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[2013] ZAKZDHC 7
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Siino West Shipping Co Ltd v NYK- Hinode Line Ltd (A56/2012) [2013] ZAKZDHC 7 (8 March 2013)
KWAZULU-NATAL
HIGH COURT, DURBAN
REPUBLIC
OF SOUTH AFRICA
(Exercising
its Admiralty Act)
REPORTABLE
Case No: A56/2012
Name of
ship:
MVAsian Forest
Arrest of
MV Sino West
In the matter between:
SINO WEST SHIPPING CO. LIMITED
.
............................................................
APPLICANT
And
NYK – HINODE LINE LIMITED
...................................................................
RESPONDENT
In the matter of an application to set aside the Respondent’s
deemed arrest of the
MV Sino West
.
JUDGMENT
MADONDO J
Introduction
[1] On 24 May 2012 and at the instance of NYK –Hinode Line
Limited (the respondent) this Court granted an order for the arrest
of the
MV Sino West
(the vessel) in terms of section 5(3) of
the Admiralty Jurisdiction Regulation Act, No. 105 of 1983 as amended
(the Admiralty Act)
for the purpose of obtaining security for the
respondent in an arbitration contemplated in London between the
respondent and CPM
Corporation Ltd (CPM) of China relating to a claim
for damages arising out of the breaches of a time charter party
concluded between
the respondent and CPM in respect of the
MV
Asian Forest
ship and indemnity given in such charter party
relating to the sinking of the said vessel off New Mangalore, India,
in July 2009.
[2] Pursuant to the order issued by this Court the vessel was duly
arrested. On 7 June 2012. Security was furnished on behalf of
the
applicant for a maximum amount of US$316720.00. The vessel has since
been released from arrest and sailed. The Sino West Shipping
Co.
Limited (the applicant) now seeks an order setting aside the
respondent’s deemed arrest of the vessel effected pursuant
to
an order made by this Court and ancillary relief. The application is
grounded on that the arrested ship was not at the time
of its arrest
an associated ship of the “Asian Forest” ship, which sank
off the India coast.
Parties
[3] The applicant is Sino West Co. Limited, a company duly
incorporated in accordance with the company laws of Hong Kong,
carrying
on business as the shipping company at Shanghai, China, and
the registered owner of the arrested vessel.
[4] The respondent is NYK – Hinode Line Limited, a company duly
incorporated and registered in accordance with the company
laws of
Japan and carrying on business as an operator of ships at Yuden
Buildings, 3-2 Marunouchi 2-Chome, Chiyoda-ku, Tokyo, Japan.
Factual Background
[5] The respondent’s claim arises from the sinking of the
Asian
Forest
following the liquefaction of a cargo of iron ore fines
loaded on the said vessel at the Indian Port of Mangalore and
Paradip.
The owner of the “Asian Forest” had time charted
the vessel to NYK Global Bulk Corporation (NYK -Global) which in turn
sub chartered the vessel to respondent. The respondent in turn sub
chartered the vessel to CPM and which in turn voyage chartered
it to
Sundial Shipping Company Limited. The latter then ordered the vessel
to sail for New Mangalore, India, where it loaded a
cargo of iron ore
fines, loading in all a total of 13,600mt of cargo. On completion,
the vessel left for her destination Zhang
Jia Gang, China, on 17 July
2009. Shortly, after her departure she developed a list and sank 3
nautical miles off New Mangalore
on 17 or 18 July 2009.
[6] The respondent avers that the sinking of the said vessel was
caused by a breach by CPM of the terms of the claim of charter
parties in that the cargo iron ore fines loaded on board the vessel
constituted “dangerous goods”. Alternatively, the
respondent alleges that CPM was in breach of an implied indemnity
given by it arising from the respondent having followed the
instructions of CPM to load the cargo of iron ore which the
respondent contends was responsible for the vessel sinking. The
vessel
was a total loss and its value was US$ 21 million. According
to the respondent the reason for the vessel to develop a list and
sank was the liquefaction of the cargo iron ore fines. In particular,
the respondent alleges that unbeknown to the master and crew
of the
Asian Forest
the cargo had moisture content in excess of her
transportable limit and that it was therefore dangerous and
improperly declared.
[7] It is trite that for an applicant seeking the arrest of property
in terms of section 5(3) of the Admiralty Act to obtain security
for
proceedings contemplated or pending in the Republic or elsewhere must
demonstrate, firstly, that it 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 against a ship
which is an associated
ship of the ship concerned. Secondly, that it has a prima facie case
in respect of such claim which is enforceable
in the nominated forum
and, thirdly, that it has a genuine and reasonable need for security
in respect of the claim. It is common
cause between the parties that
all the aforesaid requirements have been satisfied.
[8] The respondent avers that at the time when its claim arose
against CPM, CPM was controlled by Mr Wang Minggang (Wang) who also
controlled Sino West Shipping Company Limited at the time of the
arrest of the
Sino West
vessel. The respondent, therefore,
alleges that
Sino West
vessel was an associated ship of the
Asian Forest
vessel as described in section 3(6) and (7) of
the Admiralty Act.
Issue
[9] The issue between the parties is whether or not the
MV Sino
West
was at the time of her arrest an associated ship of the
MV
Asian Forest
in terms of section 3(6) and (7) of the Admiralty
Act.
[10] Section 3(6) of the Act provides:
“
An action in rem, other than an action in respect
of maritime claim referred to in paragraph (d) of the definition of
‘maritime
claim’ may be brought by the arrest of an
associated ship instead of the ship in respect of which the maritime
claim arose.”
[11] “Associated ship” is defined in subsection (7) as
follows:
“
(7) (a) For the purposes of subsection (6) an
associated ship means a ship, other than the ship in respect of which
the maritime
claim arose –
owned, at the time when the action is commenced, by the
person who was the owner of the ship concerned at the time when the
maritime
claim arose;
owned, at the time when the action is commenced, by a
person who controlled the company which owned the ship concerned
when the
maritime claim arose; and
owned, at the time when the action is commenced, by a
company which is controlled by a person who owned the ship concerned
or controlled
the company which owned the ship concerned, when the
maritime claim arose.”
[12] The respondent avers that at the time when its claim against CPM
arose Mr Wang was controlling CPM and owned all the shares
in Sino
West Shipping Company Limited at the time of the arrest of the
vessel. As a consequence Mr Wang was in control of both
companies.
CPM was therefore the deemed owner of the
Asian Forest
vessel
and Mr Wang the de jure owner of the
Sino West
vessel.
[13] The argument of the respondent involves consideration of two
questions; first whether or not at the time when the claim of
the
respondent arose Mr Wang was in control of CPM; and second; whether
at the time of the arrest of the
Sino West
Mr Wang was
controlling Sino West Shipping Company Limited, a company owning the
vessel.
[14] Mr Wragge for the applicant has argued that because there is a
dispute of fact on the papers relating to Mr Wang’s power
to
control CPM and Sino West at the relevant times in point, the rule
formulated in Plascon Evans Paints Limited v Riebeck Paints
(Pty)
Limited 1984(3) SA 623(A) should apply. The famous rule formulated in
the said case is:
“
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, justifying such an order.”
[15] The general rule was first stated in Stellenbosch Farmers’
Winery Ltd v Stellenvalle Winery (Pty) Ltd 1957(4) SA 234
(C) at 239
E-G. However, in both cases it was held that in certain instances the
denial by the respondent of a fact alleged by
the applicant may not
be such as to raise a real, genuine or bona fide dispute of fact. In
my opinion the evidence and the facts
contained in the papers in this
regard are far adequate to enable this Court to resolve the issue at
hand on the balance of probabilities.
However, if the need arises the
general rule formulated in Plascon Evans case can always be resorted
to.
[16] I propose to first deal with the question whether Mr Wang was at
the relevant time in question in control of CPM. The answer
to the
question lies in the proper interpretation of the deeming provisions
of section 3(7) (b) (ii) of the Admiralty Act in terms
of which a
person:
“
shall be deemed to control a company if he has
power, directly or indirectly, to control the company.”
[17] In EE Sharp and Sons Ltd v MV Nefeli 1984(3) SA 325(C) at
326I-327A, it was held that this relates to overall control, such
as
is exercisable for instance by a majority share holder or his nominee
of the assets and destiny of the company, it does not
refer to its
day to day management and administration.
[18] The meaning to be attributed to the words “power, directly
or indirectly to control” was considered and authoritatively
decided by the Supreme Court of Appeal in MV Heavy Metal: Belfry
Marine Limited v Palm Base Maritime CDN BHD 1999(3) SA 1083 (SCA).
At
1106D-G, Smalberger JA, delivering the majority judgment, construed
“indirect power” as referring to the defacto
position of
the person who commands or exerts authority over the person who is
recognized to possess de jure power (the beneficial
owner as opposed
to the legal owner). On the other hand, the Learned Judge of Appeal
construed “direct power” as referring
to someone who
wields direct power vis-à-vis the company and the outside
world and who therefore in the eyes of the law
(i.e. de jure)
controls the shareholding and that this determines the direction and
fate of the company. The same person may in
given circumstances
exercise both defacto and dejure control.
[19] At 1112G Marais JA held that it is not the power to manage the
operations of the company but the power to determine its direction
and fate which is what counts. In essence the direct power refers to
de jure authority over the company by the person who according
to the
register of the company is entitled to control its destiny .
See
GHS Hofmer: Admiralty Jurisdiction Law and Practice in South Africa,
2
nd
ed. p142
[20] In determining who controls the company one looks at the
immediate legal control of the company. In the case of an
incorporated
company, a person in control is the person who in
accordance with the appropriate legal system is regarded as
controlling the affairs
of the company for the purposes of the law.
Technically, it is only the registered shareholder who can exercise
the votes attaching
to a share and thereby directs the affairs of the
company. Hence the registered shareholder whose shares carry the
majority vote
will for legal purposes control the company.
See
Malcolm John Davis Wallis : The Associated Ship and South African
Admiralty Jurisdiction pp 187;1190; Inland Revenue Commissioners
v
Bibby and Sons Ltd
[1945] 1 All ER 667
at 668- 670:
[21] The applicant avers that CPM was not controlled by Mr Wang but
by Mesdames Wang Bo and Zhang Xinying who own shares in CPM
in equal
parts. CPM was incorporated in Hong Kong on 5 November 2004 with
shares issued to three parties including 62 of such shares
issued to
Bothwin Shipping Company. Thereafter, the shares in CPM were sold to
Sinofu Group Incorporated (Sinofu). The balance
of the shares, were
transferred to Sinofu on 27 July 2005. Until 29 October 2005 Mr Wang
was a director of Sinofu which then was
the 100% shareholder in CPM.
[22] The applicant alleges that on 1 April 2006 the shares in CPM
were transferred from Sinofu to two persons: Ms Wang Bo and Ms.
Zhang
Xinying. The consideration of each share was the nominal price of
HK$50. However, the said sale of shares in CPM was not
recorded in
writing. The share certificates in respect thereof were only signed
towards the end of May 2012 when a need arose to
produce same, when
the application to arrest the vessel was lodged.
[23] The respondent contends that the close relationship existing
between Mr Wang and the alleged two lady shareholders smacks
of
collusion between Mr Wang and the two ladies to deceive the outside
world to believe that the said two ladies are majority shareholders
in the CPM while the converse is true. Such close relationship
according to the respondent manifests itself in the following:-
[24] As the employees of CPM, a non- mainland Chinese registered
company, Mesdames Wang Bo and Zhang Xinying could not pay into
Chinese National Social Security Fund. Both Mesdames Wang Bo and
Zhang Xinying state that they had to devise a manner for continuing
payments into the Chinese National Social Security Fund, and they
asked to be registered as nominal employees of Vasteast and concluded
contracts with Vasteast in order to access the relevant benefits as
full time employees of Vasteast.
[25] The second aspect of association between Mr Wang and CPM relates
to the “mortgage or charge details” relating
to the
Dragon Glory Shipping Limited, a company where Mr Wang is recorded as
being the sponsor of the mortgage and CPM, Vasteast,
Pheachian
Shipping Company Limited, and Sino South Shipping Company Limited are
recorded as guarantors of the mortgage. The respondent
avers that the
circumstances surrounding a mortgage obtained by Dragon Glory
Shipping Co. Ltd for a loan facility granted for the
purposes of
financing part of the purchase price of newly built vessel, the
“Dragon Glory” provides a confirmation
that Mesdames Wang
Bo and Zhang Xinying were nominees of Mr Wang when the respondent’s
claim arose. Mr Wang is described
as sponsor of the loan and CPM as
one of the guarantors of the loan.
[26] On the other hand, the applicant contends that that CPM was one
of the guarantors does not constitute any evidence that Mr
Wang had
the power at the time the respondent’s claim arose to control
the destiny of CPM. In particular, the applicant alleges
that Mr Wang
asked Mesdames Wang Bo and Zhang Xinying to agree to CPM guaranteeing
the loan in return for a commission of one percent
(1 %) of the loan
agreement value.
[27] To the contrary, the respondent contends that it would be
unusual for a tender to require a borrower to obtain independent
guarantors. It avers that guarantors would normally have an actual
interest in the underlying transaction. It is therefore the
respondents’ contention that as the guarantor was independent
it would require security in the extent of a default of the
loan by
the borrower and had to pay upon the guarantee. No arrangement was
made in that regard in the commission agreement. For
those reasons
the respondent believes that the arrangements relating to the
mortgage and charge are consistent with CPM being controlled
by Mr
Wang, the sponsor of the loan.
[28] On 31 March 2009 an agency agreement was concluded between
Vasteast and CPM in terms of which CPM appointed Vasteast as its
exclusive agent in relation to charters, carriage of cargo,
appointment of port agents and other related issues, Mr Wang is the
sole shareholder of Vasteast, CPM and Vasteast share the same floor
and reception area in Shanghai at China Development Bank Tower
500
Pudong Road.
[29] On 13 July 2009, a few days before the
MV Asian Forest
sank;
Messrs Hioyuki Rokuta and Kazunari Tago of NYK Bulkship (China) Ltd
visited the offices of CPM, on a general business trip
to China to
conduct research into the Chinese shipping market. Tago considered Mr
Wang to be in control of both CPM and Vasteast.
Messrs Rokuta and
Tago were told that Vasteast conducted the so called “near sea
business” and CPM the “long
distance business”
since 2004. During such visit Mr Wang did not at any stage introduce
Mesdames Wang Bo and Zhing Xinying
as the directors or majority
registered shareholders of CPM.
[30] On the contrary, Mr Wang states that he did not at anytime
advise Mr Tago that he controlled CPM. He goes on to say that it
is
possible that Mr Tago may have formed that view by virtue of the fact
that Vasteast was the general agent of CPM in China. Nevertheless,
Mr
Wang concedes that at one stage CPM and Vasteast shared a reception
area where the logos of both companies were displayed.
[31] Mr Gordon for the respondent has argued that regard being had to
the fact that Mesdames Wang Bo and Zhang Xinying are relatively
young
and inexperienced, the prospect that the said two young ladies could
build a gigantic company in a few short years is highly
unlikely. He
added that this is even more so when it is considered that the
alleged shareholders bought the company at a nominal
price and had no
written record of their acquisition until it was necessary to produce
the share certificates in CPM following
upon the arrest of the
MV
Sino West.
This makes it more improbable than not that the shares
in CPM were all transferred to Mesdames Wang Bo and Zhang Xinying. He
concluded
by submitting that this could well be all the more so
because on their version it is not beneath them to rely upon
fictitious employment
contracts because they do not reside in
mainland China.
[32] It is, therefore, the respondent’s contention that in the
light of the aforegoing Mr Wang still holds the entire shareholding
in CPM and Mesdames Wang Bo and Zhang Xinying are on the
probabilities his nominees in CPM and that an effort has been made to
disguise the identity of the controlling shareholder in CPM because
CPM is the deemed owner of the
MV Asian Forest
and Mr Wang is
the de jure controller of the arrested vessel. Accordingly, the
vessels are associated within the meaning and purpose
of the South
African Law.
[33] The applicant states that Mesdames Wang Bo and Zhang Xinying are
both graduates from Dalian Maritime University and have worked
for
shipping companies. Mr Wragge for the applicant has submitted that
the decision by Mesdames Wang Bo and Zhang Xinying to take
over CPM
was based upon a careful consideration of the company and the
shipping market at the time and, in fact, it turned out
to be a
commercially sound decision. In so far as the youthfulness of
Mesdames Wang Bo and Zhang Xinying is concerned, the applicant’s
contention is that Mr Wang was born on 23 January 1974 and was
therefore three years older than Ms Wang Bo and approximately a
year
older than Zhang Xinying.
[34] I now propose to deal with the factors outlined above which the
respondent contends that they provide evidence that at the
time when
its claim arose, Mr Wang was the owner of CPM and thus controlling
its destiny: Firstly, the investigation conducted
on behalf of the
respondent has revealed that Mr Wang is the sole shareholder in and
the sole director of Vasteast. Both Mesdames
Wang Bo and Zhang
Xinying are currently registered employees of Vasteast and they have
been so employed for the period of ten (10)
years. They are neither
the officers nor the shareholders in it. In the applicant’s
affidavit this is not disclosed. Though
Mesdames Wang Bo and Zhang
Xinying are referred to as the joint registered shareholders and
directors of CPM incorporated on 5
November 2004 it could still
reasonably be inferred from their employment by Vasteast that they
are nominees of Mr Wang in CPM.
Such an inference is bolstered by the
fact that it is highly improbable that the owners of CPM would work
as the employees of Vasteast,
a third party, rather than dedicating
their time fully to their own business.
[35] Secondly, Wang Bo and Zhang Xinying were never introduced to the
representatives of the respondent, Messrs Rokuta and Tago,
during the
formal meetings held at the shared premises of CPM and Vasteast or
social events that normally followed such meetings.
At the reception
held by CPM at Pudong Shanglila in Shangai in 2008 for all its
customers and service providers hosted by Mr Wang,
only Mr Wang made
a speech and acted as the main host of the event.
[36] While it is common cause that shortly prior to the sinking of
the
MVAsian Forest
Messrs Rokuta and Tago visited Mr Wang in
China and had some discussions with him. Mr Wang could not tell why
Messrs Rokuta and
Tago might have believed that he ran the CPM
Company, as according to him this was not the case. On the other hand
Messrs Rokuta
and Tago categorically state that Mr Wang left distinct
impression in them that he ran CPM on the grounds that he dominated
the
conversations on behalf of CPM acting as if he was its chief
executive and he explained the relationship between Vasteast and CPM.
The only distinction drawn between CPM and Vasteast was that the
business of Vasteast focused on Asia and near sea whereas CPM
focused
on business further a field. In my opinion the probabilities are that
Mr Wang was in control of CPM at the particular time
in point.
[37] Thirdly, the fact that Mesdames Wang Bo and Zhang Xinying bought
the CPM company shares at a nominal price and had no written
record
of their acquisition for a period of more than six years after the
alleged purchase until it became necessary to produce
the share
certificates in CPM following upon the arrest of the vessel in
question, in my view, raises eyebrows and serves to confirm
the
suspicion of the respondent that the alleged sale was not genuine but
an effort to disguise and conceal the identity of the
controlling
shareholder of the CPM.
[38] Fourthly, the guaranteeing of the mortgage by the CPM on the
nominal commission percentage of one percent (1%) of the loan
agreement value without requiring security in extent of a default of
the loan by the borrower and the commitment to pay upon the
guarantee, viewed in the light of the fact that Mesdames Wang Bo and
Zhang Xinying had allegedly purchased the shares in CPM at
alarmingly
lower price, creates a serious doubt that the aforesaid two ladies
were true owners of the company concerned. Judging
from their
pecuniary position as it is evidenced by their purchase of the shares
in CPM with nominal price coupled with their relative
youthfulness;
it was highly unlikely that Mesdames Wang Bo and Zhang Xinying would
agree to be responsible for paying a debt involving
large sums of
money in the event of the borrower defaulting to pay. In the
premises, I agree with Mr Gordon for the respondent
that this serves
to confirm the suspicion the respondent has that Mr Wang, the sponsor
of the mortgage, not Mesdames Wang Bo and
Zhang Xinying, the
purported owners of CPM, would foot the bill instead, in the event of
a loan default by the borrower.
[39] Fifthly, the fact that in order to secure social benefits from
the Chinese National Social Security Fund in collusion with
Mr Wang,
Mesdames Wang Bo and Zhang Xinying were registered as nominal
employees of Vasteast clearly shows that they are all devoid
of
integrity and honesty. Being so, the possibility could not be ruled
out that Mesdames Wang Bo and Zhang Xinying could easily
camouflage
as a majority shareholders of CPM in order to disguise and conceal
the identity of Mr Wang as the controlling shareholder
of CPM.
[40] Lastly, more so, on applicant’s version on the business
cards Mr Wang is described as the president of Vasteast Shipping
Co.
Ltd and CPM a term, according to the applicant, outside the Peoples
Republic of China is the equivalent of a legal representative.
Nevertheless, the applicant contends that these business cards do not
in any way show that Mr Wang controlled CPM and the applicant
at the
relevant time.
[41] On 26 January Mr Tago attended a reception held by CPM at the
Pudong Shangila Hotel in Shanghai which was hosted by Mr Wang,
and at
such meeting it was said that Mr Wang was the president and owner of
CPM. Mr Rokuta understood from what was being said
that CPM and
Vasteast belonged to and were under the control of Mr Wang.
[42] In Oxford Advanced Learner’s Dictionary of Current English
(International Student’s Edition) by AS Hornby 8 ed,
the word
“president” is defined as the leader of a republic, the
person in charge of some organizations, clubs, colleges
etc and the
person in charge of a bank or a commercial organization.
[43] Reader’s Digest Oxford: Complete Word Finder, edited by
Sara Tulloch and published by the Reader’s Digest Association
Limited, defines the word “president” as the elected head
of a republic state, the head of the society or council etc,
the head
of certain colleges, the head of a company, etc and a person in
charge of a meeting council. It can also mean a chief,
leader,
principal, governor, director, managing director or a chairperson.
[44] The ultimate analysis of the word “president” shows
that it refers to a person who is in charge of particular
institution, organization or company. It could not therefore be said
to be the equivalent of the word “legal representative”,
the ordinary meaning of which can be construed as a person who has
formally been appointed or chosen to act or speak on behalf
of
another or others. No evidence has been adduced to show that Mr Wang,
as an individual, has been appointed to perform such function,
other
than that Vasteast Company has been appointed as an exclusive agent
of CPM. This supports the view of Messrs Rokuta and Tago
that Mr Wang
ran CPM and that he has at all times relevant hereto been known as
the head of the CPM Company.
[45] In the premises, I find the version of the respondent more
plausible and probable as compared to the version of the applicant
in
so far as Mr Wang being in control of CPM at the relevant time in
point is concerned and as such the respondent’s version
provides sufficient circumstantial evidence from which the only
reasonable inference that can be drawn is that Mesdames Wang Bo
and
Zhang Xinying were at the relevant time in point not majority
registered shareholders or owners of CPM, as the applicant alleges,
but mere nominees of Mr Wang. The inevitable conclusion, therefore,
is that Mr Wang was in control of the CPM Company.
[46] Section 3(7)(c) of the Admiralty Act provides:
“
If at anytime the ship was the subject of a
charter-party the charter or sub charter, as the case may be, shall
for the purposes
of subsection (6) and this subsection be deemed to
be the owner of the ship concerned in respect of any relevant
maritime claim
for which the charter or the sub charter, and not the
owner, is alleged to be liable.”
It is common cause that CPM had sub chartered the
Asian Forest
vessel to Sundial Shipping Company Limited and that the latter
ordered it to sail and load a cargo of iron ore fines at New
Mangalore,
India. Accordingly, in terms of the provisions of
subsection (7)(c) CPM is the deemed owner of the
Asian Forest
vessel.
[47] Having found that Mr Wang was in control of CPM at the time the
respondent’s claim arose and that CPM was the deemed
owner of
MV Asian Forest
at the particular time in point, I now turn to
consider the question whether or not at the time when the vessel was
arrested Mr
Wang was a de jure controller of Sino West Shipping
Company Limited, a company owning the vessel. Whether or not Mr Wang
was at
the time of the arrest of the vessel in control of Sino West
Shipping Company is a question of fact which should be proved on the
balance of probabilities.
See MV Iran Dastghay B Islamic Republic
of Iran Shipping Line v Terra Maine SA 2010 (6) SA (SCA) 509E;
Bocimar NV v Kotor Oversea`s
Shipping Ltd
[1994] ZASCA 5
;
1994 (2) SA 563(A)
at 582B
[48] It is trite that in determining who controls the company one
looks at immediate legal control of the company. In the case
of an
incorporated company, a person in control is the person who is in
accordance with the appropriate legal system regarded as
controlling
the affairs of the company for the purposes of the law.
[49] Sino West Shipping Company Limited was incorporated in Hong Kong
on 8 January 2010 as an international business company. The
applicant
avers that Mr Wang held shares in Sino West Shipping Company Limited
as nominee for a number of investors until 18 July
2011 when those
shares were transferred to Smoothie Goodie, a Seychelles Company. Mr
Wang allegedly transferred his shares to Seychelles
Company because
he was no longer prepared to be reflected on the applicant’s
public records as the sole registered shareholder
of the company when
in fact he was not the beneficial owner of the shares and exercised
no control over the applicant through his
registered shareholding. Mr
Wang believed that being reflected as the sole shareholder of the
applicant might have an effect on
his business interest in the Far
East. In fact Smoothie Goodie was interposed as the registered holder
of all the shares in the
applicant rather than Mr Wang.
[50] However, it is common cause between the parties that at the time
of the arrest of the vessel on 24 May 2012 Mr Wang was the
registered
owner of all the shares in Smoothie Goodies Limited. According to the
applicant Mr Wang holds shares in Smoothie Goodie
Limited as the
nominee for a number of investors and in fact he is the beneficial
owner of only 20% of the shareholding. The applicant
alleges that the
law of Seychelles recognizes a split between beneficial and nominal
ownership of shares and that a nominal shareholder
may hold shares
for the benefit of a beneficial shareholder in a trust relationship.
[51] The applicant avers that as such Mr Wang was obliged to comply
with the instructions of the investors as regards the operations
of
the companies and had no discretion to act otherwise in relation to
Smoothie Goodie Limited and Sino West Company. The relationship
between Mr Wang as nominee shareholder and the beneficial shareholder
is regarded as being legitimate according the laws of Seychelles
and
enforceable as between the normal shareholder and the beneficial
shareholders.
[52] It is the applicant’s contention that Mr Wang has no
discretion to act in relation to Smoothie Goodie Limited. Nor does
he
have power, directly or indirectly to control Smoothie Goodie Limited
or Sino West shipping Company. The explanation given for
Mr Wang to
hold the shares as a nominee on behalf of a number of investors is
that in corporation of Smoothie Goodie Limited was
to enable Mr Wang
to continue holding the shares therein as nominee for the investors
who had earlier beneficially owned the shares
in Sino West Shipping
Company Limited. There was a gentleman’s agreement in place
between Mr Wang and the investors pursuant
to which it was agreed
that Mr Wang would be registered as the nominee shareholder
[53] It may be true, as the respondent has correctly pointed out, to
say if Mr Wang held shares in the applicant as a nominee and
transferred the shares to Smoothie Goodie for the same investors, it
would be extraordinary in the light of the contentions made
on his
behalf that he would become the sole registered shareholder of the
shares in Smoothie Goodie Limited.
[54] The applicant alleges that Mr Wang is the registered owner of
all the shares in Smoothie Goodie Limited and the investors
have
actual and beneficial ownership of the shares in Smoothie Goodie.
Zhao Yunsheng allegedly owns 28.8476%; Wang Bing 8.5%; and
Zinyi
3.0%. The remaining 39.6544% of the shares in Smoothie Goodie is said
to be a beneficial owned by a number of small shareholders.
[55] Nominee means a person nominated or appointed by another to hold
shares in his name or on others behalf. See Sammel v President
Golding Mining Co 1969(3) SA 629(A) 666,668. The nominee is simple an
agent with limited authority, holding shares in name only
on behalf
of his nominator or principal from whom he takes instructions. See
Oakland Nominees v Gloria Mining Investment Co. 1976(1) SA 441(A)
453; Standard Bank of South Africa v Ocean Commodities Inc 1980(2)
SA
175(T) 186C-F.
[56] In terms of section 103 of the Companies Act 61 of 1973, the
precursor of the
Companies Act 71 of 2008
, a member of the company is
a person whose name is entered as a member in the register of members
of a particular company.
Section 37(9)
(a) (b) of the
Companies Act
71 of 2008
provides that a person acquires the rights when the name
of the person is entered into the certified securities register and
likewise
loses those rights if a transfer is entered into the
register. The rights arising from being the registered holder in
respect of
the shares belong exclusively to such shareholders. See
Simpson v Molson’s Bank
(1895) AC 270
(PC) at 279; RC v
Bibby and Sons Ltd
[1945] 1 All ER 667(HC)
at 671; TRC v Silverts Ltd
[1951] 1 All ER 703
(CA) at 706-709; Sammel case, supra, at 666-667.
[57]
Section 137(3)(a)(b)
of the
Companies Act 71 of 2008
and the
corresponding section 193 of the Companies Act 61 of 1973 provides
that every member has a right to vote at a general meeting
in respect
of each share held by him. Whereas, the nature of the rights and
obligations of the nominee and his nominator inter
se is governed by
the contract or relationship between them.
[58] In terms of
section 57(1)
of the
Companies Act 71 of 2008
a
shareholder means the holder of a share issued by a company and who
is entered as such in the certified or uncertified securities
register. A shareholder also includes a person who is entitled to
exercise a voting rights in relation to a company, irrespective
of
the form, title or notice of the securities to which those rights are
attached.
[59]
Section 57
(2) of Act 71 of 2008 provides:
“
(2) If a profit company, other than a state owned
company, has only one shareholder-
that shareholder may exercise any or all of the voting
rights pertaining to that company on any matter, at any time,
without notice
or compliance with any other internal formalities,
except to the extent that the Companies Memorandum of Incorporation
Provides
otherwise”
[60] The principal who does not appear on the register of members of
the company is usually described as the “beneficial
owner”
of those shares. The exact relationship between nominee and the
beneficial owner, although is usually one of agency,
will depend on
the facts of each case. The policy is that a company shall concern
itself with the registered holder and not the
owner or beneficial
owner of shares. See
Oakland Nominees case, supra, at 453A-B.
[61] In Sammel and others case, at 666D-E, it was held that the word
“nominee” comes from the English statute. The
policy of
that law is that a company shall concern itself only with the
registered shareholder and not the owner of the shares
666D-E. In
this regard, Palmer, Company Law, 19
th
Ed, at P103 says:
“
Where the registered holder is a nominee for some
other person who really controls the share this fact does not appear
on the register.
This is prohibited by sec 117 of the Act of 1948.
This enables the persons who are really in control of a company to
conceal their
position from the shareholders and from the public a
state of affairs which sometimes leads to abuse, and even fraud.”
[62] In cases where no guidance can be found in our common law, our
courts have no option but to draw from the experience of English
law
on the point in issue, and to follow the English precedents, if
justified. The control of a company resides in the voting power
of
its shareholders. This means that the control must be derived solely
from voting power attached to shares which are held by
the directors
and of which the directors are the absolute beneficial owners. See
Inland Revenue Commissioners v Bibby and Sons Ltd[1945]
1 All ER
667
at 668- 670
: In determining the power of controlling in the
company the voting power of its directors is sufficient, not their
beneficial interest
in the company. See
Inland Revenue
Commissioners v Silverts Ltd
[1951] 1 All ER 703
at 707.
[63] In Inland Revenue Commissioners v Bibby and Sons Ltd, supra, at
672, the word “interest” was construed as meaning
no more
than that the directors must have an interest such as enables them to
control the activities of the company; it does not
require some
personal financial interest on their part which control enables them
to control the fact that a vote –carrying
share vested in a
director as trustee is as far as the company concerned immaterial.
The general rule is that the trustee shares
must be excluded from
consideration since as trustees they have no “interest”
in the shares, and as beneficiaries they
had no “control”
over the company. (at 668)
[64] In Inland Revenue Commissioners v Silverts, where the National
Provincial Bank was the registered holder of all the shares
and was
not mere a nominee or bare trustee, the court held that the
controlling interest was in the bank, and that it was not permissible
to investigate the character in which the bank exercises its voting.
[65] In Inland Revenue Commissioners v J Bibby and Sons Ltd case,
supra, at 671, it was held that a trustee shareholder may, as
between
himself and his c
estuis que
trust, be under a duty to
exercise his vote in a particular manner, or a shareholder may be
bound under contract to vote in a particular
way. But such
restrictions the company has nothing to do. It must accept and act
upon the shareholders’ vote not withstanding
that it may be
given contrary to some duty which he owes to outsiders.
[66] In Pulbrook v Richmond Consolidated Mining Company (1878) 9CLD
610 at 615 Jessel MR said”
“
The company cannot look behind the register as to
the beneficial interest but must take the register as conclusive and
cannot inquire
… into the trusts affecting shares”.
[67] In Standard Bank Of South Africa Limited v Ocean Commodities Inc
1983(1) SA 276(A) at 288H – 289A, it was held that
normally the
person in whom the shares rests is the registered shareholder in the
books of the company and has issued to him a
share certificate
specifying the share, or shares, held by him. Indeed, such a share
certificate, duly issued, affords prima facie
evidence of his title
to the shares specified (section 94 of the companies Act 61 of 1973)
in some instances; however, the registered
shareholder may hold
shares as the nominee, i.e. agent of another, generally described as
the “owner” or “beneficial
owner” of the
shares. The fact does not appear on the company’s register, as
it is the policy of the law that a company
should concern itself with
the registered owner of the shares (at 289A-B).
[68] The term “beneficial owner” denotes the person in
whom, as between himself and the registered shareholder, the
benefit
of the bundle of rights constituting the share vests. See Oakland
Nominees case, supra, 447H-453A. In The Ya Mawlaya (No1)
Delray
Shipping Corporation v Eridiana Spa 1999 SCOSA C30 (D) it was held
that a party alleging a person to be the beneficial owner
of a ship
is bound by the ordinary rules of procedure and must discharge the
onus of providing such beneficial by furnishing details
of the share
ownership of the company owning the ship in question.
[69] Section 27 of the Seychelles
Companies Act, International
Business Act, 24 of 1994, provides:
“
27. (1) A company incorporated under this Act
shall state in its Articles whether or not certificates in respect of
its shares shall
be issued;
Where a company incorporated under this Act shall issue
certificates in respect of its shares, the certificates shall be
evidenced
by the signature of a director or officer of the company;
….
A certificate issued in accordance with subsection (2)
specifying a share held by a member of the company shall be prima
facie
evidence of the title of the member to the share specified
therein.”
[70] Section 28 (1) (a) (b) (c) of the Seychelles
Companies Act
requires
a company incorporated under this Act to keep one or more
registers known as Share Registers containing the names and addresses
of the persons who hold registered shares in the company; the number
of each class and series of registered shares held by each
person and
the date on which the name of each person was entered in the Share
register.
[71] In the present case, in my view, the applicant has not
discharged the required onus since it has not disclosed the names and
identities of the alleged investors and what share holding they have.
The general rule is that a person who alleges must prove.
See
Pillay
v Krishna
1946 AD 946
.
[72] The shareholding set out in the applicant’s affidavit
regarding Smoothie Goodie, a company incorporated and registered
under Seychelles
Companies Act, is
not supported by any scrap of
paper in the form of a share certificate as
section 27
(3) of the
said Act provides. Nor does the Seychelles
Companies Act make
provision for the principal of persons holding shares as a nominee,
as the applicant alleges.
[73] However, the issue involving the interpretation of the Admiralty
Act has to be determined by reference to the law of South
Africa. It
appears from the decided authorities that the claimant cannot look
beyond the register of members and seek the individual
who controls
the company concerned in order to enforce his or her maritime claim
against that particular company. Likewise, in
my view, the court
cannot look beyond the company and declare a person, who is not the
registered shareholder of the company concerned,
to be in control
thereof. The ultimate control over a company’s affairs is
exercised by its members in general meetings.
See
MV Heavy Metal
Palm Base Maritime CDN BHD v Dahlia Maritime 1998(4) SA 479 (CPD) at
492D.
[74] In MV Heavy Metal (Cape) case , supra, at page 491A-B it was
held that by providing in section 3(7) (b) (ii) of the Admiralty
Act
that the claimant need establish no more than that the person
concerned has the power to control the company concerned, directly
or
indirectly, the Legislature came to the aid of the claimant who seek
to rely on the associated ship provisions of the act in
order to
recover money due to him from the owner of an associated ship. It is
frequently difficult for a claimant in this position
to establish and
prove who the beneficial owners of the shares in a particular ship –
owning company are, because they are
concealed from him.
[75] In the present case Mr Wang is the sole registered shareholder
in Smoothie Goodie Limited, which in turn, holds hundred (100%)
percent shareholding in Sino West Shipping Company Limited.
Therefore, it follows that Mr Wang has eventually controlling
interest
in Sino West Shipping Company Limited, owning the arrested
ship. The words “controlling interest” were construed in
Inland Revenue Commissioners v J Bibby and Sons Limited case, supra,
at 670 as meaning “controlling voting power” that
is the
interest in view not beneficial interest. The words “controlling
interest” do not refer to the directors’
“beneficial
interest” in the company but to the power of controlling by
votes the decisions binding on the company
in the shape of resolution
passed at a general meeting. See
Inland Revenue Commissioners v J
Bibby and Sons Ltd case, supra, at 669.
[76] Section 3(7) (b) (i) of the Admiralty Act provides:-
“
For the purposes of paragraph (a) – ships
shall be deemed to be owned by the same persons if the majority in
number of, or
of voting rights in respect of, or the greater part, in
value, of the shares in the ships is owned by the same persons.”
[77] A link between Mr Wang and the two companies is a question of
fact which should be proved on the balance of probabilities.
Mr Wang
as the sole registered share holder in Smoothie Goodie Ltd, he has
ultimate beneficial ownership and control over the company’s
affairs as well as over Sino West Shipping Co. Ltd through Smoothie
Goodie limited. It therefore follows that Mr Wang has power
directly
to control both companies by voting the majority of the shares in
their shareholders meetings.
[78] Whether or not Mr Wang in fact exercises that power himself or
whether it is exercised through him by others is immaterial.
He is
deemed to control Sino West Shipping Company Limited whether he does
so and in fact not so. In MV Heavy Metal (Cape) at page
491C-D it was
held that this is the situation in which the Legislature sought to
achieve finality, as regards the identity of the
person or persons
who control such companies, even at the expense perhaps of
artificiality.
[79] Even if Mr Wang holds the shares in Smoothie Goodie Limited as a
nominee for various investors, as the registered shareholder
he has
the power directly to control the both companies by voting of their
shares in their shareholders meeting. In essence, this
means that as
the majority shareholder of both companies, Mr Wang has overall
control over Smoothie Goodie and Sino West Shipping
Company Limited,
and as a consequence he can exercise control over their assets and
their destinies. See
MV Heavy Metal (Cape): Belfry Marine Limited
case, supra, at 492F;
Section 57(2)(a)
of the
Companies Act 71 of
2008
.
[80] In MV Heavy Metal (SCA) case, supra, at page 1106G it was held
that if the person who has de jure power controls, at the relevant
times, the company owning the ship concerned and the company owning
the alleged associated ship, the statutory nexus between the
two
companies will have been established. See also
Transgroup Shipping
(Pty) Ltd v Omes of Kiyoju 1984(4) SA 210 (D) at 214H-J
. Marais
JA in MV Metal (SCA) case at page 1112F took the same view as
Smalberger and held that the purpose of subsection 3(7) (b)
(i) of
the Admiralty Act is to allow a claimant to pierce the veil of
apparent or ostensible power to control a company and so
reveal the
identity of the real holder of power to control the company.
[81] Smalberger JA at 1106F found the extension of de jure power to
defacto power to be in line with the objective of the subsection
to
prevent the ‘owner’, by presenting a false picture to the
outside world, from concealing his assets from attachment
and
execution by his creditors.
Conclusion
[82] In the premises, I hold that the respondent as the arresting
party has succeeded on the balance of probabilities to discharge
the
onus resting on it to prove that Mr Wang was at the time when its
claim arose in control of CPM, the deemed owner of
Asian Forest
ship, and that at the time of the arrest of
Sino West
vessel
Mr Wang exercised de jure control over Sino West Shipping Company
Limited, a company owning the arrested vessel, through
Smoothie
Goodie Company Limited. As a consequence the
Sino West
vessel
was an associated ship of the
Asian Forest
ship at the time of
its arrest.
Order
[
83] In the result, the application is dismissed with costs.
Date reserved: 11 December 2012
Date delivered: 8 March 2013
Counsel for Applicant: Adv Wragge SC
Instructed by: Shepstone & Wylie
(Ref: KR/WMW/SACH23471.1)
Counsel for Respondent: Adv Gordon SC
Instructed by: Edward Nathan Sonnebergs
(Ref: Mr A Norton/11/43)