Simon NO v Air Operations of Europe AB and Others (354/96) [1998] ZASCA 79; 1999 (1) SA 217 (SCA); [1998] 4 All SA 573 (A) (25 September 1998)

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CASE NO: 354/96

IN THE SUPREME COURT OF APPEAL OF

SOUTH AFRICA

In the matter between:

NORMAN DAVID SIMON NO.

APPELLANT

and

AIR OPERATIONS OF EUROPE AB 1ST RESPONDENT

INTERNATIONALE NEDERLANDEN

LEASE ISLAND BV

2ND RESPONDENT

FIRST NATIONAL BANK OF

SOUTHERN AFRICA LIMITED 3RD RESPONDENT

CORAM: SMALBERGER, HOWIE, PLEWMAN, STREICHER JJA et NGOEPE AJA

HEARD: 4 SEPTEMBER 1998

DELIVERED: 25 SEPTEMBER 1998

JUDGMENT

SMALBERGER JA ...

2SMALBERGER JA:

SMALBERGER JA:

The appellant is the duly appointed liquidator of Logans Tour Operators (Pty) Ltd (in liquidation) ("Logans"). Prior to being placed in provisional liquidation on 25 August 1995, Logans carried on business as a tour operator. The first respondent ("Air Operations") is a Swedish company which conducts business as a lessor and operator of aircraft. The second respondent ("ING Aviation"), a Dutch company, is a financier in the airline industry. Although Air Operations is financed by ING Aviation it is common cause that they are separate and independent legal entities.

On 19 December 1993 Logans and Air Operations entered into a written agreement described as a "Wet Lease/Operating Agreement" ("the agreement"). In terms of the agreement Air Operations undertook

3 to lease an aircraft to Logans from time to time for flights on specified

routes. It also assumed responsibility for the operational requirements

of the aircraft such as maintenance, the provision of a crew and flight

arrangements. In return Logans was to pay for the hire of the aircraft

according to prescribed rates. To ensure payment Logans was required

to open an irrevocable letter of credit in favour of Air Operations in a

specified amount. Logans duly complied with its obligations in this

regard and an aircraft was put at its disposal as envisaged by the

agreement.

During March 1994 Air Operations transferred its right to receive

payments from Logans to ING Aviation (about which more later). In

about September 1994 the letter of credit was due to expire and with it

the approval that had been granted by the foreign exchange control

4authorities to remit abroad funds derived from such payments. In

authorities to remit abroad funds derived from such payments. In

anticipation of this happening ING Aviation opened a bank account in

Johannesburg with the third respondent ("the bank account"). It was

agreed between Logans and ING Aviation that upon expiry of the letter

of credit all payments required to be made by Logans would be paid into

the bank account. This was done, and the monies so paid were held in

the account pending authorisation by the relevant authorities for their

remittance overseas.

From about February 1995 Logans began to experience cash flow

problems. This resulted in its failing to make certain payments as they

fell due in terms of the agreement. Logans attributed its problems in this

regard to alleged breaches by Air Operations of various terms of the

agreement. Attempts to overcome Logans's difficulties failed.

5 Eventually flights were suspended and Air Operations purported to

cancel the agreement with effect from 28 June 1995. On 23 August

1995 ING Aviation made written demand for payment by Logans of

more than one million dollars. Two days later Logans was provisionally

wound-up. The amount then standing to the credit of ING Aviation in

the bank account had grown to approximately R13 million.

Authorization had been sought to remit the funds abroad. The required

authorization was granted on 6 February 1996.

It is common cause that both Air Operations and ING Aviation are

foreign peregrini of the court (the Witwatersrand Local Division) within

whose area of jurisdiction the bank account at all relevant times was

situate. On 7 February 1996 the appellant sought by way of an urgent

application, and was granted, (by Goldstein J) an order in that court

6 against the three respondents in the following terms:

"1. Directing and authorising the attachment of all funds standing to the credit of ING Aviation Lease banking account number 250805046905927185 First National Bank account number 046905927185 in the name of Second Respondent at the Bank City branch (Johannesburg) of the Third Respondent ("the bank account")ad fundandam vel confirmandam juridictioneman action which the Applicant intends to institute against the First and/or Second Respondent for the following relief:

ad fundandam vel confirmandam juridictionem

1.1

Enforcement of the agreement pertaining to the withdrawal of funds referred to in paragraph 31 of the founding affidavit.

1.2

Repayment of all monies standing to the credit of the bank account.

1.3

Payment of USS2,7 million,alternatively, the Rand equivalent thereof calculated as at the Rand/Dollar exchange rate prevailing on the date on which payment is made.

alternatively

7

1.4

Interest on the aforesaid amountsa tempore morae.

a tempore morae

1.5

Costs of suit.

1.6

Further and/or alternative relief.

2.

2.1.

Interdicting the First and Second Respondents from transferring or causing to be transferred any monies standing to the credit of the bank account from such account pending the determination of the action.

2.2.

Interdicting and restraining the Third Respondent from transferring or giving final effect to any instruction to transfer any monies standing to the credit of the bank from such account pending the determination of the action. Such interdict to include the retraction of the instruction to transfer such monies in the event of the 'for value date' not having passed.

3. That the relief set forth in 1 and 2 above operate as an interim order with immediate effect.

8

4. That a Rule Nisi do hereby issue, returnable on a date to be determined by the above Honourable Court, calling upon the First, Second and Third Respondents and any other interested parties to show cause why orders 1 and 2 above should not be made final."

Paragraph 4 of the court's order simply slavishly followed the

wording of the notice of motion and did not stipulate a return date.

Despite this defect in the order, answering and replying affidavits were

filed and the matter eventually came before Nugent J. On 29 April 1996

the learned judge dismissed the rule nisi and set aside the interim

interdicts, with costs, including the costs of two counsel. He refused

leave to appeal but the appellant was subsequently granted leave to

appeal to this Court on petition to the Chief Justice. In his petition the

appellant acknowledged that the funds in the bank account belonged to

9 ING Aviation and that Air Operations had no claim on them. He

accordingly confines the relief he seeks on appeal to ING Aviation.

It is common cause that on 2 May 1996, after the appellant's

petition had been served on the respondents, but before leave to appeal

had been granted, ING Aviation launched an application in which it

sought, inter alia, an order that effect be given to the court a quo's

judgment discharging the rule nisi. The application was granted by

Nugent J on 8 May 1996, subject to security de restituendo in the form

of a guarantee being provided by ING Aviation in the event of leave to

appeal being granted and the subsequent appeal being successful. The

order was subject to certain conditions, one being that "the guarantee

shall in any event lapse after the expiry of a period of two years from the

date of issue thereof. The guarantee was duly furnished, and the

10 monies standing to the credit of ING Aviation in the bank account were

transferred overseas. The date of issue of the guarantee was 8 May

1996. No steps were taken to extend the period of the guarantee and it

accordingly expired on 8 May 1998. Subsequently the appellant

initiated proceedings in the Witwatersrand Local Division in which the

relief eventually sought was an order directing ING Aviation to provide

security de restituendo by furnishing a fresh guarantee. On 28 August

1998 Nugent J dismissed the application with costs. We were informed

from the bar that the appellant intends to seek leave to appeal against the

dismissal of the application.

These events gave rise to the filing of supplementary heads of

argument on behalf of ING Aviation two days before the hearing of the

appeal. It was contended that the appeal fell to be dismissed by virtue of

11

the provisions of sec 21 A(l) of the Supreme Court Act 59 of 1959. The

section presently reads:

"When at the hearing of any civil appeal to the Appellate Division or any Provincial or Local Division of the Supreme Court the issues are of such a nature that the judgment or order sought will have no practical effect or result, the appeal may be dismissed on this ground alone."

The contention was based on the following considerations. In paragraph

3.6 of his heads of argument the appellant had intimated that he no

longer persisted with the argument that a jurisdictional attachment was

necessary to confer jurisdiction on the court a quo; consequently the

appeal was confined to the interdict granted in paragraph 2 of the order

of Goldstein J, which related to the accumulated funds then in the bank

account; the funds had since been transferred out of the country and the

guarantee providing security de restituendo had lapsed; accordingly, if

12 the appeal was upheld no order could be made which would have any

practical effect or result.

In seeking to counter this Mr Lazarus, for the appellant, in

argument before us, was obliged to depart from the attitude which he had

taken up in his heads of argument. He contended that the question of

attachment remained relevant to the issue of jurisdiction and the

outcome of the appeal, despite the absence of any funds or a valid

guarantee. He sought thereby to shift the focus from paragraph 2 of the

rule nisi to paragraph 1. He claimed that if successful on appeal the

appellant would be entitled to a form of declaratory order which he

formulated, inter alia, in the following terms:

"1. The court a quo erred in discharging the rule issued on 7 February 1996 insofar as the order in paragraph 1 of the rule is concerned.

13

2. The court a quo has jurisdiction to adjudicate the action intended to be instituted by the appellant against the second respondent as referred to in paragraph 1 of the rule nisi."

An order in those terms, so the argument went, was one which would

have a practical effect. He conceded that as matters stand at present he

could not ask for confirmation of paragraph 2 of the rule nisi. The

position might be different if an appeal against Nugent J's refusal to

order fresh security were successful.

In the circumstances it became necessary to hear full argument on

the merits of the appeal. Because, for reasons that follow, I am firmly

of the view that the appeal on the merits cannot succeed, it is

unnecessary to consider whether this would otherwise have been an

appropriate matter in which to invoke the provisions of sec 21 A(l) of

the Supreme Court Act.

14Before passing on to the merits, a word about the section. It was

Before passing on to the merits, a word about the section. It was

inserted in the Supreme Court Act in 1993 but amended with effect from

14 February 1997. Both Mr Lazarus and Mr Duke, who appeared for

ING Aviation, accepted that the amendment applied to all appeals heard

after that date, even if the judgment or order appealed against had been

given or made before then. This Court assumed that to be so in Premier,

Provinsie Mpumalanga, en 'n Ander v Groblersdalse Stadsraad 1998(2)

SA 1136 (SCA) at 1143 A - C (see also Western Cape Education

Department and Another v George 1998(3) SA 77 (SCA) at 84 G).

However, in MV Snow Delta, Discount Tonnage Ltd v Serva Ship Ltd

1998(3) SA 636 (C) at 646 B - C Thring J stated:

"In passing, I point out that it was common cause between counsel that s 21 A of the Supreme Court Act 59 of 1959, which gives the Court a discretion to dismiss an appeal when 'the judgment or order sought will have no practical

15

effect or result' and which might have had a bearing on this point, is not applicable in this case as it was inserted into the Supreme Court Act with effect only from 14 February 1997, after the order of the Court a quo had been made."

The view expressed by the learned judge is open to doubt. Sec 21 A(l)

was designed to alleviate the pressure on, and reduce the workload of,

courts of appeal generally, and this Court in particular (see Premier,

Mpumalanga, en 'n Ander v Groblersdalse Stadsraad at the passage

quoted above). That being so it strikes me as being a procedural

provision rather than a matter of substantive law. If it were procedural

it would normally apply from the date it came into operation in respect

of both pending and prospective appeals (Steyn: Die Uitleg van Wette:

5thEd, p 90). However, as the matter was not fully argued before us I

th

refrain from expressing a firm view in regard thereto.

The appellant's application in the court a quo was based on two

16grounds:

grounds:

(1)

An assignment by Air Operations of its rights and obligations in terms of the agreement to ING Aviation, thereby rendering ING Aviation liable to Logans for any damages arising from breaches of the agreement; and

(2)

An oral agreement between Logans, Air Operations and ING Aviation in which it was agreed that, pending the determination of various disputes which had arisen during the currency of the agreement, neither Air Operations nor ING Aviation would be entitled to draw on the monies standing to the credit of the bank account. (As Air Operations makes no claim to the monies the issue is now confined to whether ING Aviation agreed that it would not be entitled to do so.)

17 I shall deal with each of these in turn.

The agreement

As I have already mentioned, the agreement was entered into

between Logans and Air Operations, and Logans was required to open

an irrevocable letter of credit in favour of Air Operations in order to

ensure payment in terms of the agreement. The manner of payment was

set out in clause 6(d) of the agreement, the relevant portion of which

provides:

"Air Ops will be able to draw against any L/C it holds on a weekly basis seven days prior to each flight, for the amount of the flight in accordance with a) above. Should Air Ops not deliver any flight in accordance with this contract, then they shall not be entitled to draw any funds for the next flight until they have satisfactorily delivered the previous flight. . . .

Should Air Ops draw the first payment from any L/C and not deliver the first flight as per the contract, Air Ops

18

undertakes to reimburse the full amount to Logans within 7 (seven) days.

. . . should Air Ops receive any payment, or draw on any L/C from Logans and not deliver as per this contract, Air Ops undertakes to reimburse the full amount to Logans within 7 (seven) days."

In terms of clause 14 of the agreement:

"Neither Air Ops nor Logans may without the prior consent of the other party assign this Agreement in whole or in part or delegate any of the agreed rights and obligations under this Agreement provided, however, that Air Ops has the right to assign this Agreement in whole or in part to ING Aviation Lease, Amsterdam, The Netherlands. Equally, Logans carries the same right of assignment to a Company still to be formed under the control of Logans."

The appellant alleged in his founding affidavit that, as

contemplated in clause 14, Air Operations assigned its rights and

obligations under the agreement to ING Aviation. This was denied by

ING Aviation. It claimed that all that had occurred was that Air

19

Operations, with Logans's consent, had transferred to it the right to

receive payment from Logans, without the transferral of any corresponding obligations. The appellant's proposed action for damages against ING Aviation proceeds on the premise that ING Aviation, by virtue of the assignment, is legally liable for all damages suffered by Logans on account of any breach of the provisions of the agreement.

It is not clear, either from the agreement itself or the record as a whole, where the agreement was concluded. I shall assume that it was outside the jurisdiction of the court a quo and that the court was not otherwise possessed of jurisdiction. As Logans was an incola of the court and ING Aviation a foreign peregrinus, attachment of the monies in the bank account (which belonged to ING Aviation) was necessary to found jurisdiction (ad fundandam juridictionem) i.e. to confer a

20 jurisdiction which did not otherwise exist. All that remained for the

appellant to establish was that he had a prima facie cause of action

against TNG Aviation. The requirement of prima facie cause of action

is satisfied if an applicant shows that there is evidence which, if

accepted, will establish a cause of action. The mere fact that such

evidence is contradicted will not disentitle the applicant to relief- not

even if the probabilities are against him. It is only where it is quite clear

that the applicant has no action, or cannot succeed, that an attachment

should be refused. (MT TIGR: Owners of the MT Tigr and Another v

Transnet Ltd t/a former 1998(3) SA 861 (SCA) at 868 B - H). The

remedy of attachment ad fundandam jurisdictionem in order to create

jurisdiction is an exceptional remedy and one that should be applied with

care and caution (Ex parte Acrow Engineers (Pty) Ltd 1953(2) SA 319

21 (T) at 2121 G - H; Thermo Radiant Oven Sales (Pty) Ltd v Nelspruit

Bakeries (Pty) Ltd 1969(2) SA 295 (A) at 302 C - D). But once all the

requirements for attachment have been satisfied a court has no discretion

to refuse an attachment (Longman Distillers Ltd v Drop Inn Group of

Liquor Supermarkets (Pty) Ltd 1990(2) SA 90(5 (A) at 914 E - G).

Insofar as the appellant also sought an interim interdict pendente

lite it was incumbent upon him to establish, as one of the requirements

for the relief sought, a prima facie right, even though open to some

doubt (Webster v Mitchell 1948(1) SA 1186 (W) at 1189). The accepted

test for prima facie right in the context of an interim interdict is to take

the facts averred by the applicant, together with such facts set out by the

respondent that are not or cannot be disputed and to consider whether,

having regard to the inherent probabilities, the applicant should on those

22 facts obtain final relief at the trial. The facts set up in contradiction by

the respondent should then be considered, and if serious doubt is thrown

upon the case of the applicant he cannot succeed. (Gool v Minister of

Justice and Another 1955(2) SA 682 (C) at 688 B - F and the numerous

cases that have followed it).

The word "assignment" in our law is generally used to denote a

transfer of both rights and obligations, but its precise meaning in a given

case may depend upon the context in which it is used. Had clause 14 of

the agreement simply spoken of "the right to assign" without

qualification it may well be that any assignment pursuant thereto would

encompass a transfer of both rights and obligations. But the right to

assign was qualified by the words "in whole or in part". Mr Lazarus

conceded that notionally this could permit of a transfer by Air

23 Operations to ING Aviation of the right to receive payment from Logans

under the agreement without a concomitant transfer of obligations.

It does not follow as a matter of law that because the right to receive payments from Logans was admittedly transferred by Air Operations to ING Aviation, the latter succeeded to the obligation to reimburse Logans in terms of clause 6(d) of the agreement if flights were not delivered. I agree with the learned judge a quo that the question of whether ING Aviation acquired that obligation would be one of fact dependent upon what arrangements were made between Air Operations and ING Aviation pursuant to clause 14. There is simply no evidence of an arrangement whereby ING Aviation undertook to reimburse Logans.

The appellant's case boils down to a bald allegation that the

24 obligations of Air Operations were transferred to ING Aviation. There

is not a shred of evidence to support it. It amounts to a speculative

conclusion rather than a statement of fact. There is nothing to show that

ING Aviation ever acted in substitution for Air Operations in respect of

the latter's obligations in terms of the agreement. In a matter such as the

present, a bald assertion as to a state of affairs by a litigant having no

personal knowledge of the relevant facts cannot, without more, establish

a prima facie case. The fact that two of appellant's deponents, Mr

Loubser and Mr Gain, purport to confirm the appellant's allegation does

not assist the appellant as they, too, cannot speak from personal

knowledge.

It appears from the record, and is not disputed, that a letter was

written by Mr Richard Gain on behalf of Logans in March 1994 in which

25 it was said, inter alia,

"As per the agreement, in order to open the letter of credit in favour of ING Bank, I require a letter from Air Ops assigning these rights over to ING. Please arrange for Thomas to fax me this today."

A letter of assignment was duly furnished in which it was provided that "Air Operations hereby assigns to ING Aviation Lease, Amsterdam, the right to be the beneficiary of the Irrevocable Letters of Credit issued by Logans".

No reference was made, either then or later, to the transfer of any

accompanying obligation. Regard may be had to these undisputed facts

which tend to negate the existence of prima facie cause of action.

Insofar as inherent probabilities may additionally be taken into

account in relation to whether prima facie case for an interim interdict

was established, it is extremely unlikely that ING Aviation would have

agreed to take over the obligations of Air Operations in terms of the

26

agreement as, in the words of the judge a quo, "it would be most

surprising if a financier had accepted the obligation to supply, maintain and equip aircraft and make all the arrangements necessary for international flights".

Consequently, in relation to the assignment issue, the appellant in my view failed to make out prima facie cause of action entitling him to either an attachment to found jurisdiction or an interim interdict.The oral agreement

The oral agreement

The appellant alleged that during the currency of the agreement numerous disputes arose between Logans on the one hand, and Air Operations and ING Aviation on the other. Attempts to resolve these disputes were unsuccessful. The appellant claimed that this led to an oral agreement being reached at a meeting between Mr Loubser

27 (representing Logans) and Mr Eikelaar (a vice-president of ING

Aviation representing both it and Air Operations) in Johannesburg in

March 1995 that, pending resolution of the disputes, neither Air

Operations nor ING Aviation would be entitled to draw on the monies

standing to the credit of ING Aviation in the bank account. This

agreement was later confirmed during April 1995 in the Maldives. The

existence of any such oral agreement was denied by both Air Operations

and ING Aviation.

On the appellant's version the oral agreement relied upon was

entered into within the court a quo's area of jurisdiction. The bank

account in which the monies were held was also situated within its

jurisdiction. The court a quo was accordingly clothed with jurisdiction

to entertain a dispute concerning the alleged oral agreement.

28 Attachment to found jurisdiction was neither necessary nor permissible.

Was the appellant entitled to an attachment to confirm jurisdiction

(ad confirmandam jurisdictionem) i.e. to strengthen an existing ground

of jurisdiction? In my view not. It appears to be generally accepted that

the principle of effectiveness underlies the rule relating to attachment.

Historically one of the underlying reasons for the attachment of property

to found (or confirm) jurisdiction was to give effect to a judgment and

provide an incola with security in advance for execution on that property

after judgment. (Jackaman and Others v Arkell 1953(3) SA 31 (T) at 34

H; Thermo Radiant Oven Sales (Pty) Ltd v Nelspruit Bakeries (Pty) Ltd

(supra) at 306 H - 307 A). This principle, in the course of time, has

become considerably eroded by permitting, in cases sounding in money,

the attachment of articles of little value bearing no correlation to the

29 amount of the judgment sought. Having regard to the origin and purpose

of attachment it is only justified (to confirm jurisdiction) in cases

sounding in money or claims relating to property i.e. claims involving

property or real rights to or in property. It would not have application

to matrimonial causes or actions in personam which do not have a

monetary or property component (see generally Herbstein and Van

Winsen: The Civil Practice of the Supreme Court of South Africa: 4thEd,

pp 56, 60, 62; Erasmus: Superior Court Practice: Al - 29; Pollak on

Jurisdiction: 2ndEd, pp 544, 82). The present matter falls into the latter

nd

category. The appellant seeks to establish the existence of an oral

agreement precluding the withdrawal of money from a bank account -

money to which it has no claim. The judgment sought is not one

sounding in money in the sense in which that term is usually understood

30 nor is it one relating to property in respect of which the appellant claims

a right. The requirements for an attachment to confirm jurisdiction are

therefore not present.

It was argued that an order for costs is one sounding in money,

and attachment is therefore required to confirm jurisdiction in respect of

such an order. This argument was based in part on a judgment I gave

some years ago in Mali v Mali 1982(4) SA 569 (SE) in which I followed

dicta to that effect in Wells v Dean-Wilcocks1924 CPD 89at 93 and

1924 CPD 89

Kibe v Mphoko and Another 1958(1) SA 364 (O). I held (at 570 H) that

there appeared to be no logical reason why the principle of effectiveness

should not also extend to an order for costs, and concluded that no order

for costs against a peregrine respondent can be effective without prior

attachment, and that without such attachment no order for costs would

31 be appropriate.

What the decision overlooks is the essentially ancillary or

consequential nature of an order for costs. Where a court has

jurisdiction in a matter involving a peregrine respondent that does not

sound in money or relate to property, and no attachment to confirm

jurisdiction would be permissible, it would be entitled, because of the

consequential nature of the order, and because of circumstances of

convenience and common sense, to make an award of costs despite there

having been no attachment (cf Sonia (Pty) Ltd v Wheeler 1958(1) SA

555 (A) at 564 A - D). This can also be seen as an application or logical

extension of the causae continentiae principle (see Pollak, op cit, at

180). To hold otherwise would subvert the basic principle that

attachment is only justified and permitted in cases sounding in money or

32 relating to property. There are potentially many cases involving

peregrine respondents that do not fall into that category. Costs are a

component of virtually all forms of litigation, and to permit an

attachment in relation to a prospective costs order would be to allow an

attachment to confirm jurisdiction in practically every case against a

peregrinus. I do not believe the law permits that, or should permit it. I

must therefore conclude (with due contrition) that I was wrong in

refusing an order for costs in Malis v Mali (supra). In the result the

appellant was not entitled to an order for attachment.

There remains the issue of the interdict pendente lite which was

refused by Nugent J. He found that the appellant had established a

prima facie right, but denied relief on the ground that the balance of

convenience favoured ING Aviation. In this respect Nugent J expressed

33 himself as follows:

"In my view, the balance of convenience clearly favours ING Aviation. No purpose at all is served by compelling it to retain the monies in the account, or even in this country. The applicant has no claim to the monies, nor has it demonstrated that it has any cause of action against ING Aviation. Indeed, on the evidence before me it is doubtful that a court would order specific performance of the alleged agreement.

The applicant's counsel submitted that in the course of resolving the disputes with Air Operations a good claim against ING Aviation may emerge. That is pure speculation and, in my view, insufficient grounds upon which to deprive ING Aviation of the use of its money. Accordingly, in my view, the applicant's claim to an interdict must fail."

I agree. A further factor favouring ING Aviation at the time would have

been the potential weakening of the rand against other major currencies

resulting in a steady decline in the value of the money, destined

ultimately to leave the country, in the bank account. This contention

34 was advanced and substantiated on the papers. There is no basis for

interfering with the discretion exercised by Nugent J in this regard. It

follows that the appellant also fails in respect of the relief sought relating

to the alleged oral agreement.

In the result the appeal is dismissed with costs, such costs to

include the costs of two counsel.

J W SMALBERGER JUDGE OF APPEAL

HOWIE, JA )concur PLEWMAN, JA ) STREICHER,JA ) NGOEPE, AJA )