United Enterprises Corporation and Another v STX Pan Ocean Company Ltd. (222/07) [2008] ZASCA 21; [2008] 3 All SA 111 (SCA) ; 2008 (3) SA 585 (SCA) (27 March 2008)

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United Enterprises Corporation and Another v STX Pan Ocean Company Ltd. (222/07) [2008] ZASCA 21; [2008] 3 All SA 111 (SCA) ; 2008 (3) SA 585 (SCA) (27 March 2008)

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REPUBLIC
OF SOUTH AFRICA
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case
number:
222/07
Reportable
In the matter between:
UNITED ENTERPRISES
CORPORATION ... FIRST APPELLANT
MV
“WISDOM C”
...
SECOND
APPELLANT
and
STX PAN OCEAN COMPANY
LIMITED ... RESPONDENT
CORAM
:
SCOTT, FARLAM, CLOETE, COMBRINCK JJA et HURT AJA
HEARD
:
26 FEBRUARY 2008
DELIVERED
:
27 MARCH 2008
SUMMARY:
Shipping –
application to set aside arrest –
exceptio
rei judicatae
not
available where previous arrest set aside because
prima
facie
case
not established – application for countersecurity – applicant
must show genuine and reasonable need for security.
Neutral
citation: This judgment may be referred to as
United
Enterprises Corporation v STX Pan Ocean Company Ltd
(222/07)
[2008] ZASCA 21
(27/03/08).
__________________________________________________
JUDGMENT
__________________________________________________
FARLAM JA
INTRODUCTION
[1] The first appellant,
United Enterprises Corporation, a company incorporated in accordance
with the company laws of the Marshall
Islands, is the owner of the
second appellant, the MV ‘Wisdom C’, a bulk carrier registered in
the Republic of Panama. The respondent
is STX Pan Ocean Company
Limited, a company incorporated in accordance with the company laws
of South Korea, which carries on business
as a charterer of vessels.
[2] The appeal is from a
judgment of Cleaver J, sitting in the Cape High Court, who dismissed
an application brought by the appellants
for orders (i) setting aside
the arrest of the second appellant at the instance of the respondent
and (ii), in the alternative, directing
that the respondent furnish
counter-security in respect of the first appellant’s claim against
the respondent in arbitration proceedings
in London. The judgment of
the court
a
quo
has
been reported: see
MV
Wisdom C:
United
Enterprises Corporation v STX Pan Ocean Co Ltd
[2007] ZAWCHC 12
;
2008
(1) SA 665
(C).
[3] On 6 July 2006 the
respondent obtained an
ex
parte
order
for the arrest of the second appellant in terms of s 5 (3) of the
Admiralty Jurisdiction Regulation Act 105 of 1983 (which I
shall call
in what follows ‘the Act’). The arrest was for the purposes of
providing security for the respondent’s counterclaim
in arbitration
proceedings in London. In those proceedings the first appellant is
claiming from the respondent payment of money allegedly
due to it in
terms of a charterparty and damages suffered by it (a) in consequence
of the alleged repudiation of the charterparty
by the respondent and
(b) in consequence of damage allegedly done to the second appellant’s
crane by servants or agents of the
respondent. The respondent has in
turn instituted a counterclaim against the first appellant and it was
in order to obtain security
for this counterclaim that the arrest was
effected. Subsequently the first appellant provided a letter of
undertaking to the respondent
and the second appellant was allowed to
sail. In terms of s 5 (3)(b), read with s 3 (10)(a)(i) of the Act,
the second appellant is
deemed to be under arrest.
[4] The appellants then
sought to set aside the deemed arrest of the second appellant and the
discharge in terms of s 5 (2)(d) of
the Act of the security provided
by the appellants to the respondent. In the alternative they sought,
inter
alia,
an
order that countersecurity be provided by the respondent in respect
of the first appellant’s claims in the arbitration.
[5] The grounds on which
the appellants relied in support of the contention that the deemed
arrest be set aside and the security discharged
were:
(a) that previous arrest
proceedings in Italy gave rise to a defence based upon the
exceptio
rei judicatae
which
prevented the respondent from causing the second appellant to be
arrested under s 5 (3) of the Act to obtain security for its
counterclaim in the arbitration;
(b) that the respondent
failed to adduce admissible evidence in its founding affidavit to
prove that it had a
prima
facie
case
in respect of its cause of action in its counterclaim in the
arbitration; and
(c) that the respondent
had failed to comply with the obligation resting on it as a litigant
seeking
ex
parte
relief
to make a full disclosure to the court of all material facts and
circumstances which might have influenced the decision of
the judge
hearing the
ex
parte
application.
The
Res
Judicata
Point
[6] The first ground
relied on was based on the fact that the respondent had previously,
in March 2006, obtained
ex
parte
an
order for the conservatory arrest of the second appellant to provide
security for its counterclaim from the court at Gorizia in
Italy,
which order was revoked on 8 April 2006. An appeal against the
revocation of the order was dismissed on the ground that, as
the
second appellant had left Italian waters by the time the appeal was
heard, the respondent was unable to prove the existence and
duration
of its interest to act. The appeal was dismissed without the merits
of the matter being considered. The judge who revoked
the arrest did
so because, so he held, the facts on which the respondent’s claim
was based appeared ‘under the present circumstances
altogether
vague and unsubstantiated’. (The relevant portion of the judgment
of the Italian court on the point is set out at 670F-I
of the
reported judgment of the court
a
quo.
)
[7] It is clear that the
Italian court did not make a decision on the merits but gave a
judgment which if it had been given in a South
African court would
have amounted to absolution from the instance. (In this regard I
agree with what the learned judge in the court
below said in para 18
of his judgment at 675B-H.)
[8] There was a dispute
between the experts on Italian law whose affidavits were filed by the
parties as to whether the decision of
the Gorizia court which revoked
the arrest order was final, or whether it would have been open to the
respondent to present a further
petition in an Italian court for the
arrest of the second appellant based on new points of fact or law
even if such points had already
existed when the original order was
made. (The contrasting opinions of experts are summarised at 671A to
672F of the reported judgment.)
[9] It was common cause
before us that Cleaver J, following
Laconian
Maritime Enterprises Ltd v Agromar Lineas Ltd
1986
(3) 509 (D), was correct in applying the
lex
fori.
It
is clear that in our law a defendant who has been absolved from the
instance cannot raise the
exceptio
rei judicatae
if
sued again on the same cause of action: see
Grimwood
v Balls
(1835)
3 Menz 448
;
Thwaites
v Van der Westhuyzen
(1888)
6 SC 259
;
Corbridge
v Welch
(1892)
9 SC 277
at 279;
Van
Rensburg v Reid
1958
(2) SA 249
(E) at 252B-C; Herbstein and Van Winsen,
The
Civil Practice of the Supreme Court of South Africa,
4
ed, 1997, 544 and 684. It was held in
African
Farms and Townships Ltd v Cape Town Municipality
1963
(2) SA 555
(A) at 563G-H that the dismissal of an application (which
ordinarily would be regarded as the equivalent to granting absolution
from
the instance:
Municipality
of Christiana v Victor
1908
TS 1117
,
Becker
v Wertheim, Becker & Leveson
1943
(1) PH F34 (A)) can give rise to the successful raising of the
exceptio
rei judicatae
where,
regard being had to the judgment of the court which dismissed the
application, ‘the import of the order [was] clearly that
on the
issues raised the Court found against the appellant [which had been
the applicant in the previous proceedings], and in favour
of the
respondent’. It is thus clear that it is not the form of the order
granted but the substantive question (did it decide on
the merits or
merely grant absolution?) that is decisive in our law and that what
is required for the defence to succeed is a decision
on the merits.
[10] In view of the fact
that the court
a
quo
correctly
found, as I have said, that the effect of the judgment in the Gorizia
court was to absolve the respondent from the instance,
it follows
that whether or not a fresh application for a security arrest would,
in the absence of new facts or points of law which
arose after the
dismissal of the first Italian application, be competent in Italy is
irrelevant for our purposes, because the judgment
of the Italian
court cannot be regarded as a judgment on the merits.
THE ALLEGED FAILURE
TO MAKE OUT A
PRIMA
FACIE
CASE
IN THE FOUNDING AFFIDAVIT
[11] The second ground
relied on by the appellants in their attack on the judgment of the
court
a
quo
was
based on the failure by Ms Reyna Soni, the respondent’s attorney
who deposed to the founding affidavit in the arrest application,
to
identify the persons who were the sources of her knowledge as to the
events and circumstances surrounding the termination of the
charter
party. The appellants’ counsel recognised that s 6(3) of the Act
provides for the admission of ‘statements which would
otherwise be
inadmissible as being in the nature of hearsay evidence’ but
contended that, before s 6(3) can apply, what they called
‘the
ultimate source of any hearsay statement’ had to be identifiable.
In support of this submission they referred,
inter
alia,
to
Southern
Pride Foods v Mohidien
1982
(3) SA 1068
(C) at 1071D to 1072B.
[12] A similar argument
based on the
Southern
Pride
decision
and the cases cited in it was rejected by this court in
Cargo
Laden on Board the MV Thalassini Avgi v MV Dimitris
1989
(3) SA 820
(A) at 842B-D where Botha JA said:
‘
I do not, however, agree with the
argument nor, with respect, with the remarks in the unreported
judgment [
Elsden Shipping
Lines (Holdings) Ltd v Atlantic Fisheries & Shipping Co Ltd, CPD,
21 March 1986] which tend
to support it. In my opinion it is quite clear that the Legislature
intended, by enacting s 6(3), to sanction
a departure in admiralty
cases from the general practice of the courts in other cases in
regard to receiving hearsay statements in
evidence. The object of the
Legislature is placed beyond doubt by the use of the expression
“which would otherwise be inadmissible”.
Counsel’s attempt to
cut down the effect of that expression by confining its operation to
cases which are not of an interlocutory
nature rests on pure
speculation as to the Legislature’s intention and is wholly
unwarranted. Although the prerequisites in other
cases to which
counsel referred, such as urgency and the disclosure of the source of
the information, are matters which will no doubt
be taken into
consideration in the exercise of the discretion conferred by s 6(3),
I can perceive no justification for thinking that
the Legislature
contemplated compliance with such prerequisites as a condition
requiring fulfilment before the exercise of the discretion
can come
into play.’
[13] Lower down on the
same page Botha JA, at 842G-H, in a passage cited by Cleaver J (at
679C-D), said:
‘
Accordingly, in my view, the
general approach to be adopted in the application of s 6(3) should be
lenient rather than strict; the
Court should, speaking generally,
incline to letting hearsay statements go in and to assess the weight
to be attached to them under
s 6(4) when considering the case in its
totality; and a decision to exclude such statements should normally
be taken only when there
is some cogent reason for doing so.’
[14] Another complaint
raised by the appellants on this part of the case was based on the
fact that Ms Soni said that she had been
given her information by Mr
Nick Graydon, an English solicitor dealing with the arbitration on
behalf of the respondent, who had
in turn been instructed by the
manager of the insurance and legal department of the respondent, who
had in turn been given information
by unnamed and unidentified
officers and servants of the respondent. In my view this complaint is
answered on the facts of this case
by what was said by Scott JA in
The MT
Tigr
:
Owner of the MT
Tigr
v Transnet Limited
1998
(3) SA 861
(SCA) at 868H-I, a passage cited by the court
a
quo
(at
678A-C), namely:
‘
In admiralty cases the evidence
tendered and accepted by the Courts for the purpose of establishing a
prima facie
cause
of action is almost invariably of a hearsay nature. Even “double
hearsay” evidence from an undisclosed source has been accepted
for
this purpose (see the
MV
Thalassini Avgi
case
supra
at 841C-843D). It follows
that the level of the test applied is, generally speaking, a low one
even in the type of applications for
attachment or arrest to which
reference has just been made.’
[15] The appellants
contended that Ms Soni’s founding affidavit also fell short of
establishing a
prima
facie
case
because she had contented herself with the bald statement that the
charterparty had been repudiated by the first appellant without
proving the facts from which the court could assess whether there had
in fact been a repudiation. It was conceded that the requisite
facts
which were missing from the founding affidavit were contained in Ms
Soni’s replying affidavit filed in reply to the first
appellant’s
affidavit stating why the arrest should be set aside but it was
argued that on this part of the case the respondent
had to stand or
fall by what was said in its founding affidavit.
[16] In my opinion the
authorities are decisively against this submission. In
Transol
Bunker BV
v
MV Andrico Unity;
Grecian
MAR SRL v
MV
Andrico Unity
1987 (3) SA 794
(C) at
799H-I, in a passage specifically approved by Botha JA in the
Thalassini
Avgi
decision,
at 834F-G (and incidentally cited by the court
a
quo
at
678, fn 14) Marais J said:
‘
It would serve no good purpose to
set aside an arrest, knowing full well that a sound basis for the
arrest does indeed exist, merely
because the party who obtained the
order failed to rely upon it initially. It would ordinarily simply
result in a new application
for arrest being launched in which
precisely the same issue would have to be considered. That is
manifestly wasteful of both time
and money.’
Similar considerations
clearly apply here.
THE ALLEGED
MATERIAL NON-DISCLOSURES AND MISSTATEMENTS
[17] The third ground of
complaint related to what were alleged to be material non-disclosures
and misstatements contained in the
founding affidavit in the arrest
application. In this regard the appellants relied on the rules set
forth in
Schlesinger
v Schlesinger
1979
(4) SA 342(W)
at 348E-349B, which have been approved on several
occasions by this court (see, eg,
National
Director of Public Prosecutions v Basson
2002
(1) SA 419
(SCA) at 428I-429B), namely that all material facts must
be disclosed which might influence a court in coming to its decision
and
the withholding or suppression of material facts by itself
entitles a court to set aside an order even if the non-disclosure or
suppression
was not wilful or
mala
fide.
[18] The non-disclosures
and misstatements of which the appellants complained were the
following:
(1) The respondent failed
to set out the basis upon which the first appellant’s claims were
being prosecuted in the arbitration,
in that
(i) it did not mention
that the first appellant alleged in the arbitration that the
respondent was not entitled to make the deductions
from the hire
payable under the charterparty because it had not provided proper
supporting statements in respect of the deduction
it claimed (as was
required under clause 29 of the charterparty); and
(ii) it did not mention
that the first appellant alleged in the arbitration that the second
appellant could have taken on bunkers
at the port of Mina Saqr in the
Persian Gulf and indeed did so (a fact which was relevant in the
context of the first appellant’s
termination of the charterparty).
(2) The respondent did
not properly describe the nature and effect of the Italian
proceedings.
(3) The respondent failed
to describe accurately what had taken place during the negotiations
between the parties with regard to the
provision of security once the
dispute between the parties had manifested itself.
[19] As was pointed out
by the respondent’s counsel, it is important to note that the
appellants did not contend that if any of
the alleged non-disclosures
had not occurred there was a reasonable prospect that the judge would
not have ordered the arrest of
the second appellant nor was an
explanation given as to how the alleged non-disclosures and
misstatements
might
have
influenced the judge’s decision to order the arrest.
[20] As far as the first
complaint is concerned I am satisfied that the respondent’s
submissions in the arbitration, which were
annexed to the founding
affidavit, contained sufficient information to convey to the judge
what she required to know for the purpose
of deciding that the
respondent had made out a
prima
facie
case
in respect of its claim.
[21] The appellant’s
second complaint, regarding what was said about the Italian
proceedings, is dealt with by Cleaver J at 681D-682C
of his judgment.
The passage in the founding affidavit which the appellants criticised
is set out at 681D-F. As Cleaver J said, the
description of the
proceedings was terse but, save in one respect, accurate. The
inaccuracy to which he referred, and on which the
appellants’
counsel placed great emphasis, was the statement that:
‘
(t)he court of final instance in
Italy declined to determine an appeal against the order of the court
of first instance, on the basis
that the vessel had left its
jurisdiction by the time the appeal was to be determined and that
Applicant [ie, the present respondent]
as appellant therefore had no
material interest enforceable by the appeal court.’
[22] As appears from what
was said earlier about the Italian proceedings the correct position
was that the court of final instance
in fact dismissed the appeal
without considering the merits because, so it was held, the
respondent had no material interest in the
appeal. I am satisfied in
the circumstances that Cleaver J correctly held that the misstatement
was not material.
[23] Cleaver J’s
reasons for rejecting the appellant’s third complaint against the
founding affidavit are set out at 682C-683B.
I agree with them and
have nothing to add.
THE CLAIM FOR
COUNTERSECURITY
[24] I turn now to
consider the appellant’s alternative claim for countersecurity. The
appellants’ case as far as this claim is
concerned is set out in
para 42 of the judgment of the court
a
quo
(at
686H-687G). In summary they rely on the following facts:
(1) The first appellant
has no security for its claim;
(2) If the first
appellant is successful in the arbitration, it will have to launch
proceedings in South Korea to enforce an award
in its favour, which
proceedings may take up to three years;
(3) Although the
respondent is one of the world’s largest carriers, owning 43
vessels, although its financial results for the second
quarter of
2006 reflected assets valued at US$1,3 billion and although its
vessels call at South African ports on a regular basis,
there is no
guarantee as to what its financial position will be in the future,
the shipping industry being notoriously volatile.
[25] In my view Cleaver J
was correct in holding (at 687D-E) that the first appellant’s claim
for security ‘is in fact based on
a consideration of convenience’.
This means that the first appellant does not have what has been
described in many of the cases
under s 5(2)(b) and (c) and (3) of the
Act as a genuine and reasonable need for security. Counsel for the
appellants submitted, however,
that, though it is clear on the
authorities that an applicant for security under s 5(3) of the Act
has to establish that security
is needed and that such need is
‘genuine and reasonable’ (see, eg, the
Thalassini
Avgi
decision
at 832I-833A), the need for countersecurity in an application under s
5(2)(b) and (c) should not be set so high. In this
regard it was
submitted that the discretion conferred by s 5(2)(b) is broader than
that conferred by s 5(3). This is because, so
it was argued, unless
countersecurity is ordered ‘one party, if successful, will have
security instantly available upon the conclusion
of the arbitration’,
while the other party, if it is successful, will not have that
advantage. Counsel relied in this regard on
the recent judgment of MD
Southwood AJ in the
MV
Gladiator: Samsun Corporation t/a Samsun Line Corporation v Silver
Cape Shipping Ltd, Malta
[2007] ZASCA 92
;
2007
(2) SA 401
(D), where the learned judge, after a full analysis of the
authorities, came to the conclusion that though an applicant for
countersecurity
under s 5(2)(b) and (c) had to show a need for such
countersecurity, a requirement that such need be shown to be ‘both
genuine
and reasonable’ would ‘lead to the loss of flexibility
which the Legislature intended . . . and thus hamstring the Court in
the
exercise of its power’ (at 424F-G). He stated that there were,
as he put it, obvious differences between the approach adopted by
Hurt J in The Yu Long Shan:
Guangzhou
Maritime Group v Dry Bulk SA
1987
(2) SA 454
(D) at 463E-F and that laid down in cases decided by the
Cape High Court,
viz
Devonia Shipping Ltd v MV Luis (Yeoman Shipping Co Ltd Intervening)
1994
(2) SA 363
(C) at 374B-C;
The
Catamaran
TNT:
Dean
Catamarans CC v Slupinski (No 1)
1997
(2) SA 383
(C) at 394C-E;
MV
Heavy
Metal:
Belfry
Marine Ltd v Palm Base Maritime Sdn Bhd
2000
(1) SA 286
(C) at 298D-I;
The
MV
Rizcun
Trader
(4):
MV
Rizcun Trader
v
Manley Appledore Shipping Ltd
2000
(3) SA 776
(C) at 804I-J; and
MV
Akkerman:
Fullwood
Shipping SA v Magna Hellas Shipping
SA
2000 (4) SA 584
(C) at 592B-F.
[26] It is noteworthy
that MD Southwood AJ recognized (at 410G-H) that ‘s 5(2)(b)
requires for its application that there is a need
for security. The
Legislature’, he continued, ‘could never have meant the Court to
order security if there is no need for it.’
(Hurt J, in the passage
to which MD Southwood AJ referred, also proceeded from the premise
that the need for counter-security had
to be established.) It is
difficult to see how a need which is not ‘genuine’ can be
regarded as a need at all. It is also not
clear to me why a need
which is not reasonable should be taken into account in the exercise
of a discretion to order countersecurity.
I agree in this regard with
Cleaver J’s statement (at 686E-F) that ‘(t)he difference in
approach may well be nothing more than
one of semantics for it seems
that it will be difficult to identify the difference in practice’
but if there is a difference, I
prefer the approach followed in the
Cape.
[27] In the circumstances
I am satisfied that Cleaver J correctly decided not to exercise his
discretion in regard to countersecurity
in favour of the first
appellant and that the attack on this part of his judgment also must
fail.
The following order is
made:
The appeal is dismissed
with costs.
……………
.
IG
FARLAM
JUDGE
OF APPEAL
CONCURRING
SCOTT
JA
CLOETE
JA
COMBRINCK
JA
HURT
AJA