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[2012] ZAKZDHC 29
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Modion Maritime Management SA v Admiralty Shipbrokers and Consultants (Pty) Ltd and Others (A30/2012) [2012] ZAKZDHC 29 (15 May 2012)
In
the KwaZulu-Natal High Court, Durban
Republic
of South Africa
Exercising
its Admiralty Jurisdiction
Case No : A30/2012
Name
of ship: mv ‘Newlead Gujarat’
In
the matter between :
Modion
Maritime Management SA
.....................................................................
Applicant
and
Admiralty
Shipbrokers and Consultants (Pty) Ltd
…..............................
First
Respondent
Chartworld
Shipping Corporation and/or its
nominee
Golden Star Investments Ltd
….........................................
Second
Respondent
Bank
of Scotland PLC
….......................................................................
Third
Respondent
The
Registrar of the KwaZulu-Natal
High
Court Durban
…..........................................................................
Fourth
Respondent
JUDGMENT
Lopes J
[1] The applicant in this matter,
Modion Maritime Management SA ( ‘Modion’), seeks an order
declaring it to have been
the purchaser of the mv ‘Newlead
Gujarat’ (‘the ship’) pursuant to the sale by
auction of the ship, conducted
by Admiralty Shipbrokers and
Consultants (Pty) Ltd (‘the auctioneer’) on the 3
rd
May,2012. The history of the matter may be summarised as follows:-
the third respondent in this matter,
Bank of Scotland PLC ( ‘the Bank of Scotland’),
concluded loan agreements during
2010 with the owner of the ship,
Bethune Properties SA (‘the owners’);
the owners and a co-debtor failed to
make timeous repayment of the loans and the Bank of Scotland caused
an action in rem to be
issued against the ship, pursuant to which it
was arrested at Richards Bay. The ship has also been arrested by at
least one other
creditor;
the owners and their co-debtor were
thereafter unable to satisfy the debts owed by them, and accordingly
the Bank of Scotland
applied to this court for authority to sell the
ship. On the 29
th
March 2012 an order for the sale of the
ship was granted. Annexed to the sale order was a set of what are
referred to as the
‘Conditions of Sale by Public Auction’
(‘the conditions of sale’);
once the necessary pre-sale steps
were taken, the ship was sold at Durban by the auctioneer on the 3
rd
May 2012.;
the highest bidder at the auction was
Modion. Alleging that Modion had not paid the deposit within the
time limit set allowed,
the auctioneer cancelled the sale to Modion,
and declared the second respondent, Chartworld Shipping Corporation
and/or its nominee
Golden Star Investments Ltd (‘Chartworld’)
to be the purchaser;
Modion then brought this application
as a matter or urgency before Swain J on the 7
th
May
2012. An order was granted suspending the sale of the ship,
interdicting the auctioneer from giving possession of the ship
to
Chartworld, and ordering that the obligations of the purchaser of
the ship are suspended and are to run afresh from the date
upon
which this court determines the further relief sought by Modion;
the further relief, which is
contained in a Second Order Prayed provides that the decision of the
auctioneer to declare Chartworld
to be the purchaser of the ship be
set aside, and that Modion be declared to be the purchaser.
[2] Having heard the parties on the
11
th
May,2012, I must now decide whether the Second Order
prayed should be granted. I have been asked to deal with this matter
on an
urgent basis because the crew of the ship (which is in the
roads outside Richard’s Bay harbour) have not been paid their
wages for the last three months. Those wages are to be paid as a
matter of priority from the fund constituted by the sale of the
ship.
There is thus an urgent need to declare which of the parties is the
correct purchaser. Failing this, the crew and their families
will
continue to be prejudiced. Crew members have always been accorded a
form of favoured status by our courts, and I have accordingly
prepared this judgment on an urgent basis. Consequently, I have been
unable to devote the time and consideration to this judgment
which I
would have preferred to have done.
[3] Relevant provisions of the sale
order, and the conditions of sale, are;-
the sale order provided at paragraph
1.2 that :
‘
The
ship and the Bunkers shall be sold in (sic) the conditions set out in
Annexure “A” hereto.’ ;
clause 20 of the Conditions of Sale
provided :
‘
The
Purchaser shall pay ten per cent (10%) of the equivalent of the
highest or second highest bid in United States Dollars (or such
other
currency as may be designated by the Auctioneer) on the fall of the
hammer, either by way of direct telegraphic transfer
into the account
of the Registrar or by way of a bank draft or cheque drawn on a
commercial bank registered in South Africa and
payable upon
presentation in Durban, and which is guaranteed by such bank as being
good for the amount of the cheque.’;
clause 22 of the Conditions of Sale
provided :-
‘
Notwithstanding
the provisions of Clause 20 above, the Auctioneer may in his sole
discretion allow the Purchaser a period not exceeding
two (2) hours
within which to pay the deposit but, in those circumstances, the
Auctioneer may stipulate that, should the deposit
not have been paid
upon the expiry of the two hour period, the auction be reconstituted
after such period has elapsed or he may
then declare the second
highest bidder to be the Purchaser.’;
clause 26 provided that :-
‘
In
the event of the deposit aforesaid not being paid as required or the
balance of the Purchase Price not being paid or secured,
the
Auctioneer may in his discretion cancel the sale and either –
forthwith make
application to court on notice to the Registrar for such further
directions as the court may deem appropriate,
whether for the
re-sale of the Ship and the Bunkers in terms of these conditions or
otherwise; or
declare the second
highest bidder to be the Purchaser.’
[4] Modion was the highest bidder at
the auction, the ship having been knocked down to it for US$22 400
000,00. Chartworld was the
second highest bidder at US$22 390 000,00.
The fall of the hammer was recorded by the auctioneer as having
occurred at 12H15. The
auctioneer notified the attorneys representing
Modion and Chartworld (Mr Stephenson and Mr Dwyer respectively) that
‘the
clock has started’ and that there were two hours
within which to meet the deposit requirement.
[5] Mr Stephenson then suggested that
a portion of the deposit (US$2 000 000,00) be paid immediately, with
the balance to follow.
Mr Martin, the managing member of Admiralty
and the actual auctioneer, indicated that part-payment would be
unacceptable. In this
regard it is clear from the tenor of Mr
Martin’s affidavit that he understood that the suggested
balance of the deposit to
be paid later, would be paid outside of the
two hour period allowed. Mr Martin believed that the suggested
part-payment of the
deposit would be made from a Customer Foreign
Currency (‘CFC’) dollar denomination account held by
Woodhead Bigby &
Irving (of which Mr Stephenson is a director and
which firm represented Modion).
[6] During the bidding, and at the
fall of the hammer, Mr Stephenson was in telephonic contact with Ms
Botsiou of Modion’s
legal department, and she immediately set
into motion arrangements with Modion’s bankers for the transfer
of the funds to
enable the deposit to be paid to the Registrar.
[7] Mr Stephenson signed the
conditions of sale as he was obliged to do, and at 13H49 received an
email from Ms Botsiou to which
was attached a copy of a SWIFT
communication. SWIFT is an acronym for Society for Worldwide
Interbank Financial Telecommunication,
and is basically a secure
financial message system for the exchange of financial messages
between member banks across the world.
These messages are intended to
be delivered quickly and securely between member banks.
[8] Ex facie the SWIFT message sent to
Mr Stephenson sent by Ms Botsiou, it was sent by BNP Paribas (Suisse)
SA of Geneva (Modion’s
bankers) to BNP Paribas USA in New York,
instructing that bank to pay into the account of the Standard Bank in
South Africa, the
sum of US$ 2 240 000, to be credited to the account
of the Registrar. The value date of the payment is recorded as the
3
rd
May 2012. (The value date is the date upon which the
funds are to be transferred between the various banks.) It was
however necessary
for there to be an intermediary between BNP Paribas
USA and Standard Bank, which intermediary was Deutsche Bank and Trust
Americas,
and to which BNP Paribas USA in due course sent a second
SWIFT message. This extra intervention was necessary because BNP
Paribas
New York was not a correspondent bank of Standard Bank,
whereas Deutsche Bank and Trust Americas was.
[9] Both the SWIFT messages were what
are referred to as ‘MT103” messages. It is common cause
between the parties that
these messages are not instruments of
payment in themselves (as, for example, would be a cheque), but are
payment instructions
between member banks. The SWIFT messages must be
sent from, and received into, recognised SWIFT addresses. This not
only ensures
the integrity of the message, but triggers the recipient
bank’s right of recourse against its fellow member, the
remitting
bank. The first SWIFT message was copied to Standard Bank
in South Africa within the two hour period, but this constituted no
more
than a record of the communication between the Geneva and New
York branches of BNP Paribas, requiring their New York office to
attend to the transfer of the funds.
[10] The importance of having the
Registrar paid by 14H15 was appreciated by Mr Stephenson, as is
evident from his email to the
Registrar at 14H00, stating ‘Our
client is working with BNP Parabas (sic) to have them arrange with
Standard Bank that the
funds will show as a credit in your Ship
Account (per the attached) by 2.15 pm’. He attached to his
email the communication
from BNP Paribas which sets out the SWIFT
MT103 message from BNP Paribas Geneva to BNP Paribas New York
requesting it to transfer
the funds to Standard Bank.
[11] Mr Stephenson then sought
confirmation from both Mr Martin and the Registrar that the SWIFT
document would constitute sufficient
confirmation that the deposit
had been paid. However at 14H56 Mr Martin sent both Mr Stephenson and
Mr Dwyer (the representative
of Shepstone & Wylie, Chartworld’s
attorney) an email recording that as of 14H29 no payment had been
received, and that,
in terms of Clause 22 of the conditions of sale,
Chartworld was declared to be the purchaser.
[12] What is clear from the affidavits
is that the deposit had not been credited to the Registrar’s
account within the two
hour ‘grace period’ afforded to
Modion by the auctioneer. It appears that the deposit from Modion was
only received
into Standard Bank’s overseas bank account with
Deutsche Bank and Trust Americas in New York at 15H41, more than an
hour
after the expiry of the two hour period. Those funds remain
there awaiting the outcome of this judgment, and have not been paid
over to the Registrar’s account.
[13] Mr
Pammenter
SC, who
appears for Modion, submits that three issues arise on a proper
interpretation of the sale order and the conditions of
sale:-
did Modion pay the deposit in
accordance with the provisions of clause 22 of the conditions of
sale?
If not, did the auctioneer have a
discretion to condone that late payment?
If so, did the auctioneer correctly
exercise that discretion?
[14] Mr
Pammenter
conceded in
argument that Modion had not shown that the deposit had been received
in Durban by Standard Bank. In this regard he
conceded that a SWIFT
payment was revocable in certain narrow circumstances, at least until
the bank account of the client of the
recipient bank was credited.
Even if a provisional credit had been made in the account of the
Registrar, it could not be said that
the money was available to the
Registrar.
[15] Mr
Pammenter
drew to my
attention the decision in
Tayeb v HSBC Bank plc and another
[2004] EWHC 1529
(Comm) (also
[2004] 4 All ER 1024)
, where it was
held that no debt can be created in favour of a bank’s client
unless and until the bank has decided to accept
the payment. In the
present matter there had been no acceptance by Standard Bank of the
amount due by Modion. Accordingly, both
factually and on the strength
of this authority, there was no payment made to the Registrar within
the allowed time.
[16] Mr
Pammenter
further
submitted that if one examines clause 20 of the conditions of sale,
none of the three methods of payment authorised - ie.
a direct
telegraphic transfer into the account of the Registrar, or a bank
draft or a bank guaranteed cheque – result in
money actually
appearing immediately in the Registrar’s account. What these
methods of payment envisage, is that the money
is ‘on the way
and will arrive’. The mischief sought to be avoided by the
clause is that the deposit is not paid.
[17] This argument however fails to
take account that the sale order stipulates the applicable conditions
of sale and clause 20
thereof is peremptory in providing that :-:-
‘
the
Purchaser
shall
pay
ten percent of the purchase price . . . on the fall of the hammer . .
.’
(my emphasis);
[18] The language of the clause is
clear, and does not permit of an interpretation that it is
sufficiently complied with if the
purchaser provides a payment
mechanism which does not ensure that the money is available to the
Registrar in accordance with the
clause. In this case, Modion
provided a document showing that its Geneva bankers had issued an
instruction to its New York bankers
to pay the deposit to the account
of the Registrar’s bankers in South Africa. That instruction
was, in addition to what is
stated below, revocable. In any
interpretation of the conditions of sale it must be borne in mind
that they constitute an authority
to sell in terms of a sale order in
which the court is the seller – the sale is fundamentally
different from the sale of
property in pursuance of a warrant of
execution. (See :
MV Guzin S (No 1) Hamburgische Landesbank –
Girozentrale v Fund created by the sale of the MV Guzin S (Allied
Sales Corporation
and Another intervening)
2002 (6) SA 113
(D) at
124 J – 125 G).
[19] The auctioneer, however,
exercised what is referred to as his ‘sole discretion’ in
clause 22 of the sale conditions,
and allowed Modion two hours after
the fall of the hammer within which to pay the deposit. That period
of time was the only extension
which the auctioneer was authorised,
in terms of the sale conditions, to extend to the purchaser. In so
doing, the auctioneer then
had a further discretion to state, at the
time of granting the extension, that if the deposit was not paid
within the two hours,
then the auction would be reconstituted after
the lapse of the two hours. It is common cause that he did not state
at the time
of granting the extension that the auction would be
reconstituted in the event of a failure to pay.
[20] As submitted by Mr
Mullins
SC , who appeared for Chartworld, the only further action the
auctioneer could then have taken is prescribed in Clause 22 which
provided that the auctioneer could, after the lapse of the two hour
period, declare the second highest bidder to be the purchaser.
This
is precisely what Mr Martin did.
[21] Mr
Pammenter
submitted
that clauses 22 and 26 must be read together, and that once the
auctioneer had decided not to reconstitute the auction
in the event
of a failure to pay timeously, he was then given two options in terms
of clause 26.
[22] The two further options in clause
26 were to cancel the sale and then either approach the court for
directions whether to resell
the ship or otherwise, or declare the
second highest bidder to be the purchaser.
[23] Although clauses 22 and 26 do
overlap because they both provide possible courses of action to be
followed by the auctioneer
in the event that amounts due in terms of
the conditions of sale are not paid timeously, there are differences
between the two.
Both clauses authorise the auctioneer to declare the
second highest bidder to be the purchaser in the event of non-payment
or non-timeous
payment. However the other option available to the
auctioneer in each clause seems to indicate that they were intended
to solve
different problems;
in clause 22 the auctioneer has a
discretion to reconstitute the auction. This is something which he
must give the parties notice
of when granting an extension of time
within which to pay the deposit. This clearly envisages that
interested parties will wait
until the two hours have elapsed in
order to ascertain whether or not the auction will be reconstituted
because of non-payment;
in clause 26 the auctioneer is given
authority to apply to court for directions, whether for the resale
of the ship in terms of
the conditions of sale or otherwise. This
option appears to contemplate a situation where parties are no
longer immediately available
to reconstitute the auction – as
would be the case where the balance of the purchase price is payable
within five days
after the auction, and is not paid.
[24] Thus although clauses 22 and 26
both deal with similar problems, each need only be considered where
appropriate. In this case
the auctioneer did not stipulate when he
exercised his discretion to grant Mr Stephenson the extended two
hours that the auction
would be reconstituted in the event of
non-payment. There was, therefore, no need for him to consider the
provisions of clause
26.
[25] Mr
Pammenter
also
submitted that because the object of the sale was to secure the
highest price in the interests of creditors, the auctioneer
incorrectly and unreasonably exercised his discretion in declaring
Chartworld to be the purchaser.
[26] This approach would appear to be
in the form of a review of the auctioneer’s decision. I could
only make a ruling on
that basis if the decision of the auctioneer
fell within the definition of ‘administrative action’ as
defined in
s 1
of the
Promotion of Administrative Justice Act, 2000
.
Mr
Pammenter
submits that I need not determine that issue
because I need only decide whether the conditions of sale afforded
the auctioneer
the discretion to condone late payment. This is
because the auctioneer did not understand the nature of his
discretion, and accordingly
his decision falls to be set aside.
[27] I do not need to, nor do I make,
any decision as to whether the discretion exercised by the auctioneer
constituted ‘administrative
action’. I am prepared to
assume, solely for the purpose of this judgment, that it does. The
decision of the auctioneer to
declare Chartworld to be the purchaser
was, in my view, neither an irrational nor an unreasonable decision.
[28] Mr
Pammenter
submitted
that Mr Martin had no appreciation of the fact that he had a
discretion which he could exercise. In this regard he referred
to an
email sent to Mr Stephenson by Mr Poseman of Cox Yeats, the attorneys
representing the Bank of Scotland stating that Mr Martin
had ‘no
alternative’ but to award the ship to Chartworld. Mr
Pammenter
submitted that this email bound the auctioneer because Mr Poseman was
also acting as its attorney. However Mr Poseman has made
it clear in
his affidavit dated the 9
th
May 2012 that as at the date
of the auction he was not representing or advising the auctioneer.
The letter relied on by Mr
Pammenter
was accordingly not
written on behalf of the auctioneer and cannot assist Modion’s
case.
[29] Mr
Pammenter
’s final
submission was that any excess time over and above the two hours
allowed, and taken by Modion, falls into the category
of being ‘de
minimus’, alternatively that there had been substantial
compliance by Modion in complying with the conditions
of sale.
[30] Given:-
the nature and extent of the first
discretion given to the auctioneer in clause 22 of the conditions of
sale; and
the fact that the day before the
auction, Mr Martin advised Mr Stephenson that he should, at the very
least, have control of the
funds constituting the deposit in order
to meet the deadline for the payment of the deposit;
the manner in which the auctioneer
exercised that discretion by warning the parties that the clock was
running ( and, in the case
of Mr Stephenson, warning him twice);
Modion was sufficiently alerted to the
fact that it was required to perform timeously. The fact that it was
unable to do so because
of the logistical problems involved in
transmitting the necessary SWIFT messages and executing the
instructions therein within
the two hour period, is irrelevant. The
auctioneer could only grant an extension of two hours, after which he
was bound, in terms
of the sale order and conditions of sale, to take
the further steps permitted by the conditions of sale. Those steps
did not include
granting a further extension of time to Modion. I
agree with Mr
Mullins
that the auctioneer was in fact
precluded from granting condonation of late payment otherwise than in
terms of the conditions of
sale. Mr Martin exercised the only
discretion which he could have done in the circumstances, and did so
correctly.
[31] The first respondent abides the
decision of this court.
[32] Mr
Wallis
placed himself
on record for the Bank of Scotland only insofar as the counterclaim
was concerned. The counterclaim is for an order
that any deposit made
by Modion be kept in the account of the Registrar as security for any
damages which the Bank may have suffered
as a result of the
cancellation of the sale to Modion. Mr
Wallis
indicated that
the counterclaim would be dealt with in due course at times to be
determined between the Bank and Modion. I was
accordingly not
required to make any decision in that regard at this stage.
[33] Mr
Pammenter
, in reply,
recorded that Modion accepted the tender to deal with the
counterclaim at a later stage on the express condition that
Modion
reserved its rights to claim any damages it suffers in the form of
lost interest on the money.
[34] A point was raised by Mr
Mullins
that the application had been brought in the name of the wrong
applicant. This was dealt with by Mr Stephenson in his replying
affidavit, and, insofar as it may be necessary for me to do, I record
that the applicant is Modion Maritime Management SA, a company
registered in the Marshall Islands and having its registered office
at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro
Marshall Islands, MH 96960 and its principal place of business at 44
Tatoiou Street, Kafissia, 145 64 , Attiki, Greece.
[35] For all the reasons set out
above, I make the following order:-
the application is dismissed;
the cancellation of the sale of the
mv ‘Newlead Gujurat’ to the applicant on the 3
rd
May,2012 is confirmed;
the appointment of the second
respondent as the purchaser of the mv ‘Newlead Gujurat’
is confirmed;
those clauses in the conditions of
sale forming annexure ’A’ to the order for the sale of
the ship, and which were
suspended by operation of paragraph 1(c) of
the order of the 7
th
May,2012, are to run anew from the
date of this order;
the applicant is to pay the costs
incurred by the second respondent in opposing this application, such
costs to include those
consequent upon the employment of senior
counsel;
the counterclaim by the third
respondent is adjourned
sine die
.
Date of hearing : 11
th
May
2012
Date of judgment : 15
th
May
2012
Counsel for the Applicant : C J
Pammenter SC (instructed by Wodhead Bigby & Irving)
Counsel for the Second Respondent : S
R Mullins SC (instructed by Shepstone & Wylie)
Counsel for the Third Respondent : P J
Wallis (instructed by Cox Yeats)