FEDERAL COURT OF AUSTRALIA Tisand Pty Ltd v MV Cape Moreton [2004] FCA 752 ADMIRALTY AND MARITIME – ADMIRALTY PRACTICE AND PROCEDURE – release of ship under Admiralty Rules rule 52 – costs – use of p & i club undertaking conditional on arresting party satisfying the criteria within ss 17, 18 or 19 of the Admiralty Act 1988 (Cth) in due course. Admiralty Act 1988 (Cth) ss 17, 18 and 19 Admiralty Rules rule 52 Republic of India & Anor v India Steamship Co Ltd (No 2) (The 'Indian Grace') [1998] AC 878 referred to The 'Zoya K' (1997) 79 FCR 71 referred to TISAND PTY LTD AND ORS v THE OWNERS OF THE SHIP MV "CAPE MORETON" (EX "FREYA") N 898 of 2004 ALLSOP J 11 JUNE 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 898 of 2004 BETWEEN: TISAND PTY LTD FIRST PLAINTIFF RICHARDS BAY IRON AND TITANIUM (PTY) LTD SECOND PLAINTIFF CHINA NATIONAL COMPLETE PLANT IMPORT & EXPORT GUANGHOU LTD THIRD PLAINTIFF AND: THE OWNERS OF THE VESSEL MV "CAPE MORETON" (EX "FREYA") DEFENDANT JUDGE: ALLSOP J DATE OF ORDER: 11 JUNE 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The ship MV "Cape Moreton" (ex - "Freya") be released from arrest pursuant to Rule 52 (1) of the Admiralty Rules 1988. 2. The costs of the parties in relation to the application for release under Rule 52 (1) be costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 898 of 2004 BETWEEN: TISAND PTY LTD FIRST PLAINTIFF RICHARDS BAY IRON AND TITANIUM (PTY) LTD SECOND PLAINTIFF CHINA NATIONAL COMPLETE PLANT IMPORT & EXPORT GUANGHOU LTD THIRD PLAINTIFF AND: THE OWNERS OF THE VESSEL MV "CAPE MORETON" (EX "FREYA") DEFENDANT JUDGE: ALLSOP J DATE: 11 JUNE 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 3 June 2004 the plaintiffs in this matter filed a writ against the Owners of the Ship MV 'Cape Moreton', and an application for the arrest of the vessel. The particulars of the claim identified a cargo claim being damage to a consignment of zircon sand owned by the plaintiffs, carried from South Africa to Shanghai in July 2003. 2 The claim in rem is made under s 17 of the Admiralty Act 1988 (Cth)based on the general maritime claim against the owner. Section 17 requires certain matters to be satisfied, relevantly that the relevant person was the owner of the ship both at the time the cause of action arose for the purposes of paragraph (a) and the time of the commencement of the proceedings for the purposes of paragraph (b). These are sometimes referred to as "jurisdictional requirements". It is unnecessary today to comment on that language and whether it is entirely appropriate. 3 The parties have resolved the basis upon which the ship is to be released, but they cannot agree on costs. 4 The issue that has arisen is that the owner at the time that the cause of action arose, being Freya Navigation Shipholding Ltd is said to have sold the vessel bona fide to a third party, being the client for whom Mr James acts, that is, Alico Marine Ltd. That sale was said to have been completed a week or so prior to the commencement of the suit. The Liberian Register, however, does not appear to have been changed by the time of the commencement of the suit. Thus, a question will arise as to the satisfaction of paragraph (b) of s 17 in relation to the arrest. 5 The potential difficulties of attempting to resolve questions such as this on an urgent, but final, basis, are well known. What the p & i club for Alico Marine, the North of England P & I Association Ltd (the Club), apparently attempted to do in negotiations with the solicitors for the plaintiffs in England, was to put in place an arrangement whereby security could be put up which was conditional upon the resolution of that "jurisdictional" argument, amongst the other issues in the case, and which would respond if the plaintiffs were successful on the s 17(b) point. 6 Discussion took place between Hill Dickinson and the Club. Agreement broke down by the 9 June as to a proposal put forward by the Club. The Club said that it would put up a letter using the phraseology, "Owners of the Vessel MV 'Cape Moreton'". This was said to be unsatisfactory by Hill Dickinson who wanted the letter to be put up on behalf of the relevant person, Freya Navigation. This was rejected by the Club. 7 It is not clear whether, and I say this respectfully, the English solicitors and the solicitor for the Club, were entirely ad idem as to what the Club would appear to have been attempting to do. The Club, if I may say so, entirely reasonably refused to put the letter up in terms for Freya Navigation. Looking at the correspondence, I think what was probably intended was that which has now been clarified, that is, that the letter was intended to be put up to provide security to the plaintiffs if the jurisdictional question were lost by the Club. That is if s 17 applied notwithstanding the sale, the letter would provide security. If however the plaintiffs failed in their s 17(b) arguments, the arrest was unauthorised and the letter would not respond. Sensibly, the debate about ownership was to be undertaken as an early step in the litigation, but not in circumstances driven by the exigencies of the arrest. 8 Unfortunately, the use of phrase, "Owners of the Vessel MV 'Cape Moreton'", especially in the light of current English law as to the true nature of in rem proceedings reflected in the Republic of India & Anor v India Steamship Co Ltd (No2) (The Indian Grace) [1998] AC 878, did leave room for real debate as to whether, as Mr Street says, the undertaking was worth the paper it was written on, if it was, in fact, only being given for the owner second in time, and not the ship. 9 I think, with respect to those who engaged in the correspondence, there was an issue that they really did not direct themselves to with clarity; that is the need for the undertaking to be given in relation to the res should s 17 be satisfied. The phrase "owners of the vessel" (in particular, in the light of The Indian Grace, if it is to be applied in this country) has a degree of ambiguity about it of some importance. 10 That said, the matter came before me yesterday. Mr Street indicated that the USD 224,000 security was inadequate because of the need to resolve the jurisdictional argument. He also pointed out yesterday the difficulty with the signature of the Club letter, which did not identify anyone signing and did not identify his or her position. With those three asserted faults, I indicated in a non-binding fashion yesterday evening, that I did not think I would grant release of the vessel on the terms of the then proffered undertaking. Mr James said that he would seek instructions overnight. 11 Mr James' client has returned today with a letter, which is acceptable to the plaintiffs and their advisers. The undertaking now makes clear that the vessel, 'MV Cape Moreton', that is, the res, is covered by the undertaking, the amount has been increased to USD 334,000 and the signature of the relevant officer is clear, as is his position. In those circumstances, the plaintiffs consent to an order for the release of the ship under arrest. 12 The question arises as to costs. Mr Street says his clients are entitled to their costs. I think with respect to those who were engaging in the correspondence, there may have been some confusion. 13 I think in all the circumstances the appropriate approach to this is to order that both sides' costs be costs in the cause. I was initially attracted to the proposition that only the plaintiffs should have their costs in the cause, but, on reflection, an outcome, if Mr James' clients win the s 17(b) argument, that they should be denied their costs of yesterday, I think, in all the circumstances, would be harsh. 14 I think, with respect to those conducting the correspondence, there may have been a degree of lack of attendance to the real problem. Terminology to a degree got in the way; as I said earlier, perhaps encouraged by the overwhelming place that in personam considerations now take in England after The 'Indian Grace'. 15 In all the circumstances, I order that the costs of the parties in relation to the application for release under s 52 be costs in the cause, and I note, for the purposes of taxing, that given the issues it was appropriate for the plaintiffs to brief senior and junior counsel to attend. 16 I order the release of the ship MV "Cape Moreton". 17 I should note that as a matter of practice the approach adopted by the Club in this case can be viewed as a sensible method of dealing with the competing considerations when a vessel is arrested and owners urgently want release of the ship in order that she may work. The requirements of proving the relationship of the relevant person with the criteria set out in ss 17, 18 and 19 can sometimes raise difficult and complex questions of proof, fact and substantive law. The urgently thrown together hearing is often a most unsuitable way of resolving these questions on a final basis, which is necessary on current authority: The 'Zoya K' (1997) 79 FCR 71. Sometimes these urgent final hearings favour the arresting party and sometimes the ship – largely depending on the issues for proof and the availability of evidence in final form. This kind of caprice of litigation is unsatisfactory. 18 In the absence of any provision in the Admiralty Act 1988 (Cth) allowing these hearings to be dealt with on a flexible interlocutory basis (a matter which Parliament could well consider) one way of dealing with the issue is for the ship (through its owners or p & i club) to put up security which only responds if the "jurisdictional" issue be lost by the ship. So, if there is a beneficial owner question or some other factual or legal issue governing the question of the application of ss 17, 18 or 19 that matter can be litigated early, first, with all appropriate despatch, but not under the conditions of urgency created by the continued arrest at great cost of a valuable commercial entity. 19 Here the Club propounded a conditional undertaking, and, if I may say so, most sensibly. In other similar circumstances parties should not assume that the Court will necessarily treat the continued detention of the vessel as one of vital urgency, if a similar conditional or moulded undertaking is not proffered. The Court is obliged to hear release applications and challenges to the application of ss 17, 18 and 19 promptly, but in the presence of evidence of a prima facie case made out by the arresting party as to the disputed elements of ss 17, 18 or 19 and an unwillingness by the ship to provide a conditional or moulded undertaking of the kind provided by the Club here, owners should not assume that the arresting party will not be given some time to prepare the preliminary issue as to the criteria underlying the authority to arrest. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop. Associate: Dated: 16 June 2004 Counsel for the Plaintiff: Mr A. Street SC with Mr D. A. McLure Solicitor for the Plaintiff: Phillips Fox Counsel for the Defendant: Mr D James (Slr) and Ms D Wilmshurst (Slr) Solicitor for the Defendant: Ebsworth & Ebsworth Date of Hearing: 10 and 11 June 2004 Date of Judgment: 11 June 2004