About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Kwazulu-Natal High Court, Durban
SAFLII
>>
Databases
>>
South Africa: Kwazulu-Natal High Court, Durban
>>
2012
>>
[2012] ZAKZDHC 75
|
|
Grand Spartounta Incorporated and Others v TMT Bulk Corporation (A66/11) [2012] ZAKZDHC 75 (13 November 2012)
IN THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC OF SOUTH AFRICA CASE NO.A66/11
(Exercising its Admiralty Jurisdiction)
Name of Vessel: MV “NEWLEAD SPARTOUNTA”
In the matter between:
GRAND SPARTOUNTA INCORPORATED
.........................................
First
Applicant
GRAND RODOSI INCORPORATED
..............................................
Second
Applicant
BRAZIL HOLDINGS LIMITED
.
...........................................................
Third
Applicant
GRAND OCEANOS INCORPORATED
............................................
Fourth
Applicant
GRAND VENETICO INCORPORATED
...............................................
Fifth
Applicant
and
TMT BULK CORPORATION
...................................................................
Respondent
JUDGMENT
Delivered : 13 November 2012
KING AJ
[1] On 5 July 2011, the MV “NEWLEAD SPARTOUNTA” was
placed under arrest at the instance of the Respondent. The owner
of
that vessel is the First Applicant in these proceedings, which are
brought to set aside that arrest.
[2] The Respondent applied for such arrest on the basis that the
“NEWLEAD SPARTOUNTA” was associated with the other
vessels which are involved in this application. Those other vessels
are the “GRAND RODOSI”, the “BRAZIL”,
the
“GRAND OCEAN” and the “GRAND VENETICO”, which
are owned, respectively, by the Second to Fifth Applicants.
In the
arrest application, the Respondent alleged that it had claims against
these four vessels that ought to be secured, pending
the outcome of
various arbitration proceedings which would finally decide those
claims.
[3] Soon after the arrest of the “NEWLEAD SPARTOUNTA, security,
in the sum of US$ 1,928 745.00 was put up, which allowed
that vessel
to proceed on its way, whilst remaining under deemed arrest, under
the provisions of the Admiralty Jurisdiction Regulation
Act No. 105
of 1983 (“the Act”).
[4] The Applicants then launched these proceedings against the
Respondent, seeking to set aside the original arrest order or,
alternatively, to amend that order so as to reduce the amount for
which security was required. Relief was also sought in terms of
which
the Respondent was required to return to the Applicants the letter of
undertaking which was furnished to provide the security
which allowed
for the release of the “NEWLEAD SPARTOUNTA” and, in the
case of the alternative relief, to substitute
it with a letter of
undertaking for such lessor amount that this court might order.
[5] This application came before me as an opposed application on 2
November 2012. By that stage, the Respondent had already conceded
(for reasons which it said arose from events subsequent to the
original arrest), that the need for security in respect of three
out
of the four associated vessels had fallen away. The Respondent
required the security relating only to the “GRAND VENETICO”
to remain in place, which involved the sum of US$ 657,313.50 plus
estimated interest in the sum of US$ 105,666.11 and anticipated
costs
in the sum of US$ 200,000.00.
[6] The Applicants’ case may be summarised as follows :-
The Respondent brought its application for arrest (the arrest
application”) on an
ex parte
basis and it accordingly
owed to the Court a duty to disclose all material facts which might
affect the Court’s decision
on the application. The Applicants
allege that the Respondent failed to disclose material facts which
were relevant to the issues
and, accordingly, the arrest order
should be set aside in its entirety.
Alternatively, upon the facts which were disclosed in the arrest
application, the Respondent did not discharge the onus upon
it to
demonstrate that there existed a genuine and reasonable need for
security in respect of all of its claims against the four
vessels.
In addition, in the case of the “GRAND VENETICO”, the
Respondent failed to show that it had a
prima facie
claim
against the Fifth Applicant. Accordingly, the arrest order should be
set aside anyway simply because the Respondent failed
to make out a
proper case for granting it.
In the further alternative, and if the court found that a case was
made out in respect of only some of the Respondent’s
claims,
the arrest order should be amended accordingly and the terms of the
related letter of undertaking amended as well.
[7] The Respondent’s case may be summarised as follows :-
All the material facts were disclosed to the court in the founding
papers for the arrest and a proper case was made out in respect
of
all four claims, both as to the existence of a
prima facie
claim
and also as to the genuine and reasonable need for security.
However, events which took place subsequent to the arrest, relating
to developments in the aforesaid arbitration proceedings,
rendered
it unnecessary to keep in place all of the security obtained for the
claim relating to the “GRAND OCEAN”.
The Respondent
agreed that it should be reduced by US$ 15,452.5 (plus an
appropriate proportion of the interest and costs which
were secured
as well).
[8] Subsequently, further facts came to light in the Replying
Affidavit filed on behalf of the Applicants and in a later
Supplementary
Affidavit. In the case of the “GRAND RODOSI”,
arbitration proceedings were finalised by way of an award in favour
of
the Second Applicant in respect of its claims and the claims
advanced by the Respondent in relation to that vessel were dismissed.
In arbitration proceedings related to the “BRAZIL” and
the “GRAND OCEAN”, arbitrators made interim awards
in
favour of the Third and Fourth Applicants in amounts equal to the
claims advanced by those Applicants, less the claims advanced
by the
Respondent against them. In the case of the “GRAND VENETICO”,
the relevant arbitrators made an interim award
in favour of the Fifth
Applicant for the full amount of its claim against the Respondent,
without making any reduction to take
account of the Respondent’s
counter-claim against that vessel.
[9] Accordingly, by the time that the Respondent delivered its Heads
of Argument in this application, it conceded that it no longer
required any security in relation to its claims against the Second,
Third and Fourth Applicants but that its claim against the
Fifth
Applicant should remain secured because the interim award made in
respect of the “GRAND VENETICO” had not been
reduced so
as to take account of that claim.
[10] The most important complaint raised by the Applicants in
relation to what facts were disclosed to the court in the arrest
application is one which is common to the issues arising in relation
to all the vessels. That complaint cannot be dealt with, in
isolation, in relation to the “GRAND VENETICO” only. In
addition, the Applicants sought a punitive order for costs
against
the Respondent, said to be justified on the basis of the Respondent’s
conduct in failing to disclose material facts
in its founding papers.
The result of these matters is that it remains necessary to consider
the issues relating to the Respondent’s
alleged failure to
disclose material facts, in relation to all the vessels, even though
the security relating only to the “GRAND
VENETICO”
remains in dispute.
[11] However, another alleged non-disclosure of facts, relating only
to the “GRAND RODOSI”, sits upon a foundation
different
to that relating to the other vessels. I shall deal with it first. In
the arrest application, the Respondent says it
was “in dispute”
with the Second Applicant and it put up, as annexures, copies of the
claim and counterclaim advanced
by the Second Applicant and the
Respondent, respectively, in the arbitration proceedings in London in
which those disputes were
to be aired. The Second Applicant’s
claim was for payment of US$ 562,499.99 plus interest and costs, made
up of hire instalments
said to be payable by the Respondent to the
Second Applicant under a charterparty in respect of the “GRAND
RODOSI”.
Part of the claim documents put up included a
provisional final hire statement prepared by the Second Applicant in
which it set
out the detailed calculation of its claim. The
counterclaim put up by the Respondent appeared as annexure “G”
to its
arrest papers, at pages 245 to 264 thereof and it included
what it described as its final hire statement in which the Respondent
set out its calculation of what it alleged was due to the Second
Applicant.
[12] It must be remembered that the arrest application, with all its
annexures, ran to over 500 pages and, as is usually the case,
it was
brought as a matter of extreme urgency. The papers were signed on 4
July 2011 and the court was asked to hear the matter
on 5 July 2011.
The bulk of the papers, and the haste with which the court was
expected to deal with the arrest application are
matters which are
relevant and to which I shall return later.
[13] In the arrest application, the Respondent set out six claims
against the Second Applicant, for which it sought security, alleging
that those claims, and the justification thereof, were set out in the
annexed counterclaim. Nothing was said in the arrest application
about any part of the Second Applicant’s claim being
undisputed. An ordinary reading of the Founding Affidavit would lead
anyone to conclude that the claims advanced by the Second Applicant
were all disputed, as were the counterclaims advanced, in turn,
by
the Respondent. Thus, the impression created was that these claims
and counterclaims were all subject to the usual vicissitudes
of
litigation by arbitration and only the ultimate award of the
arbitrators would determine which claims were good and which were
not. In fact, the concluding paragraphs of the arrest Founding
Affidavit make the point that all the claims which had been advanced
by the Second to Fifth Applicants had, in other proceedings, been
secured by the Respondent whereas the Respondent did not have
any
security in respect of its claims. Even the Respondent’s
affidavit in this application adopts this theme. In paragraph
10 of
the Answering Affidavit (at page 116 of the papers) the Respondent
contends that each claim and counterclaim in the various
arbitrations
referred to in the Applicants’ Founding Affidavit is
“self-standing and independent”. It is said
that even
though the ultimate arbitration award might result in a greater
amount being awarded in favour of one or other of the
Applicants in
relation to what was awarded to the Respondent is “immaterial
to the validity” of the Respondent’s
counterclaim which
should nevertheless be secured until that ultimate arbitration award
is made.
[14] However, if one examines the claim and counterclaim documents
put up in the arrest application by the Respondent, relating
to the
“GRAND RODOSI” arbitration, the factual picture which
emerges is quite different to what was alleged in the
Founding
Affidavit. I may say that uncovering these facts was, in light of the
bulk and complexity of the papers, no simple matter.
It required a
detailed and careful analysis of the annexed documents, particularly
the statements of account put up in support
thereof, to uncover the
details.
[15] What is most significant is the basis upon which the Respondent,
in its statement of account, analysed its position in relation
to the
Second Applicant’s claim for hire charges under the
charterparty and the Respondent’s counter-claims. In the
Respondent’s statement of account, after allowing for all the
amounts that the Respondent contended were due to the Second
Applicant, and after making various deductions, the Respondent
arrived, on its own calculations, at the conclusion that it owed
to
the Second Applicant the sum of US$ 48,606.75. In arriving at that
calculation, the Respondent had already deducted, from what
it
admitted was due to the Second Applicant, the majority of the smaller
counter-claims which it asserted, in the arrest application,
ought to
be secured. The only claim which was alleged in the arrest papers as
needing to be secured, and which was not already
taken into account
in the Respondent’s calculation of what was owed to the Second
Applicant, is the claim for damages referred
to in paragraph 21.6 of
the Founding Affidavit in the arrest application, in the sum of US$
400,000.00. The other smaller claims
amounted, in round figures, to
about US$ 46,000.00 and, as I have said, these had already been taken
into account by the Respondent,
as deductions, in arriving at what it
said was owed to the Second Applicant, for the purposes of the “GRAND
RODOSI”
arbitration.
[16] That these deductions had been made in the arbitration papers
was not mentioned at all in the Founding Affidavit of the arrest
application. Of course, the Respondent contended that these facts
were disclosed in the papers because they emerged from the annexures
to which I have referred. That may be so, but it raises the question
as to whether any judge should be expected, in dealing with
an
extremely urgent application, to analyse and digest literally
hundreds of pages of annexures, in order to uncover facts which
might
be relevant to a consideration of the application. I shall return to
that question later because the Respondent’s failure
to
disclose the facts in relation to its claims against the Second
Applicant, goes much further.
[17] The Respondent’s counterclaim in the said arbitration
proceedings was delivered on 29 March 2011 and it included a claim
against the Second Applicant of US$ 467,650.00 in respect of a credit
which the Respondent says was due to it in respect of the
bunkers
which remained on board the “GRAND RODOSI” at the time
that it was withdrawn from the charterparty. Again,
if one analyses
the statement of account put up by the Respondent as part of its
counterclaim in the arbitration, it emerges that
the claim for
payment for these bunkers (“the bunkers’ claim) had
already been deducted by the Respondent in arriving
at its
calculation that what was owed by the Respondent to the Second
Applicant was the sum of approximately US$ 48,000.00, to
which I have
referred earlier.
[18] Annexure “TR4” (at page 53 of the papers) to the
Founding Affidavit in this application is a letter dated 7 June
2011
from the Respondent’s Singapore attorney which records that the
bunkers’ claim was withdrawn. Such withdrawal,
and the date
thereof, is not disputed by the Respondent. The consequence is that,
when the Respondent made the arrest application,
it already knew that
its undisputed indebtedness owed to the Second Applicant was not just
US$ 48,000.00 but, as a consequence
of the withdrawal of the bunkers’
claim, actually US$ 516,256.75. Not a word of this is recorded in the
Founding Affidavit,
nor does it appear from even a careful perusal of
the annexures thereto.
[19] At its best for the Respondent, the position painted by it in
the arrest papers is, that it owed some US$ 48,000.00 to the
Second
Applicant whereas it contended that it was owed some US$ 446,000.00
by the Second Applicant. The true position was that,
on its own
version, it owed over US$ 500,000.00 to the Second Applicant and the
only counter-claim which was not already taken
into account in that
calculation was the damages’ claim of US$ 400,000.
[20] Are the missing facts material to the arrest application in the
sense that they might be relevant to a consideration of the
application? In my view, they certainly are. It is one thing to paint
a picture, as the Respondent did, that it and the Second
Applicant
had disputed claims between them which would only be decided,
finally, by way of an arbitration award. In that context,
it might
well be appropriate to provide security for the Respondent’s
claims, bearing in mind that the Second Applicant’s
claims had
already been secured. However, it is quite another matter if the
Respondent had set out that, on its own calculations,
it owed to the
Second Applicant in excess of US$ 500,000.00 and that, against that,
it wished to advance a counterclaim of only
US$ 400,000.00.
[21] In paragraph 65 to 76 of the Respondent’s Founding
Affidavit in the arrest application, the Respondent made out its
case
for the conclusion that it had a “genuine and reasonable need”
for security. That test is one which has long been
accepted as the
proper benchmark. It does not necessarily require the Respondent to
prove that the Applicants will have insufficient
assets to meet any
judgment granted against them. However, the Respondent must put up
facts which establish a genuine and reasonable
apprehension that the
Applicants will not satisfy any award made in favour of the
Respondent.
Asiatic
Shipping Services Inc v Elgina Marine Co. Ltd
2009 SA 236
(SCA) at 248-249
[22] In the arrest application, the Respondent made the case that in
light of the downturn in the bulk cargo market and, taking
into
account certain financial information concerning the Applicants, the
Respondent concluded that :
“
There
is no reasonable expectation that the debt of the Applicant will be
settled in respect of any of the particular vessels concerned
and
there is a genuine and reasonable apprehension that the parent
companies of the companies owning the vessels will equally not
be in
a position to settle the debts to the Applicant”.
In other words, the case made by the Respondent, in the arrest
application, was that those liable to pay the Respondent would not
be
able to pay, not that they would seek to avoid payment.
[24 Had the Respondent disclosed the true position concerning the
claims and counterclaims between it and the Second Applicant,
I have
considerable doubt that the learned judge hearing the arrest
application would have accepted the Respondent’s motivation
for
security. The true position was that even if the pending arbitration
was decided in favour of the Respondent, its best position
would be
that it would become entitled to deduct its counterclaim from what it
already owed to the Second Applicant. Subject only
to the possibility
of an interim award in favour of the Second Applicant, with which I
shall deal later, there was simply no prospect
of the Respondent ever
being in the position in which it would be owed money by the Second
Applicant, which it might be unable
to collect.
[24] In argument, Mr Mullins, for the Respondent, conceded that the
failure to record that the bunkers’ claim had been abandoned
was a shortcoming in the arrest application papers but he urged me to
accept that the resulting non-disclosure was not one which
was
intentional. For present purposes, I am prepared to accept that such
was the case but, given the context of the arrest application
and the
material difference that the abandonment of the bunkers’ claim
made to the position of the Respondent, it seems to
me that the
omission was at least careless.
[25] Mr Mullins sought to persuade me that, in any event, a proper
case was made out for the need for security because, he submitted,
the starting point must be that because the Respondent had made out a
prima facie
case for the existence of a legitimate
counterclaim, there was always a need for that counterclaim to be
secured because the Respondent
could never be assured that it would
be able, under all circumstances, to either set-off or deduct its
counterclaim from what was
owed to the Second Applicant. In this
regard, he pointed to what had occurred in the arbitration
proceedings relating to the other
three vessels. In two of them,
interim awards had been made in favour of the Third and Fourth
Applicants, respectively, for the
amount of their respective claims,
less the amount of the counterclaims advanced by the Respondent
against them. However, in the
case of the Fifth Applicant, an interim
award had been made in favour of the Fifth Applicant for the full
amount of its claim,
without any deduction being made in respect of
the Respondent’s counterclaims. What had occurred in the case
of the Fifth
Applicant evidenced the risk which Mr Mullins submitted
the Respondent had always faced in connection with all of its
counterclaims.
The risk was that, in the absence of security awarded
to the Respondent for its counterclaim, the Respondent might be left
to face
an interim award in favour of one or other of the Applicants,
whilst the Respondent’s corresponding counterclaim was left
still undecided and unsecured.
[26] As events turned out, in the case of the Second Applicant, this
risk never came to pass. The arbitrators dealt with the Second
Applicant’s claim, and the Respondent’s counterclaim,
together. The Second Applicant was successful and the Respondent’s
counterclaim was dismissed. That is why the Respondent conceded that
it was no longer entitled to preserve the security awarded
to it in
relation to the Second Applicant. The arbitrator’s award was
handed down in July 2012 and, in September 2012, the
Second Applicant
requested the Respondent to agree to an appropriate reduction in the
terms of the letter of undertaking which
had been provided to the
Respondent, pursuant to the arrest. The Respondent did not react, and
to this day, the letter of undertaking
remains unamended. That is
relevant in relation to the subject of costs.
[27] I turn now to deal with the situation as it relates to the
“BRAZIL” and the “GRAND OCEAN”. In regard
thereto, the Third and Fourth Applicants contended that the
Respondent had failed to disclose material information in the arrest
application because the court was not apprised of the fact that the
amounts owed by the Respondent to the Third and Fourth Applicants,
respectively, were undisputed, and that the counterclaims advanced
against them by the Respondent were smaller than these undisputed
claims. Put simply, the situation in regard to the Third and Fourth
Applicants was no different to the situation which pertained
in
relation to the Second Applicant.
[28] The Respondent contended that the position in regard to the
Third and Fourth Applicants was in fact different because all
the
material facts had been disclosed in the document which was annexure
“HH” to the arrest papers. It appeared at
pages 465 to
505 thereof. That annexure was an affidavit (the “freezing
affidavit”) filed on behalf of the Third, Fourth
and Fifth
Applicants in proceedings under which those Applicants sought a
worldwide freezing injunction, in respect of the assets
of the
Respondent, to secure the claims of those Applicants against the
Respondent. The freezing affidavit, the Respondent submitted,
disclosed the nature and extent of the claims of those Applicants and
the Respondent contended that putting up this annexure fulfilled
the
Respondent’s duty to disclose all the material facts.
[29] Whether proper disclosure of the facts was made needs first to
be examined in the context of what the Respondent said in its
affidavit in the arrest proceedings, in connection with this
annexure. It was referred to near the end of that affidavit and only
in the context of pointing out that a worldwide freezing injunction
had been issued against the Respondent and that it had been
discharged because the Respondent had put up security for the claims
advanced by the Third to Fifth Applicants. Nothing was said
about the
detailed contents of the freezing affidavit and the only reasonable
conclusion to draw is that, for the purposes of the
arrest
application, the Respondent did not dispute the contents of the
freezing affidavit. It records a comprehensive history of
the claims
which arose in favour of the Third to Fifth Applicants, against the
Respondent, arising from the respective charterparties
and of the
efforts to secure payment of the relevant hire charges. It also
discloses the history of excuses and explanations given
by the
Respondent for its failure to pay as well as indulgences given by the
various Applicants in regard thereto. What is manifest
from the
annexure is that, as at 17 June 2011, when the freezing affidavit was
deposed, the Third to Fifth Applicants were in fact
owed substantial
amounts by the Respondent. These were the same claims (increased by
the passage of time after 17 June 2011) which
the Third to Fifth
Applicants advanced in the arbitration proceedings against the
Respondent, to which I shall return shortly.
It is also plain that
those claims were undisputed. The freezing affidavit specifically
alleged that those were undisputed and,
as I have said, the
Respondent did not, in the arrest application, challenge that
allegation.
[30] Did the Respondent do enough in the arrest application, to
discharge the obligation upon it to disclose all material facts,
by
making such passing reference to the freezing affidavit? Is it enough
that very relevant facts are recorded in an annexure buried
deep
within bulky papers placed before the court for urgent hearing? Mr
Wragge, for the Applicants, drew my attention to the matter
of
Minister of Land Affairs & Agriculture v D & F Wevell
Trust
2008 (2) SA 184
(SCA) at 200. That Court had this to say :-
“
It is
not proper for a party in motion proceedings to base an argument on
passages in documents which have been annexed to the papers
when the
conclusions sought to be drawn from such passages have not been
canvassed in the Affidavits. The reason is manifest –
the other
party may well be prejudiced because evidence may have been available
to it to refute the new case on the facts. The
position is worse
where the arguments are advanced for the first time on appeal. In
motion proceedings, the Affidavits constitute
both the pleadings and
the evidence:
Transnet
Limited v Rubenstein
2006
(1) SA 591
(SCA) and the issues and averments in support of the
parties’ cases should appear clearly therefrom. A party cannot
be expected
to trawl through lengthy annexures to the opponent’s
Affidavit and to speculate on the possible relevance of facts therein
contained. Trial by ambush cannot be permitted”
[31] Mr Wragge submitted that the principle enunciated by the Appeal
Court applies with equal force in the present situation. Mr
Mullins
disagreed. The distinction which Mr Mullins sought to draw was that
one is here dealing with whether a party failed to
discharge its
obligation to disclose material facts and not whether the Respondent,
in the arrest application, sought to make out
a case based upon
allegations made in an annexure to its application.
[32] In my view, the principle set by the Appeal Court is of equal
application in the present case. I cannot see why the principle
should apply to the case of a Respondent trying to uncover an
Applicant’s case, but not when the court, on urgent
application,
is trying to do the same. The application of the
principle then gives rise to two consequences. The first is that the
Respondent
cannot be said to have properly disclosed material facts
merely because those facts may be uncovered by a detailed examination
of very bulky annexures to the papers. It is the Respondent’s
duty to draw the court’s attention, in the affidavits,
to the
existence of those facts and where they may be found in the
annexures. Secondly, it is too much to expect of any judge to
have to
“trawl through” such bulky papers, looking for
contradictions in the facts upon which the Respondent sought
to rely
in justifying the need for security. It was up to the Respondent to
deal specifically, in the arrest affidavit, with the
facts which
emerge from the freezing affidavit and to explain them in relation to
its claim that security was genuinely and reasonably
required.
[33] I reject the Respondent’s contention that the facts
contained in the freezing affidavit were properly disclosed to the
court when the arrest application was heard.
[34] Are the facts recorded in the freezing affidavit material and
might they have affected the court’s attitude to the arrest
application? I believe that question must be answered in the
affirmative. As in the case of the “GRAND RODOSI”, the
picture which the Respondent painted, in the arrest application, was
that it had claims against the Third to Fifth Applicants,
which were
prima facie
good claims and which were not yet the subject of
arbitration proceedings but would become so. In the Founding
Affidavit, nothing
at all was said about the fact that there existed
claims asserted by those three Applicants, for greater amounts than
the Respondent
claims, which were undisputed. The correct position
was that, in all three cases, arbitration proceedings had in fact
commenced
in that arbitrators had been appointed and the Respondent
knew exactly what claims it was going to face from those three
Applicants,
all as set out in the freezing affidavit.
[35] The picture painted by the Respondent in the arrest application
was that although claims had been asserted by the Third to
Fifth
Applicants, they were disputed and had been secured, pursuant to the
worldwide freezing injunction. As in the case of the
“GRAND
RODOSI”, the true position was that unless an interim award was
made in favour of those Applicants, without
deducting therefrom the
amount of the Respondent’s counterclaims, there was actually no
risk that the Respondent would be
left to assert an unsecured claim
against an impecunious applicant. It would always be the case that
the Respondent would have
to pay those Applicants at least something.
In my view, the true position was thus substantially different from
the picture painted
in the arrest Founding Affidavit and would almost
certainly have affected the court’s attitude towards the relief
sought
in the arrest application.
[36] To sum up, the position, as I find it, is that in regard to all
four of the vessels against which the Respondent asserted
claims, the
Respondent failed to disclose material information to the court in
the arrest application. Mr Mullins reminded me that,
even if I came
to that conclusion, I still had a discretion not to set aside the
arrest order and in this regard he submitted that
because the failure
to disclose was inadvertent, any such discretion should be exercised
in favour of preserving the arrest. I
do not agree, even though, on
the facts before me, there can be no inescapable inference that the
Respondent’s omissions
were deliberate. I shall assume that
they were not.
[37] However, the extent of the Respondent’s oversight is
substantial. The true position was quite different to the picture
painted in the arrest affidavit. In my view, had the true position
been brought to the court’s attention, it is probable
that the
arrest would either not have been granted or, at least, would have
been granted upon very different terms. There is no
good reason to
exercise a discretion in favour of the Respondent.
[38] I accordingly find that, by reason of the Respondent’s
failure to disclose material information in the arrest application,
the arrest order falls to be set aside in its entirety. However, even
if the conclusion which I have reached is wrong, there is
another
basis upon which this application should, in any event, succeed.
[39] That alternative basis has most to do with the issues relating
to “GRAND VENETICO”, because that is the only vessel
in
respect of which the Respondent seeks to preserve the security
afforded pursuant to the original arrest. However, the principle
applies equally in respect of the other vessels. The Respondent’s
contention was that, even if the matter is viewed from
the
perspective that the only real risk to which the Respondent was
exposed, in respect of its claims, was that if an interim award
in
favour of any of the Applicants did not take account (by deduction
therefrom) of the Respondent’s corresponding counterclaim,
the
Respondent might be left unable to collect that counterclaim, if it
was ultimately successful in any of the arbitrations.
[40] The problem with that contention is that such a case was never
advanced in the arrest application. It was only advanced in
answer to
this application and, even then, only in relation to the Fifth
Applicant. In the case of the Second Applicant, the Respondent’s
counterclaim was dismissed and, in the case of the Third and Fourth
Applicants, the interim awards made were for amounts from which
the
Respondent’s counterclaims had been deducted.
[41] Viewing matters as they stood at the time that the arrest order
was granted and having regard to the undisputed claims then
owed to
the various Applicants, I do not accept that the Respondent
discharged the onus upon it to show that there was a real and
genuine
need for security. As I have said, the only case made in the arrest
papers was that the Respondent feared that, in current
economic
times, those parties who might be found liable to the Respondent
would be unable to pay. Nothing at all was said about
the limited
risk which was all that the Respondent actually faced. Nothing was
said about the prospect, never mind the likelihood,
that an interim
award might be made which might leave the Respondent exposed, in
respect of its counterclaims, without security
to cover them. Nothing
was said even about the likelihood of interim awards being sought by
the various Applicants and the basis
upon which such might be
granted. In short, the court dealing with the arrest application,
even if it knew the facts, was left
completely in the dark as to the
nature and scope of the risk which the Respondent faced in regard to
the potential non-payment
of its claims. I accordingly find that, in
any event, the Respondent failed to discharge the onus which vested
upon it to establish,
on a balance of probabilities, that there was a
genuine and reasonable need for security.
[42] On this subject, the Respondent urged me to have regard, not to
the situation as it stood at the time that the arrest order
was
granted, but to matters as they stand now, taking into account all
the facts now disclosed in the affidavits in this application.
In
particular, Mr Mullins contended that I must have regard to the fact
that the very risk inherent in the granting of an interim
award, in
the case of the Fifth Applicant, has in fact come to pass in that
such interim award was for the full amount of the Fifth
Applicant’s
claim, without any deduction in respect of the Respondent’s
counterclaim. In this regard, he referred me
to the matter of
Transol
Bunker BV v MV Andrico Unity & Others
1987 (3) SA 794
(C) at
799-800. That case was referred to, with approval, in the matter of
the
MV Thalassini
reported at
1989 (3) SA 820
(A).
[43] The principle enunciated in those cases is that, when a court
has before it an application to set aside an arrest order of
a ship,
it remains open to the original applicant for the arrest to justify
that arrest upon any ground, whether or not that ground
was relied
upon when the arrest order was initially obtained. However, the court
in the matter of the
Andrico Unity
was careful to point out
that this principle was stated in relation to grounds which actually
existed at the time that the original
arrest was granted and that
different considerations would apply if such grounds were something
which only came into existence
after the original arrest was granted.
[44] In my view, there is no room, in this case, to take the
principle any further than those earlier courts did. The Respondent
is thus entitled to justify the arrest on any basis which arose from
the facts which existed at the time that the application for
arrest
was first granted. Accordingly, the Respondent cannot rely upon the
interim award made in respect of the “GRAND VENETICO”
because that award came much later.
[45] The Respondent also emphasised that, if one has regard to the
basis upon which the interim award was made in favour of the
Fifth
Applicant, it is clear that the reason why the arbitrators made an
award which did not include a deduction in respect of
the
Respondent’s counterclaim was that they were made aware that
such counterclaim had already been secured in South Africa.
It was
submitted that it would be most unfair to the Respondent if the Fifth
Applicant was thus permitted to rely upon the existence
of such
security, to obtain a higher interim award in a London arbitration
and then, later, contend in South Africa for the setting
aside of the
security which had been relied upon in London. I think the answer to
this lies in the old adage that, having made
its bed, the Respondent
must now lie in it. When the aforesaid interim award was made, the
Respondent knew very well that this
application had been made and it
was open to the Respondent, in those proceedings, to make the
arbitrators aware that the Respondent
faced the risk of its security
in South Africa being undone if this application was granted. In any
event, it was the Respondent
that chose the basis upon which it
sought to obtain security in South Africa and it has no one else to
blame if its case for that
security turns out to be a bad one.
[46] In any event, the situation in which the Respondent found itself
in the arbitration against the Fifth Applicant serves only
to
demonstrate the weakness of the Respondent’s case for security.
What seems probable from the terms of the interim award
made by the
arbitrators is that but for the existence of the security obtained by
the Respondent in South Africa, the arbitrators
would have applied
what appear to be the usual principles governing such interim awards
and, as occurred in the arbitrations involving
the Third and Fourth
Applicants, an amount equal to the Respondent’s counterclaims
against the Fifth Applicant would have
been deducted from that
interim award. In the circumstances, I am not satisfied that the
basis of that interim award constitutes
a sound foundation upon which
to preserve the Respondent’s security in relation to the Fifth
Applicant.
[47] The case in relation to the Fifth Applicant had another feature
which also militates against preserving such security. In
this
application, the Fifth Applicant contended that, having regard to
what the Respondent said in the arrest affidavit, it did
not make out
even a
prima facie
case for its claim against the Fifth
Applicant. What was said about that claim, in the arrest affidavit,
may be summarised as follows
:-
The “GRAND VENETICO” arrived at Dalrymple Bay Coal
Terminal on the morning of 2 December 2009 and gave notice of
readiness.
On various occasions between 5 January and 12 January, the Master of
the vessel cancelled arrangements for the berthing of the
vessel
because its winches were inoperable or did not have a power supply.
Repairs were effected and the vessel was able to berth on 14
January.
[48] These few facts were alleged by the Respondent to give rise to a
claim of US$ 657,313.5, being the “offhire amount”
under
the charterparty for the period from 2 December 2009 to 12 January
2012. That was the period during which the Respondent
alleged that
the vessel was unfit to perform its functions.
[49] No explanation is given as to the basis upon which it was
alleged that defects in the vessel’s winches rendered it
incapable of performing the functions which were apparently required,
namely, berthing at the coal terminal. No other functions,
which
might have been affected, are alleged in the arrest affidavit. No
allegations purport to explain why the Respondent’s
claim
extends to the month-long period between 2 December 2009 and 5
January 2010, during which the vessel apparently had no arrangements
to berth. It is not suggested that its failure to berth then arose
from any defect in the vessel and one is left to speculate about
that
position. Assuming that the Master of the vessel gave notice of
readiness on 2 December 2009, as alleged in the arrest affidavit,
then,
prima facie
, the vessel must have been fully operational
at that stage. One is left to speculate as to when the alleged defect
in the winches
occurred and under what circumstances repairs were
effected at some stage in January 2010 when, perhaps, such repairs
could have
been effected at a time before the vessel was allocated a
berth at the coal terminal. The information alleged by the Respondent
is, in my view, just too sparse to conclude, even
prima facie
,
that a claim under the charterparty arose for the period alleged by
the Respondent. For that reason as well, the arrest order,
insofar as
it relates to the Fifth Applicant, falls to be set aside.
[50] It follows that the conclusion which I have reached is that, for
more than one reason, the original arrest order granted in
favour of
the Respondent on 5 July 2011 must be set aside. It remains to decide
the question of costs.
[51] The Applicants urged me to punish the Respondent with a punitive
order for costs because of the way in which it suppressed
material
facts in the arrest application. It was alleged that the court should
show its disapproval for the Respondent’s
conduct by ordering
it to pay costs on the scale as between attorney and client.
[52] It is trite to say that orders for costs are a matter for the
court’s discretion. In the circumstances which I have
outlined
in this judgment, I can see no reason why the costs of this
application should not follow the result, namely, that they
should be
paid by the Respondent. What is more, I can see no reason why the
Respondent should not be ordered to pay its own costs
in relation to
the arrest application.
[53] I have already found that there were material facts which the
Respondent either failed to disclose, or failed properly to
disclose,
in the arrest application but I am not convinced that such failure
was deliberate. It might have been an oversight in
the case of the
facts relevant to the bunker’s claim against the Second
Applicant and what I might term a “judgment
call” in
relation to the other matters. The fact that that call was the wrong
one does not satisfy me that a punitive costs
order is appropriate.
[54] In the result, I grant an order in terms of paragraphs 1, 2 and
4 of the Draft Order sought by the Applicants which appears
at pages
4 to 6 of the application papers, save that the words “on the
scale as between attorney and client” where
they appear in
paragraph 4 are deleted.
_____________________
J.C. KING AJ
DATE OF HEARING 2 NOVEMBER 2012
DATE OF JUDGMENT 13 NOVEMBER 2012
APPLICANTS’ COUNSEL MR S.R. MULLINS SC
APPLICANTS’ ATTORNEYS SHEPSTONE & WYLIE
RESPONDENT’S COUNSEL MR M. WRAGGE SC
RESPONDENT’S ATTORNEYS WEBBER WENTZEL
(Represented locally by Cox Yeats)