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[2004] ZASCA 58
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Farocean Marine (Pty) Ltd v Malacca Holdings Ltd and Anohter (223/03) [2004] ZASCA 58; [2004] 3 All SA 279 (SCA); 2005 (1) SA 428 (SCA) (28 May 2004)
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Last Updated: 4 September 2004
THE SUPREME COURT OF APPEAL
OF SOUTH
AFRICA
Case no: 223/03
In the matter between:
FAROCEAN MARINE (PTY) LTD
Appellant
and
MALACCA HOLDINGS LIMITED First
Respondent
EARL ROMANS Second
Respondent
Coram: MARAIS, SCOTT, FARLAM, CLOETE JJA et
PATEL AJA
Date of hearing: 6 MAY 2004
Date of delivery: 28 MAY
2004
Summary: Attachment to found or confirm jurisdiction – nature
of prima facie case required against defendant in the alternative
–
joinder of further defendant in the alternative – section 5(1) of Act 105
of 1983 permitting such a joinder –
discretion of court – order in
para 19.
JUDGMENT
SCOTT JA/...
SCOTT JA:
[1] The appellant
(‘Farocean’) carries on business as yacht and shipbuilders in Duncan
Road, Table Bay Harbour, Cape Town.
The respondents are both peregrini.
The first respondent, Malacca Holdings Limited (‘Malacca’), is a
company incorporated according to the laws of the Cayman
Islands. Its sole
shareholder is the second respondent, Mr Earl Romans, a citizen and resident of
the United States of America. On
4 November 2002 Farocean sought and obtained
ex parte an order in the High Court, Cape Town, directing that the motor
yacht Summit One (and various items of equipment removed from the vessel)
be attached to found or confirm the jurisdiction of the court in an action
Farocean proposes instituting against the respondents as alternative defendants.
An order was also granted in terms of s 5(1) of
the Admiralty Jurisdiction
Regulation Act 105 of 1983 (‘the Act’) joining the respondents as
defendants in the proposed
action ‘although one or other one of them might
not otherwise be amenable to the jurisdiction of [the] ... court’. A
rule
nisi was issued and served on the respondents’ Cape Town attorneys and on
Morgan Olsen & Olsen LLP, attorneys of Fort
Lauderdale, Florida. The
confirmation of the rule was opposed, initially only by Romans, but later also
by Malacca. The matter came
before Davis J who discharged the rule and dismissed
the application with costs. The judgment is reported sub nom MV Summit
One Farocean Marine (Pty) Ltd v Malacca Holdings Ltd and another 2003 (6) SA
94 (C). The present appeal is with the leave of the court a
quo.
[2] In order to understand the issues and the context in which
they arise it is necessary to set out as briefly as the circumstances
permit the
main allegations made in founding papers, the answering affidavits and the
replying affidavits. Farocean’s cause
of action against the respondents
was founded upon an agreement, the terms of which were recorded in a letter
dated 26 March 2001
addressed by Mr Jendo Ocenasek on behalf of Farocean to
Romans. Ocenasek, who is the managing director of Farocean, had previously
travelled to Malaysia together with Mr Frederick Farmer, Farocean’s
technical director, to advise Romans on the feasibility
of purchasing and
refurbishing the Summit One, then named Sipadan Princess.
Subsequently the vessel sailed to Cape Town where it was removed from the water
and transported to Farocean’s shipyard. Notwithstanding
the absence of any
‘formal contract’, Farocean commenced stripping the vessel
preparatory to its later refurbishment.
It was at this stage that the letter of
26 March 2001 was addressed to Romans. It reads in part:
‘Until a
formal contract is drawn up and signed by both Earl Romans and a Representative
of Farocean Marine, this letter, will
serve as an abridged interim contract for
the rebuild/refit of the vessel “Summit One”, presently in the
shipyard of
Farocean Marine.
Having received verbal instructions from Mr
Earl Romans (the Owner) to remove the vessel from the water and to transport the
vessel
to Farocean Marine’s shipyard, and to commence stripping the vessel
for refurbishment once the vessel was located in Farocean
Marine’s
buildings, Farocean Marine has started this work, along with the removal of
various items, ie propellers, shafts,
interior, rudders etc and will invoice the
owner only after a sum of R700 000.00 has been reached. (See item
“Payments”
later.)
The owner has indicated he prefers the
contract to be done in local currency ie S A Rands, to be converted to U S
Dollars at an
exchange rate current on the day of invoice.’
(The letter
proceeds to set out details of rates for the repair and refitting of the
vessel.) According to Ocenasek these terms were
accepted in a subsequent
telephone conversation and confirmed by the issuing of instructions from time to
time in the form of drawings
and specifications by Romans’s architect, Mr
Douglas Sharp. This much was common cause.
[3] Once work to the value of
R700 000.00 had been completed Farocean began invoicing Romans. A dispute arose
and the latter failed
to pay. On 15 November 2001 Farocean caused the vessel to
be arrested in pursuance of an action in rem. But the dispute was
resolved and the outstanding amount was paid to Farocean which thereafter
continued working on the vessel. According
to Ocenasek, Romans once again failed
to pay when invoiced and in July 2002 the vessel was again arrested. In
September 2002, and
in response to Farocean’s particulars of claim, a plea
was filed in which it was alleged that the vessel was owned by Malacca,
which at
all material times had been represented by Romans.
[4] Ocenasek contended
that until receipt of the plea, Farocean’s representatives had always
believed that Romans had contracted
in his personal capacity and that he was the
owner of the vessel. He said this impression had been gained from correspondence
with
Romans and in particular from an application for registration with the
South African Sailing Association signed by Romans on 19 December
2000 in which
he had stated that he was the owner. (It appears that the object of the
application for registration was to enable
the vessel to be insured for the
voyage from Malaysia to Cape Town; once she was removed from the water and taken
to Farocean’s
shipyard, the registration was cancelled.) Ocenasek
explained that he subsequently obtained further documents which corroborated
the
allegation made in the plea that Malacca, and not Romans, was the owner of the
vessel. These included a ‘Bill of Sale’
dated 13 November 2000 and
signed by the seller (but not the buyer) reflecting the sale to Malacca of
‘sixty four sixty fourths
shares’ in the vessel; a letter dated 16
November 2000 addressed by Messrs Morgan, Olsen & Olsen LLP (Romans’s
Fort
Lauderdale attorneys) to the sellers of the vessel advising that the
‘buyer’s agent [Mr Douglas McLoughlin] will be the
authorized
representative of the buying company (Malacca Holdings Limited), who will
receive the original documents, execute a Protocol
Delivery of the Vessel, and
accept delivery of the vessel for [the] buyer’; and a letter dated 20
November 2000 similarly addressed
by Messrs Morgan Olsen & Olsen LLP to the
sellers confirming that they had received the money due to the sellers and
reiterating
that the buyer was Malacca.
[5] On behalf of Farocean,
Ocenasek contended that in the circumstances there was ‘confusion’
as to the identity of the
owner of the vessel and the party with whom Farocean
had contracted. He argued that the owner and party to the contract was either
Romans or Malacca and that Farocean was accordingly entitled to the order it
sought. Upon the granting of the order ex parte on 4 November 2002
Farocean withdrew the second of the in rem proceedings referred to in
para 3 above.
[6] In response to the order and before filing answering
affidavits Romans’s Cape Town attorneys addressed a letter dated 15
November 2002 to Farocean’s attorneys agreeing to the confirmation of the
rule nisi in relation to Malacca which, it was pointed
out, was the owner of the
vessel. However, Farocean was not prepared to agree to an order in relation to
Malacca only and insisted
that the matter proceed. The main answering affidavit
subsequently filed on behalf of the respondents was made by their Cape Town
attorney, Ms Fiona Stewart. While denying that Malacca was liable she reiterated
that Malacca did not oppose the granting of an order
against it, being the owner
of the vessel and the party against which the claim lay. She confirmed, too,
that Romans had at all times
represented Malacca in its dealings with Farocean.
In support of the averment that Malacca was the owner, she filed, in addition
to
the Bill of Sale previously referred to, a copy of Malacca’s certificate
of incorporation dated 17 November 2000 and a ‘Protocol
of Delivery and
Acceptance’. The latter document was signed by both the seller and by
McLoughlin on behalf of Malacca as buyer
on 21 November 2000 before a notary
public. It recorded that on that day the vessel was delivered to and accepted by
Malacca in accordance
with the terms of an agreement previously concluded.
Stewart denied that Farocean’s representatives had been led to believe
that Romans was the contracting party and the owner of the vessel, although
conceding that McLoughlin and Ocenasek, being laymen,
had loosely referred to
Romans as the owner from time to time. She insisted that the decision to have
the vessel transferred to Malacca
and the fact that at all subsequent times
Romans acted on behalf of Malacca was well known to Ocenasek. In support of this
assertion
she annexed a copy of a draft ‘final contract’ relating to
the refurbishment of the vessel proposed by Farocean in June
2001, ie more than
a year before the filing of the plea to which Ocenasek refers. The draft, which
was sent to Romans’s assistant,
Ms Carol Levy, on 27 June 2000, describes
the parties to the agreement as being Malacca on the one hand and Farocean on
the other.
A subsequent draft proposed by Malacca in December 2001 similarly
records Malacca as being the owner of the vessel and the party
to the contract.
Yet another document annexed to Stewart’s affidavit was a minute of a site
meeting dated 6 December 2001 relating
to the work on the vessel then in
progress and in pursuance of the agreement on which Farocean relies.
Significantly, it was headed
‘Malacca/FOM Meeting’ (FOM presumably
being an acronym for Farocean Marine).
[7] It was not denied that Romans
had stated that he was the owner of the vessel when applying for registration
with the South African
Sailing Association. The only explanation proffered for
this was that by obtaining registration with this association it was possible
to
obtain insurance for the vessel without the need to incur the costs associated
with obtaining a class certificate from a recognised
classification society, and
that this method of obtaining insurance had been suggested by Ocenasek himself
prior to the purchase
of the vessel. However, no reason was given for Romans
describing himself as the owner.
[8] The allegations contained in
Stewart’s affidavit were confirmed by Romans, McLoughlin, Levy and Mr
Walter Morgan of Morgan
Olsen & Olsen LLP, all of whom made confirmatory
affidavits. The latter expressly confirmed that he had acted for Malacca with
regard to its purchase of the vessel in Malaysia.
[9] In his replying
affidavit Ocenasek did not challenge the authenticity of the Protocol of
Delivery and Acceptance or any of the
other documents referred to by Stewart in
para 6 above. Nonetheless, he persisted in his assertion that Farocean was
uncertain as
to whether the vessel was owned by Romans or Malacca. In response
to the reference to the proposed refurbishment contract between
Malacca and
Farocean which the latter had drafted in June 2001 he drew a distinction between
the interim agreement of 26 March 2001
and any final agreement that Farocean may
have sought to conclude with Malacca. He submitted that it was immaterial who
the eventual
contracting party might have been as Romans in his personal
capacity was the contracting party in terms of the interim agreement
upon which
Farocean relied. The necessary implication of his submission was, of course,
that the contracting party and the owner
of the vessel may not have been the
same person. This possibility was expressly recognised in the following passage
which appeared
later in his affidavit.
‘In any event, even if it were
to be found in due course that [Romans] was not the owner of the vessel it was
indeed with [Romans]
acting in his personal capacity that the interim agreement
of 26 March 2001 was concluded.’
In the light no doubt of these
statements Malacca, which had previously not opposed the application, changed
its stance and filed
a notice of opposition.
[10] In terms of s 3(2) of the
Act an action in personam may be instituted against a peregrine who has
not consented to the jurisdiction of the court only if his property within the
court’s
area of jurisdiction has been attached to found or confirm the
jurisdiction of the court, hence the proceedings in the court below.
An
applicant seeking such an attachment must show (a) that he has a prima facie
case against the respondent (as to the requirements
for which, see eg
Hülse-Reutter and others v Gödde 2001 (4) SA 1336 (SCA) at 1343E-J
(para 12)) and (b) that the respondent is the owner of the property sought to be
attached. The latter requirement
is to be established on a balance of
probabilities. (Lendalease Finance (Pty) Limited v Corporacion De Mercadeo
Aqricola and others 1976 (4) SA 464 (A) at
489B-D.)
[11] If an applicant can show on a balance of
probabilities that property is owned by one or other of two defendants and that
he has a
prima facie case against whichever one is found to be the owner, a
court might possibly be justified in granting an order for the
attachment of the
property. In either event, the attachment would be effective. In its founding
affidavit Farocean appears to have
set out to establish that this was true of
the present case; ie that the vessel was owned by either Romans or Malacca and
that whoever
was the owner was the debtor. However, in response no doubt to the
allegations contained in the answering affidavits, Farocean found
itself obliged
in its reply to concede, and rightly so, that the debtor may not be the owner of
the vessel. The consequence of this
concession was to preclude the attachment of
the vessel on the premise that it was unnecessary to establish which of the two
was
the owner. The reason is that to do so could result in the attachment of
property not owned by the debtor which, for the purpose
of founding
jurisdiction, ‘would be futile and of no effect’. (See the
Lendalease case loc cit.)
[12] Counsel for the appellant
sought to justify the attachment confirming jurisdiction over both respondents
on various grounds in
the alternative. The ground on which they ultimately
relied in this court was shortly this: On the papers before the court it was
established on a balance of probabilities that Malacca was the owner of the
vessel and that the appellant had a prima facie case
in the alternative against
both Malacca and Romans; accordingly, Farocean was entitled to an order for the
attachment of the vessel
to confirm jurisdiction over Malacca in respect of
Farocean’s prima facie case against that company and, by reason of the
appellant’s
claim against Romans in the alternative, it ought to be
permitted to join Romans as an alternative defendant in terms of s 5(1) of
the
Act.
Section 5(1) reads as follows:
‘A court may in the exercise of
its admiralty jurisdiction permit the joinder in proceedings in terms of this
Act of any person
against whom any party to those proceedings has a claim,
whether jointly with, or separately from, any party to those proceedings,
or
from whom any party to those proceedings is entitled to claim a contribution or
an indemnification, or in respect of whom any
question or issue in the action is
substantially the same as a question or issue which has arisen or will arise
between the party
and the person to be joined and which should be determined in
such a manner as to bind that person, whether or not the claim against
the
latter is a maritime claim and notwithstanding the fact that he is not otherwise
amenable to the jurisdiction of the court, whether
by reason of the absence of
attachment of his property or otherwise.’
I shall refer to this section
in more detail later. In the meantime it is sufficient to point out that in
terms of s 1(2)(a)(ii) of
the Act an admiralty action ‘shall for any
relevant purpose commence by the making of an application for the attachment of
property to found jurisdiction’. (I do not think there is any significance
in the omission of a reference to an attachment
to confirm jurisdiction.) It
follows that the application for the attachment of the vessel in pursuance of
the appellant’s
claim against Malacca constitutes ‘proceedings in
terms of this Act’ within the meaning of s 5(1).
[13] Counsel for
the respondent contended that it was not open to Farocean to seek an attachment
solely in respect of its claim against
Malacca coupled with a joinder of Romans
as outlined above. It is convenient to deal in turn with each of the grounds
relied upon
by counsel for this contention.
[14] First, while conceding
that it was established on a balance of probabilities that Malacca was the owner
of the vessel, he argued
that this did not avail Farocean as the latter had
contended that Romans was the owner. I do not think there is merit in this
submission.
As previously observed, Farocean alleged in its founding papers that
it was uncertain which of the two was the owner and pointed
to correspondence in
which Romans had been referred to as the owner and an instance where Romans had
described himself as the owner.
But this cannot preclude Farocean from relying
on the averments in the answering affidavit that Malacca is the owner,
particularly
when supported by the affidavit of the attorney who acted on behalf
of Malacca when purchasing and accepting delivery of the vessel
as well as by a
copy of the ‘Protocol of Delivery and Acceptance’ executed in
Malaysia on 21 November 2000 before a notary
public.
[15] Second, counsel
argued that Farocean had not only failed to make out a prima facie case against
Malacca in its founding papers
but that Ocenasek in his replying affidavit had
‘insisted’ that Farocean’s claim lay against Romans and not
Malacca.
Accordingly, so the argument went, notwithstanding the
respondents’ assertion that it was Malacca and not Romans that had
contracted
with Farocean, the latter was precluded from now contending that it
had made out a prima facie case against Malacca. Once again,
I do not think
counsel’s contention is correct. In his founding affidavit Ocenasek set
out the terms of the agreement on which
Farocean relied and the grounds for his
belief that the other contracting party was Romans. However, he annexed to his
affidavit
the plea filed in the in rem proceedings in which it was
alleged that Romans had at all times acted as agent for Malacca. In view of the
contents of the plea,
Ocenasek took up the attitude that there was uncertainty
as to the identity of the party against whom the appellant’s claim
lay and
that it was for this reason that the appellant sought to proceed against Malacca
and Romans in the alternative. It is unquestionably
so that an applicant is
generally speaking obliged to adduce evidence to establish a prima facie case
against the party whose property
it is sought to be attached and that a mere
assertion that it has such a case is not enough. But this requirement must as a
matter
of common sense be relaxed in appropriate circumstances. Such a
relaxation was permitted in MT Tigr: Owners of the MT Tigr and another v
Transnet Ltd t/a Portnet (Bouygues Offshore SA and another intervening) 1998
(3) SA 861 (SCA). There a defendant sought to attach the property of two
peregrini from whom it claimed a contribution or indemnity as joint
wrongdoers with the defendant in the event of the defendant being found
liable.
The liability of the peregrini to the defendant was dependent on the
liability of the defendant to the plaintiff, which the defendant denied. In
order to establish
a prima facie case in so far as this element of the
defendant’s claim was concerned, it was held sufficient for the defendant
to rely on the allegations contained in the plaintiff’s particulars of
claim to the effect that the defendant was liable to
the plaintiff. Although the
particular circumstances in the Tigr were somewhat different from those
of the present case, in both cases the prima facie case sought to be established
and other averments
made by the applicant were mutually destructive. In the
present case Farocean seeks to sue on a contract and is unsure whether the
other
contracting party acted as principal or agent. In these circumstances the
reference to the allegations contained in the plea
filed in the earlier
proceedings is, in my view, sufficient to establish a prima facie case against
Malacca as one of two alternative
defendants. It is of course somewhat anomalous
for the respondents to contend that Farocean has failed to make out a prima
facie
case against Malacca when they themselves contend that Malacca, and not
Romans, was the party to the contract on which the appellant
relies.
[16] It is so that in his replying affidavit Ocenasek contended
that Romans contracted as principal and not as agent for Malacca.
But this was
in response to the allegation to the contrary in the answering affidavit. It was
at all times Farocean’s case
that the other contracting party was either
Romans or Malacca and that it wished to proceed against them both as alternative
defendants.
I do not read the replying affidavit as constituting an abandonment
of its claim against Malacca in the alternative. It follows that
in my view
Farocean was entitled to an order for the attachment of the vessel to found or
confirm jurisdiction in respect of Farocean’s
claim against
Malacca.
[17] The next question is whether Farocean ought to have been
permitted to join Romans as an alternative defendant in the proceedings
against
Malacca. Once it is acknowledged that Malacca is the owner of the vessel it
follows that Romans would not be amenable to
the jurisdiction of the court a
quo in the absence of an order in terms of s 5(1) of the Act (quoted in para
12 above). In terms of Admiralty Rule 24 the application
of Uniform
Rule 10 dealing with joinder is not excluded in admiralty proceedings. Joinder
under the latter rule does not require
the leave of the court, but the rule is
inapplicable where it is sought to join a person over whom the court has no
jurisdiction.
It follows that if the joinder of Romans is to be permitted it
must be in terms of s 5(1). Two questions arise. The first is whether
the
section permits the joinder of a defendant in the alternative. Merely because no
express reference is made to a defendant in
the alternative does not mean that
the joinder of such a party is precluded. The language used, I think, is clearly
wide enough to
include such a party. The section permits, for example, the
joinder of a person ‘in respect of whom any question or issue in
the
action is substantially the same as a question or issue which has arisen or will
arise between the party [seeking the joinder]
and the person to be joined
....’ There is furthermore nothing in the section to indicate an intention
to preclude the joinder
of a person on the ground that to do so may result in a
party over whom the court would not otherwise have had jurisdiction possibly
being found to be the only party liable. Given the wide language used, such a
result could hardly have been beyond the contemplation
of the legislature. In
the circumstances, I can see no reason for construing s 5(1) so as not to
include the joinder of an alternative
defendant. Admittedly, the powers of
joinder in terms of the section so construed are far-reaching. But the object of
the legislature
was clearly to permit all the parties to a dispute to be joined
in an action. The absence of such a provision could well result in
the
undesirable situation of courts in different countries having to adjudicate on
the same or substantially the same issues arising
out of the same incident or
set of facts.
[18] The second question is whether the joinder of Romans
is justified in the circumstances of the present case. In my view the word
‘may’ in s 5(1) is to be understood in its permissive sense and not
in the sense of serving what has been described as
a ‘predictive
function’. (Minister of Environmental Affairs and Tourism and others v
Pepper Bay Fishing (Pty) Ltd 2004 (1) SA 308 (SCA) at 322B-C.) This much, I
think, is apparent from the use of the word ‘permit’ in the phrase
‘the court may
... permit’. The court a quo accordingly had a
discretion to permit or refuse the joinder of Romans. It did not exercise that
discretion and this court is now
free to do so. It is common cause that the
party with whom Farocean contracted was Romans. Farocean’s case is that it
is uncertain
whether Romans acted as a principal or as agent for Malacca. It
therefore wishes to have both before court. Romans is unquestionably
the alter
ego of Malacca which is the defendant in the ‘proceedings’ within
the meaning of s 5(1) and Romans is therefore
unlikely to be prejudiced by the
joinder. In the circumstances, it is appropriate, in my view, to permit the
joinder of Romans as
an alternative defendant in the proceedings.
[19]
The following order is made:
(A) The appeal is upheld with costs,
including the costs occasioned by the employment of two counsel;
(B) The order of the court a quo is set aside and replaced by
the following:
‘1. The Sheriff of this court is directed and
authorized to attach the MY Summit One (‘the vessel’) (and
the equipment and materials described more fully in annexures
‘U’ and ‘V’
to the founding affidavit of Johann
Willem Ocenasek filed in support of this application) to confirm the
jurisdiction
of this court in an action to be instituted by the applicant
against the first respondent for :
1.1 payment of the amount of US$789
072.10;
1.2 interest thereon at the South African prime rate a
tempore morae until the date of final payment;
1.3 payment of the
amount of R477 139.73;
1.4 interest thereon at the legal rate from 8
October 2002 (being the date of the cancellation of the agreement) until
the
date of final payment;
1.5 payment of the amount of R1 500.00 per day
from 5 July 2002 until the date of removal of the vessel from the
premises
of the applicant;
1.6 interest on the aforesaid amount of R1
500.00 per day at the South African prime rate a tempore
morae until the date of final payment;
1.7 payment of the amount of
R700 000.00 (alternatively of the amount of US$86 978,46);
1.8 interest
thereon at the legal rate calculated from 8 October 2002 until the date of
payment;
1.9 alternative relief;
1.10 costs of suit.
2. The second
respondent is joined as a defendant in the alternative in the action in terms
of section 5(1) of the Admiralty
Jurisdiction Regulation Act 105 of
1983.
3. Service of the applicant’s particulars of claim shall
be effected:
3.1 upon Ms F Stewart at the offices of Fairbridge
Arderne & Lawton Inc, 16th Floor, Main Tower, Standard
Bank Centre, Heerengracht, Cape Town; and
3.2 by facsimile at telefax
number 0954-4633570 or such other telefax number as is confirmed by
affidavit to be that
of Morgan Olsen & Olsen LLP, attorneys-at-law of
315 NE Third Avenue, Suite 200, Fort Lauderdale, Florida 33301, USA, for
attention Walter L Morgan.
4. Costs of this application, including
the costs occasioned by the employment of two counsel,
shall be
borne by first and second respondents jointly and severally , the one paying
the other to
be absolved.’
C. The appellant is directed to serve
its particulars of claim upon the respondents within 30 days of this
order.
D G SCOTT
JUDGE OF
APPEAL
CONCUR:
MARAIS JA
FARLAM JA
CLOETE JA
PATEL AJA