The Shipping Corporation of India Ltd v Evdomon Corporation and Another

• Jurisdiction: South Africa
• Citation: 1994 (1) SA 550 (A)

The Shipping Corporation of India Ltd v Evdomon Corporation and Another
1994 (1) SA 550 (A)

1994 (1) SA p550

Citation	1994 (1) SA 550 (A)
Case No	686/91
Court	Appellate Division
Judge	Corbett CJ, Botha JA, Milne JA, Goldstone JA and Van den Heever JA
Heard	August 27, 1993
Judgment	November 12, 1993

Flynote : Sleutelwoorde B

Shipping — Admiralty action in personam — Admiralty Jurisdiction Regulation Act 105 of 1983 — Whether, in terms of s 6(1), application in terms of s 3(2)(b) to attach property of defendant to found or confirm C jurisdiction of Court to entertain action in personam to be determined in accordance with admiralty law applied by English High Court of Justice in 1890 or in accordance with Roman-Dutch law — Arrest or attachment to found jurisdiction not part of procedure relating to actions in personam before English Admiralty Courts in 1890 — Issue thus to be determined in D accordance with Roman-Dutch law — Such Roman-Dutch law being modern Roman-Dutch law administered by Courts.

Shipping — Admiralty action in personam — Application in terms of s 3(2)(b) of Admiralty Jurisdiction Regulation Act 105 of 1983 to attach E vessel owned by private company, all of whose issued share capital owned by Government of India, to found or confirm Court's jurisdiction to entertain action in personam against Government of India — Applicant contending that, because in truth company an 'organ, department or instrumentality' of Government of India, vessel belonging to Government — F Court holding that, unlike vast majority of cases where issue of corporation's being regarded as organ, instrumentality or department of Government arising in relation to doctrine of sovereign immunity, in instant case issue whether, because of company's status and relationship with Government, its property to be treated as property of Indian Government — Basic rule that property rights of company to be kept G distinct from those of shareholders, even where latter a single entity — Deviation from rule only permissible where 'piercing' corporate veil justified — Circumstances justifying piercing corporate veil include element of fraud or other improper conduct in establishment or use of H company or in conduct of its affairs — No grounds for piercing corporate veil in instant case — No basis upon which company's ownership of vessel could be ignored — Attachment set aside on appeal.

Headnote : Kopnota

The second respondent, the President of India, acting on behalf of the Government of India, had chartered from the first respondent a vessel to I transport a cargo of rice from Thailand to India. The voyage was duly completed and the cargo fully discharged by 25 December 1988 but, despite demand, the Government of India failed to pay a portion of the freight due under the charterparty. Claiming that the Government of India was the owner of the MV Vallabhbhai Patel ('the vessel') then berthed at Saldanha Bay, in September 1990 the first respondent brought an application in terms of s 3(2)(b) of the Admiralty Jurisdiction Regulation Act 105 of 1983 for the attachment of the vessel in order to found or confirm the jurisdiction of the Cape Provincial Division to entertain an action in J personam to be instituted

1994 (1) SA p551

A against the Government of India for payment of the freight still due under the charterparty. The attachment was ordered pending confirmation of the rule nisi. On the return day the appellant intervened to oppose the order, claiming that since it, and not the Government of India, was the owner of the vessel, the vessel should be released. It was common cause that the appellant was a private company registered under the Indian Companies Act 1 of 1956 and that the vessel was registered in its name. It was also common cause that the Government of India was the actual or beneficial B owner of the appellant's entire issued share capital. It was the first respondent's contention that, because the appellant was a wholly-owned subsidiary of the Indian Government and because of the degree of control exercised over its policies, operations and business activities by the Government, the appellant was in truth an 'organ, department or instrumentality' of the Government, with the result that its property belonged to the Government and was therefore attachable to found or confirm jurisdiction for an action in personam against the Government of C India. The appellant's company secretary stated that, despite the degree of Government control provided for in the articles of association, in practice such control was confined to the responsible Ministry's issuing policy guidelines from time to time; that the appellant's board of directors enjoyed full autonomy; and that all decisions with regard to the day-to-day functioning of the company were taken by the board itself. The Court a quo accepted the first respondent's basic contention and confirmed the attachment. D

One of the issues raised by the Court on appeal was whether in terms of s 6(1) of the Admiralty Jurisdiction Regulation Act the validity of the attachment of the vessel should be determined in accordance with the law applied by the High Court of Justice of the United Kingdom in the exercise of its admiralty jurisdiction ('English admiralty law') or in accordance with the Roman-Dutch law applicable in the Republic, that is whether this was a matter in respect of which a South African Court of admiralty had E jurisdiction immediately before the commencement of the Act on 1 November 1983. The Court defined the 'matter' as an application for the attachment of property alleged to belong to the Government of India to found or confirm the jurisdiction of the Court a quo to entertain an action in personam against the Government of India. In terms of s 2(2) of the Colonial Courts of Admiralty Act, 1890, which governed the jurisdiction of the South African Admiralty Courts prior to 1 November 1983, such F jurisdiction was dictated by the admiralty jurisdiction of the English High Court as it existed in 1890 and its proceedings as regulated by the Rules in force in 1890 under the Vice-Admiralty Courts Act, 1863.

Held, as to whether English admiralty law or Roman Dutch law applied, that English admiralty law recognised two procedures: actions in rem and actions in personam. (At 560D.)

Held, further, that it appeared that, in terms of the legislation and the G Rules in force in 1890, arrest or attachment to found jurisdiction was not part of the procedure relating to actions in personam before the English Admiralty Courts. (At 561C and D-E, summarising 560D-562C.)

Held, further, that the attachment procedure provided for by s 3(2)(b) of the Admiralty Jurisdiction Regulation Act in cases of actions in personam was obviously derived from South African common law which, in general, and unlike English law, allowed a peregrine defendant in a personal action to H be sued and process to be served by edictal citation, provided that property of the defendant was attached to found or confirm jurisdiction. (At 562C/D-D/E.)

Held, accordingly, that prior to 1 November 1983 a South African Admiralty Court would not have had jurisdiction to make the kind of order of attachment sought in this case and that, in terms of s 6(1) of the Act, the Roman-Dutch law therefore had to be applied (the Roman-Dutch law applicable being the modern Roman-Dutch law administered by the Courts). I (At 562H-I read with 559D.)

Held, further, that the vast majority of cases in which the question whether a body or corporation should be regarded as an organ instrumentality or department of a Government had arisen related to the doctrine of sovereign immunity. (At 564C-D.)

Held, further, that the issue in the present case was an entirely different one, namely whether, because of the appellant's status and its relationship with the Government of India, its property should be treated J as being the property of the Government. (At 565I.)

1994 (1) SA p552

A Held, further, that it was generally of cardinal importance to keep distinct the property rights of a company and those of its shareholders, even where the latter was a single entity, and that the only permissible deviation from that rule was in those rare cases where circumstances justified 'piercing' or 'lifting' the corporate veil, and it should make no difference whether the shares were held by a holding company or by a Government. (At 566C/D-E.)

The dictum in Dadoo Ltd and Others v Krugersdorp Municipal Council 1920 AD B 530 at 550-1 applied.

Held, further, that the circumstances in which a Court would pierce the corporate veil would generally have to include an element of fraud or other improper conduct in the establishment or use of the company or in the conduct of its affairs. (At 566E.)

Held, further, that no grounds had been shown for piercing the corporate veil in the instant case; nor was there any other basis upon which the C vesting of ownership of the vessel in the appellant could be ignored and the attachment thereof upheld by treating the Government of India as the lawful owner thereof. The appeal was accordingly allowed. (At 566F/G-G/H and 568J-569A.)

The decision of the Cape Provincial Division in Evdomon Corporation v President of India NO (The Shipping Corporation of India Ltd Intervening) reversed. D

Case Information

Appeal from a decision in the Cape Provincial Division (King J). The facts appear from the judgment of Corbett CJ.

R W F MacWilliam for the appellant referred to the following authorities (the heads of argument having been drawn by M Wragge in part and by R W F MacWilliam in part): As to onus, see Weissglass NO v Savonnerie E Establishment 1992 (3) SA 928 (A) at 936F-I; Anderson and Coltman Ltd v Universal Trading Co 1948 (1) SA 1277 (W) at 1280; Lendalease Finance (Pty)...