The duty to disclose in arrest applications

Oct 24, 2006
Author: Anisa Govender, Shepstone & Wylie

Its critical to follow the courts requirements where a case requires a full and frank disclosure in order to establish a prima facie case in application proceedings, advises Anisa Govender of Shepstone & Wylie’s International transport and trade department.

This summary is set out in the uberimma fides (utmost good faith) rule in the case of Schlesinger v Schlesinger (1979) (4) SA 342 (W):

In ex parte applications all material facts must be disclosed which might influence a Court in coming to a decision

the non-disclosure or suppression of facts need not be wilful or mala fide to incur the penalty of rescission and

the Court, apprised of the true facts, has a discretion to set aside the order obtained on material facts not disclosed or to preserve it. Unless there are very cogent practical reasons why an order should not be rescinded, the Court will always frown on an order obtained ex parte on incomplete information and will set it aside even if relief could be obtained on a subsequent application by the same applicant. A litigant who approaches a Court ex parte is not entitled to omit any reference to a fact or attitude of his opponent which is relevant to the point in issue merely because he is not prepared to accept the correctness thereof.

This judgement was applied in the MV "Rizcun Trader" where the court held that every litigant has a duty to disclose every circumstance which might influence the court's decision whether or not to grant relief. The litigant's duty is even more onerous when the application is brought ex parte as a matter of urgency and where the relief sought is based largely on untested hearsay evidence. Whether or not the rule has been breached must be decided upon the basis of the facts before the court when the ex parte order granted judged against facts subsequently coming to light.

The court then went on to decide whether the breach of the duty of full disclosure in this instance warranted the arrest being set aside. In coming to its decision, the court considered the following factors:
a) the extent of the breach,
b) the reasons for the non – disclosure,
c) the extent to which the court might have been influenced by proper disclosure, the consequences of denying relief to the applicant; and
d) the interests of innocent third parties

In the arrest application, the court had not only been misled as to the terms of Clause 8 of the charterparty but also had been misdirected regarding the legal principles applicable to the facts.

The applicant failed to disclose that the standard terms of the charterparty relied upon in the application were modified to shift the primary liability for cargo claims from the charterer to the shipowner, despite clear evidence that respondent's Durban attorneys had been informed via fax as to the state of affairs. Had the court hearing the arrest application been aware of the discrepancy regarding clause 8, it might have influenced its decision. On a careful balancing of factors (a) – (d) set out above, the court concluded that the arrest had to be set aside.

Finally, the recent decision of the "MV Doxa", which judgement was handed down on 22 December 2003 is of assistance.

In this case, the Applicants instituted an urgent ex parte application for the arrest of the "Doxa" on 28 November 2003. The Respondent did not put up security but rather applied on an urgent basis to set aside the arrest which matter was heard on 4 December 2003. The case made out by the Applicants in their application for the arrest of the vessel was that in terms of the applicable contract of carriage, the vessel was due to carry a cargo of iron from Malaysia to Qatar. During the course of the voyage, the vessel suffered engine failure and could not proceed and salvors were enlisted.

The Applicants claimed against the ship owner for various amounts arising from salvage and general average and stated that the vessel had not been seaworthy at the commencement of the voyage.

In the application to set aside the arrest, the Respondent's attorney stated that the applicants did not make out a prima facie case in their founding affidavit and that the applicants were in breach of their obligation to show the utmost good faith when moving an urgent application ex parte. The Respondent's case was that the applicants failed to disclose the material terms of the contract of carriage. Further, nowhere in the founding affidavit is any evidence adduced to establish that the servants of the carrier did not exercise due diligence. Nor was there any factual foundation from which an inference could be drawn that the carrier was not covered by the exemptions in the Hague Visby Rules.

The Respondent's legal representatives in London had provided the General Average adjustment and an expert report which stated that the cause of the breakdown was a latent defect. The Respondent's attorney stated in the application to set aside the arrest that all of this evidence pointed to the fact that the cause of the engine failure was not attributable to lack of due diligence on the part of the vessel's crew.

Judge Levinsohn was of the view that the objection had to be upheld for the following reasons:
"For whatever reason the applicants took a decision that their deponent would go no further than making a "contention" that the engine failure resulted from the respondent's servants lack of due diligence and that no facts in support would be set out. I am somewhat surprised at this approach. These applications for the arrest of a ship are usually moved ex parte and as a matter of urgency.

The Judge went on to state:

"In my view no case whatsoever was made out in the founding papers and the order ought not to have been granted in the first place".

"The applicants were guilty of a flagrant breach of what is termed the uberrima fides rule".

The Judge concluded by stating that "…the applicant's London solicitors were in possession of the general average adjustment which clearly cast considerable doubt on whether the servants of the ship owner could be held liable in terms of the contract of carriage for the engine failure. They also knew from the reply to their request what the respondent's attitude was. If the learned judge had been apprised of these facts, he would not in my view have granted the order".

The arrest was thus set aside on the basis of non – disclosure.