MV Heavy Metal; Belfry Marine Ltd v Palm Base Maritime SDN BHD

• Jurisdiction: South Africa
• Judge: Smalberger JA, Nienaber JA, Marais JA, Melunsky AJA and Farlam AJA
• Judgment Date: 31 May 1999
• Citation: 1999 (3) SA 1083 (SCA)
• Docket Number: 323/98
• Hearing Date: 08 March 1999
• Counsel: J J Gauntlett SC (with him P J Berthold) for the appellant. D A Gordon SC (with him M Wragge) for the respondent.
• Court: Supreme Court of Appeal

E Farlam AJA:

[1] This is an appeal with the leave of the Court a quo from a judgment of Thring J sitting in the Cape of Good Hope Provincial Division exercising its admiralty jurisdiction in terms of the Admiralty Jurisdiction Regulation Act 105 of 1983 (to which I shall hereinafter refer as 'the Act'). F

[2] The order against which the appeal is brought was for the arrest of the appellant's motor vessel Heavy Metal, in terms of s 5(3) of the Act, the purpose of the arrest being to provide the applicant therefor, the respondent in this Court, with G security for a claim for US$2 737 776,49 (plus interest and costs) which is to be the subject of an arbitration which the respondent contemplates bringing in London against a company known as Dahlia Maritime Ltd (to which I shall hereinafter refer as 'Dahlia').

H [3] This claim, which is alleged to be a maritime claim in terms of s 1(1)(c) of the Act, arose from a dispute under a memorandum of agreement dated 23 October 1996, in terms of which the respondent, Palm Base Maritime SDN BHD, a Malaysian company, purchased the MV Sea Sonnet (to which I shall hereinafter refer as 'the Sea Sonnet'), which was later (after she became the property of the I respondent) renamed the MV Seri Ibonda, from Dahlia. Both Dahlia and the appellant are companies incorporated in the Republic of Cyprus, with their registered offices at the same address.

[4] The respondent's claim against Dahlia is based on an alleged breach of clause 11 of the memorandum of agreement, which reads as follows: J

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'11. Condition on delivery A

The vessel with everything belonging to her shall be at the sellers' 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 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.' B

[5] According to a report furnished to the respondent by Michael Cheyne, a C consultant marine engineer, 'numerous problems with the vessel were uncovered after [her] delivery and these were matters which should have been reported to . . . the seller's classification society'. He stated further that in his opinion, Dahlia, the seller, was 'unquestionably in breach of clause 11' of the memorandum of agreement.

[6] Mr Cheyne expressed the view in his report that if the 'matters [in question] had D been reported to class then recommendations would have been imposed'. Attached to his report was a 'schedule of losses' totalling US$2 737 776,49, which losses had arisen, according to Mr Cheyne 'due to seller's breach of the [memorandum of agreement]'.

[7] The respondent sought the arrest of the Heavy Metal on the basis that she E was, so it was alleged, a vessel associated with the Sea Sonnet in terms of s 3(6) and (7) of the Act and that it had a genuine and reasonable need for security in the arbitration.

[8] In the founding affidavit filed on the respondent's behalf the allegation that the Heavy Metal and the Sea Sonnet were associated ships was put on two bases. F

[9] The first was that one Emilios Lemonaris, a Cypriot advocate, was the majority shareholder and sole director of both Dahlia and the appellant. G

[10] The second was that the same person, probably one Nikolaos H Vafias, exercised what was called ultimate control over an entire group of vessel owning companies, plus a company called Brave Maritime Corporation Inc, which is incorporated in Greece, and which managed and operated a fleet of vessels which included the Heavy Metal and the Sea Sonnet, when it belonged to Dahlia. H

[11] As far as Lemonaris was concerned it was stated in the affidavit filed on behalf of the respondent that he was 'probably a nominee for Mr Vafias and his family'. The deponent of the affidavit continued:

'To the best of the knowledge and belief of those instructing me, he is not directly I involved in the business of owning or operating ships but serves as a ''postbox'' and registered office for the Brave Maritime group of companies, and possibly in other roles, such as the authorised signatory of the companies. If I am wrong in this speculation, however, in any event he has a controlling interest in all of the vessels by virtue of his position as majority shareholder.'

[12] Earlier in the affidavit it was submitted that the Sea Sonnet and the J

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Heavy Metal were associated because Lemonaris 'apparently has the power directly or indirectly to control the vessels'. A

[13] In an opposing affidavit filed on behalf of the appellant, Mr Lemonaris stated that the shares he held in Dahlia and in the appellant were held by him as nominee for non-residents of Cyprus. He added:

B 'It is normal practice in Cyprus for advocates to be appointed as nominee shareholders and directors. We act on the instructions of beneficial owners, which instructions are often given through intermediaries. We are required by the laws of Cyprus to abide strictly by, and carry out, these instructions and we are more often than not, as in the case of my relationship with [Dahlia] and [the appellant], simply ''postboxes''.

C I am therefore merely a nominee director and shareholder of [Dahlia] and [the appellant] in which I have no interest or ownership. I exercise no control over these companies and, indeed, I have no discretion to represent these companies without having received instructions as I have, for example, for the purpose of dealing with this application.

D Cypriot advocates are not, in terms of the ethical rules applicable, permitted to disclose information given to them in confidence by their clients. The information contained in the instructions given to me when I attended to the registration of [Dahlia] and [the appellant] was given to me in confidence and I am accordingly not at large to disclose this information.

E I am, however, able to disclose that Mr Nikolaos Vafias did not own or control [Dahlia] at the time of the delivery and sale of the MV Sea Sonnet or at any other material time.'

[14] While admitting that the Sea Sonnet was managed by Brave Maritime Corporation Inc he denied that the vessel was operated by it and also denied that a document annexed to the affidavit filed on the respondent's behalf and relied on by it to show that the Heavy Metal was operated by Brave Maritime Corporation Inc indicated that fact. He said, correctly, in my view, that the document concerned showed no more than that Brave Maritime Corporation Inc was an agent for the Heavy Metal. F

[15] He denied the allegation in the founding affidavit that he had a controlling interest in all the vessels allegedly managed by Brave Maritime Corporation Inc, including the Heavy Metal. He admitted the earlier allegation made on behalf of the respondent, which has been quoted in para [11] above, that he served as a 'postbox' for Dahlia and the appellant. G

[16] In response to the allegation that he 'apparently had the power directly or indirectly to control' the Sea Sonnet and the Heavy Metal, he pointed out that it was alleged elsewhere in the affidavit that the ultimate control over the vessels rested with Vafias and that he, Lemonaris, was merely a nominee for Vafias and his family. H

[17] In a subsequent affidavit filed on behalf of the appellant Mr Lemonaris stated that during the whole of the period from 23 October 1996, the date of the I memorandum of agreement relating to the sale of the Sea Sonnet, to 9 December 1996, the date the vessel was delivered to the respondent, the Sea Sonnet was owned by Dahlia, the shareholding in which, during that period, was held as to 52% of the shares by himself, J

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as nominee on behalf of a Liberian corporation called Carnation Finance Inc, and A as to 48% by another Liberian corporation called Wichita Maritime and Trading Inc. He stated further that during the whole of the period in question all the shares of Carnation Finance Inc were owned by one Nikolaos Tsavliris and that he had, for the purposes of the application, been specifically authorised to disclose the identity of Mr Tsavliris as 'the ultimate beneficial owner of the MV Sea Sonnet at the time of the conclusion of the memorandum of agreement of sale of the vessel and the subsequent delivery thereof to the purchaser'. B

[18] He also stated in this affidavit, as he had in his earlier affidavit, that he C

'acted as a nominee shareholder in respect of the controlling interest in the MV Heavy Metal. I am not authorised by the beneficial owner of the MV Heavy Metal to disclose to the above honourable Court the true identity of such owner. However, I can state that Mr Nikolaos Tsavliris had no interest, whether as owner or otherwise, in the MV Heavy Metal on 1 April 1988 or at any time to date hereof.' D

[19] In an answering affidavit filed on behalf of the respondent it is stated that Lemonaris' 'bald statement that he is ''merely a nominee director and shareholder in [Dahlia] and [the appellant] in which I have no interest or ownership'' cannot be accepted in the absence of corroboration', this despite the statement in the founding affidavit that 'it seems likely that Lemonaris is probably a nominee for Mr Vafias and his family'. E

[20] Later in the answering affidavit appears the following statement:

'In the circumstances I respectfully submit that Mr Lemonaris' bald and uncorroborated F statement that he holds the shares in [Dahlia] and [the...