MT Pretty Scene: - Galsworthy Ltd v Pretty Scene Shipping SA and Another

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Wallis JA, Zondi JA, Mocumie JA, Schippers JA and Goosen AJA
• Judgment Date: 12 April 2021
• Court: Supreme Court of Appeal
• Hearing Date: 12 April 2021
• Citation: 2021 (5) SA 134 (SCA)
• Counsel: M Wragge SC for the appellant. GD Harpur SC for the respondent.
• Docket Number: 684/219 [2021] ZASCA 38

Wallis JA (Zondi JA, Mocumie JA, Schippers JA and Goosen AJA concurring):

[1] On 18 June 2007 and by way of the exchange of recapitulation messages dated 17 and 18 June 2007, the appellant, Galsworthy Ltd (Galsworthy), let, and Parakou Shipping Pte Ltd (Parakou Shipping) hired, the MV Canton Trader (to be renamed Jin Kang) on a time charterparty for a minimum of 60 and maximum 63 months, with

Wallis JA (Zondi JA, Mocumie JA, Schippers JA and Goosen AJA concurring)

delivery due to take place at Singapore between March and April 2009. Parakou Shipping did not intend to trade the Jin Kang but concluded a back-to-back five-year charterparty with an entity called Ocean Glory at a slightly higher charter rate. However, with the collapse in the charter market as a result of the world financial crisis in 2008, Ocean Glory went into liquidation. Thereafter the shareholders and directors of Parakou Shipping sought unsuccessfully to extricate it from the charter with Galsworthy. Ultimately Parakou Shipping refused to take delivery of the vessel when tendered.

[2] Arbitration in London followed in which Galsworthy sought damages from Parakou Shipping for its repudiation of the charterparty. In a first final arbitration award dated 31 August 2010 the appointed arbitrators declared that —

'the parties entered into a legally binding charterparty as a result of the ratification by the Charterers of the terms set out in the recapitulation messages of 17 and 18 June . . . and that the Charterers are accordingly in repudiatory breach of charter'.

Flowing from that conclusion the arbitrators made an award in favour of Galsworthy in an amount of USD 2 673 279,15. Parakou Shipping had conceded during the course of the hearing that if they were found to be in breach of charter they were liable for damages in that sum. The balance of Galsworthy's claim for additional damages and costs was reserved for further adjudication. On 13 May 2011 the arbitrators made a second final arbitration award in favour of Galsworthy for payment of damages in the sum of USD 38 579 000, together with interest and costs.

[3] The present appeal arises from Galsworthy's attempts to enforce payment of those awards by way of an action in rem against the MT Pretty Scene as an associated ship in relation to the Jin Kang. It initially arrested the Pretty Scene on 18 June 2016. The first respondent, Pretty Scene Shipping SA (PSS), the owner of the Pretty Scene, applied to set the arrest aside. The application came before Vahed J and the arrest was set aside on 31 October 2016. Vahed J refused leave to appeal, but this court granted leave to appeal to the full court of the KwaZulu-Natal Division. In anticipation of an unfavourable judgment from Vahed J, Galsworthy effected a second arrest of the Pretty Scene on 28 October 2016. An application by PSS to set aside that arrest, and a counter-application for security for a claim for wrongful arrest under s 5(4) of the Admiralty Jurisdiction Regulation Act 105 of 1983 (the AJRA), were dismissed by Henriques J on 10 August 2017. Reasons were provided on 22 September 2017. Like Vahed J, Henriques J refused leave to appeal, but this court again granted leave to appeal to the full court.

[4] The two appeals were heard in a consolidated hearing on 1 August 2018 and judgment was delivered (Mbatha J, with Madondo DJP and Van Zyl J concurring) on 4 March 2019. The appeal against Vahed J's order was dismissed and that against Henriques J's judgment upheld. In the result both arrests were set aside and the counter-application for security for costs was granted. The order of the full court does not specify the terms on which security was ordered, merely recording that:

Wallis JA (Zondi JA, Mocumie JA, Schippers JA and Goosen AJA concurring)

'The applicant's counter-application be and is hereby upheld with costs, costs to include costs of two counsel where applicable.'

It must be accepted therefore that the order was in the terms prayed and meant that security was to be provided in an amount in excess of USD 6,6 million, plus interest and costs. The appeals are before us by virtue of the grant of special leave by this court.

Mootness

[5] PSS contended that the appeals had become moot, because after its arrest the Pretty Scene was sold and the proceeds distributed under ss 9 and 11 of the AJRA. It is common cause that Galsworthy received nothing in consequence of that sale and distribution. On that basis it was submitted that success in the appeals would have no practical effect or result and therefore that they should be dismissed in terms of s 16(2)(a)(i) of the Superior Courts Act 10 of 2013.

[6] There is no merit in this contention. In the first instance there remains a live issue in that the full court's order that Galsworthy provide security for PSS's claim for damages for wrongful arrest remains in existence, albeit that security has not yet been furnished. In any event the jurisdiction of the South African courts to deal with such a claim has been established. [1] Furthermore, the case raises matters of importance in regard to admiralty procedure and it is desirable that these be resolved in the wider interests of clarifying the law and practice in admiralty cases. [2]

The first arrest

The procedural objection to the first arrest

[7] Galsworthy applied ex parte to judges in KwaZulu-Natal, [3] the Eastern Cape and the Western Cape, for orders directing the registrars of those courts to issue warrants of arrest and accompanying writs of summons in respect of eight vessels. The eight vessels were product tankers alleged to be associated ships in relation to the Jin Kang. Galsworthy brought the applications before judges because it wanted confidentiality orders in respect of the applications and the warrants of arrest, with a view to ensuring that Parakou Shipping would not learn of them and divert the vessels elsewhere to avoid arrest. This could occur via an inspection of the register of admiralty actions at the courts. It is not uncommon for confidentiality orders to be sought and granted in admiralty proceedings, both in rem and in personam.

[8] The application was brought in the conventional form on notice of motion supported by an affidavit detailing the claim; the basis for association; and the reasons for seeking confidentiality. The order was

Wallis JA (Zondi JA, Mocumie JA, Schippers JA and Goosen AJA concurring)

granted in all three divisions. The warrants and writs of summons in the KwaZulu-Natal Division were subsequently extended for two years by way of a further order granted on 29 March 2016.

[9] An application to set aside the arrest of the Pretty Scene was launched on 1 July 2016, two weeks after its arrest. When the arrest was made, only the warrant of arrest and writ of summons were served, but a copy of the application papers was furnished to PSS's attorneys by Galsworthy's attorneys before the application to set aside the arrest was launched. The application raised a number of issues, principal among which was a procedural objection that the summons did not comply with the requirements of the judgment in The Galaecia [4] and Practice Directive 27 (the Directive) issued by the KwaZulu-Natal Division of the High Court. This objection was upheld by Vahed J and the arrest set aside. He did not address any of the other grounds on which the arrest was challenged. His decision was upheld by the full court for essentially the same reasons as his.

[10] With respect, this conclusion was erroneous for the following reasons:

(a)

PSS's procedural objection was misconceived, as a warrant of arrest cannot be set aside because of deficiencies in the writ of summons;

(b)

the decision in The Galaecia was misconstrued;

(c)

the approach to the Directive misconstrued admiralty rule 2(1)(b) and imposed requirements on the contents of a summons that are inconsistent with the general structure of the admiralty rules, unnecessary and unduly burdensome;

(d)

the summons in any event complied with the requirements of the Directive in the only respect in which it was challenged.

Each of these will be dealt with in turn.

The misconceived challenge to the warrant

[11] For the purposes of considering this point I will assume that PSS was correct in saying that the writ of summons was defective. However, its aim was to set aside the arrest of the Pretty Scene. Accordingly, it needed to show that the order directing the registrar to issue the warrant of arrest was invalid. For the procedural objection to have effect, the defect in the summons had to invalidate both the order that the warrant of arrest be issued and the warrant itself.

[12] The parties appeared to accept that the invalidity of the summons would lead inexorably to the invalidity of the warrant of arrest. The assumption was that the two are mutually interdependent, that is, the one cannot exist without the other. That is not the case. This is apparent

Wallis JA (Zondi JA, Mocumie JA, Schippers JA and Goosen AJA concurring)

from admiralty rule 4(3), which provides that the registrar may only issue a warrant of arrest if summons has been issued, but makes an exception in the case where the arrest is ordered by the court. The court may order an arrest without a summons being issued, as may well occur in circumstances of extreme urgency. If a vessel is about to depart from the jurisdiction an arrest may be ordered on affidavits, or oral evidence, placed before a judge at home in the middle of the night. While this is fortunately relatively unusual, it does occur and the rule accommodates it. What it demonstrates is that there is no link between the arrest and the summons. A deficiency in the latter does not affect the validity of the former.

[13] Even were the summons and the warrant of arrest linked I fail to see on what basis a...