Big Red One Incorporated and Another v Macro Fishing (Pty) Ltd (033/06) [2006] ZASCA 87; 2006 (6) SA 309 (SCA) (1 June 2006)

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[2006] ZASCA 87
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Big Red One Incorporated and Another v Macro Fishing (Pty) Ltd (033/06) [2006] ZASCA 87; 2006 (6) SA 309 (SCA) (1 June 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
Case no: 33/06
NAME
OF VESSEL: MV
SPIRIT OF NAMIBIA
In
the matter between:
BIG
RED ONE INCORPORATED
First Appellant
QUARTERDECK
PROSPECTING AND
MINING
(PTY) LTD
Second
Appellant
and
MARCO
FISHING (PTY) LTD
Respondent
________________________________________________________________
Coram
:
SCOTT,
STREICHER, FARLAM, MTHIYANE
et
NUGENT
JJA
Date of hearing
:
22
MAY 2006
Date of delivery
: 1 June
2006
Summary
: Sale of ship
pendente lite
in terms of s 9(1) of Act 105 of 1983
Neutral citation
: This
judgment may be referred to as MV
Spirit of Namibia
[2006] SCA
86 RSA
JUDGMENT
________________________________________________________________
SCOTT JA/…
SCOTT JA:
[1] On 17 November 2004 the
respondent, a Namibian company, (to which I shall refer as Marco)
launched an application in the Cape
High Court for an order
authorising the sale
pendente lite
of the MV
Spirit of
Namibia
which had been tied up in Cape Town harbour under
attachment since August 2002. The granting of the order was opposed
by both her
owner and head-demise charterer who are the appellants in
this appeal. The former is Big Red One Incorporated, a company of
Tortola,
British Virgin Islands. I shall refer to it as ‘Big Red’.
The latter is Quarterdeck Prospecting and Mining (Pty) Ltd, a South
African company and the holding company of Big Red. After the
exchange of the usual affidavits, the matter was argued on 3 March
2005 before Veldhuizen J, who on 23 September 2005 gave judgment in
favour of Marco. The order was in the form of a
rule
nisi
and contained detailed provisions for the sale of the vessel and the
establishment of a fund which was to be subject to the control
of the
registrar in accordance with Rule 21(7)(a)(i) of the Admiralty
Proceedings Rules. The
rule nisi
was subsequently confirmed by
Griesel J on 14 November 2005. The appeal is with the leave of
Veldhuizen J.
[2] Before considering the issues
raised in argument it is necessary to set out in some detail the
events which led up to the attachment
of the
Spirit of Namibia
and the subsequent application for her sale
pendente lite
.
[3] On 7 June 2002 the fishing vessel
Meob Bay
, which was owned by Marco, sank off the Namibian
Coast while proceeding from the port of Luderitz to the fishing
grounds. Marco alleges
that the loss occurred as a result of the
vessel’s propeller fouling a polypropylene rope floating on the
surface, which was attached
to a steel anchor on the sea bed. It
alleges further that the rope and anchor had been left where the loss
occurred by the servants
of a Namibian company, Gemfarm Investments
(Pty) Ltd, (‘Gemfarm’) which was the sub-demise charterer of the
MV
Lady S
, being the vessel it employed in the conduct of its
business of marine mining. At the relevant time Gemfarm and the
appellants were
associated companies. It was initially a party to the
proceedings in the court
a
quo but has since been placed in
liquidation.
[4] On 23 August 2002 Marco sought and
obtained ex parte a
rule nisi
and interim order for the
attachment of Gemfarm’s right, title and interest as demise
charterer in the
Lady S
as well as Gemfarm’s right, title
and interest to any additional equipment, victuals, supplies and fuel
on board the
Lady S
. The attachment was effected to found
jurisdiction in an action
in personam
which Marco intended to
institute against Gemfarm for damages. By agreement the return day
was postponed to 18 February 2003. Gemfarm
was unable to put up any
form of security or letter of undertaking to procure the release of
the
Lady S
, which it required to continue its mining
operations. However, Gemfarm was also the sub-demise charterer of the
Spirit of Namibia
which was owned by Big Red and was then in
Cape Town harbour undergoing, it was said, an extensive refit and
modification which would
keep it in port for two to three months. The
appellants through their attorney represented that the unencumbered
equity in the
Spirit of Namibia
amounted to some R35 million.
It was accordingly proposed to Marco that the
Spirit of Namibia
be substituted for the
Lady S
. On 29 August 2002 a
substitution agreement was entered into between Marco, Gemfarm, Big
Red and Quarterdeck. (The latter was the
head demise charterer of
both vessels.) In terms of the agreement, which was made an order of
court, Big Red undertook personal liability
for payment of any amount
found due by Gemfarm and agreed to the attachment of its vessel, the
Spirit of Namibia
, to found the court’s jurisdiction over it
in respect of its undertaking. In return it was agreed that Gemfarm’s
rights in the
Lady S
would be released from attachment and
that those rights would thereafter be deemed to be attached pursuant
to the provisions of ss
3(10)(a)(i) of the Admiralty Jurisdiction
Regulation Act 105 of 1983 (‘the Act’). The subsection reads:
‘
Property shall be
deemed to have been arrested or attached and to be under arrest or
attachment at the instance of a person if at
any time, whether before
or after the arrest or attachment, security or an undertaking has
been given to him to prevent the arrest
or attachment of the property
or to obtain the release thereof from arrest or attachment.’
Pursuant to the order, the
Spirit
of Namibia
was duly attached and the
Lady S
released from
attachment.
[5] On 18 February 2003, being the
postponed return day of the
rule nisi
, Gemfarm and Big Red
opposed the granting of a final order of attachment. Their right to
do so had been reserved in terms of the
substitution agreement. The
ground upon which they relied was that Marco had not discharged the
burden of showing that it had a
prima facie
case against
Gemfarm based on negligence. They disputed that the rope that fouled
the
Meob Bay
’s propeller was one left by the
Lady S
and argued that, if it was, it did not follow that Gemfarm’s
servants had been negligent. They disputed too that the fouling of
the
Meob Bay’
s propeller would have caused the loss and
argued that either the vessel had been unseaworthy or that her master
and crew had failed
to exercise the necessary degree of seamanship.
The matter was heard by Van Reenen J, who eventually handed down
judgment on 29 September
2003 confirming the attachment. (The
judgment is reported
sub nom
Marco Fishing (Pty) Ltd v
Gemfarm Investments (Pty) Ltd
[2003] 4 All SA 614
(C).) By then
the
Spirit of Namibia
had been under attachment for more than
a year.
[6] In the meantime, on 19 December
2002 Marco instituted its action
in
personam
against
Gemfarm and Big Red, claiming N $ 7 981 455 (about R8
million) plus interest and costs. The parties exchanged
pleadings
with little sense of urgency but in fairness to them they would have
been uncertain whether the attachment would be confirmed.
While also
still awaiting the judgment of Van Reenen J, and following a survey
of the vessel, Marco launched an urgent application
on 28 August 2003
in which it alleged that subsequent to the attachment, the
Spirit
of Namibia
had been stripped of a considerable amount of
equipment, much of which had been installed on the mining vessel
Anya
in which Gemfarm had an interest and which was owned by a company
called Lazig Marine (Pty) Ltd. Relying on the report of a marine
surveyor, Mr Paul Coxon, Marco contended further that the
Spirit
of Namibia
had been reduced to a ‘neglected hulk’ with a
concomitant reduction in value from about R20 to R25 million to about
R5.5 to R6
million. The relief it sought was an order directing the
sheriff to board the
Anya
and attach the various items of
equipment which had been identified by Marco as having been removed
from the
Spirit of Namibia
. A
rule nisi
was issued
returnable on 26 September 2003, but was anticipated by Gemfarm and
Big Red. In an answering affidavit, Mr Gershon Ben-Tovim
simply
denied without elaboration the allegation of stripping and consented
to an order that Gemfarm furnish security equal in value
to the items
alleged to have been removed. The matter came before Davis J, who,
with commendable promptitude, delivered judgment
on 15 September
2003. In terms of the judgment, Gemfarm was ordered to furnish
security to Marco in the sum of R3.5 million. Two
weeks later, ie on
29 September 2003, judgment was given confirming the attachment.
[7] In July 2004 Coxon conducted a
further survey of the
Spirit of Namibia.
He reported that in
the absence of any maintenance work the vessel had deteriorated
considerably since his last inspection in June
2003; he expressed
the view that it would be uneconomical and not commercially viable
for the vessel to be restored, whether as a
mining vessel or a
general purpose vessel, and that her only value was value as scrap.
After making inquiries at overseas scrap yards
he expressed the view
that the vessel would fetch somewhere between US $230 and US $300 per
ton as scrap. I interpose that Captain
Roy Martin, who is the
managing director of a ship brokering company and who deposed to an
affidavit on behalf of the appellants,
reported that the delivered
scrap value in India was US $300 per ton. Working on a scrap value of
US $ 300 per ton, an overall tonnage
of 1400 tons and an exchange
rate of R6.5 to the US dollar, Coxon calculated the delivered scrap
value of the vessel to be R2.73
million. From this, he said, there
had to be deducted the cost of towage which he estimated at R1 228
500, leaving a balance of some
R1.5 million. This valuation was not
seriously contested. Martin made no reference to it in his affidavit
and Mr Saar Ben-Tovim,
the general manager of Gemfarm who did not
profess to be an expert, simply asserted without elaboration or
reasons that the ‘value
ascribed by Coxon [was] too low’. In
these circumstances Coxon’s valuation of the vessel as at July 2004
must be accepted.
[8] The port dues in respect of the
Spirit of Namibia
were then being incurred at the rate of R30
000 per month. By 26 September 2004 the outstanding port dues
amounted to R837 974.96.
In terms of s 11 of the Act the claim for
port dues would rank ahead of Marco’s claim, as would the costs of
procuring the sale
of the vessel. In the event of a sale in execution
at that stage the amount available for distribution would
accordingly have
been no more than about R700 000. Cost orders had
also been made in favour of Marco both in the attachment proceedings
and in the
proceedings arising out of the alleged stripping of the
vessel.
[9] In the meantime, the trial in the
main action had been set down for hearing on 1 November 2004. An
application had also been brought
by a creditor on 21 June 2004 to
have Gemfarm provisionally wound up. The application, which Gemfarm
opposed, was postponed to 10
February 2005. Marco delayed its
preparations for trial until it appeared that a winding order would
not be granted. In the result
it was late in making discovery; Big
Red and Gemfarm launched an application for a postponement and by
agreement the trial was postponed
to 23 August 2005 when it was again
postponed.
[10] As previously indicated, the
application which is the subject of the present appeal was launched
on 17 November 2004. On 11 February
2005, and before the matter was
argued, Gemfarm was provisionally sequestrated. We were informed by
counsel that the provisional
order has since been made final.
[11] In terms of ss 9(1) of the Act, a
court is afforded a wide discretion to order ‘at any time’ that
property ‘which has been
arrested in terms of this Act be sold’.
Although the subsection speaks of property that has been arrested, it
applies equally by
reason of ss 8(2) to property that ‘has been
attached to found or to confirm jurisdiction relating to a maritime
claim’. Marco’s
claim against Gemfarm was a maritime claim as
defined in para (e) of ss 1(1) of the Act. Its claim against Big Red
and Quarterdeck
is a maritime claim as contemplated in paras (ee) and
(ff) of that subsection.
[12] The Court
a quo
, in a
short judgment, found that in all the circumstances of the case the
sale of the
Spirit of Namibia
was justified and in pursuance
of that finding made the order that it did. It did not deal with an
argument which counsel for the
appellants said he had advanced,
namely that properly construed the substitution agreement precluded
the sale
pendente lite
of the
Spirit of Namibia
. In
this court counsel confined his argument to that issue (and a further
point about what could be sold, which I shall deal with
later) and
indicated that should it fail he would no longer persist in the
contention that the sale of the vessel was not justified
in the
circumstances. Before, however, considering the meaning to be
attributed to the substitution agreement I find it necessary
to say
something about the manner in which the proceedings were conducted in
the court below.
[13] In the ordinary course of events
when a ship is arrested or attached and the owners are seriously
intent on defending the action,
the release of the ship is almost
invariably procured by the owners putting up security or providing a
letter of undertaking. But
it does happen that on occasions the
owners, although contesting their liability, either refuse or are
unable to furnish some form
of security to the satisfaction of the
plaintiff. In such an event it is imperative that every effort be
made to have the dispute
resolved with the utmost expedition.
Regrettably this did not happen in the present case; nor do the
papers reveal any proper explanation
for the inordinate delay that
occurred. The initial attachment was made on 23 August 2002. Because
the
Lady S
was no doubt urgently required for Gemfarm’s
mining operations, the substitution agreement was negotiated and
concluded within
six days. But thereafter all sense of urgency
appears to have been abandoned. The return day of the attachment
order was extended
by agreement and the parties exchanged affidavits
apparently at their leisure. Almost six months passed before the
matter was finally
argued on 18 February 2003. Judgment was then
reserved, regrettably for a period of more than eight months. Even
then the parties
appear to have made little effort to expedite the
proceedings. The trial did not proceed on 1 November 2004 but was
postponed to
23 August 2005 because, it was said, there had been late
discovery by Marco and the matter was not ‘ripe’ for hearing. By
1 November
2004 the vessel had been tied up in Cape Town harbour
under attachment for well over two years. In these circumstances one
would
have expected the legal representatives of the parties to have
suffered the inconvenience of late discovery and if necessary to have
burnt the midnight oil to ensure that the trial proceeded.
[14] The courts have in the past
stressed that the power afforded by s 9 to order the sale of property
pendente lite
will be sparingly exercised, particularly where
there is a reasonable prospect, as there is in the present case, that
the owner will
be able to show that the ground for the arrest or
attachment is not a good cause of action. See eg the
MT Argun
2001 (3) SA 1230
(SCA) para 34 and the cases there cited. See also
Shaw
Admiralty Jurisdiction and Practice in South Africa
at
68; Hare
Shipping Law and Admiralty Jurisdiction in South Africa
at 105
.
Nonetheless, the length of time a vessel is likely to
be detained and the costs involved in maintaining the vessel are
often decisive
in determining whether a sale
pendente lite
should be ordered. Thus in the
Myrto
[1977] 2 Lloyd’s Rep
243 (QB Adm Ct) Brandon J at 260 considered that an anticipated
delay of a further 18 months (the vessel had already been under
arrest
for three months) and the costs involved in maintaining the
vessel during that period justified a sale
pendente
lite. The
learned judge characterised an argument resisting the sale in such
circumstances as lacking reality. A similar approach
was adopted in
the
Gulf Venture
[1985] 1 Lloyd’s Rep 131 (QB Adm Ct).
[15] In the present case, whatever
justification there may have been for resisting the sale of the
Spirit of Namibia
has, in my view, long since ceased to be of
any relevance on account of the inordinate delays that have occurred
in the conduct of
the proceedings. By reason of the deterioration of
the vessel and the extent of the outstanding amount owing in respect
of port dues,
the balance available in the event of a sale of the
vessel would, as long ago as September 2004, have been no more than
about R700
000. By the time the court
a quo
gave judgment that
amount would have been further reduced by some R360 000, being the
increase in outstanding port dues. The remaining
balance of R340 000
would then not even have been sufficient to cover Marco’s costs in
the attachment and ‘stripping’ applications.
Those had been
taxed at R371 182,54 and R152 231,94 respectively. Subject to the
question of the interpretation of the substitution
agreement – to
which I shall turn – any argument that the vessel should not be
sold would therefore have been wholly unrealistic.
In the
circumstances, counsel had little option but to make the concession
he did.
[16] Two grounds were advanced in
support of the contention that the sale of the vessel
pendente
lite
was precluded by the substitution agreement. The first,
shortly stated, is as follows. The jurisdictional element necessary
for the
pursuit of the claim against Gemfarm was provided by the
deemed attachment in terms of ss 3(10)(a)(i) of the Act (quoted in
para
4 above); the purpose of the attachment of the
Spirit of
Namibia
, on the other hand, was to provide security, in the form
of a pledge, for Big Red’s accessorial obligation to Marco as
surety.
Accordingly, so it was argued, the attachment was not an
attachment in terms of ss 3(2)(b) simpliciter and the vessel did not
constitute
property which had been arrested (or attached) in terms of
ss 9(1) read with ss 8(2) of the Act. In my view there is no merit in
the submission. The first two clauses of the substitution agreement
read:
‘
1. Big Red undertakes
personal liability for the payment to Marco of any amount found due
to Marco by Gemfarm in the action.
2. The MV S
pirit of
Namibia
, and all of Big Red’s right, title and interest
therein, shall be attached by the Sheriff pursuant to an order to be
obtained by
Marco with the agreement of Big Red and Gemfarm
immediately upon this agreement being made an order of court, the
attachment being
to found the jurisdiction of the Honourable Court
over Big Red in the action which Marco intends to institute against
Gemfarm and
Big Red.’
It is clear from these provisions that
Big Red is not a surety; it interceded as a co-principal debtor whose
liability was not dependent
on the failure of Gemfarm to pay. (For
the distinction between a surety and an intercessor see eg Forsyth &
Pretorius
Caney’s The Law of Suretship
5 ed at 33.)
Furthermore, and in any event, the agreement expressly provides that
the
Spirit of Namibia
was attached to found the jurisdiction
of the court over Big Red in respect of a claim which, it was common
cause, was a maritime
claim. The vessel was therefore attached to
found jurisdiction ‘relating to a maritime claim’ within the
meaning of ss 8(2).
It accordingly constituted ‘any property’
within the meaning of ss 9(1) and in terms of that subsection could
be ordered to be
sold ‘at any time’.
[17] The second ground relied upon was
based on the wording of clause 7 of the agreement. It reads:
’In the event of Marco
succeeding in its intended action against Gemfarm and Big Red, and of
Gemfarm and/or Big Red not immediately
paying the judgment debt,
execution may be levied upon the MV
Spirit of Namibia
and/or
she will be sold in accordance with the provisions of Act No 105 of
1983 and the Admiralty Proceedings Rules, free of any
encumbrances
and free of any possessory rights which Quarterdeck and Gemfarm may
have as head charterer and sub-charterer respectively
of the MV
Spirit of Namibia’
.
It was contended on behalf of the
appellants that the effect of this provision was that the
Spirit
of Namibia
could only be sold in the event of Marco obtaining
judgment in its favour and neither Gemfarm nor Big Red immediately
paying the
judgment debt. In my view this contention must also fail.
The clause is permissive, not restrictive, in its effect. It permits
Marco
to execute against the vessel in the circumstances mentioned.
It does not purport to restrict any of Marco’s rights arising out
of the attachment, nor can I see any basis for reading such a
restriction into the clause. It is concerned with the matter of
execution
after judgment, not the sale of the vessel
pendente lite
and the establishment of a fund with the proceeds.
[18] In the alternative, it was argued
that the order of the court
a quo
was in any event too widely
stated as it authorised the sale of the vessel ‘including her
equipment, furniture, stores and bunkers’
and these items were not
included in the attachment order granted on 29 August 2002. In
support of this contention, counsel for
the appellant drew attention
to the distinction between the attachment order of 29 August 2002 and
the order granted on 23 August
2000 in relation to the
Lady S
.
In the latter a distinction was drawn between Gemfarm’s right title
and interest in the
Lady S
and Gemfarm’s right, title and
interest in ‘any additional equipment, victuals, supplies and fuel
currently on board the vessel’.
The order of 29 August simply
authorised the sheriff to ‘attach [Big Red’s] right, title and
interest in the MV
Spirit of Namibia
in accordance with the
provisions of the said agreement’. (The relevant provision is
clause 1 which is quoted in para 16 above.)
[19] In response, counsel for Marco
pointed out that there was a good reason for the distinction between
the two attachment orders.
In the case of the attachment in relation
to the
Lady S
, Gemfarm’s right title and interest in the
vessel was limited to that of a demise charterer and the second leg
of the order was
included merely to cover any ‘additional
equipment, victuals, supplies and fuel’ that may have belonged to
Gemfarm. However,
in the case of the
Spirit of Namibia
, which
was owned by Big Red, he submitted that it was quite clear that it
was the ship itself that was being attached and in the
absence of
anything to the contrary the attachment would include ‘her
equipment, furniture, stores and bunkers’. He pointed out
further
that the only other persons who may have had interest in the
Spirit
of Namibia
’s equipment, furniture, stores and bunkers were
Gemfarm and Quaterdeck and although they were parties to the
submission agreement
there was nothing in its provisions to indicate
that the equipment etc was their property. This, he contended, would
have been made
clear had it been the case.
[20] While much of what counsel for
Marco contends is unquestionably correct, it seems to me that it is
in any event not open to the
appellants to argue at this stage that
the order granted by the court
a quo
was too widely stated in
the respect contended. The order that was sought and granted clearly
reflected Marco’s understanding of
what was covered by the
attachment order made in pursuance of the substitution order. The
only parties other than Big Red who could
have had an interest in the
Spirit of Namibia
’s equipment, furniture, stores and bunkers
were Gemfarm and Quarterdeck. Both were respondents in the court
a
quo
. Had their understanding of what was included in the
attachment order differed from that of Marco they would no doubt have
raised
the issue in the papers. But nowhere do they lay claim to
anything on board the vessel. Had they done so, Marco could have
dealt
with the matter in reply. In any event, the point taken by
counsel is clearly an afterthought. Had the equipment etc on board
the
Spirit of Namibia
not been regarded by the appellants as
subject to the attachment order Mr Gershon Ben-Tovim would not in the
‘stripping’ application
have tendered security in an amount equal
in value to the items alleged to have been removed.
[21] It follows that the appeal must
fail. It is however necessary to correct the order of the court
a
quo
in two respects. The reason for the first is that the
Spirit
of Namibia
was cited in the court
a quo
as the first
respondent as if the vessel had been arrested in an action
in rem
.
The draft, which was made an order of the court, similarly refers
throughout to the ‘first respondent’ (and sometimes simply
to
‘the respondent’) when the reference should have been to the
Spirit of Namibia
. The draft incorporated in the order will
have to be corrected accordingly. The reason for the second
correction is that the judge
when granting an order in terms of the
draft overlooked that it already contained a provision dealing with
the costs of the application.
Because of this, he included a
reference to costs in para 17 of his judgment. The paragraph reads:
‘
The application is
granted with costs and the amended draft order marked ‘AHV’ is
made an order of court.’
Paragraph 10 of the draft, however,
reads:
‘
The costs of this
application shall forthwith be paid out of the fund on the scale as
between attorney and client, as taxed or agreed
with respondents’
attorneys.’
In the circumstances, the order in
para 17 of the judgment will have to be corrected by the deletion of
the words ‘with costs’.
[22] In the result the following order
is made:
(a) The appeal is dismissed. The
respondent’s costs are to be paid by Big Red One Incorporated and
Quarterdeck Prospecting and Mining
(Pty) Ltd, their liability
therefor being joint and several.
(b) The order of the court
a quo
is corrected as follows:
(i) The name of the vessel, ie
Spirit
of Namibia
, is substituted for the words ‘first respondent’
and for the word ‘respondent’, where applicable, in the draft
marked ‘AHV’.
(ii) The words ‘with costs’ are
deleted.
__________
D G SCOTT
JUDGE OF APPEAL
Concur
:
Streicher JA
Farlam JA
Mthiyane JA
Nugent JA