THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case No:   279/2012
Not Reportable

In the matter between:

LYKES LINES LIMITED, LLC                                           APPELLANT

and

VEREENIGING MEAT PACKERS (PTY) LTD             RESPONDENT

Neutral citation: Lykes Lines Ltd v Vereeniging Meat Packers (279/2012)
[2013] ZASCA 18 (20 March 2013)

Coram:
Mthiyane DP, Brand, Petse JJA, Schoeman and Erasmus
AJJA

Heard:
25 February 2013
Delivered:
20 March 2013

Summary: Breach of Contract ─ Shipping line claiming damages for non-
return of container ─ Shipping line failing to prove that it suffered damages
─ appeal dismissed with costs.

_____________________________________________________________________

ORDER

On appeal from: KwaZulu-Natal High Court, Pietermaritzburg (Balton,
Sishi JJ and Moodley AJ sitting as court of appeal):

The appeal is dismissed with costs.
___________________________________________________________

JUDGMENT

MTHIYANE DP (BRAND, PETSE JJA, SCHOEMAN AND
ERASMUS AJJA CONCURRING)

[1] This is an appeal against a judgment of the full court of the
KwaZulu-Natal High Court (Balton J, with Sishi J and Moodley AJ
concurring) allowing an appeal from the decision of a single judge, Swain
J in favour of the appellant. The appeal is concerned with a claim by the
appellant for damages against the respondent arising out of the loss of a
reefer container which was being conveyed by the appellant from
Montreal, Canada to the port of Durban in terms of a contract of carriage,
more fully described in the Bill of Lading.

[2] The appellant is a registered company based in the United States of
America where it carries on business as an ocean carrier. The respondent,
Vereeniging Meat Packers (Pty) Ltd, is a South African company which
produces processed meats of which turkey skins are an ingredient. At the
time the reefer container was full of frozen turkey skins. The respondent
located some of these turkey skins in Canada and arranged for their

transportation to the City Deep Cold Storage, in City Deep,
Johannesburg.

[3] In terms of the parties’ contract of carriage the appellant received a
reefer container for ocean carriage from Montreal, Canada, on board the
MV Lykes Runner to the port of Durban. The terms of the carriage were
subject to the carrier’s conditions printed on the reverse of the Bill of
Lading. In terms of clause 6(b)(1) thereof:
‘─ If Containers supplied by or for the Carrier are unpacked at the Merchant’s
premises, the Merchant is responsible for returning the empty Container in working
condition with interiors brushed and cleaned. The Containers must be returned to the
point or place designated by the Carrier within the time prescribed failing which the
Merchant will be liable for all resulting direct, incidental and consequential damages
including demurrage, detention and per diem charges, however designated.’

[4] On discharge of the container in the port of Durban, the
respondent’s clearing agent, Impson Freight (Pty) Ltd (Impson),
presented the original Bill of Lading to the appellant, took delivery of the
container, arranged for its transportation to the respondent’s premises, at
the City Deep Cold Storage. On the respondent’s instructions Impson
arranged for the container to be conveyed by merchant haulage, that is by
a road haulier which had to uplift it from the port and deliver it to the
respondent, as the importer. Impson outsourced the transportation of the
container to Pascal Logistics, which arranged for a truck to convey the
container to the respondent’s premises. In terms of the contract the
respondent ‘undertook to turn the empty container into the [appellant’s]
depot for empty containers’. The container was unfortunately not returned
to the appellant. It transpired that the truck transporting the container was
hi-jacked en route from Durban to the respondent’s premises and the
container was stolen.

[5]     The appellant was not the owner or lessee of the container. In reply
to the respondent’s request for further particulars for trial as to the
identity of the owner of the reefer container the appellant averred that GE
SeaCo was the owner and that it was ‘the person in whom the risk in the
container was vested’. The container had been leased by CP Ships (UK)
Limited (CP Ships) from its owner, GE SeaCo Services Limited (GE
SeaCo). The appellant is a subsidiary of CP Ships. CP Ships reimbursed
GE SeaCo for the loss by payment of the sum of US$21 601.25. In terms
of a certain internal arrangement involving certain book entries CP Ships
debited the appellant with the amount of the loss, on the basis that it was
the shipping line within its group that had carried the container
immediately prior to its loss.

[6] The question which is before this court, with its special leave, is
whether the appellant has proved that it has suffered loss as a result of the
loss or theft of the container. Put differently, the question is whether the
allocation of the loss in terms of the aforesaid internal arrangement vested
the appellant with the right to recover from the respondent, the loss it
claims to have suffered as a result of the non-return of the container. At
the trial in the high court Swain J found for the appellant and granted
judgment against the respondent in the sum of US$21 601.25 being the
replacement value of the container. The respondent successfully appealed
to the full court which substituted the trial court’s judgment with an order
dismissing the appellants claim with costs.

[7] The appellant’s claim was based on clause 6(b)(1) of the Bill of
Lading. It sued for breach of contract arising out of the respondent’s
failure to return the container and for the value of the container in the sum
of US$21 601.25. The respondent disputed the claim primarily on the

basis that the appellant did not have locus standi to sue and that the
appellant had not proved that it was the entity that bore the risk of loss in
respect of the container.

[8] In the appeal before us the question is still whether the appellant
proved that it suffered damages consequent upon the loss of or the non-
return of the container and whether the evidence led by the appellant of
the so-called internal arrangement was sufficient to indicate that the
appellant bore the risk of loss of the container at the time of its loss or
theft in the hi-jacking incident.

[9] At the trial Swain J identified two issues as material to the
determination of the dispute between the parties. The first was whether
the appellant had established  locus standi (standing) and the second was
whether on a correct interpretation of clause 6(b)(1) of the Bill of Lading
the respondent was liable to compensate the appellant for the financial
loss it suffered as a result of the non-return of the container. The court
noted that the real issue in the case was whether the appellant has
established that it suffered the financial loss, occasioned by the loss of the
container in terms of the ‘internal arrangement’ between CP Ships,
Container Equipment Leasing (CEL) and the appellant. As already
indicated the appellant was neither the owner nor the lessee of the reefer
container but relied for its right to claim solely on a certain ‘internal
arrangement’ in terms of which the loss of the container was allocated to
it by CP Ships.

[10] The internal arrangement testified to by the appellant’s witness Mr
TJ Phillips insofar as it related to the leasing of the container in question
was to the following effect. GE SeaCo was the owner of the container. It

concluded a lease agreement with CEL, which was a leasing entity for CP
Ships. All containers leased to CP Ships were done through CEL. CEL, a
subsidiary of CP Ships was set up in order to source all the containers
needed for CP Ships and all the other various lines within its group. If a
leased container was lost or damaged CP Ships would pay the leasing
company (in this case GE SeaCo) on behalf of CEL and then the
individual line in this case, the appellant, Lykes Lines, would be debited
by CP Ships internally. In terms of this internal arrangement CP Ships
allocated the loss of the container to the line that was in fact carrying the
container at the time.

[11] During cross-examination by the counsel for the respondent, Mr
Shepstone, Mr Phillips was asked whether the appellant was in
possession of any document that ‘evidences or records such an internal
arrangement’. He initially said that there would be one but later positively
asserted: ‘yes there is’. The document was never produced. In response to
a question by Swain J whether the container was to be understood as
having been leased by CEL to the appellant, Mr Phillips merely reiterated
that the arrangement ‘was part of the operating procedures between the
various companies’.

[12] The question still remains whether there was any legal basis for the
holding company, CP Ships to atrribute to the appellant, the loss accruing
initially to CEL, namely the US$21 601.25 incurred as a result of the loss
of the container. The appellant bore the onus of showing that it it bore the
risk of loss at the relevant time and that it had ‘suffered damages pursuant
to a legally binding agreement’. The full court noted that for there to have
been an enforceable contract, the appellant was burdened with the onus to
prove that the parties had intended that their consensus should give rise to

legally enforceable obligations, that is, that the parties should have had
animus contrahendi (intention to contract). (See Minister of Home Affairs
& another v American Ninja TV Partnership & another 1993 (1) SA 257
(A). An agreement will constitute a contract only if the parties intend to
create an obligation or obligations. If this intention is present the
agreement is said to be valid in the eyes of the law. (See Van der Merwe
et al Contract: General Principles 4 ed p 7) The evidence of Mr Phillips
as to the internal arrangement indicates how the loss was distributed by
CEL amongst its subsidiaries and ultimately to the end entity, in this
cases the appellant. There is however no proof that this was done in terms
of a binding contract between CEL and the appellant. On the evidence the
internal arrangement appears to be no more than inter-corporate mutual
dealings not in themselves creating legal liability but resulting rather in
no more than a non-binding agreement often described as a ‘gentlemen’s
agreement’. (See Christies The Law of Contract in South Africa 6 ed p
94) To illustrate the point, when Mr Phillips was questioned by the
respondent’s counsel, Mr Shepstone, as to whether there was any separate
lease agreement between CP Ships or CEL and the appellant, he simply
said ‘it was merely this internal understanding.’ He further stated that
none of the subsidiaries could, through this internal arrangement, dictate
as to who would bear the loss. He said: ‘there was no dictating. It was per
operating procedures.’ Clearly under these circumstances it cannot be
said that there was a legally enforceable agreement in place entitling the
appellant to claim for the loss of the container.

[13] I conclude therefore that the appellant has not proved on a balance
of probability that it suffered any loss as a result of the loss or theft of the
container. The evidence of Mr Phillips, which was presented on the
appellant’s behalf in respect of the ‘internal arrangement’ was insufficient

to discharge the onus resting on the appellant as it does not amount to
evidence of a legally binding obligation on the part of the appellant to pay
for the loss of the container.

[14] The above finding renders it unnecessary to traverse other issues
arising in this appeal. As to costs, the respondent was represented by two
counsel on appeal and had asked for costs of two counsel in its heads. But
on appeal it was conceded, correctly, in my view, that the employment of
two counsel was not warranted.

[15] In the result the following order is made.
The appeal is dismissed with costs.

______________________

K K MTHIYANE
DEPUTY PRESIDENT

APPEARANCES

For Appellant:
SR Mullins SC
Instructed by:
Shepstone & Wylie Attorneys, Durban
Matsepes, Bloemfontein

For Respondent:

PF Louw SC (with him HA van der Merwe)
Instructed by:
Senekal Simmonds, Johannesburg
Schoeman Maree Inc, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME
COURT OF APPEAL

FROM
The Registrar, Supreme Court of Appeal

DATE
20 March 2013

STATUS
Immediate

Please note that the media summary is for the benefit of the media and
does not form part of the judgment.

LYKES LINES LTD v VEREENIGING MEAT PACKERS (279/2012) [2013]
ZASCA 18 (20 MARCH 2013)

Today the SCA dismissed an appeal by the appellant, a shipping line, Lykes
Lines Limited, LLC against the judgment and order of the full court of the Kwa-
Zulu Natal high court. The full court had upheld an appeal by a meat
processing company, Vereeniging Meat Packers (Pty) Ltd, which had been
ordered by a single judge to pay to the shipping line, damages in the sum of
US$21 601.25 for the container which was stolen in a hi-jacking incident en
route from the port of Durban to the City Deep Cold Storage, in City Deep,
Johannesburg.

The container had been conveyed from Montreal, in Canada to Durban by the
same shipping line in terms of a contract of carriage the shipping line had
entered into with Vereeniging Meat Packers.

At the trial the single judge of the KwaZulu Natal high court, Pietermaritzburg
had found that the Vereeniging Meat Packers were liable to compensate the
shipping line. But on appeal to the full court of the KwaZulu-Natal high court, it
was found that the shipping line had failed to prove that it was the entity that
bore the risk of loss in respect of the container. It was neither the owner nor
lessee of the container. The shipping line had relied on certain internal
arrangements within the shipping corporate group, in terms of which, loss of
containers leased by the shipping group were attributed to the shipping line
which was carrying the container at the time of the loss. The full court found
that this internal arrangement did not establish that there was a binding
contract between the shipping line and the holding company, entitling the
shipping line, Lykes Lines Limited, LLC to claim damages for the loss of the
container. The SCA agreed and accordingly the appeal was dismissed.