GENERAL .DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) IN ADMIRALTY ) QG 27 of 1997 ) QUEENSLAND DISTRICT REGISTRY ) BETWEEN: BAYSIDE AIR CONDITIONING PTY LTD Plaintiff AND: THE OWNERS OF THE SHIP 'CAPE DON' Defendant JUDGE: Cooper J PLACE: Brisbane DATE: 15 August 1997 MINUTES OF ORDER THE COURT ORDERS THAT: 1. Bain Gasteen Solicitors have leave to withdraw and to file a notice of change specifying the new address for service of the plaintiff which address, in default of the plaintiff supplying to Bain Gasteen a new address, will be the address of the registered office of the plaintiff. 2. Bain Gasteen be released from its undertaking to pay on demand to the Marshal the Marshal's costs and expenses of maintaining the ship 'Cape Don' under arrest, being such costs and expenses incurred by maintaining the said ship under arrest from and after 12 midday on 19 August 1997 but otherwise the said solicitors to remain liable on their undertaking for all costs and expenses of the Marshal of and maintaining the ship under arrest until 12 midday on 19 August 1997. 3. The plaintiff pay the costs of Bain Gasteen, Martaban Ltd, and the Marshal of and incidental to their appearance on 7 and 12 August 1997 for directions and of and incidental to the notice of motion of Bain Gasteen. 4. The parties to have liberty to tax forthwith on an indemnity basis the costs referred to in paragraph 3 above and to enforce payment of the same forthwith. AND THE COURT DIRECTS THAT :- 5. In the absence of a written undertaking to the Court by a solicitor practising within the jurisdiction to pay upon demand the Marshal's costs and expenses of maintaining the ship under arrest, or alternatively, the plaintiff providing some form of security for such costs and expenses satisfactory to the Marshal, the ship be released from arrest at 12 midday on 19 August 1997. 6. In the event that the vessel is released from arrest at 12 midday on 19 August 1997, vacate the order of 15 May 1997 directing the Marshal to sell the ship and to pay the net proceeds of sale into Court. 7. The Marshal forthwith make demand of the plaintiff whether as an interim demand or as a final demand upon its undertaking for payment forthwith of the costs and expenses of the valuation and sale undertaken by the Marshal in consequence of the order made on the plaintiff's application for such an order. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) IN ADMIRALTY ) QG 27 of 1997 ) QUEENSLAND DISTRICT REGISTRY ) BETWEEN: BAYSIDE AIR CONDITIONING PTY LTD Plaintiff AND: THE OWNERS OF THE SHIP 'CAPE DON' Defendant JUDGE: Cooper J PLACE: Brisbane DATE: 15 August 1997 REASONS FOR JUDGMENT On 4 March 1997 Bain Gasteen, Solicitors of Brisbane filed an application to arrest the ship 'Cape Don'. The application was supported by the affidavit of Christopher Gasteen, a partner of the firm of solicitors. The affidavit in support was based on Form 13 in the Schedule to the Admiralty Rules 1988 and included in para 2 the request for the arrest of the ship. The warrant issued on 4 March 1997. It was in Form 14 in the Schedule and disclosed on its face that the warrant was taken out by Bain Gasteen. The warrant was executed by the Marshal and the ship was arrested at Yamba in northern New South Wales. Bain Gasteen as the applicant for the arrest thereby undertook to the Court to pay to the Marshal, on demand, an amount equal to the amount of fees and expenses of the Marshal in relation to the arrest (Rule 41 of the Admiralty Rules 1988). On 8 May 1997 the Marshal filed a notice of motion to enforce the undertaking in respect of fees and expenses of the Marshal, payment of which had been demanded and not paid. On 9 May 1997 I ordered payment of certain monies by the solicitors. I also directed the plaintiff to file and serve any application for appraisement and sale pending trial it may wish to make by 13 May 1997 for hearing on 15 May 1997. In accordance with the direction the plaintiff filed an application in Form 26, which included an undertaking to pay on demand to the Marshal an amount equal to the fees and expenses involved. The application was filed by Bain Gasteen as solicitors for the plaintiff. On 15 May I made the following orders on the Marshal's notice of motion to enforce the undertaking: 1. On the Notice of Motion, the Respondent firm Bain Gasteen Solicitors pay the sum of $7,600.00 to the Marshal monthly in advance for the cost of maintenance of the vessel "Cape Don", the first of such payments to be made on 9 June 1997 and thereafter until sale of the vessel in accordance with the orders made today. 2. The Marshal be paid:- (i) At the rate prescribed for the Marshal of the Supreme Court of Queensland in respect of the items itemised in paragraph 9 of the affidavit of Frederick John Gillis filed 8 May 1997. (ii) His Salary at the rate prescribed by Federal Court Regulation 2 Schedule Item 6. 3. That the costs of the Marshal of and incidental to the Notice of Motion be the Marshal's costs of and incidental to the arrest and maintenance of the vessel and be paid as such on a solicitor and own client basis. 4. The plaintiff's costs with respect to the Marshal's notice of motion be reserved. I also ordered on that date that the ship be valued and sold and I gave consequential directions. The Marshal sought directions on 30 July 1997 as to the acceptance of a tender for the purchase of the ship. On that date I directed the Marshal to accept the tender of the highest bidder, which was the bid of the plaintiff. On 30 July 1997 the Marshal accepted the plaintiff's tender and called for payment of the deposit in accordance with the tender conditions. The plaintiff has failed to pay the deposit and has repudiated the contract of sale. In its tender bid the plaintiff nominated Bain Gasteen as its solicitors to act in the purchase of the ship. Bain Gasteen refused to act because of a failure of the plaintiff to put them in funds to pay the Marshal's fees and expenses and to pay their professional costs and outlays. The plaintiff then engaged G P S Spencer Woodhead, solicitors, to act for it in respect of the purchase of the ship. On 7 August the Marshal sought directions as to what course he should follow having regard to the repudiation by the plaintiff of the contract to purchase the ship. On that day Bain Gasteen foreshadowed that it would be filing a notice of motion seeking leave to withdraw as solicitors for the plaintiff, that they be relieved of their undertaking imposed by Rule 41, from the operation of paragraph 1 of my order made on 15 May 1997 and from any further obligation to pay to the Marshal amounts with respect to fees and expenses of the Marshal in relation to the arrest and sale of the 'Cape Don'. On the hearing on 7 August 1997, Mr Woodhead appeared on behalf of the plaintiff in its capacity as successful tenderer, but not on behalf of the company as plaintiff in the action. Mr Thompson of Counsel appeared for Bain Gasteen, Mr Webb of Counsel for the owner and Ms Cameron for the Marshal. I gave directions as to the filing of the notice of motion by Bain Gasteen and the giving of notices to the caveators against release of the ship. The matter was adjourned to 12 August 1997. On that day Mr Derrington of Counsel appeared for Bain Gasteen, Mr Webb of Counsel for the owners and one of the caveators, Ms Philippides of Counsel for the Marshal and Mr Woodhead for the plaintiff in its capacity as successful tenderer for the ship. The other caveator, Delores Trading, which had received notice did not appear when called. The material filed by all parties shows that the plaintiff refuses to fund its solicitors in order that they can discharge their undertaking to the Court. Although Mr Woodhead advises the Court that the principal of the plaintiff company is in the Western Provences of the Solomon Islands and difficult to obtain instructions from, he is in sufficient contact to obtain instructions as to the sale. Further, there are other persons in Brisbane, e.g. Mr Marks, who speak on behalf of the plaintiff. A not insignificant part of the Marshal's costs and expenses are legal costs which are arising from the plaintiff's failure to fund its solicitors and its refusal to perform its obligations upon acceptance of its tender. I am satisfied that the conduct of the plaintiff is calculated and unreasonable and that the plaintiff has no intention to fund Bain Gasteen in order that they can discharge the undertaking to the Court. In those circumstances Bain Gasteen should be discharged from the undertaking at an appropriate time and relieved from any obligation to pay the Marshal's fees and expenses incurred after that date. I am satisfied that Bain Gasteen has ceased to act as solicitor for the plaintiff. Counsel for the Marshal submitted that I should order Bain Gasteen to pay into a trust fund established by the Marshal sufficient funds to enable the Marshal to make payments without having to make further demand upon the solicitors. Further it was submitted that to allow a bank guarantee in lieu of payment into a fund was unsatisfactory as it may prove to be an insufficient security. The undertaking of the solicitor under Rule 41 is to pay on demand an amount equal to the amount of the fees and expenses of the Marshal in relation to the arrest. It is not an undertaking to provide a fund or security. Further, the Marshal is entitled under Rule 78 to make one or more demands for interim payment. The solicitors' undertaking in the instant case is enforceable by committal (Rule 75). Bain Gasteen are a reputable firm and if not previously are now clearly aware of the personal nature of the undertaking of the firm, and that it must be satisfied. The firm does not seek to avoid its obligations under it; rather it seeks to stop the open ended nature of its operation. This is in circumstances where the client has exposed the solicitors to liability on the undertaking and is taking no steps to itself pay the Marshal's costs and expenses or to advance the proceedings. I do not propose to order that the solicitors create a fund or provide security to the Marshal. However, I do intend to hold Bain Gasteen to its undertaking. In my view, the ship ought to be released from arrest in the absence of an undertaking from a solicitor representing the plaintiff to pay the ongoing fees and expenses of the Marshal in respect of the continued arrest. Having seen the costs and expenses incurred to date and the likely additional costs associated with a further sale by the Marshal, I am not persuaded that such a course will at the end of the day see the Marshal in any significantly better position than he now is in in relation to payment of his fees and expenses. The order to sell the ship made on 15 May 1997 will be vacated in the event that the ship is released from arrest. In the absence of a written undertaking of a solicitor within the jurisdiction to pay upon demand the Marshal's future costs and expenses of the arrest from 12 midday Tuesday 19 August 1997 the Marshal should release the ship from arrest. The Caveator for whom Mr Webb appears does not oppose release of the ship. The non-appearing Caveator has an arrangement with the plaintiff as to any proceeds arising out of success in the action by the plaintiff. If the Caveator wishes, it can itself move to arrest the ship, if it has any valid basis to do so before the ship is released. Bain Gasteen should be released from their undertaking and paragraph 1 of the Court's order of 15 May 1997 from 12 midday on 19 August 1997 in respect of any cost or expense thereafter incurred by the Marshal should the ship remain under arrest from that time. The Marshal should forthwith identify the costs and expenses attributable to the valuation and sale of the ship to the plaintiff, including the costs and expenses incurred as a consequence of the plaintiff's default on the sale, and make demand under the plaintiff's undertaking contained in its application for valuation and sale pending trial. I am satisfied that the plaintiff was on notice of these proceedings and simply chose not to appear but to wait to see whether or not the proceedings resulted in any advantage accruing to it. The submission by Mr Woodhead on behalf of the plaintiff as a defaulting purchaser, that a resale occur presumably at the cost and expense of some other party, in which the plaintiff may again be a bidder on different terms, confirms me in this view. The entire costs of the further directions hearings and the solicitors' notice of motion have been caused by the plaintiff's conduct. Those costs should be paid by the plaintiff on an indemnity basis and there should be liberty to tax and enforce the costs forthwith. The Court orders that :- 1. Bain Gasteen Solicitors have leave to withdraw and to file a notice of change specifying the new address for service of the plaintiff which address, in default of the plaintiff supplying to Bain Gasteen a new address, will be the address of the registered office of the plaintiff. 2. Bain Gasteen be released from its undertaking to pay on demand to the Marshal the Marshal's costs and expenses of maintaining the ship 'Cape Don' under arrest, being such costs and expenses incurred by maintaining the said ship under arrest from and after 12 midday on 19 August 1997 but otherwise the said solicitors to remain liable on their undertaking for all costs and expenses of the Marshal of and maintaining the ship under arrest until 12 midday on 19 August 1997. 3. The plaintiff pay the costs of Bain Gasteen, Martaban Ltd, and the Marshal of and incidental to their appearance on 7 and 12 August 1997 for directions and of and incidental to the notice of motion of Bain Gasteen. 4. The parties to have liberty to tax forthwith on an indemnity basis the costs referred to in paragraph 3 above and to enforce payment of the same forthwith. AND THE COURT DIRECTS THAT :- 5. In the absence of a written undertaking to the Court by a solicitor practising within the jurisdiction to pay upon demand the Marshal's costs and expenses of maintaining the ship under arrest, or alternatively, the plaintiff providing some form of security for such costs and expenses satisfactory to the Marshal, the ship be released from arrest at 12 midday on 19 August 1997. 6. In the event that the vessel is released from arrest at 12 midday on 19 August 1997, vacate the order of 15 May 1997 directing the Marshal to sell the ship and to pay the net proceeds of sale into Court. 7. The Marshal forthwith make demand of the plaintiff whether as an interim demand or as a final demand upon its undertaking for payment forthwith of the costs and expenses of the valuation and sale undertaken by the Marshal in consequence of the order made on the plaintiff's application for such an order. I certify that this and the preceding eight ( 8 ) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper. Associate: Dated: 14 August 1997 Solicitor for the Plaintiff (Sale purposes only): GPS Spencer Woodhead Otherwise no appearance for Plaintiff Counsel for the Defendant: J R Webb Solicitor for the Defendant: King and Company Counsel for Bain Gasteen: R M Derrington Solicitor for Marshal in Admiralty: Australian Government Solicitor Counsel for Marshal in Admiralty: A I Philippides Solicitor for Caveator, Coastpac Enterprises Pty Ltd: King and Company Counsel for Caveator, Coastpac Enterprises Pty Ltd: J R Webb No appearance for Caveator, Delores Trading Date of hearing: 12 August 1997