MV Rizcun Trader (3) - Manley Appledore Shipping Ltd v MV Rizcun Trader

• Jurisdiction: South Africa
• Judge: Knoll AJ
• Judgment Date: 26 April 1999
• Docket Number: AC146/98
• Hearing Date: 18 February 1999
• Counsel: M Wragge for the applicant. R W F MacWilliam for the respondent.
• Court: Cape Provincial Division

Knoll AJ:

This is an interlocutory application brought before the Court sitting in admiralty in terms of the Admiralty Jurisdiction Act 105 of 1983 (hereinafter referred to as 'the Act'.) It is an application for security for costs brought in terms s 5(2)(b) and/or (c) of the Act read with Rule 47 of the Uniform Rules of Court. B

On 17 April 1998, and in this Court, applicant obtained an order in terms of s 5(3) of the Act for the arrest of the respondent, which arrest was effected on 18 April 1998. The arrest of respondent was effected on an associated ship basis to obtain security for the payment of a claim and related costs in the amount US$1 742 535,05 to C be brought by applicant against a third party, Ikhlas Offshore Shipping Co Ltd (hereinafter referred to as 'Ikhlas'), in arbitration proceedings in England.

In order to procure the release of respondent, a letter of undertaking was provided by the vessel's so-called 'P and I D Insurers' in the amount of US$900 000. This letter of undertaking was accepted by applicant and the respondent released. The said amount represented the agreed value of respondent.

On 5 November 1998 an application was launched for the setting aside of respondent's arrest (hereinafter referred to as 'the main application'). Respondent is cited as the applicant in the main E application. Applicant, therein cited as respondent, opposes the main application and is still to file its answering papers.

Applicant seeks an order directing respondent to provide security for its costs incurred in opposing the main application, which costs are to include its costs incurred in pursuing an interlocutory F application for an order that the current and erstwhile owners of respondent (namely two companies known as Lantau Link and Latif Maritime Ltd respectively (the latter hereinafter referred to as 'Latif'), make discovery before applicant is obliged to file its answering affidavits in the main application.

The discovery application was heard by this Court on 16 G February 1999 and has been dismissed in a judgment handed down simultaneously with the judgment in this matter.

The history and relevant facts of the main application are referred to in some detail in that judgment and I do not propose to repeat them, other than as and where relevant during the course of this judgment.

It is necessary at the outset to examine whether this Court has the power to grant the relief claimed. H

Section 5(2)(b) and (c) of the Act read as follows:

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

(a)

. . .

(b)

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

(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 for costs, expenses, loss or damage caused or likely to be caused, or otherwise;

. . . .' J

Knoll AJ

The Legislature has, by way of these two subsections, A conferred a wide discretion on a Court to act in terms thereof, without defining the content of such discretion.

In order to give some content to this discretion, it is necessary to refer to s 5(3) of the Act and judicial decisions defining the discretion given to the Court in terms of that section because, as B referred to below, such definitions have been applied by our Courts in the exercise of the discretion conferred upon them by s 5(2)(b) and (c) of the Act.

Section 5(3) provides as follows:

'(a)

A court may in the exercise of its admiralty jurisdiction order the arrest of any property for the purpose of C providing security for a claim which is or may be the subject of an arbitration or any proceedings contemplated, pending or proceeding, either in the Republic or elsewhere, and whether or not it is subject to the law of the Republic, if the person seeking the arrest has a claim enforceable by an action in personam against the owner of the property concerned or an action in rem against such property or which would be so enforceable but for any such arbitration or proceedings.

(aA)

Any property so arrested D or any security for, or the proceeds of, any such property shall be held as security for any such claim or pending the outcome of any such arbitration or proceedings.

(b)

Unless the Court orders otherwise any property so arrested shall be deemed to be property arrested in an action in terms of this Act.'

This section introduced to this Court's admiralty E jurisdiction a power it did not have prior to the enactment of the Act, other than indirectly by way of a lengthy and costly in rem action (Katagum Wholesale Commodities Co Ltd v The MV Paz 1984 (3) SA 261 (N) at 264E-266C). The circumstances under which such power should be exercised were not set out in the Act but left to our Courts to define.

In the Katagum Wholesale Commodities case F supra at 2654A Friedman J held that the Court was given an 'unfettered judicial discretion which falls to be exercised upon a consideration of all the relevant facts and circumstances'. The learned Judge further sought and formulated certain general guidelines as to a Court's approach to the powers conferred upon it by s 5(3). At 268A-C the learned Judge held the following:

'In the first place, an applicant should make averments that G will satisfy the Court prima facie that he has reasonable prospects of success in the main proceedings. In addition, . . . it must be expected of an applicant that he will say why he needs the assistance of a South African Court. Where, therefore, the application is one to obtain security for a claim sounding in money, it will be at least expected of an applicant that he allege and explain: H

(a)

why he needs security;

(b)

that he has not already obtained security; and

(c)

that he cannot obtain such security in the other contemplated or pending arbitration or proceedings.'

In the same matter Didcott J, while concurring in the result, I in his judgment added the following with regard to what, in his view, an applicant in a s 5(3) arrest must show (at 269H-270B):

'It is a serious business to attach a ship. . . . (T)he Court must therefore be given sufficient information to show that a measure with results so harmful to others is nevertheless necessary for the protection of the applicant's legitimate interests. It will therefore want to assure itself, for instance, that his claim in the main J

Knoll AJ

proceedings is apparently no spurious one, that he is not bent on A merely harassing the other side in these or gaining a tactical advantage in relation to them, that his need for security is both genuine and reasonable, that no alternative and less disruptive opportunity for obtaining such has been or is likely to become available to him and, if one has already been lost that this was not his fault or, I should rather say, not his fault to such a degree as to be fairly held against him. The Court must be told enough to put it at ease on all these scores.' B

In the matter of Cargo Laden and Lately Laden on Board the MV Thallassini Avgi v MV Dimitris 1989 (3) SA 820 (A), the Appellate Division, as it then was known, had occasion to consider and pronounce upon the application of s 5(3) in practice.

Botha JA considered the judgments of Friedman and Didcott JJ, C inter alia, and in so doing concluded that the test that these learned Judges had formulated, ie that an applicant must show prima facie prospects of success in the main proceedings was pitched too high. The test to be applied was then considered and is summarised as follows at 832I-833D: D

'A claimant applying for an order for the arrest of a ship in terms of s 5(3)(a) for the purpose of obtaining security in respect of a claim which is the subject of contemplated proceedings to be instituted in a foreign forum is required to satisfy the Court (a) that he has a claim enforceable by an action in rem against the ship in question or against a ship of which the ship in question is an associated ship; (b) that he has a E prima facie case in respect of such a claim, which is prima facie enforceable in the nominated forum or forums of his choice, in the sense explained above; and (c) that he has a genuine and reasonable need for security in respect of the claim.

If an applicant satisfies the requirements enumerated above, he is, in our judgment, entitled to an order in terms of the section, unless the respondent shipowner places countervailing material before the Court by which it is proved that there is sound reason for not granting the order. Failing that, we do not consider that the Court has a F discretion to decline to exercise its power in favour of the applicant; the postulate of an unfettered discretion would, in our view, run counter to the intention of the Legislature. On this footing the apparent differences of approach reflected in the judgments in the MV Paz case supra do not, with respect, call for further comment. G

It follows, then, that when once the criteria mentioned above are met, the respondent shipowner who would oppose the granting of an order must raise, and discharge the onus of proving, some countervailing factor of sufficient weight to persuade the Court not to grant the order.'

The allegations which an applicant should make in order to H satisfy the Court that he needs security and that such need is both genuine and reasonable as discussed by Friedman and Didcott JJ in the MV Paz case supra were...