MV Heavy Metal Belfry Marine Ltd v Palm Base Maritime Sdn Bhd

• Jurisdiction: South Africa
• Judge: Comrie J
• Judgment Date: 07 May 1999
• Citation: 2000 (1) SA 286 (C)
• Docket Number: AC74/98
• Hearing Date: 27 August 1998
• Counsel: J J Gauntlett SC (with him P J Berthold) for the applicant. D A Gordon SC (with him M Wragge) for the respondent.
• Court: Cape Provincial Division

Comrie J :

This matter can perhaps best be E described as an application in admiralty for counter-security. It arises in this way. On 1 April 1998 Veldhuizen AJ granted an ex parte application for the arrest of a vessel rejoicing under the name Heavy Metal. It was a security arrest in terms of s 5(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983, as amended, the purpose being to obtain security in arbitration F proceedings in London between Palm Base (the then applicant and present respondent) and Dahlia Maritime Ltd (the then first respondent). It was also an 'associated ship' arrest. The Heavy Metal was at that time owned by Belfry Marine (the present applicant and then third respondent). Palm Base alleged in the arrest proceedings that the Heavy Metal was an 'associated' ship within the G contemplation of s 3(6) and s 3(7) of Act 105 of 1983. The underlying dispute arose from the sale and delivery of another vessel, the MV Sea Sonnet, by Dahlia to Palm Base, which sale was concluded in October 1996 under a Bimco Saleform 1987, as adjusted. Clause 15 provided for arbitration in London and that the contract be subject to English law. Palm Base, as buyer, contended that Dahlia, as seller, was in breach of clause 11 of the sale agreement:

'11. Condition on delivery H

The vessel with everything belonging to her shall be at the seller's risk and expense until she is delivered to the buyers, but subject to the conditions of this contract, she shall be delivered and taken over as she is at the time of inspection, fair wear and tear excepted.

However, the vessel shall be delivered with present class free of I recommendations. The sellers shall notify the classification society of any matters coming to their knowledge prior to delivery which upon being reported to the classification society would lead to the withdrawal of the vessel's class or to the imposition of a recommendation relating to her class.'

Delivery took place at Singapore on 13 December 1996. Not long thereafter the Sea Sonnet (renamed Seri Ibonda) developed engine J

Comrie J

trouble; other problems were discovered; and expensive repairs became A necessary. The amount of loss and damage suffered by Palm Base was alleged to have been US$2 737 776,49. Simple interest thereon calculated over a period of three years, by when the arbitration might be concluded, amounted to US$657 066. Recoverable costs of the arbitration were estimated at around US$400 000. Palm Base accordingly sought and obtained an order for the arrest of the B Heavy Metal as security for those sums, amounting in the aggregate to US$3 794 842.

The Heavy Metal was duly arrested pursuant to the order granted by Veldhuizen AJ. Belfry Marine moved to set aside the arrest. It recognised that Palm Base had to satisfy three requirements for such arrest, viz: C

(i)

that Palm Base had a prima facie claim enforceable by an action in rem in respect of Sea Sonnet;

(ii)

that on a balance of probabilities Heavy Metal and Sea Sonnet were 'associated ships'; and

(iii)

that on a balance of probabilities Palm Base had a genuine and reasonable need for the security sought. D

See Cargo Laden and Lately Laden on Board the MV Thalassini Avgi v MV Dimitris 1989 (3) SA 820 (A). The attitude which was taken by Belfry Marine through its representative, Lemonaris, was that Palm Base had 'failed to establish the alleged association' (see (ii) above), and for that reason alone the arrest fell to be set aside. Lemonaris, in his affidavit, went on to state: E

'9. In these circumstances the third respondent does not intend, and is indeed not required, to deal with those parts of the applicant's application which deal with its alleged prima facie case and need for security. The third respondent, however, placed the following on record: F

9.1

it is denied that the applicant has a claim against the first respondent, either prima facie or otherwise, and furthermore that any such case has been made out in the applicant's application; and

9.2

it is denied that the applicant has any need for security; and

9.3

the quantum of security demanded by the applicant is excessive.' G

Belfry Marine's application to set aside the arrest, which was opposed by Palm Base, came before Thring J who, after hearing argument, dismissed the application and thus in effect confirmed the arrest of the Heavy Metal. See MV Heavy Metal: Palm Base Maritime SDN BHD v Dahlia Maritime Ltd and Others 1998 (4) SA 479 (C). H On the 'association' issue the learned Judge found in favour of Palm Base. An additional point of law was debated (at 484 - 5 of the reported judgment). Following October International Navigation Inc v MV Fayrouz IV 1988 (4) SA 675 (N), notwithstanding a subsequent amendment to the relevant provisions of Act 105 of 1983, the learned Judge held against Belfry Marine. Thring J, however, granted leave to appeal from his judgment to the Supreme Court of Appeal. I

The present application is brought by Belfry Marine against Palm Base. The powers which I am asked to invoke are to be found in s 5(2)(a) - (c) of Act 105 of 1983:

'5(2) A Court may in the exercise of its admiralty jurisdiction - J

Comrie J

(a)

consider and decide any matter arising in connection A with any maritime claim, notwithstanding that any such matter may not be one which would give rise to a maritime claim;

(b)

order any person to give security for costs or for any claim;

(c)

order that any arrest or attachment made or to be made or that anything done or to be done in terms of this Act or any order of the Court be subject to such conditions as to the Court appears just, whether as to the furnishing of security or the liability B for costs, expenses, loss or damage caused or likely to be caused, or otherwise;

. . . .'

There is authority for the view, which I shall consider later in this judgment, that the aforegoing provisions empower this Court, in C the exercise of its admiralty jurisdiction, to order that counter-security be furnished.

The relief (as amended) now sought by Belfry Marine is an order that Palm Base furnish security in an amount of US$1 709 635,40 (for capital, interest and costs) in respect of Belfry Marine's claim for damages against Palm Base arising from the arrest of the Heavy D Metal on 1 April 1998. That action is to be instituted in this Court. In addition to the prayer for costs, there is a further relevant prayer:

'5. Directing that, should the respondent fail to provide security in terms of para 2 of this order, the arrest of the MV Heavy Metal effected on 1 April 1998 at the instance of E respondent shall be and become of no force and effect and shall be deemed to have been set aside by order to the above honourable Court.'

As a matter of substantive right, as distinct from security, the present application is founded on s 5(4) of Act 105 of 1983:

'5(4) Any person who makes an excessive claim or requires F excessive security or without reasonable and probable cause obtains the arrest of property or an order of Court, shall be liable to any person suffering loss or damage as a result thereof for that loss or damage.'

It may be pointed out that Palm Base has made no 'claim' against Belfry Marine directly. Palm Base's claim lies against Dahlia and is G the subject-matter of the arbitration in London. For present purposes that makes no material difference since the amount of Palm Base's claim influenced the amount of security which was sought through the arrest. That forms part of one leg of Belfry Marine's application, namely that Palm Base, in the arrest application and subsequently, demanded and required excessive security. The other leg of the H application is that Palm Base allegedly obtained the order of Court for the arrest of the Heavy Metal and its arrest 'without reasonable and probable cause'. The enquiry here was directed principally at the merits of Palm Base's claim against Dahlia. As I have indicated, Belfry Marine avers that it has suffered damages as a result of the aforegoing, that it is entitled to recover such damages I from Palm Base in terms of s 5(4) and that it should be granted (counter-) security for such claim in terms of s 5(2) coupled with the sanction set out in prayer 5.

The papers are voluminous. In this application (AC 74/98) alone, they run to 370 pages and include six affidavits instead of the usual three. Counsel did not argue the striking out of paras 17 - 20 of the first affidavit J

Comrie J

of Mr Posemann (Palm Base's attorney), nor did they argue the objections A to some of the later affidavits. They rather left it to me to adopt a sensible attitude towards those parts of the record, asking me to bear in mind the objections which had been lodged. I shall do my best to comply, keeping in mind, first, that hearsay is more readily admissible in admiralty and, second, that some of the facts contained in the fourth and subsequent affidavits are most relevant. Among them: that security by way of a bank guarantee in the sum of B US$1,3m was eventually put up and accepted on about 9 July 1998, freeing the Heavy Metal from arrest and enabling her to proceed on what appears to have been her final voyage to the scrapyard. This lead to Belfry Marine's recalculation of its claim in the amount of US$1 709 635,40. It was on about the same date that Palm Base's points of claim (against Dahlia) were filed in the London arbitration. C It may be observed that the points of claim disclose causes of action (for example implied terms and misrepresentations) additional to the original reliance on alleged breaches of clause 11. D

The ambit of clause 11

I have set out the provisions of this clause earlier in the judgment. For completeness it should be read with clause 17, especially the first sentence:

'Vessel...