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[2011] ZAKZDHC 8
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Mediterranean Shipping Company SA v Cape Town Iron & Steel Works (Pty) Ltd (A55/2007) [2011] ZAKZDHC 8; 2011 (2) SA 547 (KZD) (22 February 2011)
REPORTABLE
IN THE KWAZULU-NATAL HIGH COURT
DURBAN
REPUBLIC OF SOUTH AFRICA
(EXERCISING ITS ADMIRALTY JURISDICTION)
CASE NO.A55/2007
NAME OF SHIP: mv “MSC GINA”
In the matter between
MEDITERRANEAN SHIPPING COMPANY SA
….........................
Plaintiff
and
CAPE TOWN IRON & STEEL WORKS (PTY) LTD
…...............
Defendant
In the matter of an application in terms of section 5(3) of the
Admiralty Jurisdiction Regulation Act 105 of 1983
___________________________________________________________
J U D G M E N T
Del. 22 February 2011
WALLIS J.
[1] Mediterranean Shipping Company SA (‘MSC’)
carries on business as an ocean carrier from its base in Geneva,
Switzerland.
It has sued to recover from the defendant freight
charges in respect of the carriage of containers from Cape Town to
Tema in Ghana.
The action is being defended on the basis that
Angeline Shipping Services CC, the freight forwarder that booked the
cargo, is the
party liable to pay the freight.
[2] In December 2010, when preparations for the trial
were underway, MSC’s attention was drawn to a letter published
in Business
Day on 23 November 2010. In general the letter
concerned the government’s industrial policy. The impetus for
writing
the letter, however, was said by its author to be that:
‘
Cisco, the Cape Town Iron and Steel
Corporation switches off its electric arc furnaces for the last time
on December 3 – after
fifty years as a producer of reinforcing
bar and billet. It served the Western Cape and many Southern African
Development Community
countries. Several hundred decent and
productive jobs will be lost permanently. A few thousand jobs will be
indirectly affected.’
The letter goes on to refer to Cisco closing and being
‘the first to go under’. MSC believed that this letter
referred
to the defendant and understandably became concerned that
pursuing an action against an entity that was on the point of closing
down would be a waste of time and money. Accordingly on 13 December
2010 its attorney wrote a letter to the defendant’s attorney
saying:
‘
We have been advised that your client is
closing down shortly. Please advise what the situation is and if your
client would be in
a position to satisfy a judgment and/or an adverse
costs order.’
[3] The issue was again raised at the pre-trial
conference on 22 December 2010. The defendant’s
attorney indicated
that he had no instructions but would revert by
7 January 2011. On that date he replied saying:
‘…
my client fails to see the
relevance of the assertions made and the questions posed therein, to
the merits of the case and accordingly
declines to address these
points. They have no bearing on the trial whatsoever, which is now
less than a month away, and both parties
appear to be ready to
proceed on 2 February.’
Thereafter followed ten paragraphs in which the
defendant’s attorney addressed on an abstract basis the
question of security
for costs.
[4] It comes as no surprise that the response by MSC was
an urgent application for a security arrest in terms of s 5(3) of the
Admiralty
Jurisdiction Regulation Act 105 of 1983, as amended, (the
AJRA). In response to that application a notice was filed stating
that:
‘
(1) The applicant has made out no case for
urgency.
(2) The applicant has made out no case that the above Honourable
Court has jurisdiction to determine the Application.
(3) The applicant has failed to identify the property to be arrested
and to satisfy the requirements for a security arrest in relation
thereto.
(4) The applicant has not made out a case that it has a “genuine
and reasonable need” for security.’
[5] The need to deal with the application urgently fell
away because the trial was adjourned. Arrangements were then made for
it
to be argued in the ordinary Motion Court. The argument proceeded
on the basis of the second, third and fourth points in the notice.
[6] It is by now well established
that a person seeking the arrest of property in terms of s 5(3) of
the AJRA must show a genuine
and reasonable need for security.
1
This means that the person seeking
the arrest must show that it has a genuine and reasonable
apprehension that the party whose property
it seeks to arrest will
not satisfy a judgment or award made against it.
2
The party seeking the arrest must
prove this on a balance of probabilities.
3
[7] In addressing this point Mr van
Eeden, who appeared for the respondent, placed much reliance on
certain passages from the judgments
in
P
& O Nedlloyd Limited v United African Lines (Pty) Limited
4
and
Ever
Growth: Green Africa Shipping (Pty) Limited v Hifu Electronic Trading
CC
5
.
I have not, however, found these of
much assistance as the comments were clearly made in the light of the
facts before the court
in those two cases and those facts differ
markedly from the facts before me. It is the facts of this case that
must be addressed.
What they show is that there was a statement by a
person writing to a well-respected business newspaper that the
operations of
an entity called Cisco were to be closed. Cisco was
identified as the Cape Town Iron and Steel Corporation and it was
said to have
been in business for some fifty years but was now ‘going
under’, with many staff losing their jobs and further indirect
ripple effects on employment elsewhere in the economy. The
information was clearly hearsay but hearsay evidence is admissible in
admiralty proceedings. In the founding affidavit it was expressly
stated that the business that was closing was the defendant’s
business. In other words, the slight difference between the name of
the firm mentioned in the letter in the newspaper and the name
of the
defendant is, according to the deponent to that affidavit, to be
disregarded because the defendant is the entity mentioned
in the
letter. The basis for the claim for security is that, as the
defendant appears to be closing down, the plaintiff reasonably
fears
that it may be left with a hollow judgment and no security for its
claim.
[8] Mr van Eeden attacked this as
mere speculation not based on fact. However MSC did make the factual
allegations I have identified
and the defendant on two occasions
refused to deal with them. It first refused to deal with them in the
e-mail of 7 January 2011.
It again refused to deal with them when it
decided not to deliver affidavits in response to the application.
That was an extraordinary
approach to adopt if the facts on which MSC
was relying were incorrect. It is well established that, where the
matter in question
is peculiarly within the knowledge of the opposite
party, less evidence will suffice to establish a
prima
facie
case than
would under other circumstances be required.
6
When the party having knowledge of
the facts and in a position to rebut them, if they are capable of
rebuttal, chooses not to do
so, that in itself is a factor that
reinforces the
prima
facie
case already
before the court.
7
[9] In my view the present is a case where those
principles apply. I find it quite extraordinary, if the true
situation is that
the defendant is still in business and possessed of
significant assets that would enable it to pay any judgment granted
against
it, that it did not say that. After all the amount of the
plaintiff’s claim is not large. The security sought is for
approximately
R750 000. That is not a vast sum in relation to a
business that has been operating an iron and steel works for fifty
years with
established furnaces and an export business. If the
business is continuing in operation why not say so? Why not indicate
that its
trading operations are such that it will be able to pay any
judgment? I am not saying that the evidence in this case was strong.
It might have been sufficient to rebut it to point to relatively
limited assets or trading operations or to the existence of a
controlling shareholder, such as a major public company of which it
is a subsidiary, as grounds for rebutting the plaintiff’s
fears. However, the defendant chose not to do this.
[10 It is instructive to compare the
stance adopted by the defendant in this case with the stance of the
appellant in the
Orient
Stride.
That too
involved a security arrest. Elgina Marine had claims under a charter
party against Asiatic Shipping that it was pursuing
in arbitration
proceedings in the United Kingdom. The defence to the claims was that
Asiatic Shipping had entered into the relevant
charter party as
agents for another entity described as PIL. Asiatic Shipping
accordingly alleged that PIL was a party to the charter
party and the
arbitration agreement. PIL initially sought to join in the
arbitration for the purposes of a counter-claim but refused
to be
joined as a party for the purposes of Elgina Marine’s claim
under the charter party. Thereafter they distanced themselves
from
the proceedings, rejecting a notice of appointment of an arbitrator
on the grounds that they were not party to an arbitration
agreement
with Elgina Marine. Against that background Elgina Marine sought an
attachment of bunkers and freight by way of security
in terms of s
5(3) of the AJRA. Asiatic Shipping’s only response to the
application was to say that it had ‘more than
sufficient assets
to satisfy any judgment’ although it gave no details of those
assets. Scott JA said
8
:
‘
Having regard to the nature of the
application and PIL’s change of stance, one would have expected
that if Asiatic had assets,
it would in reply at least have given
some indication of their nature and extent. Had it done so, its
response may well have put
paid to the application for security. But
it declined to do so. Instead, it contended that its financial
standing was “now
a moot point because [Asiatic] has in fact
secured [Elgina’s] claim”. This evasive response was in
itself sufficient
to cause concern to a reasonable person in the
position of Elgina, particularly when regard is had to the fact that
it was PIL
and not Asiatic that had provided the security.
9
’
[11] In my view the position in the
present case is similar to that which prevailed in the case of the
Orient Stride
.
Accordingly I hold that MSC discharged the onus of showing that it
had a genuine and reasonable need for security.
[12] The other two points taken by the defendant are
linked. The contention that this court lacks jurisdiction to
determine the
application is based on the proposition that a court
can only order an arrest in terms of s 5(3) of the AJRA where
the property
to be arrested is within the territorial jurisdiction of
the court or, possibly, is property that is likely to come into the
jurisdiction
after the making of the order. The defendant contends
that the plaintiff has not established jurisdiction on this footing
in part
at least because it has not identified the property that it
seeks to have arrested. Identification of the property to be arrested
is, so the defendant contends, a fundamental requirement for an
application under s 5(3) of the AJRA.
[13] The order prayed by the plaintiff reads:
‘
The Sheriff for the district of Durban
central or other such Sheriff having jurisdiction be and is hereby
authorised and directed
to arrest the property of Cape Town Iron &
Steel Works (Pty) Limited, the said arrest to be in terms of s 5(3)
of the Admiralty
Jurisdiction Regulation Act … for the
purposes of providing security for the applicant’s claim of
R317 481 together
with a further amount of R200 000 for interest and
R150 000 for costs arising out of a contract of carriage, such claims
being
pursued by the applicant against the respondent in the
KwaZulu-Natal High Court (exercising its Admiralty Jurisdiction)
under Case
No.A55/1007.’
The contentions on behalf of MSC, in response to the
points raised by the defendant, are that the court has jurisdiction
by virtue
of the fact that the action is proceeding before it and
that it is permissible for a security arrest of property to be
couched
in the terms set out in the order.
[14] I am by no means certain whether
the defendant’s point about the jurisdiction of this court is
correct. The action is
one
in
personam
in which
the court has jurisdiction because the defendant, as a company
registered and incorporated in South Africa, has its registered
office in the Republic.
10
The court is accordingly entitled in
these proceedings to exercise its admiralty jurisdiction in relation
to the defendant. Its
powers in that regard are set out in s 5
of the AJRA each of the sub-sections of which (other than sub-section
(4)) commences
with the words:
‘
A court may in the exercise of its
admiralty jurisdiction …’
In this case the court is asked to
exercise the admiralty jurisdiction that it has over the respondent
to order the arrest of the
respondent’s property by way of
security in terms of s 5(3) of AJRA. Whilst the claim for
security is ‘a separate
and ancillary issue between the
parties, collateral to and not directly affecting the main dispute
between the litigants’,
11
the court is being asked to order
security as an ancillary to the action at present pending before it
and in the exercise of a jurisdiction
that already exists. It seems
slightly odd to say that the court nonetheless lacks jurisdiction to
deal with this issue if there
is property susceptible to arrest
within the Republic but outside its area of jurisdiction. It is after
all empowered to order
that security be provided for these
proceedings in terms of s 5(2)(b) of the Act.
[15] Mr van Eeden drew my attention
to the provisions of s 4(4)(c) of the AJRA in regard to the
circumstances in which a court may
make an order for the arrest of
property not within its area of
jurisdiction
.
He stressed in particular the provisions of s 4(3)(c)(i) the
relevant portions of which read:
‘
A court may make an order for the arrest or
attachment, to found jurisdiction, of property not within the area of
jurisdiction of
the court if
(aa) (aaa) that property is in the Republic or is likely to come into
the Republic after the making of the order; and
(bbb) no court in the Republic otherwise has jurisdiction in
connection with the claim or can otherwise acquire such jurisdiction
by an arrest or attachment to found jurisdiction; or
(bb) other property within the area of jurisdiction of the court has
been or is about to be arrested or attached to found jurisdiction
in
connection with the same claim.’
There are, however, a number of
difficult questions of interpretation in regard to this section. For
example, it is unclear whether
it relates at all to a security arrest
under s 5(3) of the Act, or whether the conjunction of the
reference to an arrest and
an attachment to found jurisdiction means
that the section relates only to the commencement of proceedings,
either
in rem
or
in
personam
under s 3
of the AJRA. In view of those complexities and because I think the
third point raised by the defendant must succeed,
I prefer to express
no view on the jurisdictional question but will assume that this
court has jurisdiction to make the order sought
by the plaintiff.
[16] Mr McIntosh, who appeared for
the plaintiff, submitted that it is not necessary to identify
property or prove ownership in
order to obtain a security arrest
under s 5(3) of the AJRA. He submitted that in terms of s 26(1)
of the Supreme Court
Act
12
the civil process of a provincial or
local division runs throughout the Republic and may be served or
executed within the jurisdiction
of any division. Accordingly, just
as a writ of execution can be addressed to any sheriff of the High
Court for the purpose of
attaching property and executing on a
judgment, so he submitted, an order granted in the terms sought by
the plaintiff can be executed
against property owned by the defendant
anywhere in the Republic.
[17] In my view this argument is fallacious. The court
is authorised in terms of s 5(3)(a) of the AJRA to:
‘…
order the arrest of any property
for the purpose of providing security for a claim … if the
person seeking the arrest has
a claim enforceable by an action
in
personam
against
the owner of the property concerned or an action
in
rem
against such property
…’
This postulates, in the case of a
claim enforceable by an action
in
personam
,
that the party seeking the arrest has
a claim against an identifiable person and that such person is the
owner of the property to
be arrested. In the case of a claim
enforceable by an action
in
rem
it postulates
that the property to be arrested is susceptible to having an action
in rem
instituted
against it in respect of that claim. In both instances the party
seeking the arrest must identify the claim and establish
it on a
prima facie
basis. That was decided in the
Thalassini Avgi
case.
13
In the
Bocimar
case,
supra,
Corbett CJ said that in an attachment
to found or confirm jurisdiction the onus is upon the applicant to
prove on a balance of probabilities
that the property to be attached
belongs to the respondent and that the same rule applies to
applications to arrest property under
s 5(3) of the AJRA.
14
If the property to be arrested is not
identified in the application and the order this requirement cannot
be satisfied. An order
in the form sought by MSC amounts to the court
saying that if the sheriff can find property owned by the defendant
it is to be
arrested and held as security for the applicant’s
claim. That is not an order for the arrest of property. It is a
licence
to the sheriff to engage in a fishing expedition. It is not
an order contemplated in s 5(3) of the AJRA.
[18] The problem with this approach
is perhaps best illustrated by the case where the party seeking the
arrest says that the claim
is one
in
rem
against the
property to be arrested. In order to make that case it is obviously
essential to identify the property that one wishes
to arrest. In the
absence of identification it cannot plausibly be contended that there
is an action
in rem
against any
property. Nor can it be permissible to authorise the Sheriff to
arrest any property that can be found against which
an action
in
rem
will lie at the
instance of the arresting party. That is clearly beyond the Sheriff’s
remit. In any event it inverts the sequence
of events contemplated in
s 5(3). That sequence involves the court first making an order
and thereafter the Sheriff executing
upon it by arresting property.
The Sheriff cannot do that unless the property is identified in the
order. The position in the case
where the arresting party contends
that it has a claim enforceable by an action
in
personam
against a
named respondent cannot be different from the situation where the
arresting party says that the claim is enforceable by
an action
in
rem
.
[19] In support of his argument and
perhaps with a view to hoisting me with my own petard Mr McIntosh
cited a passage from my book
The
Associated Ship and South African Admiralty Jurisdiction
in which I wrote:
‘
The security arrest under s 5(3) is a
procedure whereby property can be arrested and detained and
ultimately, if no alternative
security is provided, sold to satisfy a
claim. In that sense it is more closely akin to the process of
execution than it is to
any form of action.’
15
Whilst no doubt I will in the future
be obliged to modify or recant some of the views I have expressed as
an author, on this occasion
the relevant passage is taken out of
context because it ignores the passage that precedes it. My concern
was to deal with the statement
in
The
mv Zaltini Piasatzi : Frozen Food International Limited v Kudu
Holdings (Pty) Limited and Others
16
that an arrest under s 5(3) of the
AJRA is a proceeding
in
rem
directed at
bringing the ship before the court and the underlying notion that it
is therefore to be equated with an action
in
rem
. That view is,
with respect, incorrect and I accordingly wrote:
‘
It will I think be apparent from the fact
that the security arrest is a special institution under the South
African Act that it
is inappropriate to speak of a security arrest,
whether of the ship concerned or of an associated ship, as a
proceeding
in rem
or as a proceeding
in personam,
at
least insofar as those expressions convey meaning in regard to
different forms of action in admiralty proceedings in South Africa.
It is correctly described as a “stand alone” procedure
unconnected, unlike similar provisions elsewhere with any action
before the South African court.’
It is in that context that I suggested that a security
arrest is more closely akin to a procedure by way of execution than
to an
action
in rem
because
it may lead to the arrested property being sold. I added that it is
in rem
only in the
sense that it is directed at a particular asset, whilst suggesting
that to describe it in that way leads to confusion.
[20] Whatever similarities there may be between a
security arrest and a process by way of execution they do not
dispense with the
need for an applicant for such an arrest to
identify the property that it seeks to have arrested. It is only when
it does so that
a court can be satisfied both that such property
exists and is owned by the person against whom the claim
in
personam
lies or is vulnerable to an action
in rem
. In addition
not to identify the property that is to be arrested deprives the
other party, at the stage of arrest, of the undoubted
right to resist
the arrest on the grounds that it is not the owner of the property to
be arrested.
[21] The application in terms of s 5(3) must
therefore fail and be dismissed with costs. Counsel accepted in the
course of
argument that the costs of the appearance on 11 February
2011 must follow the result.
[21] The order that I make is that the application is
dismissed with costs, such costs to include the reserved costs of the
hearing
on 11 February 2011.
M J D WALLIS
DATES OF HEARING 15 FEBRUARY 2011
DATE OF JUDGMENT 22 FEBRUARY 2011
PLAINTIFF’S COUNSEL MR K C McINTOSH
PLAINTIFF’S ATTORNEYS SHEPSTONE & WYLIE
DEFENDANT’S COUNSEL MR P A VAN EEDEN
DEFENDANT’S ATTORNEYS BOWMAN GILFILLAN INC
c/o Van Velden Pike & Partners
1
Cargo
Laden and Lately Laden on Board the MV Thalassini Avgi v MV Dimitris
1989 (3) SA 820
(A) at 833 A.
2
MV
Orient Stride: Asiatic Shipping Services Inc v Elgina Marine Co
Limited
[2008] ZASCA 111
;
2009 (1) SA 246
(SCA)
para [7].
3
Bocimar
NV v Kotor Overseas Shipping Limited
[1994] ZASCA 5
;
1994
(2) SA 563
(A) at 583 E-F.
4
Shipping
Cases of South Africa (SCOSA) p258 (C).
5
SCOSA
251 (D).
6
Union
Government (Minister of Railways) v Sykes
1913
AD 156
at 173-174;
Marine & Trade
Insurance Co Limited v Van der Schyff
1972
(1) SA 26
(A) at 39A-40D.
7
Hasselbacher
Papier Import and Export (Body Corporate) and Another v MV Stavroula
1987 (1) SA 75
(C).
8
In
para [16]
9
That
is the security for the release of the arrested bunkers.
10
S
3(2)(e) of the AJRA.
11
Per
Van den Heever J in Ecker v Dean
1937
SWA 3 at 4;
Shepstone & Wylie and
Others v Geyser NO
1998 (3) SA 1036
(SCA) at 1041 C-F.
12
Act
59 of 1959.
13
At
832 I-J.
14
At
581 D-F.
15
Malcolm
Wallis,
The Associated Ship and South
African Admiralty Jurisdiction
, 309.
16
1997
(2) SA 569
(C) 574 G-H.