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[1999] ZASCA 30
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Tradax Ocean Transportation SA v mv 'SILVERGATE' Properly Described as mv 'ASTYANAX' and Others (1) (107/97) [1999] ZASCA 30; [1999] 3 All SA 175 (A); 1999 (4) SA 405 (SCA) (24 May 1999)
Case
No 107/97
IN
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
In
the appeal between:
TRADAX
OCEAN TRANSPORTATION SA
Appellant
and
mv
“SILVERGATE” PROPERLY DESCRIBED AS
mv
“ASTYANAX”
First Respondent
ASTYANAX
COMPAÑIA NAVIERA SA
Second
Respondent
GARDENIA
MARITIME INC
Third
Respondent
Coram
:
Nienaber, Marais, Plewman, Streicher JJA
et
Farlam AJA
Heard
:
1 March 1999
Delivered
:
24 May 1999
Maritime
law - whether a certain Greek decision should be enforced in South
Africa - whether the vessel arrested was the property
of second
respondent and therefore liable for execution in South Africa in
satisfaction of the judgment - whether issue of ownership
of the
vessel was
res
judicata
as a consequence of a decision in US District Court for the Central
District of California - whether terms of the letter of undertaking
furnished on behalf of third respondent to appellant to secure
release of vessel from attachment in USA precluded appellant from
bringing proceedings in court
a
quo.
_____________________________________________________________________
J U D G M E N T
_____________________________________________________________________
FARLAM
AJA
FARLAM
AJA
:
[1] This is
an appeal, with the leave of the court
a
quo
,
from a judgment of Booysen J, sitting in the Durban and Coast Local
Division of what was then termed the Supreme Court of South
Africa,
exercising its admiralty jurisdiction in terms of the Admiralty
Jurisdiction Regulation Act 5 of 1983.
[2] In the
court
a
quo
the appellant,
Tradax
Ocean Transportation SA, a company incorporated under the company
laws of Panama, claimed judgment against the first respondent
, a
motor vessel flying the Panamanian flag and thereupon registered in
the Panamanian registry as the “Silvergate”,
for payment
of US $500 959,95 “together with legal interest thereon in
accordance with Greek law from 4 October 1990
to date of payment and
legal costs as adjudged in [certain] Greek proceedings amounting in
the sum of Greek Drachmae 3 170 000".
In addition the
appellant asked for an order that it be granted leave to execute the
judgment sought against security which the
third respondent had
provided in order to obtain the release of the first respondent and
that its costs of suit be paid by the
first and third respondents
jointly and severally.
[3] The
second respondent, which does not oppose the appeal and against which
no relief was sought in the court below, is
Astyanax
Compañia Naviera SA, a company registered under the company
laws of Panama, which carried on business as a shipowner
at Piraeus,
Greece. It belongs to a group of companies known as the “Stef
Stravelakis Group of Companies”.
[4] The
third respondent is Gardenia Maritime Inc, a company registered under
the company laws of Liberia. It is registered in
the Panamanian
registry as the owner of the first respondent.
[5] In
what follows I shall call the appellant “Tradax”, the
first respondent “the vessel”, the second
respondent
“Astyanax SA” and the third respondent “Gardenia”.
[6] As appears from the terms
of relief sought, the proceedings in the Durban
and Coast Local Division had
been preceded by certain proceedings in the courts of Greece. In
addition there had been proceedings,
followed by a judicial sale, in
the Netherlands, and in the United States District Court for the
Central District of California
and the United States Court of Appeals
for the Ninth Circuit.
Prior
to the institution of these various legal proceedings arbitration
proceedings instituted by Tradax took place in London
in respect of
claims arising from a charter party relating to the vessel.
Before the
issues which arose for decision in the court
a
quo
and in this court are stated it is necessary to set out in detail the
circumstances which gave rise to the litigation between the
parties
in the court
a
quo
.
[7] On
7 July 1983 Tradax, as charterer, concluded a voyage charter party in
respect of the vessel with a contracting party described
in the
charter party as “Panagiotis Stravelakis SA Piraeus as
disponent owners of [the vessel]”. It is now common cause
between the parties that no such entity as Panagiotis Stravelakis SA
has ever existed . At the time when the voyage charter party
was
concluded and for some five years thereafter this fact was not known
to Tradax.
[8] An
individual named Panagiotis Stravelakis is according to the evidence
an employee of the Stef Stravelakis group and a relative
of Stefanos
Stravelakis, who is, amongst other things, the president of Astyanax
SA and the main, if not the only, shareholder
in the companies in the
group.
[9]
In
terms of the voyage charter party between Tradax and “Panagiotis
Stravelakis SA” a cargo of grain was to be transported
from
Bahia Blanca in the Argentine to three ports in Japan.
[10] A
dispute arose during the voyage between Tradax and the owner’s
representatives, who demanded payment of US $218 895,83
as demurrage
and threatened to interrupt the discharge of the cargo in Japan and
to exercise a lien over it if this sum was not
paid.
[11] On
22 November 1983 Tradax agreed to pay under protest the sum demanded
as demurrage on receipt of the owner’s fleet
guarantee to repay
this amount “if by written agreement signed by both owners and
charterers or by final arbitration award”.
The sum in
question was thereafter paid by Tradax to S Stravelakis SA of Piraeus
Greece against the owner’s fleet guarantee,
in which Stefanos
Stravelakis, on behalf of eight companies in the Stef Stravelakis
group, bound the companies “as surety
and co-principal debtor
to and in favour of [Tradax] by way of security for the true and
proper discharge of [Astyanax SA] registered
owners of Astyanax
(hereinafter to be referred as the principal debtor) of whatever the
principal debtor may be found to be indebted
to [Tradax] by virtue of
a valid London arbitration award ... in respect of the principal
amount interest and costs if legal proceedings
in London relating to
the claim against the principal debtor for overpayment of demurrage
to the principal debtor pursuant to Charter
Party of 7.7. 1983 of MV
Astyanax...”
[12] Subsequently
in August 1985 arbitration proceedings commenced in London between
Tradax and “Panagiotis Stravelakis SA”
in respect of
Tradax’s claim for repayment of the demurrage it had paid under
protest and for despatch it said was due to
it under the charter
party.
[13] The
arbitration proceedings were resisted by the respondent in the
arbitration whose representatives did not inform either
Tradax or the
arbitrators that their client, “Panagiotis Stravelakis SA”,
did not exist.
[14] On
30 May 1986 the arbitrators made an interim final arbitration award
in terms of which they ordered the respondent
in the
arbitration to pay to Tradax US $14 981,25 in respect of
discharging port despatch and £250 in respect of costs.
Subsequently, on 15 December 1987, they made a final arbitration
award in which they ordered the respondent in the arbitration
to pay
Tradax US $267 498 (being US $210 140 in respect of the loading port
demurrage which Tradax had paid under protest as previously
described
and a further US $57 358 in respect of despatch) with interest
thereon from 23 November to the date of the award, plus
interest on
the previous award from 1 January 1984 to 30 May 1984, as well as
certain amounts in respect of costs.
[15] On
5 July 1988 the arbitrators made a third award, described as a final
award of costs, in which they ordered the respondent
in the
arbitration to pay Tradax £12 208,20 in respect of earlier
costs and a further amount of £385 in respect
of the costs
award itself.
[16] It
is common cause between the parties that the US dollar equivalent of
the total of the three awards with interest thereon
as at 10 April
1989 amounted to
US
$500 959,99.
[17] On
15 June 1986, that is to say just over two weeks after the first
award was made, the vessel was arrested in the Netherlands
pursuant
to an order of the President of the Rotterdam District Court, at the
instance of the Chase Manhattan Bank, which was
the mortgagee of the
vessel.
[18] On
25 June 1986 the District Court at Rotterdam ordered Astyanax SA to
pay US $139 487 734,05 to the Chase Manhattan Bank
and on 1 August
1986 at a judicial sale in execution held at the instance of the bank
the vessel was sold to Carla Maritime Inc
for Dfls 5 170 000, an
amount less than the judgment debt.
[19] On
12 August 1986 Carla Maritime Inc sold the vessel by private treaty
to Silver Trident Shipping Co Ltd, which caused the
vessel, on 13
August 1986, to be provisionally registered in the Maltese registry
as the “Silver Trident”.
[20] On
9 July 1987 the Silver Trident Shipping Co Ltd sold the vessel by
private treaty to Gardenia, which caused her to be deleted
from the
Maltese registry on 4 August 1987 and permanently registered as the
“Silvergate” in the Panamian registry
on 20 November
1987.
[21] It
will be recalled that the arbitrators made their second award in
favour of Tradax and against “Panagiotis Stravelakis
SA”
on 15 December 1987. On 27 April 1988 Tradax sought an order before
the Single Member First Instance Court of Piraeus
against “Panagiotis
Stravelakis SA” enforcing the two arbitration awards that had
been given at that stage.
[22] These
proceedings were not defended and on 28 June 1988 the court gave
judgment in Tradax’s favour and declared the
two awards
executory in Greece.
[23] As
has already been said, the arbitrators’ third award was given
in London against “Panagiotis Stravelakis SA”
on 5 July
1988. After the judgment of 28 June 1988 was served at the offices of
the Stef Stravelakis group Tradax’s attorney,
Emmanuel John
Stephanakis, contacted the attorney who acted for the group sometime
in September 1988 and asked why the enforcement
proceedings had not
been defended and why the judgment had not been satisfied. The reply
he received was: “How should I defend
a party which does not
exist?” This was the first intimation that Tradax received to
the effect that “Panagiotis
Stravelakis SA” did not
exist. When asked why the owner’s fleet guarantee provided to
Tradax when it paid under protest
the demurrage claimed under the
charter party gave the name of Astyanax SA as the principal debtor,
the attorney explained that
as the vessel was usually traded in the
name of Astyanax SA, the registered owner of the vessel, and as the
charter party had not
been to hand when the guarantee was drafted, it
had been assumed that the owner under the charter party was Astyanax
SA. No coherent
reason appears to have been furnished as to why the
arbitration had been defended in the name of a non-existent company.
[24] Tradax
then launched proceedings in Greece against all the companies which
had given the guarantee. It also instituted proceedings
against
Stefanos Stravelakis and Panagiotis Stravelakis on the basis that
they were liable in delict to Tradax for the damages
sustained by it
because they had, so it was alleged, instructed their New York
brokers to insert a non-existent company into the
charter party and
they had instructed their London solicitors to defend the arbitration
on behalf of a non-existent company.
[25] On
10 April 1989 a letter was written to Tradax on behalf of Astyanax SA
which I quote as it reads:
“Dear
Sirs,
‘M/V
ASTYANAX - C/P dd 07.07.1983'
We
refer to the above matter and wish to make clear to you the
following:
1. We confirm, as registered
owners of the above mentioned vessel, that have, a long ago,
recognized and accepted that we owe to
you the sums awarded by the
issued in accordance with the terms of said C/P of 7-7-1983
arbitration awards, namely the Interim
Final Award dated 30-5-1986,
the Final Award dated 15-12-1987 and the Final Award of Costs dated
5-7-1988 of the London Arbitrators
Mr. M. W. Hamser, Mr. A. J.
Kazantzis and Mr. B.A. Harris, plus their costs and the statutory
payable interest, which as we understand
are presently amounting to
the sum of U.S. Dollars $500.959,99.
2. However, you must appreciate
that the above vessel is no longer in our hands and because of that
we find it very difficult to
meet with the payment of the above
indisputed sums, nevertheless we confirm that shall make our best to
rectify the position, in
view of the fact that our group of companies
is still very much interested to maintain good business relations
with your goodselves.”
The
letter was signed by Stefanos Stravelakis in his capacity as
president of Astyanax SA.
[26] The
statement that Astyanax SA found it “very difficult to meet
with the payment of the above indisputed sums”
appears to have
been something of an understatement because Astyanax SA, which was a
“single ship company” whose vessel
had been sold in
execution in Rotterdam over two and a half years earlier, was clearly
without any assets whatever.
[27] On
31 December 1990 the Multi Member First Instance Court of Piraeus in
Decision no 2367/1990 ordered Astyanax SA to pay Tradax
US $500
959,99, plus legal interest thereon from the date of service of the
action, being 4 October 1990, and legal costs in the
sum of 3 170 000
Greek Drachmae. It is clear from the judgment that its order against
Astyanax (which did not defend the action)
was based on the letter of
10 April 1989.
[28] In its
judgment the Multi Member First Instance Court also dealt with a
claim Tradax brought against Gardenia,
viz
for an order declaring that Astyanax SA was still the owner of the
vessel.
[29] The
court refused to uphold this claim on the ground that it had no
jurisdiction to grant such an order as against Gardenia.
Although the
vessel was, as I have said, registered in the name of Gardenia in the
Panamanian registry on 20 November 1987 it was
not deleted from the
Greek register until 4 March 1993.
(Before
that date, on 13 November 1992, the vessel was arrested at Durban
by order of Booysen J at the instance of Tradax.
She was
subsequently released after Gardenia provided security.)
[30] On
17 August 1990, before Tradax obtained its judgment in Greece against
Astyanax SA in the amount of US $500 959,99, it
caused the vessel
to be arrested at Long Beach, California, in the United States,
pursuant to a writ of attachment issued by the
United States District
Court for the Central District of California. On 21 August 1990 the
vessel was released after Gardenia’s
Californian attorneys
furnished Tradax on 21 August 1990 with a letter of undertaking in
the following terms:
“
In consideration of your
releasing the M/V SILVERGATE (ex M/V ASTYANAX) (hereinafter ‘the
Vessel’), from attachment
in the action entitled ‘Tradax
Ocean Transportation S.A. vs Astyanax Compania Naviera S.A.’,
Case No. 90-4419 RB (GHkx)
filed in the United States District Court
for the Central District of California, and in further consideration
your agreeing not
to re-attach or arrest the Vessel or any other
property of Gardenia Maritime, Inc. for the claims which you have
asserted in the
aforesaid action, we agree to satisfy any judgment
which ultimately, after appeal, if any, may be rendered in the said
action against
Astyanax Compania Naviera S.A. and which shall be
deemed in said action enforceable against the Vessel as property or
as an asset
of Astyanax Compania Naviera S.A. or against any property
interest which Astyanax Compania Naviera S.A. has in the Vessel,
insofar
as such judgment does not exceed the sum of Six Hundred
Thousand U.S. Dollars ($600,000), inclusive of interest, and costs
and
any other expenses.
We also agree that upon written
demand by you, we will cause to be filed a bond in a form acceptable
to the said court in the amount
and subject to the same terms and
conditions set forth hereinabove. (If such bond is posted, we, the
undersigned Association, shall
have no further obligation under this
letter).
This letter of undertaking is
issued without prejudice to any right or defense presently or
hereafter available to the Vessel or
Gardenia Maritime, Inc.,
including without limitation, any defenses that the aforesaid
attachment is wrongful, and that the Vessel
is not property of
Astyanax Compania Naviera, S.A.”
[31] A
preliminary attempt by Gardenia to obtain the release of the vessel
and the return of its security having failed and an
attempt by Tradax
to obtain an order staying the proceedings until a judgment was
obtained in Greece, which would have made each
of the issues in the
action pending in the US District Court
res
judicata,
also
having failed, the US District Court on 9 May 1991 ordered that the
matter proceed to trial.
[32] Thereafter
on 11 September 1991 Spencer Letts J, a judge of the US District
Court for the Central District of California,
granted an application
brought by Gardenia for summary judgment in its favour “on the
ground that the [vessel] cannot be
attached ... because it is not
property of defendant [Astyanax SA]”. The court ordered that
the attachment be vacated and
that the security posted by it or on
its behalf be exonerated and released.
[33] He
had earlier, when the case was being orally argued before him,
indicated that he proposed denying Gardenia’s motion
for
summary judgment but added that he would reconsider the matter and
that if he changed his mind he would give the parties the
chance to
reargue the case. He subsequently did change his mind and he offered
to permit reargument of the matter. This offer
was not taken up by
Tradax.
[34] On
19 September 1991 the Piraeus Court of Appeal, in Decision 1153/91,
upheld Tradax’s appeal against that part of
the judgment of the
Multi Member First Instance Court of Piraeus in which Tradax’s
claim as against Gardenia for an order
declaring that Astyanax SA was
still the owner of the vessel was rejected.
[35] Tradax
appealed against the order granted by Letts J on 11 September 1991 to
the United States Court of Appeal for the Ninth
Circuit. Pending this
appeal, it sought a stay of the execution of the judgment of Letts
J. This application was refused on 26
September 1991 but on the next
day two judges of the US Court of Appeals for the Ninth Circuit
denied as unnecessary Tradax’s
emergency motion for a stay of
the district court’s judgment pending appeal. The Court of
Appeals held that the motion was
unnecessary because it had
jurisdiction to determine whether the district court exonerated the
letter of undertaking “improperly,
fraudulently or
accidentally”.
[36] While
these events were taking place in California the parties were also
involved in further legal proceedings in Greece.
[37] Decision
2367/1990 of the Multi Member First Instance Court of Piraeus and
Decision 1153/91 of the Piraeus Court of Appeal
were both given in
the absence of Gardenia. In January 1992 Gardenia, as it was
permitted to do in Greek law, brought what was
described as an Appeal
in Default in which it requested the Piraeus Court of Appeal to
reconsider its Decision 1153/91.
[38] On 16
July 1992 the Piraeus Court of Appeal gave its judgment, Decision
1108/92, in the reconsidered appeal. It held that
by Greek law the
vessel continued to belong to Astyanax SA because the adjudication
decree of the Rotterdam District Court confirming
the judicial sale
of the vessel to Carla Maritime Inc had not been registered in the
Piraeus Ship Registry. The Court of Appeal
proceeded, however, to
deal with a further contention advanced by Gardenia,
viz
that
Tradax’s attempt to execute its judgment against Astyanax SA
against the vessel would amount to an abuse of right which
is
prohibited by section 281 of the Greek Civil Code, which reads as
follows:
“
The exercise of a right
shall be prohibited if such exercise obviously exceeds the limits
imposed by good faith or morality or by
the social or economic
purpose of the right.”
It
held that if the facts alleged by Gardenia were true the section
would apply but that as they were denied by Tradax its definite
decision on the point would be deferred until the facts alleged by
Gardenia were proved. It accordingly “extinguished”
its
decision 1153/91 (with exceptions now not relevant) and ordered that
evidence on the facts in issue should be heard by the
junior judge of
the First Instance Court of Piraeus and “in case of impediment
before the directly senior judge and so on.”
[39]
Tradax’s appeal on the merits against the judgment of Letts J,
which was set down for hearing on 5 April 1993, was
never heard.
This was because Tradax, as has already been said, caused the vessel
to be arrested on 13 November 1992 at Durban
and applied,
inter
alia
,
for the enforcement in South Africa of certain judgments of the
Piraeus Multi Member Court of Appeal and for a declarator as to
the
ownership of the vessel, which application having been sent to trial
resulted in the judgment presently under appeal.
[40] On
27 November 1992, in an affidavit filed on behalf of the vessel and
Gardenia, Gardenia’s Durban attorney, Anthony
John Louis
Norton, referred to the proceedings pending in California and stated
that the jurisdiction of the California court,
to which Tradax had
submitted for the resolution of its claim, was in the circumstances
a more appropriate jurisdiction than that
of the Durban court for the
determination of the claim and he accordingly prayed on behalf of his
clients for the arrest of the
vessel to be set aside.
[41] Tradax
responded to this submission by filing an affidavit deposed to by
Emmanuel John Stephanakis, who, it will be remembered,
was its Greek
attorney, in which the following was said (I quote the affidavit as
it reads):
“
Whilst it is correct
that the appeals were pending the Applicant [Tradax]
tendered to Third Respondent
[Gardenia] by open correspondence that in the event of this
Honourable Court maintaining the arrest
and referring the matters in
dispute to trial it would cause the pending appeal to be abandoned
and withdrawn and the letter of
undertaking (which in any event has
been vacated by the Californian Court) to be returned to the Third
Respondent’s attorneys
in the USA. Since making such tender
the Applicant has decided there is no purpose in maintaining the
Appeal and has issued instructions
to its US lawyers to take the
necessary formal steps to abandon that Appeal. I verily believe that
by the date of the hearing of
this matter in South Africa these
formalities will have been completed and the Appeal will no longer be
pending.
....
As indicated above the Applicant
has abandoned the Appeal including any argument with regard to the
reinstatement of the letter
of undertaking.”
[42] On
30 March 1993 Gardenia’s Californian attorneys launched an
emergency motion in the US Court of Appeals for the Ninth
Circuit for
the immediate dismissal of the appeal on the ground of mootness. In
support of this motion Gardenia relied on the
allegation that Tradax
had in the Durban proceedings “undertaken and agreed to dismiss
the appeal”.
[43] Tradax
opposed this motion, denying that it had undertaken or agreed to
dismiss its appeal.
[44] On
2 April 1993 the US Court of Appeals for the Ninth Circuit gave its
judgment in the motion to dismiss the appeal. It
rejected
Gardenia’s contention that the appeal was moot but nevertheless
dismissed it, under rule 42 (b) of the Federal Rules
of Appellate
Procedure, on the ground that “Tradax’s representations
to the South African Court, under oath, and Gardenia’s
motion
to this court expressing willingness to dismiss constitute a
voluntary stipulated dismissal”. The reasons given by
the
Court of Appeals are set out fully in paragraph [66] below.
[45] In the
court
a quo
Tradax
led the evidence of three witnesses,
viz,
Emmanuel John Stephanakis, its Greek attorney, Professor Konstantinos
Kerameus, a Greek law professor, who testified as an expert
on Greek
law, and Professor Rudolph Eric Japikse, a Dutch professor, who
testified as an expert on Dutch law.
[46] Gardenia
led the evidence of three witnesses, Constantinos Tasiopoulos, its
Greek attorney, who testified as an expert on
Greek law, Wilhelmus
Verhoeven, who had acted as Chase Manhattan’s attorney in
regard to the judicial sale of the vessel
in Rotterdam and who
testified as an expert on Dutch law, and Alan Nakazawa, its American
attorney, who testified as an expert
on American Law.
[47] In the
court
a
quo
the following issues were argued by the parties:
(a) whether Decision 2367/90
which Tradax had obtained against Astyanax SA in Greece should be
enforced in South Africa;
(b) whether at the time of the
arrest in South Africa the vessel, notwithstanding her sale in
execution in Rotterdam and delivery
pursuant thereto, remained the
property of Astyanax SA and therefore liable for execution in
satisfaction of the judgment;
(c) whether
the issue of the ownership of the vessel was
res
judicata
as a consequence of the decision of Letts J in the US District Court
for the Central District of California;
(d) whether
the terms of the letter of undertaking furnished on behalf of
Gardenia to Tradax to secure the release of the vessel
from
attachment in the Californian proceedings precluded Tradax from
pursuing the proceedings in the court
a
quo
;
and
(e) whether
there was a non-disclosure of the Californian proceedings in the
ex
parte
application brought before the court
a
quo
for the arrest of the vessel and, as a consequence thereof, whether
the proceedings should have been dismissed.
[48] The
learned judge in the court
a
quo
found in the favour of Gardenia on issues (a), (b), and (d). In
regard to issue (e) he found that, had the existence of the
proceedings in California, the findings of Letts J and the letter of
undertaking been brought to his attention before he initially
granted
the arrest, he would not have made an order on the application. He
made no finding on issue (c).
[49] When
the matter was argued in this court submissions were advanced in
respect of the issues listed above. In addition two
further issues
were debated,
viz
:
(f) whether appellant’s
claim falls within the definition of a ”maritime claim”
in section 1 of the Admiralty
Jurisdiction Regulation Act 5 of 1983;
and
(g) whether
the doctrine expressed in the maxim
pretium
succedit in locum rei sub hasta
is
part of the law of the Netherlands and, if it does, whether the
appellant’s claims in this case were transferred to the
price
paid by Carla Maritime Inc after the judicial sale, with the result
that, even if Astyanax SA was still the owner of the
vessel when it
was arrested in Durban, Tradax’s claim could not be enforced by
means of an action
in
rem
brought against the vessel.
[50] When
issue (b) was debated in this court counsel also dealt with the
question, which was not dealt with in the court
a
quo
,
whether a reference to the
lex
situs
of the vessel to determine the legal effect of the judicial sale, in
this case the law of the Netherlands, was a reference to the
internal
law of the Netherlands or to the law of the Netherlands including its
rules of private international law, which in turn,
according to
Professor Japikse, refer to the law of Greece.
[51] In
view of the fact that I have come to the conclusion that both issues
(c) and (d) have to be decided in favour of Gardenia
it is
unnecessary in my opinion to say anything further regarding the other
issues which were debated in this case.
[52] I
commence with issue (c).
In its plea
Gardenia raised the defence that the issue of ownership of the vessel
was
res
judicata
by reason of the order for summary judgment granted by Letts J in the
U S District Court for the Central District of California
on 11
September 1991.
[53] Counsel
were agreed that in terms of our common law for the defence of
res
judicata
to succeed it had to be established that:
(a) the judgment relied on was
a final or definitive decision;
(b) it emanated from a
competent court;
(c) the judgment was between
the same persons; and
(d) the cause of action was the
same.
Counsel
were further agreed that these rules are equally applicable where the
judgment relied on was given by a foreign court.
[54] In my
view this summary of the legal position in relation to the doctrine
of
res
judicata
can be accepted provided that the phrase “the cause of action”
in (d) above is understood as referring not the cause
of action in
the strict sense but to “the same matter in issue” : see
Voet 44.2.4;
Boshoff
v Union Government
1932 TPD 345
and
Kommissaris
van Binnelandse Inkomste v Absa Bank Bpk
1995 (1) SA 653
(A).
[55] Counsel
for Tradax did not contend that the U S District Court for the
Central District of California was not a competent
court for the
purposes of the application of the rules relating to
res
judicata
nor that the same matter was not in issue. The parties were
obviously the same. They contended, however, that the decision given
by Letts J was not a final and definitive decision because Tradax did
not, so it was argued, have a full and fair opportunity to
litigate
the dispute in California because the Court of Appeals for the Ninth
Circuit denied it a review of the decision on the
merits.
[56] They
also contended that the Californian proceedings offended, so they
argued, our principles of natural justice, in particular
the
principle of
audi
alteram partem
,
and should accordingly on that ground also not be given effect to.
In support of this submission they contended that there was
a lack of
a fair hearing, referring in this regard to what was described as
“the manner in which Judge Letts arrived at his
decision and
the manner in which the appeal was dismissed”.
[57]
Counsel for Tradax also argued that faced with conflicting foreign
decisions on the question of ownership of the vessel,
viz
the American decision and judgments of the Greek courts, which they
submitted were “prior and clearly final and binding”,
the
court
a
quo
should have preferred to follow the decisions of the Greek courts. As
appears from paragraph [32] and [34] above the decision of
Letts J
was given on 11 September 1991 and the first relevant Greek decision
dealing with the ownership of the vessel was given
eight days later
on 19 September 1991.
[58] In
their submissions on this point counsel for Gardenia referred to
section 1 F of the Protection of Business Act 99 of 1978,
which
reads as follows:
“
It
shall
be a defence to any action brought in any court in the Republic if it
is proved to the satisfaction of such court that the cause
of action
founding the action so brought was the subject of a judgment given by
a court in a foreign country, if-
(a) in terms of the laws of
the foreign country the court which gave such judgment was competent
to give that judgment;
(b) in terms of such laws such
judgment is final and conclusive; and
(c) the parties to the
proceedings in which such judgment was given, or their successors in
title, are the same as the parties
to the proceedings in the
Republic”.
[59] Counsel
for Gardenia contended that Parliament has spelt out in the section
when a foreign judgment will constitute
res
judicata
and
that provided the foreign judgment relied on complies with the
provisions of the section (which they submitted was the case
here)
the court has no discretion to consider the issues raised by Tradax
in regard to the manner in which the dispute was dealt
with by Letts
J and the Court of Appeals for the Ninth Circuit.
[60] It is
by no means clear to me that Parliament, in enacting section 1 F,
intended to codify the law relating to
res
judicata
when a foreign judgment is involved. It may well be (I state the
possibility without deciding the point) that section 1 F only
applies
to such foreign judgments as are referred to in section 1 (1) (a)
read with section 1 (3) of the Act,
viz
judgments delivered or given in connection with civil proceedings
arising from an act or transaction “connected with the
mining,
production, importation, exportation, refinement, possession, use or
sale of or ownership to any matter or material”.
Because I
am of the view, on other grounds, that the defence of
res
judicata
must succeed it is not necessary for me to say anything further on
the question as to whether section 1 F of Act 99 of 1978 applies
in
this case.
[61] Counsel
for Gardenia contended further that the summary judgment was clearly
a final and definitive decision. They relied
on the testimony of Mr
Nakazawa, who referred in his evidence to an authoritative American
treatise,
Moore’s
Federal Practice,
where the following appears in the commentary on Rule 56, the rule
dealing with the American federal doctrine of summary judgment:
“A
determination of a summary judgment under Rule 56 is a final
adjudication of the merits of the claim presented; if granted
in
favor of a claimant it affirmatively adjudicates the merits of the
claim and if in favor of the defendant the judgment is
in bar and
not in abatement ... Matter in bar is that which is sufficient to
prevent a meritorious recovery on a claim.”
[62] Mr
Nakazawa also referred to
Ruple v City of Vermillion, South Dakota
[1983] USCA8 594
; ,
714 F 2d 860
(1983), a decision of the United State Court of Appeals
for the Eighth Circuit, in which it was held that for the purposes of
res
judicata
a judgment entered on a motion to dismiss or for summary judgment is
just as binding as a judgment entered after a trial of the
facts.
[63] Tradax’s
counsel, in support of their submission that final and preclusive
effect ought not to be given to Letts J’s
judgment, relied on a
concession made by Mr Nakazawa that in deciding whether preclusive
effect should be given to a judgment an
American Court will have
regard, as an element of the enquiry, to the question as to whether
there was a full and fair opportunity
to litigate the claim. They
referred also to a statement made by the Supreme Court of the United
States, in
Montana
v U S
[1979] USSC 29
; ,
1979, 99 S Ct 970
at 979 in note 11, which reads as follows:
“
Redetermination of issues
is warranted if there is reason to doubt the quality,
extensiveness,
or fairness of procedures followed in prior litigation.”
[64] Tradax’s
counsel also cited in support of their argument on this part of the
case a statement by Mr Nakazawa that in
deciding whether preclusive
effect is to be given to a prior judgment a U S Court will look at
the adequacy of the hearing and
the opportunity for review of the
decision by way of an appeal to a higher court. They submitted that
Tradax did not have a full
and fair opportunity to litigate the
dispute in California
“
... because the Court of
Appeals denied a review of the decision not on its merits or on the
ground of mootness but simply because
the dispute was to be litigated
at a trial in South Africa and in the circumstances it felt that
Tradax should be held to the undertakings
given on its behalf in
South Africa by Stephanakis. In doing so on the face of it the
provisions of Rule 42 (b) - on which it relied
- were given a
strained and unconvincing meaning.”
[65] Rule
42 (b) of the Federal Rules of Appellate Procedure is in the
following terms:
“If
the parties to an appeal or other proceeding shall sign and file with
the clerk of the court of appeals an agreement
that the proceeding
be dismissed, specifying the terms as to payment of costs, and shall
pay whatever fees are due, the clerk
shall enter the case dismissed,
but no mandate or other process shall issue without an order of the
court. An appeal may be dismissed
on motion of the appellant upon
such terms as may be agreed upon by the parties or fixed by the
court”.
[66] The
judgment given by the Court of Appeals when Tradax’s appeal was
dismissed reads as follows:
“
Appellee
Gardenia Maritime, Inc. has moved this Court for an order dismissing
the appeal as moot, on the basis of representations
made by counsel
for Appellant Tradax Ocean Transportation, S. A. in a sworn
deposition before the Durban and Coast Local Division
of the Supreme
Court of South Africa (the ‘South African Court’) in
proceedings involving the same parties to this
action. This appeal is
not moot, however, in that this Court retains jurisdiction of the
controversy and may grant effective relief.
See
Republic
National Bank of Miami v. United States
,
113 S. Ct. 554
(1992);
Elliott v
M/V
Lois B.
,
980 F.2d 1001
, 1004-05 (5th Cir. 1993).
Nevertheless,
a court of appeals may, in the exercise of its plenary power, dismiss
an appeal as frivolous or as not taken in good
faith.
Pacific
Westbound Conf. v. United States
,
[1964] USCA2 401
;
332 F. 2d 49
, 51 n.5 (9th Cir. 1964);
Cohen
v Curtis Publishing Co.
[1964] USCA8 182
; ,
333 F.2d 974
, 978 - 79 (8th Cir. 1964),
cert.
denied
,
380 U. S. 921
(1964). Moreover, on motion of an appellant we may
dismiss an appeal ‘upon such terms as may be ... fixed by the
court.’
Fed. R. App. P. 42 (b). This circuit has approved
dismissal of an action without a formal agreement signed by both
parties,
where there was an unqualified oral stipulation of dismissal
made in open court.
See
Eitel
v. McCool
,
782 F. 2d 1470
, 1473 (9th Cir. 1986). We see no reason why the
same conduct may not support dismissal of an appeal in this case.
Tradax’s
argument that there is no settlement agreement
between Gardenia and Tradax is irrelevant to whether Tradax’s
counsel’s
sworn representation to the South African Court
should bind it.
Tradax’s
counsel represented to the South African Court that Tradax had
‘decided there is no purpose in maintaining
the Appeal and has
issued instructions to its US lawyers to take the necessary formal
steps to abandon that Appeal.’ Stephanakis
Affidavit at 70 ¶
229. Counsel did not mention that extracting a settlement of
Gardenia’s counterclaims was a part of
the ‘necessary
formal steps.’ Counsel represented it as a done deal: Tradax
‘has abandoned the Appeal.’
Id
.
¶ 230. This appears to be an expression of unqualified intent
to dismiss. Furthermore, Tradax denied that it has submitted
to the
jurisdiction of the United States District Court or that the United
States courts are an appropriate forum.
Id.
at 80 ¶ 261.
This presents
an even stronger case for finding a mutual stipulation to dismiss
than
Eitel
,
since Tradax’s statement of intent to dismiss appears in a
written document signed under oath. Gardenia, obviously, has
a mutual
intent to dismiss. We find Tradax’s representations to the
South African Court, under oath, and Gardenia’s
motion to this
Court expressing willingness to dismiss constitute a voluntary
stipulated dismissal under F.R.A.P. 42 (b). Accordingly,
the appeal
is DISMISSED.”
[67] I do
not agree with Tradax’s counsel’s submission that Tradax
did not have a full and fair opportunity to litigate
the dispute in
California because the Court of Appeals denied a review of the
decision. As appears from the judgment of the Court
of Appeals the
appeal was dismissed because Tradax’s representative had said
under oath in the court
a
quo
that
Tradax had abandoned the appeal and Gardenia, as the court said, had
“a mutual intent to dismiss”. In the circumstances,
the
Court of Appeals was entitled, in the exercise of its plenary power
to dismiss the appeal “as frivolous or as not taken
in good
faith” to make the order it did. There was nothing inherently
unfair or unjust in what the court did. (Whether
a South African
court would have reached the same conclusion in the same manner is
irrelevant.)
[68] Nor
can Tradax justifiably complain about the procedure followed by Letts
J. It is clear that both parties were afforded a
full hearing at the
summary judgment application and were in fact offered the opportunity
of delivering further argument after
the judge had informed the
parties that he had decided to grant Gardenia’s motion for
summary judgment. Tradax after receiving
this invitation decided not
to reargue the matter.
[69] The
quotation from the decision of the United States Supreme Court in
Montana
v U S, supra
,
upon which Tradax’s counsel relied is taken from a footnote
from which it appears that the court relied expressly on the
formulation appearing in Restatement (Second) of Judgments, Tentative
Draft No 4, 1977, § 68 1 (c), the comment to which
says that
preclusion should only be denied upon “a compelling showing of
unfairness”.
[70] I
do not think that it can be said in this case that there was a
compelling showing of unfairness such that the preclusive
effect of
Letts J’s judgment should be denied. Tradax appealed to the
Appeals Court and at the same time it rearrested
the vessel in
Durban. In my view it clearly had to choose in which forum to
proceed. In the Durban proceedings it expressly stated
that it was in
the process of abandoning the appeal in California. By doing so it
compromised its US appeal. This led to the appeal
being dismissed and
that, in turn, rendered the summary judgment on the issue of
ownership final.
[71] Although
all the parties were keen to litigate in South Africa, by not
protecting its own position
vis-à-vis
Gardenia, Tradax exposed itself to a plea of
exceptio
rei judicatae.
It could have protected itself by obtaining an acknowledgement from
Gardenia that a
res
judicata
plea would not be advanced, failing which it should have pursued the
US appeal proceedings to finality. I do not think that its
failure to
protect its position deprives Letts J’s decision of preclusive
effect.
[72] In
my view the contention advanced by Tradax’s counsel that the
Greek decisions on the ownership of the vessel should
be preferred to
the American decision must also be rejected. In my view the only
relevant Greek decision, where both Tradax and
Gardenia were before
the court, is that given by the Piraeus Court of Appeal in Decision
1153/91, on 19 September 1991, eight days
after the decision of Letts
J on which Gardenia relies. That decision was, however, (as stated in
paragraph [38] above) “extinguished”
pending a decision
on Gardenia’s abuse of right contention after evidence had been
heard by a judge of the First Instance
Court of Piraeus. I do not
think that any effect can be given in this country to Decision
1153/91 while it remains “extinguished”
as a result of
Decision 1108/92.
[73] This
renders it unnecessary for me to deal with a contention advanced by
Gardenia’s counsel to the effect that logic
dictates that Letts
J’s judgment, which was the earlier judgment, should in any
event be preferred to Decision 1153/91 (cf
Spencer Bower, Turner and
Handley,
Res Judicata,
3rd ed, paragraph 372 and
Showlag
v Mansour & Others
[1995] 1 AC 431
(PC)).
[74] I
am accordingly satisfied that issue (c) has to be decided in favour
of Gardenia.
[75] I am
also of the view that issue (d) was correctly decided in the court
a
quo
in favour of Gardenia.
[76] As
the letter of undertaking was given in California in order to secure
the release of the vessel there, its interpretation
is governed by
its proper law, which in this case is the law which would be applied
in a federal court sitting in California. Counsel
did not refer us to
any American legal decisions on the point nor have we been able by
our own efforts to discover any directly
in point. It is not
suggested, however, that the approach which a federal court sitting
in California would adopt differs in
any way from the approach which
a South African court would adopt in construing the terms of the
letter had it been given to secure
the release of the vessel from a
South African arrest.
[77] The
terms of the letter of undertaking have been set out in
paragraph [30] above. The key portion reads as follows:
“
[1] In consideration of
your (i e Tradax’s) releasing [the vessel] from attachment in
the action ... Case No 90-4419 RB (GHkx)
... and [2] in further
consideration your agreeing not to re-attach or arrest the Vessel ...
for the claims which you have asserted
in the aforesaid action, [3]
we agree to satisfy any judgment which ultimately, after appeal, if
any, may be rendered in the said
action ...”
[78] Counsel
for Tradax contended that on a proper reading of the letter of
undertaking it relates only to claims made in the Californian
proceedings and cannot be construed as an undertaking never to
re-attach or arrest the vessel.
[79] In
my opinion this interpretation of the letter of undertaking is
plainly incorrect.
In
terms of the letter of undertaking Gardenia promised:
to
provide a guarantee for a sum in excess of the amount of the claim.
And
Tradax promised:
(i) To
release the vessel immediately
(ii) To
restrict its claim to $600 000
(iii) Not
to re-arrest the vessel.
[80] If
Tradax’s action in California had been taken to its conclusion,
and succeeded, the guarantor would have paid Tradax
in terms of the
letter of undertaking. If, on the other hand, the action failed the
guarantor would have been released. (As it
happens the action was not
pursued to finality and therefore the guarantor was held to be
released from its undertaking.)
[81] Interdependence
or reciprocity existed between (i) Gardenia’s promise to
provide and maintain the security, pending
the successful outcome of
the current proceedings, and (ii) Tradax’s promise, inter alia,
not to re-arrest the vessel; it
did not exist between (i) the promise
to provide the security, whatever the outcome of the proceedings,
even if they failed, and
(ii) the promise not to re-arrest the
vessel. The letter is not in terms limited to re-attachments or
arrests in California
and no basis exists for such an implied
restriction of its express terms. It was given to effect the release
of the vessel from
arrest in California. The parties would not have
contemplated further arrests or attachments in California for the
reason, as was
submitted by counsel for Gardenia, that, security
having been given for Tradax’s claim, such further arrest or
attachment
in California would have been very remote indeed. Gardenia
would, however, have been concerned about arrests in other
jurisdictions
and the undertaking not to attach or arrest is to be
read in the light of that concern. It is therefore clear in my view
that
the effect of the giving of the letter of undertaking in this
case was, in the words of Willmer J in
The
Hartlepool
(1950) 84 Lloyd’s List Law Reports 145 (PDA) at 146, that
“
the ship’s release
[was] purchased and she is free from further arrest in any country in
respect of the same claim”.
(See also
The
Soya Margareta
[1960] 2 All ER 756
(PDA) at 761 G - H, where the
dictum
of Willmer J was cited with approval.)
[82] This
appears also to be the effect of the case law on the point in the
United States: see Gilmore and Black,
The
Law of Admiralty
,
2
nd
ed, p 799, citing
The
New England (J K Welding Co Inc v Gotham Marine Corp
)
47 F 2d 332
at 335;
American
Jurisprudence
2d, vol 2
“Admiralty
”
§ 233 and
Overstreet
v Water Vessel Norkong
[1983] USCA5 704
; ,
706 F 2d 641
(5
th
Cir) at 643 fn 2 : “Once a vessel is released from arrest by a
bond, the vessel itself can no longer be held to answer for
the
claims the bond is designed to meet. The bond is the claimant’s
sole source of recovery”. (It seems that the position
is the
same where, as here, a letter of undertaking is given instead of a
bond: see
Continental
Grain Company v Federal Barge Lines Inc
[1959] USCA5 378
;
268 F 2d 240
(5
th
Cir) at 243.)
[83]
Counsel for Tradax also contended that if, for example, the insurer
had gone into liquidation after judgment had been given
in favour of
Tradax it could hardly be contended that an attachment of the vessel
was impermissible for the purposes of execution.
The fact
that cases may arise where the guarantor goes into liquidation or is
sequestrated after the release of the vessel does
not compel one to a
conclusion different from that stated above. Either the liquidation
or sequestration of the guarantor and
his or its consequent inability
to honour the guarantee will entitle the party accepting the
guarantee to resile from his or its
promise not to arrest the vessel
again in respect of the claim (
cf
Westminster Bank Ltd and Ano v West of England Steamship Owners’
Protection and Indemnity Association Ltd and Ano
(1933) 46 Ll L Rep 101) or, possibly, the view will be taken that as
the insolvency of those giving the letter of undertaking was
something which the person who arrested the vessel could have
foreseen, it was a risk that was taken and the vessel is still immune
from re-arrest in respect of the original claim:
cf
US v Ames
99 US 35
(1878), to which Gilmore and Black refer,
op
cit
p 800 fn 466.
[84] Whatever
the position may be where the grantor of the letter of undertaking
goes into liquidation or is sequestrated, nothing
of that kind
happened here. There is no reason to believe that the undertaking
would not have been honoured if Tradax had obtained
judgment in its
favour in Case 90-4419 RB (GH kx).
[85] Finally,
counsel for Tradax argued that at the time of the arrest in South
Africa Gardenia’s American attorneys were
contending that the
security in question had been rendered void by the decision of the
District Court and were demanding that the
letter of undertaking be
returned. Tradax’s counsel contended further that for Gardenia
to rely on the letter of undertaking
to resist the arrest of the
vessel in South Africa while at the same time contending that the
security was no longer operative
amounted to approbating and
reprobating.
[86] In
my view this contention cannot be accepted. It is not correct to say
that Gardenia’s attorneys were contending that
the letter of
undertaking was void. What they were contending was that the security
undertaking contained in the letter had lapsed
by reason of Letts J’s
judgment exonerating the security. In truth what had happened was
that the insurance company’s
obligation to satisfy any judgment
given in the action which was enforceable against the vessel fell
away (subject to a possible
reversal on appeal) when the judge ruled
that the vessel belonged after the judicial sale not to Astyanax SA
but to Gardenia for
the reasons stated earlier. But for the reasons
stated earlier it did not and cannot follow that Tradax’s
counter promise
(not to re-arrest the vessel) also fell away.
[87] It
may be going too far to say that, as contended by counsel for
Gardenia, on a proper interpretation of the letter the parties
intended that the undertaking not to re-attach or arrest should
remain effective even although the security was no longer in place
whatever the reason for that might be. What seems quite clear,
however, is that it could never have been intended that the
undertaking
would fall away as a consequence of the fact that the
security was no longer operative by reason of a final and binding
judicial
decision negating the existence of the very basis upon which
the claim for, and the provision of, security rested. If Tradax lost
the case in America, it could not simply re-attach or arrest in
another jurisdiction and continue litigating there or elsewhere.
That
could not have been the basis on which the letter of undertaking was
issued.
[88] In
the circumstances I am satisfied that the appeal must fail. The
following order is made: The appeal is dismissed with
costs,
including those occasioned by the employment of two counsel.
I
G FARLAM
ACTING JUDGE OF APPEAL
NIENABER
JA )
MARAIS
JA )
PLEWMAN
JA ) - Concur
STREICHER
JA )