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[2009] ZASCA 74
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Bulkship Union SA v Qannas Shipping Co Ltd and Another (339/08) [2009] ZASCA 74; 2010 (1) SA 53 (SCA); [2009] 4 All SA 189 (SCA) (1 June 2009)
THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case
No: 339/08
NAME OF
SHIP: mv 'CAPE COURAGE'
In
the matter between:
BULKSHIP
UNION SA APPELLANT
and
QANNAS
SHIPPING COMPANY LTD FIRST RESPONDENT
DRY BULK
MARITIME LTD SECOND RESPONDENT
Neutral citation:
Bulkship Union SA v Qannas Shipping Co
Ltd & Another
(339/08)
[2009] ZASCA 74
(1 June 2009)
Coram:
FARLAM,
MAYA JJA, HURT, LEACH et GRIESEL AJJA
Heard:
5 MAY 2009
Delivered:
1 JUNE
2009
Summary:
Shipping
– Admiralty Jurisdiction Regulation Act 105 of 1983, s 3(7) -
interpretation of phrase 'when the maritime claim arose'.
____________________________________________________________
ORDER
On appeal from:
High Court Durban and Coast Local Division
(
Balton J sitting as court of first
instance).
The
following order is made:
1. The
appeal is allowed with costs including those occasioned by the
employment of two counsel.
2. The order made by the court
a quo
is set aside and replaced
with an order in the following terms:
'1. Subject to paragraph 2 below, the application is dismissed with
costs including those occasioned by the employment of two counsel.
2. The order of arrest granted on 15 June 2006 is amended by adding
the following at the end of paragraph 1:
"save for the claim brought by the applicant in respect of an
alleged breach of clause 5(a) of the Memorandum of Agreement".'
JUDGMENT
FARLAM JA
(Maya JA, Hurt, Leach et Griesel AJJA concurring)
[1] This
is an appeal against a judgment delivered and an order granted by
Balton J sitting in the Durban High Court, on 4 March
2008, in which
the deemed arrest of the the MV 'Cape Courage' was set aside. The
judgment of the court
a quo
has
been reported: see
MV 'Cape Courage':
Bulkship Union SA v Qannas Shipping Company Ltd v Bulkship Union SA
SCOSA C 124(D). The vessel had been
arrested on 15 June 2006 in terms of s 5(3) of the Admiralty
Jurisdiction Regulation Act 105
of 1983, as amended (which I shall
call in what follows 'the Act'), for the purpose of providing
security for claims brought by
the appellant, Bulkship Union SA,
against the second respondent, Dry Bulk Maritime Limited, in
arbitration proceedings in London.
The claims which are the subject
of the arbitration are in respect of alleged breaches of a memorandum
of agreement for the sale
and purchase of another vessel, MV 'Pearl
of Fujairah', and for misrepresentations relating to the condition of
that vessel.
[2] The MV 'Cape Courage' was arrested as an 'associated ship'
pursuant to s 3(6) and (7) of the Act on the basis that the second
respondent owned the MV 'Pearl of Fujairah' when the appellant's
claims arose, and the same person or persons controlled the second
respondent at the time when the claims arose and the first
respondent, Qannas Shipping Company Limited, (the owner of the MV
'Cape
Courage') at the time of the arrest. Security was established
by the provision of a guarantee and the MV 'Cape Courage' was
released
but she remains deemed to be under arrest in terms of s
3(10) of the Act.
[3] On 23 August 2006 the first and second
respondents brought an application for an order setting aside the
deemed arrest and the
return of the guarantee, alternatively for the
reduction of the amount of the security, and in addition an order
that the appellant
provide them with counter-security in the
arbitration. The alternative claim for a reduction in the quantum of
security and the
claim for counter-security were thereafter resolved
between the parties and it is unnecessary to make further reference
to them.
The only issue in the appeal is therefore whether the court
a quo
correctly
set aside the deemed arrest of MV 'Cape Courage'.
[4] As the original application for the arrest of
the vessel was brought
ex parte
the
appellant was obliged in the application before Balton J to justify
the arrest. It accordingly had to show: (a) that the MV
'Cape
Courage' is susceptible to arrest
in rem
in respect of its claim; and (b) that
it has a
prima facie
case
in respect thereof. In respect of the first issue the appellant had
to establish its case on a balance of probabilities while
on the
second issue it had only to establish that there was evidence which,
if accepted, would establish a cause of action.
[5] Before I set out the issues which have to be considered in this
appeal it is desirable to set out sections 3(4), (6) and 3(7)
and s
5(3)(a) of the Act, as far as they are material.
Section 3(4), (6) and (7) provide:
'(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–
. . .
(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) . . . [A]n action
in
rem
. . . may be
brought by the arrest of an associated ship instead of the ship in
respect of which the maritime claim arose.
(7) For
the purposes of ss (6), an associated ship means a ship, other than
the ship in respect of which the maritime claim arose
–
. . .
(iii) owned at the time when the action is commenced, by
a company which is controlled by a person who . . . controlled the
company
which owned the ship concerned, when the maritime claim
arose.'
Section
5(3)(a) of the Act is in the following terms:
'(a) A court may in the exercise of
its admiralty jurisdiction order the arrest of any property for the
purpose of providing security
for a claim which is or may be the
subject of an arbitration or any proceedings contemplated, pending or
proceeding, either in
the Republic or elsewhere, and whether or not
it is subject to the law of the Republic, if the person seeking the
arrest has a
claim enforceable by an action
in
personam
against
the owner of the property concerned or an action
in
rem
against such
property or which would be so enforceable but for any such
arbitration or proceedings.'
[6] In the present case the MV 'Pearl of Fujairah'
was owned by the second respondent prior to her transfer in terms of
the contract
of sale between the second respondent and the appellant,
which it is common cause took place when the vessel was delivered to
the
appellant at Lianyungang Roads, China, at 7.05 pm, local time on
20 October 2005. It is not disputed, at least for the purpose of
these proceedings, that the first and second respondents were
controlled at the relevant times by the same person or persons. What
is in dispute, however, is whether it can be said that the MV 'Pearl
of Fujairah' was owned by the second respondent when the appellant's
claims 'arose' and whether one of the appellant's claims, viz that
based on an alleged breach of clause 5(a) of the memorandum
of
agreement between the appellant and the first respondent, was
established
prima facie.
[7] Counsel for the appellant stated that if this
court were satisfied that all the claims arose at a time when the MV
'Pearl of
Fujairah' was still owned by the second respondent they
would not persist in their contention that a
prima
facie
case had been made out in respect
of the alleged breach of clause 5(a) of the memorandum of agreement.
[8] The other alleged breaches of the memorandum
of agreement, which the respondents concede were established
prima
facie,
related to clause 11 of the
memorandum (which provided that the vessel should be delivered and
taken over in substantially the same
condition as when inspected,
fair wear and tear excepted), clause 18 (which provided that the
vessel should be delivered 'with
her present BV class maintained,
free of outstanding recommendations and average damage affecting her
present class at the time
of delivery') and a term implied by s 14 of
the English Sale of Goods Act 1979 (as amended) (that the vessel was
of satisfactory
quality or fit for the purpose for which it was
sold).
[9] The claims based on alleged misrepresentations made by the second
respondent relating to the true condition of the vessel were
to the
effect (a) that the second respondent provided the appellant at the
pre-purchase survey with incorrect Ultra Thickness measurement
readings (which showed the extent to which the steel work had rusted
away) and incorrect technical data relating to the vessel's
operating
speeds; (b) that the second respondent incorrectly advised the
appellant's agent at the time of the pre-purchase survey
that the
vessel was in 'normal operating condition'; and (c) that the second
respondent incorrectly represented to the appellant
when the notice
of readiness for delivery was given on 18 October 2005 that the
vessel was as of that date in every respect physically
ready for
delivery in accordance with the terms of the memorandum of agreement.
[10] Before the vessel was delivered to it the
appellant paid the second respondent the purchase price of the vessel
US $14 990
000. On doing so it became entitled to delivery of the
vessel and, as I have said, it received delivery of the vessel at
7.05 pm
local time on 20 October 2005, when ownership in the vessel
passed to it. It accordingly received a right
in
personam
against
the first respondent (what we would call a
ius
in personam ad rem acquirendam)
on
payment of the purchase price, and this was followed by the real
right of ownership, when delivery took place.
[11] The learned judge in the court
a
quo
held that the appellant's claims
against the second respondent did not arise until the appellant had
suffered damage in consequence
of the breaches of the contract
between the parties and the misrepresentations alleged. She came to
this conclusion because she
held that the words 'when the maritime
claim arose' in s 3(7)(a) mean when all the juristic facts necessary
for the claim to exist
have occurred, 'even though the claim might
not yet be enforceable because, for example, a suspensive condition
has not been fulfilled.'
She also held that the appellant did not
suffer any damage until it became owner of the vessel on delivery. It
followed in her
view that none of the appellant's claims arose when
the second respondent owned MV 'Pearl of Fujairah', with the result
that, as
the appellant had failed to establish the necessary
association between the two vessels, the deemed arrest had to be set
aside.
[12] Counsel were agreed that the first issue to be decided related
to the interpretation of the expression 'the time when the
maritime
claim arose' in s 3(7)(a) of the Act and that that question is to be
determined under South African law.
[13] The second issue debated at the bar related to when a cause of
action accrues for the purposes of what is called limitation
of
actions under the Limitation Act, 1980, in England (what we would
call prescription). Both the appellant and the respondents
filed
opinions by English barristers on this point, stating their views
(which were sometimes in agreement and sometimes not) as
to when the
appellant's various claims accrued under English law, which it was
common cause was the proper law of the contract
between the parties
and of the arbitration. Both barristers assumed that the appellant's
causes of action based on the alleged
misrepresentations would also
be governed by English law (whether that assumption was correct is a
matter on which I express no
opinion).
[14] Counsel for the appellant contended that the reference in s
3(7)(a) of the Act to the time 'when the maritime claim arose'
with
regard to 'the ship concerned' is a reference to the time when the
wrong giving rise to the maritime claim occurred or was
committed and
that it did not refer to the existence of a complete cause of action.
In particular, they submitted that in the context
of a claim based on
a breach of contract a maritime claim arises at the time of the
breach, whether or not damage has as yet been
suffered. As far as
claims in delict (or tort) are concerned, they submitted that the
maritime claim arises at the time the delict
was committed, even if
actual damage was only suffered thereafter. In the circumstances,
their argument continued, where the breach
takes the form of the
delivery of a defective ship under a contract of sale the maritime
claim arises when the seller performs
its obligation to deliver the
ship and 'the performance of that obligation precedes – and is
completed prior to – the
passing of ownership in the vessel
sold from the seller to the buyer.'
[15] As regards the claims based on alleged
misrepresentations by the seller they submitted that, to the extent
that it is held
that such claims arise only when the buyer acts to
its prejudice, the payment of a deposit or the purchase price is
sufficient
prejudice, it not being necessary that the buyer also
receive ownership of the defective ship. In support of their
submissions
on the meaning of the phrase 'when the maritime claim
arose' they relied heavily on the decision of this court in
MV
'Heavy Metal':
Belfry Marine Ltd v Palm
Base Maritime SDN BHD
1999(3) SA 1083
(SCA). They also relied on an unreported judgment delivered in the
Cape Town High Court by Foxcroft J,
MV
'Meng Hai':
Multi Spirit SA v MV
'Meng
Hai
' and Cosco
Bulk Carrier Company Ltd,
delivered on 10 September 2004.
[16] Counsel for the respondents submitted that the phrase 'the time
when the . . . claim arose' refers, 'at the earliest, to the
time
when the claim came into existence and that in South African law, the
law to be applied in regard to this issue, the claims
under
discussion cannot have arisen until at least some part of the damages
claimed had been suffered, which in each case did not
occur until
delivery of the vessel had been accepted by the buyer.'
[17] Counsel on both sides sought to rely on the
decision of this court in MV 'Forum Victory":
Den
Norske Bank ASA v Hans K Madsen
CV
2001
(3) SA 529
(SCA) in which the expression 'a claim which arose', which
appears in s 11(4)(c) of the Act, was held (para [14] at 525G-H and
para [17] at 536I) to mean the 'claim came into existence'. It must
be pointed out, however, that Scott JA said (para [11] at 534G-J):
'The expression "when the maritime claim arose in s
3(7) is perhaps no less ambiguous than the expression "claim
which
arose" in s 11(4)(c). In these circumstances there would
seem little to be gained by interpreting the one, in its different
contextual setting, in order to serve as an aid to the interpretation
of the other.'
[18] As far as the decision of this court in the
'Heavy Metal'
is
concerned, counsel for the respondents pointed out that the judgment
does not deal with the question as to whether the damages
claim in
that case could only have arisen when the damages were suffered. He
pointed out that counsel for the appellant in that
case did not argue
the point. In the circumstances counsel for the present respondents
submitted that the 'Heavy Metal' is not
authority for the proposition
relied on by the appellant in this case. I agree with this
contention. I was one of the judges in
the 'Heavy Metal' and the
passage relied on by the appellant's counsel comes from the judgment
I delivered, which on this point
at least was concurred in by the
other members of the court. As counsel for the present respondent
submits, the point was not argued
in the case nor considered in the
judgment. If it had been argued it would have been discussed in the
judgment. It follows that
the point will have to be considered on the
basis that it is
res nova
in
this court.
[19] The unreported decision of Foxcroft J in
MV
'Meng Hai',
on which counsel for the appellant
relies, affords a useful starting point. The case also concerned a
claim for damages suffered
as a result of the delivery of a defective
ship and the arrest of a ship which was allegedly an associated ship.
The owner of the
ship also argued, as here, that the association
between the two vessels had not been established because the
applicant's claim
only arose after it became the owner of the
defective ship. Foxcroft J rejected this contention, relying largely
on the
Heavy Metal,
which
he held decided the point. At pp 14-15 of his judgment, however, he
said this:
When
one looks at all the dictionary definitions of the word 'arise' one
is struck by the idea of origin. The Shorter Oxford English
Dictionary gives under the third meaning of the verb, 'to spring up,
come above ground, into existence'. The transferred use is
given as
'to take its rise, originate'. The second meaning under this third
heading is 'to be born, come into the world of action'.
Insofar as
one can ever have regard to dictionary meanings, the idea of origin
in these meanings of the word 'arise' is paramount.'
[20] It is important to note that the phrase 'when the maritime claim
arose' was taken over by our legislature from article 3(1)
of the
International Convention Relating to the Arrest of Sea-going Ships,
signed in Brussels in 1952. (In what follows I shall
refer to this
convention as the 'Arrest Convention'.)
[21] The convention permitted a claimant to
'arrest either the particular ship in respect of which the maritime
claim arose, or
any other ship which is owned by the person who was,
at the time when the maritime claim arose, the owner of the
particular ship'.
The article embodied a compromise arrived at
between the representatives of the countries represented at the
convention. The nature
of the compromise appears from a passage in
the judgment of Lord Denning MR in
The
Banco:
Owners
of the Motor Vessel
Monte Ulia
v
Owners of the ships
Banco
and
Others
[1971] P 137
(CA) at 151F-H
([1971]
1 All ER 524
at 532a-c), which is quoted in the 'Heavy Metal'
case at 1098A-C and which reads as follows:
'In
1952 there was an international convention held at Brussels. . . . It
was held because of the different rules of law of different
countries
about the arrest of sea-going ships. Some countries, like England,
did not permit the arrest of any ship except the offending
ship
herself: whereas many continental countries permitted the arrest, not
only of the offending ship, but also of any other ship
belonging to
the same owner. In the result a middle way was found. It was agreed
that
one
ship might be arrested, but only
one.
It might
either
be the offending ship herself
or
any other ship
belonging to the same owner: but not more. This was an advantage to
plaintiffs in England because it often happened
previously that,
after a collision, the offending ship sank or did not come to these
shores. So there was nothing to arrest. Under
the Convention the
plaintiff could arrest any other ship belonging to the same owner
whenever it happened to come to England.'
[22] In England a ship which may be arrested
despite the fact that it is not 'the offending ship' is called a
'sister ship'. Our
Act, of course, goes further than the Arrest
Convention and the English Act which followed it by widening the net
and providing
for a statutory piercing of the veil to combat the
practice frequently adopted by ship owners of seeking to evade the
sister ship
provision by setting up a series of one-ship companies.
On the point presently at issue, however, the requirement that the
owner
or ultimate controller of the ship sought to be arrested, ie,
with us the associated ship, must have been the owner or controller
of the offending ship 'when the maritime claim arose' is similarly
worded. Counsel did not refer us to authority on the meaning
of the
phrase in question in article 3 of the Arrest Convention or in
legislation elsewhere in the world in which it has been adopted
by
countries not parties to the Convention, such as Australia which uses
a similar formulation in s 19 of its Admiralty Act 1988
(Cth), nor
was I able to find any. I note also that no cases on the point are
cited in the leading textbook on the 1952 and 1999
Arrest
Conventions,
Berlingieri on Arrest of
Ships,
3 ed,
by Professor Francesco Berlingieri.
[23] In my view it is significant that in cases
other than those involving maritime liens, where other considerations
apply, for
a maritime claim to be enforced by an action
in
rem
the owner of the property to be
arrested must be liable to the claimant in an action
in
personam
in respect of the cause of
action concerned. When one realises that the owner or controller of
the 'offending ship' has to be personally
liable on the claim, it
becomes clear that it is really inappropriate to speak of the
'offending ship': it is really the 'offending
owner' (or controller)
who should be looked at because property owned or controlled by it,
in the form of another ship, becomes
liable to be arrested when the
associated ship provision is utilised. It accordingly makes sense,
when a claim has 'originated'
and enough factors are present to
indicate that the owner or controller of the ship concerned at that
time (or those for whose
actions or omissions it is liable) has
'offended', that another ship owned or controlled by that person when
the claim is enforced
may be arrested in respect of the claim. Damage
resulting from the offending actions or omissions by the owner or
controller (or
for which it is liable) may not yet have been suffered
but if it is clear that it will in due course be suffered, I think
that
it is not stretching language to say that the claim has
'arisen'. Although the point did not form the subject of the decision
in
the case it is interesting to note that Gaudron, Gummow and Kirby
JJ, in their judgment in
Laemthong
International Lines Co Ltd v BPS Shipping Limited
[1997] HCA 55
;
(1997)
190 CLR 181
(H C of A) used the expression 'when the cause of action
. . . arose' in speaking of a date when a breach occurred but before
the
damages in question were suffered. The case concerned a voyage
charter party for the carriage of a cargo of bagged rice from Bangkok
to Nouakchott in Mauritania. The agreement was breached on 8 July
1995 at Bangkok when the charterers failed to ensure proper
fumigation of the cargo, leading to the infestation of the cargo by a
species of beetle. As a result of this the vessel was arrested
in
Mauritania and the owners subsequently claimed $1 833 285 as damages
from the charterers in consequence of the arrest, which
included
interest and the cost of obtaining the release of the vessel and also
certain demurrage and dead freight charges alleged
to be due under
the charterparty. These damages would all appear to have been
suffered after the failure to fumigate. Yet Gaudron,
Gummow and Kirby
JJ said (at 200): '(o)n 8 July 1995, when the cause of action of the
respondent against the appellant arose on
the respondent's general
maritime claim concerning the
Nyanza
.
. .
'
[24] In the circumstances I am satisfied that the appellant's
submissions regarding the meaning of the phrase 'when the maritime
claim arose' in s 3(7)(a) are correct and that it was also correctly
submitted that the claims under clauses 11 and 18 of the memorandum
of agreement and s 14 of the English Sale of Goods Act 1979 as well
as the claims in tort based on alleged misrepresentations all
arose
when the first respondent was still the owner of the MV 'Pearl of
Fujairah'.
[25] It is accordingly unnecessary to deal with the respondent's
contentions regarding a possible breach of clause 5(a) of the
memorandum of agreement.
[26] Save for a slight alteration of the order of arrest in regard to
the claim under clause 5(a), the appeal in my view must be
allowed
with costs including those occasioned by the employment of two
counsel.
[27] The following order is made:
1. The
appeal is allowed with costs including those occasioned by the
employment of two counsel.
2. The order made by the court
a
quo
is set aside and replaced with an
order in the following terms:
'1. Subject to paragraph 2 below, the application is dismissed with
costs including those occasioned by the employment of two counsel.
2. The order of arrest granted on 15 June 2006 is amended by adding
the following at the end of paragraph 1:
"save for the claim brought by the applicant in respect of an
alleged breach of clause 5(a) of the Memorandum of Agreement".'
……………
..
IG
FARLAM
JUDGE OF APPEAL
APPEARANCES:
FOR APPELLANT: D A GORDON SC
S R MULLINS SC
Instructed
by
Garlicke & Bousfield Inc
Durban
Webbers Bloemfontein
FOR RESPONDENT: A M STEWART SC
Instructed by
Shepstone & Wylie Durban
Matsepe Inc Bloemfontein