman Gilfillan Inc c/o Chris Baker Attorneys, Port
Elizabeth