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REPORTABLE
Case No: 323/98
IN THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
In the matter between:
BELFRY
MARINE LIMITED Appellant
and
PALM BASE
MARITIME SDN BHD
NAME OF SHIP: MV “HEAVY
METAL” Respondent
CORAM: SMALBERGER, NIENABER, MARAIS JJA, MELUNSKY and FARLAM AJJA
HEARD: 8 MARCH 1999
DELIVERED: 31 MAY 1999
________________________________________________________
JUDGMENT
________________________________________________________
. . . SMALBERGER JA
SMALBERGER JA:
[1] I have had the benefit of
considering the judgment of my colleague Farlam. I share his views, and the
conclusions reached by him,
in regard to the first two issues on appeal. I
disagree, however, with his approach and conclusion in respect of the third
issue.
[2] To recapitulate, the third issue is whether it was established
that Lemonaris, or some other person or persons, had “power,
directly or
indirectly, to control” Dahlia and the appellant at the relevant
times.
[3] The answer to the third issue lies in the proper interpretation of
sec 3(7)(b)(ii) of the Act (“the subsection”) which
provides
that
“(A) person shall be deemed to control a company if he has power, directly or indirectly, to control the company.”
[4] It was
pointed out in Dole Fresh Fruit International Ltd v MV Kapetan Leonidas and
Another 1995(3) SA 112 (A) at 119 F - G that a person may control a company
without controlling all the shares in the company; and control
over a company
can be exercised even without a majority shareholding. In the present case
there is no suggestion that Dahlia and
the appellant were controlled in any way
other than via their majority shareholdings, and it is common cause that
Lemonaris was, in terms of the respective share registers, the majority
shareholder of both companies.
[5] When interpreting the subsection, and in
order to give proper effect thereto, regard must be had to the language used,
the apparent
purpose of the provision, its contextual setting and the object of
the Act as a whole.
[6] The object of the associated ship provisions in the
Act is to enable an associated ship to be arrested instead of the ship in
respect of which the maritime claim arose (“the guilty ship”). Its
purpose was to benefit a party applying for arrest
by providing it with a method
of recovery against an alternative defendant thereby affording relief to which
it would not otherwise
have been entitled.
[7] Sec 3(7)(a) deals with the
meaning of an associated ship. Sec 3(7)(a)(ii) and (iii) both contemplate a
situation where either
the guilty ship or the ship which it is sought to arrest
as an associated ship (“the targeted ship”), or both, are owned
by a
company or companies controlled by a particular person.
[8] The subsection
elaborates upon and refines the concept of control by that person. Control is
expressed in terms of power. If
the person concerned has power, directly or
indirectly, to control the company he/she shall be deemed (“geag ...
word”)
to control the company. “Power” is not circumscribed
in the Act. It can be the power to manage the operations of the
company or it
can be the power to determine its direction and fate. Where these two functions
happen to vest in different hands,
it is the latter which, in my view, the
legislature had in mind when referring to “power” and hence to
“control”.
In South African legal terminology that means
(essentially for the reasons given by the court a quo at 1998(4) SA 479
(C) at 492 C - F (“the reported judgment”); see also sec 195(1) of
the Companies Act 61 of 1973) the
person who controls the shareholding in the
company. Foreign law is a question of fact. If the appellant wished to make
out a case
that the law of the Republic of Cyprus differed significantly from
the law of South Africa, it should have adduced evidence to that
effect. It did
not do so. Consequently there is no reason to surmise that the applicable law
in Cyprus differs materially from
that of South Africa (cf Caterham Car Sales
& Coachworks Ltd v Birkin Cars (Pty) Ltd and Another 1998(3) SA 938 (A)
954 B - E).
[9] The subsection clearly distinguishes between
“direct” and “indirect” power. That distinction must be
given a meaning. Indirect power can only refer to the person who de
facto wields power through, and hence over, someone else. The latter can
only be someone who wields direct power vis-à-vis the company and
the outside world and who therefore, in the eyes of the law (i.e. de
jure), controls the shareholding and thus determines the direction and the
fate of the company. On the facts of the present case Lemonaris
is the person
in that situation. Of course, the same person may in given circumstances
exercise both de facto and de jure control.
[10] In my view,
therefore, direct power refers to de jure authority over the company by
the person who, according to the register of the company is entitled to control
its destiny; and indirect
power to the de facto position of the person
who commands or exerts authority over the person who is recognised to possess
de jure power (i.e. the beneficial “owner” as opposed to the
legal “owner”). This extension of de jure power to de
facto power is in line with the objective of the section: to prevent the
true “owner”, by presenting a false picture to the
outside world,
from concealing his assets from attachment and execution by his
creditors.
[11] From the above analysis it follows in my view that if the
person who has de jure power happens to control, at the relevant times
for such control, both companies concerned (i.e. the company which owns the
guilty
ship and the company which owns the targeted ship), the statutory
requirement of a nexus between the two companies will have been
satisfied. This is the position in which Lemonaris found himself.
[12] On
the other hand, if de jure control of the respective companies vests in
different hands it would still be open to the applicant for arrest to establish
that
the same person was in de facto (i.e. indirectly) in control of
both, thereby also supplying the required statutory nexus to satisfy the
provisions of sec 3(7)(a) of the Act.
[13] The principal purpose of the Act
is to assist the party applying for arrest rather than the party opposing it.
While the section
is designed, in the interests of an applicant, to cater for
the situations referred to in paras [12] and [13] above, it is not, in
my view,
designed to cater for the converse situation where de jure control over
both vessels (companies) vests in one person but the owner of the targeted ship
is able to show that such person is
a mere puppet dancing at the string of two
different masters. If the latter approach were to be the correct one, the
distinction
drawn by the legislature between “direct and indirect
control” would fulfil no purpose. The only issue, on that approach
would
be de facto control. If that had been the legislature’s intention
it need only to have spoken of the “power to control” in
the
section. Any approach which effectively negates a clear provision in an Act
cannot be sound unless there are compelling reasons
to the contrary. No such
compelling reasons have been advanced in the judgment of my
colleague.
[14] It needs to be emphasised that the subsection does not speak
merely of the “power to control”. If it did, the decision
in
Barclays Bank Ltd v Inland Revenue Commissioners [1961] AC 509 (HL)
referred to by my colleague may have been of greater relevance to its
interpretation. There is much to be said
for the view that where one speaks
simply of a “power to control” one is concerned with a single
repository of power
- the person who is in actual, overall control. But the
power to control directly or indirectly envisages two possible repositories
of
power, one de jure and one de facto. Either form of control can
be satisfied to bring the subsection into operation. If there can only be one
repository of power in
terms of the subsection it would follow that the person
who has de jure control could be ignored once it has been established
that someone else has de facto power. This would appear to be contrary
to the clear wording of the subsection. By using the words “directly or
indirectly”
the legislature clearly intended to extend and not restrict
the expression “power to control” (cf Olley v Maasdorp and
Another 1948(4) SA 657 (A) at 665 - ff and Lipschitz NO v UDC Bank
Ltd 1979(1) SA 789 (A) at 797 D - E).
[15] In my view, and on the
undisputed facts, the respondent therefore succeeded in establishing the
requisite nexus for the conclusion that the Heavy Metal was an associated
ship of the Sea Sonnet. If that conclusion results in the bizarre position
referred to in para 57 of my colleague’s judgment, that is the direct and
foreseeable consequence of a shipowner choosing to
operate behind a cloak of
secrecy. It is precisely for that reason, because the creditor is at such a
disadvantage in tracing the
assets of his debtor, of which this case is a prime
example, that the subsection was worded as it is. The result is not as unfair
as it may at first blush seem, for it lies within the power of the shipowner to
arrange his affairs and his relationship with the
company in question so as to
avoid any prejudicial consequences to himself (cf National Iranian Tanker Co
v MV Pericles 1995(1) SA 475 (A) at 485 C).
[16] Apart from that, it
seems to me that the appellant in any event failed to rebut the inference
arising on the papers, that the
power behind Lemonaris in respect of the Heavy
Metal is in fact the same entity who is the power behind Lemonaris in respect of
the
Sea Sonnet.
[17] The appellant had no difficulty in disclosing the
identity of the beneficial owner of the Sea Sonnet but it steadfastly refused
to
disclose the identity of its own beneficial owner. In those circumstances the
respondent, in launching its application, had little
option but to list a host
of objective factors which it submitted pointed, prima facie it not
conclusively, to a duality of control between the guilty ship and the targeted
ship, and to speculate as to the identity of
the common controller. (As to
these see, for example, the reported judgment at 489 B - G.)
[18] In the
light of the appellant’s policy of presenting a distorted picture to the
outside word by spuriously holding out
Lemonaris as its majority shareholder
and, when that fact was exposed, by refusing to reveal the true power behind the
throne when
challenged to do so, the respondent cannot fairly be criticised for
not leading contradicting evidence or for deviating, between
its founding and
replying affidavits, in its speculation as to the controlling force behind the
appellant’s affairs.
[19] Admittedly the dispute of fact on the issue
of who controls Lemonaris had to be approached in line with what was stated in
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984(3) SA 623
(A) at 634 E - 635 C. Due allowance must, however, be made for the fact that
the appellant deliberately concealed
the identity of the true beneficial owner
of the Heavy Metal in circumstances where that was the central issue in dispute.
In my
view that silence and the failure of the appellant to offer an adequate
explanation for it, when the appellant must have appreciated
that it ran the
risk of an inference being drawn against it, justifies the conclusion that the
appellant had every reason not to
be candid with the court and,consequently,
that the dispute raised by Lemonaris as to the beneficial ownership of the Heavy
Metal
was a contrived one and as such was not a genuine dispute of
fact.
[20] In my view, those considerations, read against the background of
the prima facie case made out by the respondent, are enough to overcome
Lemonaris’s express denial that there was a relevant connection in
the
ownership of the Sea Sonnet and the Heavy Metal. It can therefore not be
accepted as an established fact, as the judgment of
my brother seems to do, that
Lemonaris was not controlled in respect of the Heavy Metal by either Tsavliris,
or someone who in turn
controlled Tsavliris. On the facts of this case, as
presented by the appellant, one simply does not know.
[21] With regard to
whether the deeming provision in the subsection gave rise to an irrebuttable
finding (the fourth issue on appeal)
I agree with Thring J where he said, at 491
D - E of the reported judgment:
“In other words, this is a situation in which the Legislature sought to achieve finality as regards the identity of the person or persons who control such companies, even at the expense perhaps of artificiality. Had it not sought this result, it seems to me that the Legislature would not have used the very strong word ‘deemed’ in the subsection (Afrikaans text: ‘geag’): it would have used some less far-reaching expression such as ‘presumed until the contrary is proved’.”
[22] This conclusion is fortified by a
consideration of other deeming provisions in the Act (see eg secs 3(7)(c),
3(10)(a)(i) and
(ii) and (b), 3(11)(b)) all of which have an element of finality
with regard to that which is deemed. It is unlikely that the legislature
would
have adopted an inconsistent approach towards the effect of the various deeming
provisions.
[23] In the result the appeal is dismissed with costs, including
the costs of two counsel.
___________________
J W SMALBERGER
JUDGE OF APPEAL
NIENABER JA )
)Concur
MELUNSKY
AJA)
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