Imperial Marine Company v The Motor Vessel Pasquale Della Gatta and Another; Imperial Marine Company v The Motor Vessel Filippo Lembo and Another

Imperial Marine Company (vessel owner) chartered the bulk carrier George T to Deiulemar Compangnia di Navigazione Spa (charterer) on NYPE form charterparty for 35-37 months. Deiulemar sub-chartered the vessel to Dabkomar Bulk Carriers on back-to-back terms. In March 2005, the vessel's main engine suffered damage, allegedly due to out-of-specification bunkers supplied by Deiulemar at Yeo Su, Korea. The vessel went off-hire for repairs at Pylos, Greece for 71 days. Deiulemar claimed the damage was due to Imperial Marine's failure to maintain the vessel in efficient condition. Dabkomar cancelled the sub-charter in September 2005. In March 2007, damage to No 8 Double Bottom Tank shell plating was discovered at Rotterdam, allegedly sustained at Richards Bay. Further extensive corrosion damage was discovered in multiple tanks. Imperial Marine arrested two associated vessels (the Pasquale della Gatta and Filippo Lembo) in South Africa under s 5(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983 to secure its claims. Deiulemar challenged the arrests and counterclaimed for security for its own claims. The George T was sold to Dalton Worldwide in June 2007 and ultimately scrapped in March 2010.

• Whether Imperial Marine established a prima facie case for security in respect of its claim for replacement of cylinder blocks repaired by Metalock stitching
• Whether Imperial Marine established a prima facie case that damage to No 8 DBT shell plating was caused by an underwater protrusion at Richards Bay constituting an unsafe port/berth
• Whether Imperial Marine established a prima facie case that extensive corrosion in the vessel's tanks was caused by Sulphate Reducing Bacteria (SRB) introduced at specific ports on charterer's orders
• Whether Deiulemar was entitled to counter-security under s 5(2)(c) of the Act and if so, in what amount
• The proper test for establishing a prima facie case in security arrest applications
• Whether unchallenged evidence in opposing affidavits should be considered in assessing whether a prima facie case exists
• The approach to expert evidence in applications requiring proof of a prima facie case
• The proper measure of damages under English maritime law for claims relating to vessel damage and loss of profits

In the Pasquale della Gatta case: Appeal dismissed with costs. Cross-appeal upheld with costs. Arrest order set aside. Imperial Marine ordered to pay costs on attorney-client scale. Order for counter-security set aside. In the Filippo Lembo case: Appeal partially succeeded. Counter-security reduced from US$17,477,128.40 to US$7,047,177.50 with proportionate interest reduction from US$3,408,040 to US$1,374,199.61. Security for Imperial Marine's claims reduced by deleting cylinder block and Richards Bay claims. Each party ordered to pay half the costs of record preparation (volumes 1-9 and 16) and otherwise bear own costs.

When determining whether a prima facie case exists for a security arrest under s 5(3) of the Admiralty Jurisdiction Regulation Act 105 of 1983, courts should consider unchallenged factual evidence in opposing affidavits that the applicant cannot contradict, at least where there is no reason to believe such facts could be challenged with discovery. Inferences relied upon must be reasonable inferences that can properly be drawn from proven facts, not tenuous, far-fetched or based on speculation. Expert evidence in such applications must be based on facts established on a prima facie basis, and the expert's opinion must be one that can reasonably be held based on logical reasoning from those facts. The measure of damages for vessel damage under English maritime law is the diminution in value of the vessel, which is prima facie the cost of repairs, but this can be rebutted by evidence. A claim for replacement of items already repaired is a claim for diminution in value requiring proof that value was actually diminished. For counter-security applications, applicants are entitled to security for their reasonably arguable best case, but courts must exercise discretion to exclude speculative claims, account for overlapping alternative claims, and allow for contingencies in loss of profit calculations.

Wallis JA observed that security arrests under s 5(3) are fundamentally different from attachments to found jurisdiction because they seek final relief in the form of security for foreign proceedings, not establishment of jurisdiction. The merits being decided later does not justify the same low-level test. The court noted it is undesirable for expert evidence on English law to come from representatives of the parties, as English admiralty and maritime law is readily accessible in standard legal resources and courts can take judicial notice of it under s 1(1) of the Law of Evidence Amendment Act 45 of 1988. The court observed that since at least 1797 (Cape Colony) and 1856 (Natal), South African courts have been required to apply English admiralty and maritime law. Wallis JA noted that the exercise of discretion in ordering counter-security should not be unduly circumscribed by a formulaic approach, and various factors may be relevant including the location of the foreign forum, whether the arrestor is a peregrinus, the nature of counterclaims, and the strength of the case on the merits. The court expressed that shutting one's eyes to relevant factual material that may fatally undermine an arresting party's claim seems inconsistent with the constitutional requirement that both parties are entitled to a fair hearing.

This judgment is highly significant for South African admiralty practice as it comprehensively addresses the requirements for security arrests under s 5(3) of the Admiralty Jurisdiction Regulation Act. It clarifies that courts should consider unchallenged evidence in opposing affidavits when assessing prima facie cases for security arrests, moving beyond the traditional low-level test applicable to jurisdiction-founding attachments. The judgment provides important guidance on the treatment of expert evidence in motion proceedings requiring prima facie proof, establishing a two-stage test: first, whether underlying facts are established prima facie, and second, whether the expert's opinion is reasonably based on logical reasoning from those facts. It emphasizes that security arrests have serious consequences and courts should not shut their eyes to relevant admissible evidence. The case also clarifies the approach to calculating counter-security for loss of profit claims, requiring courts to exercise discretion to exclude speculative elements and account for contingencies rather than accepting optimistic calculations at face value. It affirms that a litigant is entitled to security based on its "reasonably arguable best case" but with appropriate adjustments for overlapping claims and contingencies.