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
>>
2011
>>
[2011] ZAKZDHC 52
|
|
Plaus Shipping Ltd v Due Srl (A112/2011) [2011] ZAKZDHC 52 (25 November 2011)
In
the KwaZulu-Natal High Court, Durban
Republic
of South Africa
exercising
its Admiralty Jurisdiction
Case
No : A112/2011
Name
of Ship : MV ‘Behice’
In
the matter between :
Plaus
Shipping Limited
…...................................................................................
Applicant
and
Augusta
Due Srl
….........................................................................................
Respondent
Judgment
Lopes J
[1] On the 20
th
October
2011, and pursuant to the provisions of s 5(3)(a) of the Admiralty
Jurisdiction Regulation Act, 1983 (‘the Act’),
I granted
an order at the instance of the respondent (‘Augusta’)for
the arrest of the MV ‘Behice’.
[2] Augusta’s cause of action,
and the basis on which I granted that order of arrest, may be
summarised as follows :-
Augusta concluded an agreement with
Furtrans Denizchilik Sanayi Ve Ticaret AS (‘Furtrans’)
for the construction by
Furtrans of a chemical/oil products tanker
which was eventually named the MT ‘Lido’; and
the agreement and all disputes
arising out of it were to be subject to English law and London
arbitration proceedings;
disputes arose between the parties,
and Augusta cancelled the shipbuilding contract;
the matter was then the subject of
arbitration proceedings in London. The arbitrators found in favour
of Augusta and ordered that
Furtrans repay to Augusta the deposit of
€ 2 995 000, an amount for which Augusta held security;
the arbitrators reserved the question
of liability for the costs of the arbitration in the following terms
:-
‘
We HEREBY
RESERVE our jurisdiction to determine all questions of liability for
the parties’ recoverable costs and for the
assessment of such
costs if not agreed.’ Augusta confidently expects that award
of costs to follow the result, and that
it will be awarded costs in
due course;
Furtrans then appealed the award in
terms of s 68 of the English Arbitration Act, 1996 challenging the
award on the grounds of
serious irregularity affecting the tribunal,
the proceedings or the award;
Furtrans also sought to appeal the
award in terms of s 69 of the Arbitration Act, 1996 appealing on a
question of law arising
out of an award made in the proceedings;
the appeal in terms of s 69 of the
Arbitration Act was dismissed and Furtrans was directed to pay the
costs of that hearing to
be assessed on what is described as ‘the
standard basis’;
the challenge to the arbitration
award in terms of s 68 is still pending before the High Court.
However, once again, Augusta expresses
confidence that costs will be
awarded in its favour;
in the application before me on the
20
th
October 2011, Augusta sought security for its claims
for legal costs on the three bases set out above in the sum of £2
374 426,65. Those costs were calculated on the basis that it was
anticipated the Augusta’s legal costs would be :
no less than £2 200 000 for
the arbitration costs; and
no less than £152 286,65 in
respect of the two appeal proceedings (the apparent discrepancy of
£22 140.00 seems
of no consequence, forming as it does, less
than one percent of the amount claimed);
it was alleged that the MV ‘Behice’
was an associated ship of the MV ‘Lido’ in terms of the
Act, and accordingly
subject to arrest in terms of s 5(3)(a) to
enable security to be provided for Augusta’s claims for costs
as set out above.
[3] On the 8
th
November
2011, Plaus Shipping Limited (‘Plaus’), the registered
owner of the MV ‘Behice’, brought an urgent
application
for the setting aside of the order which I granted on the 20
th
October 2011. It was agreed between the parties that I would hear
argument as to whether, in terms of r 6(12)(c) of the Uniform
Rules
of this Court, I should reconsider the order which I made on the 20
th
October 2011. In the event that I found in favour of Plaus on the
reconsideration application, that would be the end of the matter
and
the arrest would be set aside. In the event that I did not do so,
further affidavits would be filed, and the matter would become
the
subject of a further application to set aside the arrest, dealing
with the merits, including the question of association, in
due
course.
[4] Mr
Mullins
SC who appeared
for Plaus submitted that the arrest order should not have been
granted because :-
an order for an arrest to provide
security cannot be made in advance of a claim becoming enforceable
in this court. The claim
must both have arisen and be enforceable.
As at the date of the application there was no contractual or
delictual liability for
the arbitration costs which have yet to be
awarded by the tribunal;
in respect of the s 69 costs which
had been awarded by the High Court, they had not yet been
quantified;
an action in rem, and accordingly an
arrest in terms of s 5(3)(a) of the Act can only be brought by the
arrest of an associated
ship where the claim is one which ‘arose’
at the time that the debtor liable in personam (maritime liens
aside) was
the owner of the ship concerned. Furtrans were no longer
the owner of the ship concerned when the s 68 costs award was made.
If the other costs order are awarded in favour of Augusta the same
logic would apply.
[5] S 5(3)(a) of the Act provides :-
‘
A court may
in the exercise of its admiralty jurisdiction order the arrest of any
property for the purpose of providing security
for a claim which is
or may be the subject of an arbitration or any proceedings
contemplated, pending or proceeding, either in
the Republic or
elsewhere, and whether or not it is subject to the law of the
Republic, 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 or which would be so enforceable but for any
such arbitration or proceedings.’
[6] In relation to the costs of the
arbitration proceedings, Mr
Mullins
submitted that any claim
for costs only comes into existence when the award for costs is made.
It is not the same as a claim on
the merits, which is confirmed by an
arbitration tribunal when it rules that an existing claim has been
established or proved.
It is created by the award. In those
circumstances neither the arbitration costs nor the costs which
Augusta seeks in the s 68
High Court proceedings have ‘arisen’
and do not exist as yet. As the claims have not yet ‘ arisen’
there
can be no question of the enforceability of any such claims.
[7] Mr
Mullins
submitted that
as Furtrans ceased to be the owner of the MT ‘Lido’ on
the 8
th
August 2011, any claim for costs pursuant to the
order of the 13
th
October 2011 (when the High Court
refused the application pursuant to s 69 of the Arbitration Act,
1996) could not be enforced
against Furtrans and was accordingly not
capable of being enforced against an associated ship.
[8] Finally, Mr
Mullins
submitted that the only other provision in the Act which could
provide relief for Augusta would be in terms of sub-s 5(2)(b) which
provides that :-
‘
(2) A court
may in the exercise of its admiralty jurisdiction –
...
order any person to give security for
costs or for any claim;
...’
He submitted that this is an ancillary
power which, in the absence of a valid arrest, does not exist. A
court cannot authorise an
arrest in terms of sub-s 5(3)(a) of the Act
in circumstances where a claim is not enforceable.
[9] Mr
Shaw
QC for Augusta
submitted that a basic principle of the arbitration agreement was
that the parties would pay any award for costs
and interest and that
there was a payment due for the award which was made in favour of
Augusta as well as a potential claim for
costs. This was catered for
in the provisions of sub-s 5(3)(a) of the Act where reference is made
to ‘a claim which is or
may be the subject of an arbitration or
any proceedings ...’. He submitted that this was consistent
with the English admiralty
procedure where one brings an action in
rem and then the defendant asks for relief of the property arrested
in exchange for security
for arbitration proceedings. When one
identifies the proceedings in rem, that is done with regard to the
claim together with ancillary
claims such as interest and costs. In
addition it has always been the practice of this court to grant
security for interest and
costs. Once a claim succeeded, interest and
costs would normally follow. In this matter security had been put up
for the main claim
and although the costs are reserved, Augusta has
every confidence that the costs order will follow the result and they
will be
successful in obtaining them from the arbitration tribunal
and the High Court. Mr
Shaw
pointed to the strong prima facie
case in respect of the costs of the main arbitration. The appeal
costs in respect of the s 68
proceedings follow from the main
arbitration agreement.
[10] Mr
Shaw
submitted that
once there is an agreement to pay an arbitration award, the
underlying claim for costs exists and is not to be found
in the
making of the award any more than it would be for an award of
damages. It is the original source of the claim which is important,
in this case the arbitration proceedings themselves. Once the
arbitration proceedings begin the right to costs is potential and
is
suspended until the order is made which becomes executable upon
taxation or agreement.
[11] With regard to the provisions of
sub-s 5(2)(b) of the Act he submitted that these provisions were not
applicable in the present
case because they do not refer to an order
for costs not yet incurred and pending elsewhere.
[12] The first aspect which falls to
be considered is whether a judgment for costs can, on its own, form
the subject of an action,
independent and separately from the
underlying claim. If a claim for costs cannot stand on its own, an
action on that basis is
not competent, and no security for such a
claim can be sought .
[13] In
Erasmus v Daley & Co
1912 TPD 465
, the appellant appealed against a decision of a
magistrate who ruled that it should supply certain further
particulars and pay
the costs of the hearing. The costs had followed
the result. The appeal court held that if the order for further
particulars was
correct, then the order as to costs was correct. The
case was, however, viewed by the appeal court as not being an appeal
on the
issue of costs, because there was no appeal on the substance
of the case – i.e. the order for the provision of further
particulars.
The appeal accordingly failed.
[14] In
Dhlamini v Jooste
1925
OPD 223
, the plaintiff had objected in the magistrates’ court
to a plea on the grounds that it did not comply with the relevant
requirements.
The objection was dismissed with no reference being
made to the question of costs. The plaintiff appealed, but on appeal
a preliminary
objection was taken by the respondent that the order
was not an appealable order. It was then submitted by counsel in the
appeal
that he was entitled to appeal with regard to the costs. The
court held that because the magistrate had said nothing about costs,
costs would be costs in the action. The court referred to
Warner v
Reid and Others
(1907, T.S. 306)
for authority that an order of
costs in the cause was a final order and therefore appealable.
[15] De Villiers JP in
Dhlamini
held that an order for costs was a final order and a court, in order
to decide an appeal on costs, may have to consider whether
the
substantive order was correctly made. That does not mean it can set
aside the substantive order but could merely enquire, for
the
purposes of costs, into the legality of the order itself. The court
disagreed with the magistrate’s reasoning and the
appeal
against costs was allowed, although the original decision by the
magistrate was not overturned because it was not appealable.
In
conclusion de Villiers JP stated at page 237:-
‘
I may add
that, if the appeal had,
ab
initio
,
been merely as to the costs, I do not know whether I should have
entertained it at the present stage. I might have held that,
as the
costs were to abide the result of the case, the appeal might more
appropriately have been brought after the final determination
of the
case.’
I do not understand those concluding
remarks to suggest that costs on their own cannot stand. Indeed, the
contrary appears to be
the tenor of the whole judgment because the
question of the costs was the only point which the court could
consider.
[16]
Erasmus
and
Dhlamini
were then considered in the leading case of
Pretoria Garrison
Institutes v Danish Variety Products (Pty) Limited
1948 (1) SA
839
(A). The majority judgment held that on appeal it is necessary to
look at the merits of the matter even where the appeal is only
on the
question of costs. This could arise in circumstances where, by the
time the matter came before the court, the necessity
for a costs
order had disappeared or because an order on the merits was not made,
or was not necessary. Ultimately the decision
on the question of
costs should not be reached in total isolation from considerations
linked to the merits. Watermeyer CJ stated
at page 863 :-
‘
In my
opinion the view expressed in
Erasmus
v Daley
is wrong and that expressed in
Dhlamini
v Jooste
is right. A litigant’s right to recover the costs of an opposed
application from his opponent will, in general, depend upon
whether
he was in the right, either in making the application or in opposing
it as the case may be (provided always there are no
grounds for
exercising a judicial discretion to deprive him of these costs). The
form in which this rule is usually stated is that
the successful
party is entitled to his costs unless the Court for good reason in
the exercise of its discretion deprives him of
those costs. Now,
discarding for the moment the idea of a discretion, in an appeal
against an order for costs the Court of appeal
does not judge a
party’s right to his costs in the Court
a
quo
by asking the question
was
he the successful party
in that Court. It asks
ought
he to have been
the successful party in that Court and decides the question of costs
accordingly. ... the merits of the dispute in the Court below
must be
investigated in order to decide whether the order as to costs made in
that dispute was properly made or not.’
The learned Chief Justice then
continued with an examination of
Erasmus
and at page 864
stated :-
‘
The
reasoning seems to suggest that the order on the merits and the order
for costs are a unity and necessarily bound together in
some way,
instead of being two separate orders based upon similar reasons.
An appeal against the order on the
merits is an application to a superior Court to set aside or vary
that order. No such application
to set aside the order on the merits
can be made in an appeal against the order for costs. Whatever order
is made as to costs on
the appeal, the original order on the merits
stands and the obligation to obey it which is imposed by law on the
person against
whom it is made stands unimpaired and can be enforced
by the party in whose favour it is made.’
[17] Although the appellant in
Pretoria Garrison Institutes
was successful in relation to
costs, the original decision by the magistrate for the provision of
further particulars stood.
[18] Further authority for the
proposition that a costs order is appealable even where the merits of
the matter are not, is to be
found in
De Vos v Cooper &
Ferreira
1999 (4) SA 1290
(SAC) para [18].
[19] In
First National Bank of
Southern Africa Ltd t/a Wesbank v First East Cape Financing (Pty) Ltd
1999 (4) SA 1073
(SECLD) the applicant sought an order for the costs
incurred by it in respect of the preparation of an application which
the applicant
intended to institute against the respondent. The
application became unnecessary because of a concession by the
intended respondent.
In limine the respondent challenged the right of
an applicant to seek relief for costs (in this case extra judicial
costs) which
do not fall to be taxed in terms of the rules of the
High Court. Citing authority for the proposition that where papers
are prepared
for an application, but not issued because a demand
concerning the matter in dispute is complied with by the other party
after
the date of the demand, but before the completion of the papers
relating to the application, damages amounting to the costs payable
by the applicant to his attorney cannot be claimed from the
respondent and that the correct remedy is to proceed with the
application
in regard to costs only, obtain an order in regard
thereto and then proceed to tax a bill. At page 1077 marginal letter
H –
I, Mbenenge AJ stated :-
‘
In my view,
an applicant who institutes a fresh application in regard to costs
and annexes to such application papers the intended
application
papers is in no different position than the one who proceeds with the
application for costs only.’
[20] The learned acting judge also
referred to the analogous situation of
Eisenstadt v Barone
1931 AD 486
where the appellant obtained judgment against the
respondents for payment in a specific sum of money and costs. An
appeal was noted
but not prosecuted. A bill for the appeal costs in
the High Court was drawn up, and a notice of taxation given, but the
respondent’s
attorney adopted the view that the respondent was
not liable for costs. An application was then made to the Chamber
Court in Pretoria,
presided over by a single judge, for an order of
costs. The then Appellate Division considered whether the costs of
the appeal
were ancillary to, and connected with, the appeal itself,
and whether only the court which was competent to deal with the
appeal
was competent to deal with the costs in connection therewith.
The Appellate Division made the point that the merits of the appeal
had disappeared but that the Chamber Court was perfectly entitled to
deal with the application for costs.
[21] Mr
Mullins
relied upon the
matter of
Santam Ltd v Ethwar
1999 (2) SA SA 244 (SCA) as
authority for the proposition that recoverable costs are only
determined once the registrar of the court
has given his/her
allocatur and until then there is no enforceable claim and any
endeavour to recover costs by way of action would
be met by a
successful exception on that basis. That case, however, dealt with an
agreement between the parties in terms of which
the defendant agreed
to pay the plaintiff’s costs as taxed or agreed between the
parties. As pointed out by the court, the
parties had not intended
that the respondent could recover costs without a prior agreement or
taxation. In my view that situation
is distinguishable from the
present one. It may well be that no process for execution may issue
for the raising of costs awarded
by a party until they have been
taxed or agreed to in writing (see r 45(2) of the Uniform Rules of
this Court) but barring a litigant
from obtaining an order for costs
(for example to be taxed or agreed later) is a different matter. A
dilatory plea to a claim for
payment of a specific sum of costs as
yet not taxed or agreed might delay the finalisation of the action,
but would not debar the
plaintiff from proving his or her claim.
[22] Based on the aforegoing
authorities there would appear to me to be no reason why Augusta
would not have been entitled to institute
a claim for costs alone
against the owner of the ship. That there exists the uncertainty of
whether they will be awarded (both
in the arbitration proceedings and
in the s 68 appeal) puts Augusta in no different a position than it
would have been had it sued
for damages which were required to be
computed by the arbitration tribunal or a court in due course. No
proper evidence was put
before me regarding the position in English
law, and I accordingly presume it to be the same as our law. (
Banque
Paribas v The Fund comprising proceeds of the sale of the MV
Emerald
Transporter
1985 (2) SA 452
(O) at 464 C – F)
[23] If Augusta is entitled to
institute an action against the owner of the ship concerned for the
three categories of costs referred
to above, then it is entitled to
security for those claims.
[24] Mr
Mullins
further argued
that, with regard to the question of association, the associated ship
(the MV ‘Lido’) is required to
have been owned at time
when the action was commenced by a person who was the owner of the
ship concerned at the time when the
maritime claim arose. As I
understand Mr
Mullins
’s argument it is that the ‘Lido’
was owned by Furtrans until the 8
th
August 2011. As the
shipbuilding agreement was cancelled on the 12
th
March
2010 the claim on the merits clearly arose prior to Furtrans
disposing of its ownership in the MV ‘Lido’. However
the
costs award only arose, at the earliest, in 2011 when the arbitration
tribunal found in favour of Augusta. In respect of the
s 68 appeal
and the arbitration the claim could be said only to arise when a
decision in that regard is made. With regard to the
s 69 appeal, that
was dismissed with costs on the 13
th
October 2011.
[25] Mr
Shaw
pointed to the
fact that an arbitration agreement existed between the parties in
terms of which they clearly anticipated and agreed
that one of them
may have to pay costs in the event of the merits not being resolved
in their favour. He submitted that the right
to claim is not to be
found in the making of the costs award any more than damages would
be. It is found in the original source
of the undertaking to pay the
costs – i.e. the arbitration agreement.
[26] I agree with this view. The right
of Augusta to claim costs is not a right which existed independently
of the underlying merits.
The existence of the right to claim costs
depends upon the existence of an underlying right to approach the
arbitration tribunal
and/or the High Court in the first place. Those
rights arose well before the disposal by Furtrans of the MV ‘Lido’.
In those circumstances I would not uphold the point that the claim
arose after the vessel had been disposed of by Furtrans.
See
Byron v Duke Inc
2002 (5)
SA 483
(SCA), para [7].
[27] In all the circumstances I make
the following order :-
save for reducing the quantum of the
security to be provided to the sum of £2 352 286,65, the
application for reconsideration,
in terms of Uniform Rule 6(12) of
the grant of the ex parte order made by me on the 20
th
October 2011, is dismissed;
the applicant in the application for
reconsideration, Plaus Shipping Ltd is directed to pay the costs of
the application for reconsideration,
such costs to include those
consequent upon the employment of two counsel.
Date of hearing :11
th
November 2011
Date of judgment : 25
th
November 2011
Counsel for the Applicant : S R
Mullins SC (instructed by Shepstone & Wylie)
Counsel for the Respondent : D J Shaw
QC (instructed by Edward Nathan Sonnenbergs)