Thursday, December 20, 2007

Bid Industrial Holdings v Strang: Establishing jurisdiction without arrest

The recent decision by the Supreme Court of Appeal in Bid Industrial Holdings v Strang [2007] SCA 144 (RSA) is a fine example of our courts’ willingness to actively develop the common law in accordance with the Constitution. In this case, the Court assessed the constitutionality of the common-law rule requiring a resident plaintiff suing a foreign defendant to apply, in the absence of a possible attachment, for the arrest of the defendant to found or confirm jurisdiction. Our courts are empowered in terms of section 19(1)(c) of the Supreme Court Act 59 of 1959 to order the arrest of a person or the attachment of property to establish jurisdiction. Section 28 of the Supreme Court Act prohibits the arrest of a defendant who is a South African resident. The Court held that, albeit well-entrenched in our law and insofar as it relates to the arrest of a person, this common-law rule constitutes an unjustifiable infringement of a variety of constitutional rights that apply to foreign defendants and must therefore be abolished. In turn, the Court actively developed the common law of civil procedure and rendered the infringing parts of section 19(1)(c) redundant – a decision that arguably gives practical and meaningful effect to our Bill of Rights.

The facts

The Appellant was a South African company that wished to sue two Australian citizens for delictual damages and, as a result, sought an order for the Respondents’ arrest to establish jurisdiction. The Respondents opposed this application on the basis that the common-law rule requiring jurisdictional arrest in cases where a resident plaintiff is suing a foreign defendant was unconstitutional. The Respondents argued that this common-law rule, together with section 19(1)(c) of the Supreme Court Act which empowers such rule, infringed various of their constitutional rights as enshrined in our Bill of Rights, including the right to equality before the law; the guarantee against unfair discrimination; the right to human dignity; the right to freedom of movement; and the right to a fair civil trial.

The Court’s reasoning

In determining the constitutionality of the common-law rule, the Court considered the purpose for which jurisdictional arrests exist in our law. The Court confirmed that under common law a jurisdictional arrest was considered a necessary vehicle with which to enable a court to take cognisance of a suit and deliver an effective judgement (paras 29 and 41). Section 19(1)(c) was therefore enacted merely to extend the High Courts’ jurisdiction to order certain arrests and attachments insofar as they are a requirement of the common law (para 61). However, this provision has been applied to require either an attachment of property or the arrest of a person to establish jurisdiction whenever the defendant in question is a foreign national (para 30).

In respect of the Respondents’ allegation that the common-law rule infringes their constitutional right to freedom and security of the person, the Court held, at para 35, that the common-law rule requiring a jurisdictional arrest undoubtedly seeks to limit the liberty of the arrestee. The Court said that, in the absence of a legal obligation or a will on the part of the arrestee to secure his or her release by consenting to jurisdiction, offering security or making a payment into court, the inevitable consequence of a jurisdictional arrest is detention. The Court concluded that it is “not the arrest which might render any subsequent judgment effective but [rather] the defendant’s coerced response”, as a defendant’s decision to provide security or a payment into court is likely to follow only where to do otherwise would result in arrest and in turn detention. Furthermore, at para 41, the Court held that there can be no justification “to coerce security, or more especially payment, from a defendant who does not owe what is claimed or who, at least, is entitled to the opportunity to raise non-liability in the proposed trial”. In light of these and other points, the Court concluded that the common-law rule requiring the arrest of a foreign defendant to establish jurisdiction did infringe the Respondents’ constitutional right to freedom and security of the person.

The Court went further, at para 43 read with para 45, to hold that the infringement by this common-law rule cannot be reasonably justified under the limitation clause of the Bill of Rights, as it erodes the foundational rights of our Constitution, namely the rights to human dignity, equality and freedom. Further to this, the Court stated that the governmental purpose underpinning jurisdictional arrest, namely to favour resident plaintiffs by enabling “them to establish jurisdiction which would not otherwise exist and so avoid the trouble and expense of suing abroad”, can be achieved in a manner that is less restrictive on the constitutional rights of the Respondents. The Court stated, at para 47, that jurisdiction could be established by way of an attachment of property, failing which alternative possibilities could be considered. Attachment, unlike arrest, does not ordinarily involve the infringement of constitutional rights but nevertheless remains a useful vehicle with which to obtain some degree of effectiveness be it in the form of security or the prospect of successful execution (para 38). The Court therefore concluded that it was necessary to abolish the common-law rule requiring arrest to establish jurisdiction in cases involving resident plaintiffs suing foreign defendants. The Court appears to have preserved the common-law rule insofar at it relates to attachment, thus rendering attachment a favourable means to enable a court to take cognisance of a suit and to deliver an effective judgment.

It was at this juncture that the Court exercised its constitutional power to develop the common law where such development sought some degree of congruency between the common law and the continued operation of section 19(1)(c) of the Supreme Courts Act. The Court held, at para 55 read with para 57, that reasonable and practical measures should be adopted in identifying alternative ways of establishing jurisdiction where attachment is not possible, and that it is largely the responsibility of the plaintiff to establish jurisdiction and determine the effectiveness of a court’s judgment. The Court then held, at para 56 read with para 59, that the service of a summons on a foreign defendant while he or she is in South Africa, albeit temporarily, together with the existence of significant factual links between the suit and South Africa would suffice to establish jurisdiction and provide for an appropriate and convenient disposal of the matter by the court. The Court stated that the strongest connection is this regard would exist where the cause of action arises within that area of jurisdiction.

Following its decision to abolish the common-law rule, the Court held, at para 61, that those words in section 19(1)(c) of the Supreme Courts Act which related to the arrest of a person had become redundant and, until removed by legislative amendment, should be read down. Consequently, a declaration of invalidity was unnecessary. Bid Industrial Holdings v Strang is unlikely to impinge upon an application for an arrest tamquam suspectus de fuga in that such an arrest is aimed not at establishing jurisdiction but rather at providing a creditor with an effective means to secure the presence of a debtor within the court’s area of jurisdiction pending final judgment on the matter.

Bid Industrial Holdings v Strang is arguably a victory for both foreign defendants and our Constitution in that it displays a willingness on the part of our judiciary to boldly shape our common law of civil procedure in a way that seeks to prompt future resident plaintiffs to adopt responsible methods of establishing jurisdiction that are more congruent with the values which underpin our Constitution. That said, it remains to be seen what measures will be adopted by resident plaintiffs to establish jurisdiction where attachment is not possible.