MV Wisdom C: United Enterprises Corporation v STX Pan Ocean Co Ltd

• Jurisdiction: South Africa
• Judge: Cleaver J
• Judgment Date: 01 March 2007
• Citation: 2008 (1) SA 665 (C)
• Docket Number: AC111/2006
• Counsel: RWF MacWilliam SC (with RDE Gordon) for the applicants M Wragge for the respondent
• Court: Cape Provincial Division

Cleaver J:

[1] On 6 July 2006 and pursuant to an ex parte application brought by A the respondent (STX) as applicant, the MV Wisdom C (the vessel) was arrested in the exercise of the court's admiralty jurisdiction in terms of s 5(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983 (the Act). The arrest was for the purpose of providing security in arbitration proceedings in London B for STX's counterclaims against the applicant (UEC), for payment of amounts due in terms of a charterparty agreement and the repudiation thereof.

[2] Thereafter, security was provided by UEC, the owner of the vessel, for an amount acceptable to STX and the vessel was released C from arrest and left the jurisdiction of this court.

[3] UEC now applies on motion for the deemed arrest of the vessel to be set aside and for the letter of undertaking by which security was provided to be declared null and void. In the alternative, and in the event of the aforesaid prayers not being granted, UEC D counterclaims for security to be furnished in respect of its claims in the arbitration proceedings in London.

[4] Before dealing with the grounds on which the applicant seeks relief, it would be convenient to record the events which preceded the E application for the arrest of the vessel in this court.

[5] On 17 December 2003 STX entered into a time charterparty (the head charterparty) with UEC whereby it agreed to hire the Wisdom C from UEC 'from the time of delivery, for a minimum 10 months up to about 13 months (about to mean 15 days more or less in CHOPT)'. The vessel was delivered to STX only on 23 F September 2004 and STX was accordingly entitled to employ the vessel for a period up to 7 November 2005. On 30 January 2004, STX as respondent owners sub-chartered the vessel to VOC Bulk Carriers (the 1st time sub-charterers) under a time charterparty for a period of about four to about six months. According to STX, the 1st time G sub-charterers claimed off-hire and balance of account from STX and after adjusting for the difference in rates of hire STX contend that they have a claim for off-hire and balance of account against UEC in the sum of US$283 282.

[6] The vessel was re-delivered by the 1st time sub-charterers to STX on 16 February 2005. However, on 28 January 2005 H before the 1st-time sub-charterer party came to an end, STX sub-time-chartered the vessel to Daeshin Shipping Co Ltd (the 2nd-time sub-charterers). The period of the sub-time charter was 'from the time of delivery . . . for period minimum 6 months up to about 7 months' and the vessel was delivered to the 2nd-time sub-charterers on 16 I February 2005. STX contends that the 2nd-time sub-charterers could have employed the vessel for a duration of up to 1 October 2005.

[7] Before the 2nd-time sub-charterparty between STX and the 2nd-time sub-charterers came to an end, UEC purported to terminate the J

Cleaver J

head charterparty agreement. This occurred in June 2005 when the vessel A was reported to have been refused permission to berth at the port of Mina Cleaver JSaqr in the United Arab Emirates (UAE) on account of problems with the vessel's crane. At that time disputes arose between STX and UEC in regard to the head charterparty. UEC contended that a rental payment due on 5 June 2005 had not been paid, whereas STX contended that even though the payment of hire had B not been made, it had overpaid hire in the sum of US$15 608,47. There is a dispute as to what happened at the port of Mina Saqr, but on 16 June 2005 UEC purported to terminate the head charterparty as a result of the alleged repudiatory breach thereof by STX and purported to withdraw the vessel from STX's service. The claim for termination C by UEC was based on the following:

1.

STX had made excessive and unlawful deductions from hire.

2.

STX had failed to provide and pay for bunkers.

3.

STX had demanded unreasonable security during the course of D negotiations to obtain security for its claim against UEC.

STX denies that the grounds for termination relied upon by UEC are sound in law and maintains that UEC's action in purporting to terminate the head charterparty amounted to a repudiatory breach thereof and alleges that in the result it has suffered damages. E

[8] In March 2006 STX applied ex parte to the Italian Court of Gorizia for the arrest of the vessel in order to provide security for the counterclaims which it intended to file in the arbitration proceedings in London. An order for the conservatory seizure of the vessel was obtained and early in April a decision as to the future of F the seizure order was made by a judge in Gorizia after consideration of representations made on behalf of the parties. In terms of an order dated 8 April 2006 the order of seizure was revoked. An appeal noted by STX was dismissed 'on account of intervened lack of interest to act'. Counsel were agreed that the reason for the dismissal of the G appeal was that by the time the appeal was heard, the vessel had left Italian waters and the court concluded that in the circumstances the appellant had been unable to prove the existence and duration of its interest to act, ie the presence of the vessel in Italian waters. H

[9] The principal submission to me on behalf of UEC was that the judgment of the court at Gorizia constituted a final judgment and as such UEC was entitled to raise the exception rei judicatae. In the alternative, it was submitted that the arrest warrant issued in this court should not have been granted because of material non-disclosures in the founding affidavit. Counsel for UEC also I submitted that the founding affidavit in the proceedings before me lacked the necessary factual averments to establish the prima facie case which STX had to put up.

[10] The requirements for a successful defence of res judicata are well J

Cleaver J

known, namely that the judgment pleaded must be a final and definitive decision which puts an end to A the dispute between the parties. [1]

[11] An English translation of the Gorizia judgment in which the arrest was set aside is included in the papers and both counsel have accepted the accuracy of the translation which does make for rather quaint reading. B

[12] The Gorizia judgment

After dismissing certain points taken in limine on behalf of UEC, the judge proceeds to deal with what he terms the point of 'fumus boni iuris'. (Counsel were agreed that the English translation of fumus boni iuris is prima facie C case.) The judge then records that STX intends to bring an action in the arbitration proceedings in which it will dispute the lawfulness of the termination of the charterparty by UEC relating to

(i)

Set off on freight amounts to an excessive extent.

(ii)

The failure of STX to pay for bunkers at their charge under the Charterparty. D

He finds that STX has made out a prima facie case 'at least as concerns the ''fumus''' in respect of its claim for set-off on freight amounts to an excessive extent. However, in regard to the issue of payment for the bunkers, after recording that payment was not made, the judge concludes that the evidence presented on affidavit by STX is not sufficient 'since it is, in itself, but a E statement of knowledge having no value even as a mere clue'. (According to STX's expert, this was because evidence by way of affidavit was not acceptable.) Then follows what is to my mind the crucial portion of the judgment, namely:

Moreover, the facts underlying the second Sub-Charterers' refusal to pay for bunkers and thus the alleged 'set-off' under point (ii) F hereof (against delays caused by the ship's cranes and the consequent inability of the ship to berth at the port of Mina Saqr) appear, under the present circumstances, altogether uncertain and unsubstantiated, with reference to both the 'an' and the 'quantum debeatur', there being no proof (on the point, a thorough investigation would be necessary, as object of the pending proceedings G on the merits) either on the causes of such damages or on the party to whom they are ascribable, or again on the amount of the damages.

In view of the foregoing, vis-à-vis the 'fumus' of the Defendants' submissions on the reasons underlying the advanced termination of the Charter and with specific reference to failure to pay for the bunker, in the light of the result of the summary H investigation, which is customarily made in the preliminary proceedings for obtainance of a remedy measure, the court does not envisage the existence of the 'fumus boni iuris' in the Plaintiff's demand.

The Order of seizure granted 'ex parte' on 29.3.2006 must therefore be revoked. I

[13] Both parties produced an expert witness who supported each's case.

Cleaver J

On behalf of UEC an affidavit was filed by one Filippo Bruno (Bruno), an Italian attorney with experience in maritime law. His view A of the judgment is that the court set aside the arrest of the vessel on the basis that STX's admitted failure to provide bunkers for the vessel as it was obliged to do in terms of the charterparty amounted to a breach of the charterparty justifying the termination thereof by UEC. In his affidavit he records: B

The court found that the Respondent had failed to establish even on a 'prima facie' basis that the conduct of the First Applicant (UEC) in terminating the Charterparty amounted to a repudiatory breach thereof entitling the Respondent to the contemplated relief it sought in the London proceedings. C

As to the order made by the appeal court, he states that STX's appeal 'was not admissible, because an appeal which cannot lead to a concrete result is not admissible for ''lack of interest'', according to art 100 of Italian Civil Procedure Code'. His view is that the decisions of both the court of first instance and the court of appeal are final because no further...