Bominflot Limited v Kien Hung Shipping Co. Ltd and Others (AC71/2003) [2003] ZAWCHC 57; [2004] 1 All SA 509 (C); 2004 (2) SA 556 (C) (21 October 2003)

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[2003] ZAWCHC 57
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Bominflot Limited v Kien Hung Shipping Co. Ltd and Others (AC71/2003) [2003] ZAWCHC 57; [2004] 1 All SA 509 (C); 2004 (2) SA 556 (C) (21 October 2003)

IN
THE HIGH COURT OF SOUTH AFRICA
(Cape
of Good Hope Provincial Division)
REPORTABLE.
Case No. AC71/2003
In
the matter between:
BOMINFLOT LIMITED
Applicant
And
KIEN HUNG SHIPPING CO. LTD
Respondent
CENTRAL LEASING CORPORATION
First Intervening Party
HAMBURG SÜAMERICKANISCHE DAMPFSCHIFFAHRT
GESELSCHAFT KG
Second Intervening Party
JUDGMENT: DELIVERED ON 21 OCTOBER 2003
DAVIS J:
Introduction.
Applicant
seeks confirmation of a rule nisi granted on 6 June 2003 in terms
whereof containers as described in paragraph 1.1 of
the order of 6
June 2003 were attached for the purpose of founding or confirming the
jurisdiction of this court in an action to be
instituted by applicant
against respondent for payment of the sum of US $766 484,52 and US $1
266 484,52, interest thereon and costs.
It is established law
that the requirements for an attachment of this nature are that
The
respondent is a peregrinus;
The property sought to be attached is that of respondent; and
The
applicant has a prima facie case in that it must tender evidence
which, if accepted, will establish cause of action. See Weissglass
NO v Savonnerie Establishment 1992(3) SA 928(A) at 936G.
It is
common cause that respondent is a peregrinus and that applicant has
established a prima facie case against it. The present
dispute is
solely concerned with whether respondent is the owner of all the
containers which have been attached.
On 7
August 2003 this Court confirmed the rule nisi in respect of
containers listed as ‘A” in an annexure which was handed in
with
the consent of all parties as constituting a complete list of the
containers arrested. The list entitled ‘B’ is that of
containers
in which the intervening parties have no interest and which again
with the consent of the parties, this Court was asked
to confirm the
rule nisi.
Accordingly, the dispute continued with regard to
two intervening parties who have contested applicant’s allegations
with regard
to the ownership of further containers which were the
subject of the rule nisi. By the time of the hearing, the Court was
informed
that applicant does not seek confirmation of the rule in
respect of those containers to which the second intervening party
lays claim.
For this reason, the containers which are the subject of
the present dispute are listed under the heading ‘C’, and ‘E’
of
the annexure to which I have made reference. The only question
which remains for determination is whether these containers are owned
by respondent or by the first intervening party.
The first intervening
party contends that it is the owner of the balance of the containers
pursuant to a series of conditional sale
agreements in terms whereof
ownership of the containers remains vested in it until payment in
full of the purchase price.
Applicant
contends that the question of the ownership of the containers falls
to be determined in accordance with the laws of Taiwan.
Briefly
stated, Mr Fitzgerald, who appeared together with Mr Manca on behalf
of applicant, submitted that, although it was a principle
of South
African private international law that disputes concerning the
ownership of movables are generally to be governed by the
lex situs
at the time of the transaction, the lex domicilii of the owner might,
in particular circumstances, be applied. See Marcard
Stein and
Company v Port Marine Contractors (Pty) Ltd
[1995] ZASCA 76
;
1995 (3) SA 663(A)
at 671
H – J.
According
to Mr Fitzgerald, applicant was not able to determine the precise
location of each of the containers at the time of the
alleged
transfer of ownership to the first intervening respondent. In his
view, it may well have been that the containers, allegedly
transferred, were dispersed around the world on various different
vessels and at various different depots at the relevant time. He
therefore submitted that in such a case, the application of the lex
situs would be unworkable, insofar as the determination of the
dispute regarding ownership of the containers pursuant to these
transactions were concerned. The only realistic candidates for
ownership
of the containers were the respondent and the first
intervening party, both of whom were domiciled in Taiwan. In this
case therefore
the application of the lex domicilii would provide
legal certainty.
As the papers revealed
that there was a dispute between the parties regarding the contents
of Taiwanese law and its application to
this case, Mr Fitzgerald
submitted this dispute was a matter which could only be resolved by
oral evidence and he therefore contended
that a referral to oral
evidence was the appropriate approach for the court to adopt.
Factual
Background.
It was common cause that the containers, which formed the basis of
the present dispute, were the subject of four installment sale
agreements between the first intervening party and respondent.
Although these agreements were drafted in Chinese script and there
was an incomplete translation of these documents, it did appear that
each contract contained a reservation of title clause to the
following effect:
‘
The title of
the subject matter shall remain with party A until the installments
are paid in full by party B.’
According to an
affidavit deposed to by Ms Pitman on behalf of the intervening
parties, these installments have not been fully paid.
This
contention has not been placed in dispute by applicant. For this
reason the first intervening party contends that, as title
of the
containers remained with it, being the seller until such time as all
the installments have been paid in full, attachment
of all
containers, being the subject of these contracts, falls to be set
aside. Simply stated the containers do not belong to respondent
but
rather to it, the first intervening party.
The
Essential Legal Dispute.
Mr Fitzgerald submitted that, notwithstanding the provisions of the
contract entered into between respondent and first intervening
party,
article 5 of the Chattel Secured Transactions Act of Taiwan (‘the
Act’) provided:
‘
Chattel-Secured
Transactions shall be by contract in writing and shall not be valid
against
bona fide third parties
unless duly registered’.
As it was common cause that the contracts in question had not been
registered and as a chattel-secured transaction included a
conditional
sales contract, Mr Fitzgerald submitted that Taiwanese
law in effect provided that, as to applicant, first respondent was
deemed
to be the owner of the containers.
In support of these
contentions, Mr Fitzgerald referred to an affidavit deposed to by Mr
CY Huang, a Taiwanese attorney on behalf
of applicant, who stated
the following:
‘
Mr Chen
correctly points out in paragraphs 14 and 15 of his Declaration that
as CAI (first intervening party) had no actual constructive
knowledge
of any conflicting claims of ownership to certain group B containers,
nor the alleged underlying installment sale contracts
between the
Respondent and CLC, CAI should naturally be deemed a ‘good-faith
third party’ vis-à-vis the said containers as contemplated
by the
plain language of Article 5, and as further supported by the
legislative commentary of the said Article 5.
In relation to this
matter, at the time that the Applicant conducted business with and
sold fuel to the Respondent during the period
February to March 2003,
it was not aware that containers in the possession and control of
Respondent and marked with the Respondent’s
insignia were subject
to the reservation of ownership clauses in installment sale
contracts. The Applicant therefore in my opinion
qualifies as a
good-faith third party under the Act.’
In a further affidavit
on behalf of applicant, Mr Overmeyer contended that at the time
applicant contracted with respondent, ‘it
was not aware of the fact
that the containers with prefixes '‘KHLU'’and/or “KHJU” were
subject to an installment sale agreement
and/or agreement(s) in which
ownership was reserved in favour of the party other than the
Respondent.’
In the
alternative, Mr Fitzgerald submitted that as the court would not be
able on the available evidence, to determine the effect
of Article 5
of the Act, the question of whether the applicant was a bona fide
third party as contemplated by Article 5 should be
referred to oral
evidence in terms of Uniform Rule 6(5)(g).
Mr Wallis, who
appeared together with Mr Stewart on behalf of the intervening
parties referred to Mr Chen’s affidavit and in particular
to his
averment that ‘A conditional sales contract refers to a contract
whereby the purchaser takes possession of the subject matter
of the
sale but ownership is only transferred to the purchaser once certain
conditions are met. In the case of an installment sales
contract,
the ownership will not be transferred until all agreed installments
of the purchase price are paid on time’.
Mr Wallis also
referred to the concluding paragraph of Mr Huang’s affidavit in
which the latter stated, ‘The First Intervening
Party’s failure
to register the installment sale contract(s) in accordance with the
Act has the effect that ownership in and to
the containers under
attachment is deemed to vest in the Respondent rendering the
containers susceptible to attachment by the Applicant.’
Mr Wallis
submitted that this conclusion needed to be evaluated in terms of the
key provisions of the Act. Thus, Article 5 of the
Act had to be read
in conjunction with Articles 26 and 27 (3) of the Act. Article 26
provides, ‘A conditional sale is a transaction
under which the
buyer first takes possession of the chattel object with an agreement
that ownership of the object shall vest in him
only upon payment of
part or all of the price, or upon the performance of the specific
condition’. In terms of article 27(c),
‘a conditional sale
contract shall specify the following particulars: (3) A statement
that the seller retains ownership of the
object while the buyer may
take possession and make use of it’.
According to Mr
Wallis, a plain reading of these provisions of the Act suggests that
ownership does not pass to respondent. By contrast,
Mr Huang’s
contention that ownership was deemed to vest in the respondent
rendering the containers susceptible to attachment by
applicant was,
at best, questionable and, at worst, not of any assistance to
applicant, for, according to Mr Wallis, applicant could
not show that
respondent was the owner of the containers. In short, Mr Huang’s
contention supported an argument that the containers
might be deemed
to vest in respondent.
On
whatever construction of Mr Huang’s affidavit, Mr Wallis submitted
that the applicant had not shown, on a balance of probabilities,
that
the containers, at the time of the attachment, were the property of
respondent. See Shipping Corporation of India Limited
v Evdomon
Corporation 1994(1) SA 550(a) at 556 F.
Mr Wallis also
referred to the passage already quoted from the supplementary
affidavit of Mr Overmeyer where the latter confirmed
‘At the time
the Applicant contracted with the Respondent it was not aware of the
fact that the containers with prefixes “KHLU”
and/or “KHJU”
were subject to an installment sale agreement and/or agreements in
which ownership was reserved in favour of a
party other than
Respondent.’ According to Mr Wallis, the crux of applicant’s
case first emerged in this one, skeletal paragraph
in a
supplementary affidavit without any further confirmation as to how it
had come to pass that when applicant supplied bunkers,
it had taken
the view that respondent was the owner of these containers. In Mr
Wallis’ view, this argument had further implications
in that, in
the affidavit deposed to by Mr Huang, it was claimed that ‘[T]he
group B containers were in control and visibly marked
with the
insignia of the Respondent and thus CAI was led to believe that those
containers in the Respondent’s possession were the
Respondent’s
property….and further CAI continued to conduct business with Kien
Hung on reliance of Respondent’s apparent ownership
of the relevant
containers.’
Mr Wallis
contended that no basis had been laid as to the foundation of these
conclusions and hence there was no evidential source
which had been
provided for a bona fide person to have arrived at the conclusions
reached by Mr Huang.
Mr Wallis
further submitted that it was settled law that the ownership of a
tangible movable was to be governed by a lex situs,
that is the law
of the place where the object is located. See Standard Bank of South
Africa Limited v Ocean Commodities Inc 1983(1)
SA 276(A) at 294 D.
As the containers were situated in South Africa, it was clear that
South African law must govern this dispute.
In terms of South
African law, a reservation of ownership clause was valid. Hence the
first intervening party owned the containers,
subject to the four
installment sale agreements and accordingly the attachment of these
containers fell to be set aside. Furthermore,
there was no basis to
have regard to the law of Taiwan in determining the rights of the
third party to the contract in terms of which
ownership was reserved,
particularly where that party is registered in the United Kingdom,
does not undertake any business in Taiwan
and where the supply of
bunkers to vessels was undertaken in Durban.
Evaluation.
The primary issue in the present dispute concerns the determination
of the proper law governing the question of ownership and the
‘conditional sale agreements’ between the first intervening party
and respondent. If applicant is correct, the law of Taiwan
applies.
If so, then the further question arises as to the interpretation of
the applicable provisions of the Act
Mr
Fitzgerald correctly conceded that there was a principle of South
African private law that disputes concerning the ownership of
movables are to be governed generally by the lex situs at the time of
the transaction. In this connection Corbett CJ said in Marcard
Stein and Company v Port Marine Contractors (Pty) Ltd 1995(3) SA
663(A) at 671 H-672 B ‘[a] South African Court, exercising its
admiralty jurisdiction, should in general apply the principle of
lex
situs
in determining the passing of ownership in movable property
when the case involves a foreign element and there is a potential
conflict
of laws. I might add that it would seem that a South
African Court exercising its ordinary jurisdiction would adopt the
same approach….
This general principle would apply also to the
passing of ownership in a ship sold while located within the
territory, i.e. not
on the high seas. In the present case the
Gulf
Trader
was in East London harbour at the time of the sale (and
had been there for at least some nine or ten days) and it must be
inferred
that the parties to the sale were at the time well aware of
this fact. It is not necessary to decide what the position would be
were a ship to be on the high seas at the relevant time. It follows
that the question whether ownership on the Gulf Trader passed
from
Verena to Alvo must be determined by reference to the lex situs at
the time of the transaction, viz South African law.’
Given
applicant’s case, the question arises as to when the lex domicilii
of the owner might find application in circumstances similar
to the
present dispute. C.F. Forsyth Private International Law (3
rd
ed) at 321-324 contends that the
lex situs
governs most
questions concerning movables. However, in certain circumstances,
South African law might apply the maximum mobilia
sequuntur personam,
whereby a person’s movables are deemed to be situated in the place
of his or her domicile. However, Forsyth
states at 322 ‘[t]he lex
domicilii of the owner is generally applied in questions affecting
movables. However, although the classical
sources consider the lex
domicilii rule as the basic rule, the truth today, it is submitted,
is that the lex situs is the basic rule
with the lex domicilii
applying exceptionally. The reason for this is in part simply
practical – if ownership for the raise is
disputed, the lex
domicilii of the owner may be unknown so the lex domicilii rule is
unworkable – and in part common sense since
the application of the
lex situs accords with the expectations of the parties’.
Significantly in his discussion with regard to deviations from the
lex situs, Forsyth refers, in particular, to the position of
res in
transitu and provides an example of goods which may be despatched
from Malawi through Zambia, Zimbabwe and Botswana to South
Africa.
The owner/seller may purport to transfer the goods to the
transferee/buyer by mere agreement. Such an agreement is effective
to
transfer ownership under the law of Zambia and Malawi but is
ineffective under the law of Zimbabwe, Botswana and South Africa.
But
it is unknown where the goods were at the crucial time. In such
circumstances, Forsyth concedes that the lex situs is on weak
ground
because, it is unknown at the crucial time. However he goes on to
submit that the lex domicilii of the transferor cannot be
supported
as providing an adequate solution to the difficulty in question. He
therefore suggests that the choice lies between the
lex loci
expeditions (the law of the place of despatch) and the lex loci
destinationis (the law of the place of destination). See
also in this
connection J L Neels
1991 TSAR 309
at 310 and 315 where the learned
author rejects any recourse to the lex domicilii in such a situation.
I should add that Dicey and
Morris The Conflict of Laws (13
th
ed) at 968 only suggest the replacement of the lex situs in
exceptional circumstances.
Given the
difficulties of finding an appropriate governing law other than lex
situs, considerable care should be given before extending
the concept
of goods in transit so as to justify a deviation from the lex situs.
In the present case, it was common cause that all
containers were
situated in South Africa. As Mr Overmeyer stated in his founding
affidavit, ‘I understand that during April 2003
Fairbridge, Arderne
and Lawton Inc acting at the instance of their client, Container
Applications International Inc, also effected
the arrest of
containers bearing the name Kien Hung Line or marked with the
aforementioned prefixes at Uniroute Logistics (Pty) Ltd
in
Johannesburg, Cape Town and South African container depots in
Durban’.
In a
situation where the containers are to be found in South Africa and
the dispute turnied on a reservation of ownership clause,
there is,
in my view, no cogent reason as to why the lex situs should not
apply. Accordingly, if South African law governs this
issue the
reservation of ownership clause is effective. Thus the first
intervening must be taken to own the containers which are
the subject
to the four installment sale agreements.
In the
event that the lex domicilii should be applied, the question arises
as to whether the law as contended for by applicant would
justify a
different finding or as Mr Fitzgerald contended whether there would
be a basis for recourse to oral evidence regarding
the proper
interpretation of Taiwanese law.
Assuming
that Mr Overmeyer has made out a sufficient case in his supplementary
affidavit to the effect that at the time applicant
contracted with
respondent, it was justified in holding to the view that respondent
was the owner of the applicable containers, the
further question
arises as to the implications of the various sections of the Act as
set out in the expert affidavits. In short,
the question which needs
to be determined is whether, on the probabilities, applicant has made
out a case that the provisions of
this Act support the conclusion
that respondent was the owner of the relevant containers. Article 5
provides that a chattel secured
transaction shall be concluded by a
contract in writing and shall not be valid as against bona fide third
parties unless duly registered.
Therefore applicant’s contention
is that, notwithstanding Article 26 which confirms the reservation of
ownership clause in a contract,
a good faith third party such as
applicant must be deemed, as the possessor, to be the owner of the
containers.
In
seeking to resolve the competing versions of the law placed before
the Court, it is significant to note that the dispute turns
on an
interpretation of one key section of an Act which has been placed
before this Court. Where a Court is satisfied that a section
of the
foreign law is plain and unambigious it can, in my view, base its
approach to the resolution of the dispute on its own reading
of such
law. See for example, Continental Illinois Bank v Seamen’s Pension
Fund 1989(2) SA 515(d) CLD at 544-545.
In any
event, the high water mark of applicant’s case is that respondent
is deemed to be the owner. As to the concept of ‘deeming’,
Mr
Wallis referred to S v Rosenthal 1980(1) SA 65(A) at 75-76 where
Trollip JA examined the concept of ‘deemed’ and concluded
that
one of the usual meanings is, being merely prima facie or
rebuttable’. In the present dispute, the fact that the possessor
is deemed to be the owner, absent registration of the contract,
would appear to support a conclusion that this meaning of the
word
‘deemed’ has been employed in the Act. The provision does not
justify a sufficiently confident assertion of ownership so
that, on
the probabilities, an attachment would be justified. But even were
applicant to show that, in terms of Article 5 of the
Act, ownership
vested in respondent, it would appear that two further requirements
must be met, namely that applicant in the present
dispute must have
mistakenly believed that the possessor of the goods concerned was the
owner of the containers and secondly that
the mistaken belief caused
applicant to conclude the transaction to the latter’s detriment.
It appears from a
reading of the affidavits of both Mr Chen and Mr Huang that these
requirements are part of Taiwanese law. However,
only in the
supplementary affidavit of Mr Overmeyer is any attempt made to
provide evidence to satisfy these two requirements and
then in very
generalised terms.
In
summary, the lex situs should apply to this dispute in which case it
is the first intervening party who continues to own the
containers
which were the subject of the four installment sale agreements.
In the
event that the lex domicilii applies (I might add against all the
authority set out both in Forsyth and Neels, supra) applicant
has not
demonstrated that respondent was the owner of the containers which
are the subject of attachment. At best it has only shown
that the
containers are ‘deemed to vest’ in respondent. Furthermore, save
for a perfunctory assertion in Overmeyer’s supplementary
affidavit,
no evidence has been placed before the court as to the basis upon
which applicant contracted with respondent, and further
concerning
any basis for a mistaken belief that respondent was the owner of the
goods and that the mistaken belief caused the applicant
to transact
accordingly.
For these reasons, the
containers described in B of the annexure to this order are
confirmed. The attachment of those containers that
are subject to the
purchase and sale agreement between respondent and the first
intervening party and which are described in C and
E of the annexure
are set aside as well as the containers which are described in D of
the annexure which belong to the second respondent.
As to costs, the
question arose as to costs to be awarded to the second intervening
party. Since this dispute was never disputed before
me no basis for
an award of costs was ever set out to justify this decision. Thus
costs are awarded in favour of the first intervening
party, such
costs to include the costs attendant upon the employment of two
counsel.
­­­­­­­_____________
DAVIS J