FEDERAL COURT OF AUSTRALIA APC Marine Pty Ltd (ACN 119 763 012) v The Ship "APC Aussie 1" [2009] FCA 690 APC MARINE PTY LTD (ACN 119 763 012) v THE SHIP "APC AUSSIE 1" VID 234 of 2009 T-D JOINT VENTURE PTY LTD (ACN 124 308 685) v APC MARINE PTY LTD (ACN 119 763 012) VID 244 of 2009 RYAN J 25 JUNE 2009 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 234 of 2009 BETWEEN: APC MARINE PTY LTD (ACN 119 763 012) Plaintiff AND: THE SHIP "APC AUSSIE 1" Defendant JUDGE: RYAN J DATE OF ORDER: 25 JUNE 2009 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application be dismissed. 2. The plaintiff pay the costs of T-D Joint Venture Pty Ltd of and incidental to the proceedings herein, such costs to be taxed in default of agreement. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 244 of 2009 BETWEEN: T-D JOINT VENUTRE PTY LTD (ACN 124 308 685) Plaintiff AND: APC MARINE PTY LTD (ACN 119 763 012) Defendant JUDGE: RYAN J DATE OF ORDER: 25 JUNE 2009 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. IT BE DECLARED that as at 17 April 2009 the charter in force between the plaintiff as charterer and the defendant as owner of the Ship "APC Aussie 1" pursuant to a charterparty made 27 June 2008 had not validly been terminated. 2. The interlocutory injunction granted by Ryan J on 17 April 2009 be dissolved. 3. The defendant be released from its undertaking as to damages recorded in the said order of 17 April 2009. 4. The defendant pay the plaintiff's costs of this application, including any reserved costs, such costs to be taxed in default of agreement. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 234 of 2009 BETWEEN: APC MARINE PTY LTD (ACN 119 763 012) Plaintiff AND: THE SHIP "APC AUSSIE 1" Defendant and VID 244 of 2009 BETWEEN: T-D JOINT VENUTRE PTY LTD (ACN 124 308 685) Plaintiff AND: APC MARINE PTY LTD (ACN 119 763 012) Defendant JUDGE: RYAN J DATE OF ORDER: 25 JUNE 2009 WHERE MADE: MELBOURNE REASONS FOR JUDGMENT 1 Two applications are before the Court: one filed by APC Marine Pty Ltd ("APC Marine") seeking the arrest of the ship "APC Aussie 1" ("the Ship") in connexion with a claim for $1,725,000 plus statutory interest or damages. The Ship is currently under bareboat charter and is consequently in the effective control of Trident Darwin Joint Venture Pty Ltd ("TDJV") which, in turn, makes an application to restrain APC Marine from re-taking possession of the Ship. Each of those applications was filed on 9 April 2009. Following several days of ultimately unsuccessful negotiations, the applications returned to the Court on 15 April and interlocutory orders were made on 17 April 2009. 2 At the heart of the litigation is a straightforward question of whether the charter of the Ship has effectively been brought to an end. The answer to that question turns on the proper interpretation of the charterparty and the application of its relevant provision to the conduct of the parties. The Charter 3 The Ship was hired under a modified version of a "Barecon 2001" charterparty, which is produced as a standard form document by the Baltic and International Maritime Council ("BIMCO"). Two clauses prescribe the consequences of an alleged failure punctually to pay the hire fixed by the charterparty. 4 First, cl 11 of Pt II of the BIMCO Agreement, a standard clause, provides in relevant part that: '11 Hire (a) The Charterers shall pay hire due to the Owners punctually in accordance with the terms of this Charter in respect of which time shall be of the essence. (b) The Charterers shall pay to the Owners for hire of the Vessel a lump sum in the amount indicated in Box 22 which shall be payable not later than every thirty (30) running days in advance, the first lump sum being payable on the date and hour of the Vessel's delivery to the Charterers. Hire shall be paid continuously throughout the Charter Period. … … (f) Any delay in payment of hire shall entitle the Owners to interest at the rate per annum as agreed in Box 24. If Box 24 has not been filled in, the three months interbank offered rate in London (LIBOR or its successor) for the currency stated in Box 25, as quoted by the British Bankers' Association (BBA) on the date when the hire fell due, increased by 2 per cent., shall apply. (g) Payment of interest due under sub-clause 11(f) shall be made within seven (7) running days of the date of the Owners' invoice specifying the amount payable or, in the absence of an invoice, at the time of the next hire payment date.' 5 Box 22 is in these terms; '22. Charter hire (C1 11) AUD $75,000 (Seventy Five Thousand Australian Dollars)' 6 Secondly, cl 28(a)(i), the provision relating to rights of termination in default of cl 11, is to be found in Pt II of the BIMCO Agreement, and it, too, is a standard clause. It provides, so far as is relevant; '28. Termination (a) Charterers' Default The Owners shall be entitled to withdraw the Vessel from the service of the Charterers and terminate the Charter with immediate effect by written notice to the Charterers if: (i) The Charterers fail to pay hire in accordance with Clause 11. However, where there is a failure to make punctual payment of hire due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers, the Owners shall give the Charterers written notice of the number of clear banking days stated in Box 34 (as recognised at the agreed place of payment) in which to rectify the failure, and when so rectified within such number of days following the Owners' notice, the payment shall stand as regular and punctual. Failure by the Charterers to pay hire within the number of days stated in Box 34 of their receiving the Owners' notice as provided herein, shall entitle the Owners to withdraw the Vessel from the service of the Charterers and terminate the Charter without further notice; (ii) the Charterers fail to comply with the requirements of: (1) Clause 6 (Trading Restrictions) (2) Clause 13(a) (Insurance and Repairs) provided that the Owners shall have the option, by written notice to the Charterers, to give the Charterers a specified number of days grace within which to rectify the failure without prejudice to the Owners' right to withdraw and terminate under this Clause if the Charterers fail to comply with such notice; (iii) the Charterers fail to rectify any failure to comply with the requirements of sub-clause 10(a)(i) (Maintenance and Repairs) as soon as practically possible after the Owners have requested them in writing so to do and in any event so that the Vessel's insurance cover is not prejudiced.' 7 The charterparty also provided for "Dispute Resolution" by cl 30 which stipulated in part; '(a) This Charter shall be governed by and construed in accordance with Australian law and any dispute arising out of or in connection with this Charter shall be referred to arbitration in Australia. The reference shall be to one arbitrator to be agreed between the parties or, if no agreement can be reached to be appointed in accordance with Australian Law. The award of the sole arbitrator shall be binding on both parties as if he had been appointed by agreement. …' 8 Box 34 of the charterparty was in this form: '34. Grace period [state number of clear banking days] (Cl. 28) 10 DAYS' 9 Two further clauses should be noted; additional cl 32 and additional cl 44. It will be necessary to return to these clauses later. Additional cl 32 provides that: '(a) Charter rate for mobilisation/demobilisation, standby and use of the vessel for accommodation support shall be AUD $75,000 (Seventy Five Thousand Australian Dollars) per day. (b) Owners shall raise invoice at or before the beginning of each calendar month for that month hire (where applicable) and the Charterers are to pay hire amount within the same month that invoice is charged for i.e. Oct 08 hire invoice shall be due and payable within the month of Oct 08 after receipt of such invoice. (c) For all other invoices, charterer and owners agree to pay the undisputed portion of the invoice within 30 days upon the receipt of original invoice, save the period expressly stated in this contract and mutually agreed otherwise.' 10 Additional cl 44 stipulates that: 'Where a conflict exists between clauses in part II and "additional clauses" mentioned herein, additional clauses take precedence.' 11 It can be said at this point that, notwithstanding additional cl 44, the obligation to pay hire is imposed by standard form cl 11. Clause 44 prescribes how any inconsistency between additional cl 32 and standard form cl 11 is to be resolved. However, additional cl 32 prescribes only administrative machinery for payment of the hire. It does not impose on the Charterers any substantive obligation to pay the hire. In light of that feature of the structure and operation of the charterparty it is convenient now to review the events which have given rise to the alleged termination. The Parties' Course of Conduct 12 The charterparty was entered into by the parties on 27 June 2008, with an addendum added on 21 February 2009. It seems that the Ship was delivered to TDJV on 20 February 2009 and on the same date APC raised an invoice in the amount of $2,250,000 for the first period of hire being the period from 21 February 2009 plus 30 days. TDJV made payment against that invoice in full on 27 February. 13 On 23 March 2009, by the operation of cl 11 and Box 22, a sum by way of payment fell due. On that date, no payment was made. The affidavit of Mr Sneddon, APC Marine's Group Accountant, sworn 14 April 2009, indicates that there was some email correspondence and telephone discussion between himself and Mr Ross, TDJV's commercial manager, about the non-payment of that amount. 14 The tenor of that discussion, says Mr Sneddon, was that TDJV had not received any money from the client for which it had chartered the Ship and, consequently, was unable to pay the invoiced amount. Mr Ross' account of his conversation with Mr Snedden is different. He has deposed as follows in an affidavit sworn 14 April 2009; '17. The Second Invoice was on its face due and payable within 7 days i.e. on 23 March 2009. The Applicant did not make immediate payment of the Second Invoice. The basis for the delay in payment was that the Applicant believed the Respondent had incorrectly invoiced the Applicant. 18. On or around 2 April 2009 I spoke with Mr James Sneddon who holds the position of Finance Manager at the Respondent. We discussed the Second Invoice and I said the Applicant was only required to pay pursuant to Additional Clause 32(b) which is per calendar month. He said he thought I would say this but he was instructed to invoice on the anniversary date i.e. from the 21st of each month for the following 30 days and the balance that remained unpaid. 19. I put to Mr Sneddon that the Applicant was required to pay the Charter Fees in accordance with Additional Clause 32 of the Charter, that regime providing for payment per calendar month. 20. Mr Sneddon said words to the effect that invoicing has been and would continue on an 'anniversary' basis. That is to say, on each monthly 'anniversary' of the Delivery Date. This was in accordance with clause 11(b) of the Charter which, by virtue of Additional Clause 32, in my opinion had no operation under the Charter. 21. I requested that the Respondent resubmit the Second Invoice in accordance with Additional Clause 32 of the Charter.' 15 On the reading of the charterparty for which it contended, TDJV claimed that it expected to be invoiced in the amount of $525,000, which would have covered charter fees to the end of March 2009. APC Marine, for its part, insisted that the regime embodied in cl 11(b) entitled it to render an invoice in the amount of $2,250,000. 16 On 3 April 2009, the managing director of APC Marine, Mr Greenhill, sent an email to Mr Ross which, so far as is relevant, recited; 'The second 30 running days charter hire in advance was due on 23 March 2009 amounting to AUD$ 2,250,000. This has not been paid to date. Pursuant to clauses 11 and 28 of the charter party read with box 34, the charter hire shall be paid to us no later than 6 April 2009, that is, 10 clear banking days from 23 March 2009. If the charter hire is not received by our bankers (for value) on or before 6 April 2009, APC as the owners of the vessel, shall exercise our right of termination of the charter pursuant to clause 28 and seek re-delivery of the vessel forthwith.' 17 TDJV then made part payment of the amount due for the charter period commencing 24 March, in the sum of $525,000. Upon that payment, $1,725,000 remained outstanding on the face of the rendered invoice. 18 On 7 April 2009 Mr Greenhill sent a further email to Mr Ross, which, again so far as is relevant, recited; 'Further to our discussion with regard to the late charter payment on Monday 30/3/09 and Thursday 2/4/09, I sent you a termination notice for the TDJV Charter which was to be applicable if the Charter payment was not completed before Tuesday 7/4/09. Since that time APC has not been contacted nor has the 30 day charter payment been made …' (emphasis added) 19 Mr Ross replied by two emails, the first acknowledging that his understanding of the payment regime was different from Mr Greenhill's and requesting that they should discuss the matter on the next morning, when he was to return to Australia. The relevant part of his second email, sent approximately 20 minutes after the first, was; '[We] are of the opinion that we have complied just to be clear and to avoid any possible adverse affect please be advised we seek your agreement to invoke the dispute resolution clause and seek to appoint an arbitrator please confirm your understanding of this text message.' 20 There was, thus, an evident difference between the parties about what amount was due under the charterparty, and when it was payable. However that difference be resolved, (and it is not necessary for present purposes to reach a concluded view about when and in what amount hire was payable under the charterparty) the dispute would ordinarily have enlivened the dispute resolution procedure in cl 30, as Mr Ross contended in his second email. Nevertheless, APC Marine did not invoke that procedure but purported to terminate the charter on (depending upon a reading of the email correspondence) either three or four days' notice. Accordingly, on 8 April, a notice of termination was served on TDJV in the following terms: 'Notice of Termination … Charter Agreement for the barge "APC Aussie 1". Whereas: (a) Trident Darwin Joint Venture Pty Ltd (the 'Charterer') and APC Marine Pty Ltd (the 'Owner') entered into a "Barecon 2001" Standard Bareboat Charter Agreement Dated 27 June 2008, and subsequent Addendum dated 21 February 2009 in relation to the barge known as "APC Aussie 1" (the 'Agreement'); (b) The Agreement requires the Charterer to pay charter fees of $75,000 per day, 30 days at a time in advance, and makes time of the essence; (c) The second 30 day charter hire fee, in the sum of $2,250,000, fell due pursuant to the Agreement on 23 March 2009; (d) On or about 3 April 2009, the Owner issued to the Charterer formal written notice, pursuant to clause 28 of the Agreement, of the Owner's intention to terminate the Agreement for non-payment of charter fees, should full payment not be received by 6 April 2009; (e) On or about 3 April 2009, the Charterer subsequently made part payment of the sum of $525,000; (f) The sum of $1,725,000 remains outstanding and is now overdue by 11 clear banking days; (g) The charterer has been in default of the Agreement since 23 March 2009, and has failed to remedy the fault on demand. Now the Owner gives notice that: (a) The Agreement is terminated for breach of contract, effective immediately; (b) The Owner will re-take possession of APC Aussie 1 today, while it is in dock at Portland, Victoria, and you are required to co-operate in facilitating the surrender of possession to the Owner; (c) You are required to confirm immediately on receipt of this notice your company's undertaking : i. to immediately return unobstructed custody of the APC Aussie 1 to the Owner; and ii. that it will not take any action to cause APC Aussie 1 to leave the Portland Harbour; (d) The termination of the Agreement is without prejudice to any other legal right or remedy that the Owner may have by virtue of the Agreement, or otherwise at law or in equity. Dated: 8 April 2009 APC Marine Pty Ltd …' 21 APC Marine's contentions are restated in the recitals in that notice, namely that the sum of $2,250,000 had fallen due on 23 March 2009; that APC Marine had given a cl 28 notice on 3 April; that the amount of $1,725,000 remained outstanding following the part-payment on 3 April; and that "[t]he charterer has been in default of the Agreement since 23 March 2009, and has failed to remedy its default on demand". Consistently with those contentions, APC Marine purported to terminate the charter and sought to re-take possession of the Ship. Mr Ross then telephoned Mr Greenhill, again seeking arbitration pursuant to the dispute resolution clause. That request was rejected, apparently on the basis that the charter had been terminated. Later on the same day, TDJV paid, under protest pending resolution of the dispute, the balance due on the face of APC Marine's invoice, namely $1,750,000. 22 On 9 April, as mentioned, each party instituted separate proceedings in this Court. Application of the charterparty to the parties' conduct 23 Whether the charter was effectually terminated depends on whether the requirements of the charterparty as to form of notice and as to the running of time were satisfied. I have already indicated, at [11] above, my view that additional cl 32(b) is adjectival to standard cl 11 in the sense that it contains machinery provisions for the raising of invoices by the Owners and the making of payments against those invoices by the Charterers. It does not create the obligation to pay the hire or prescribe the period in respect of which each instalment of hire is payable. If it matters, I consider that it was open to APC Marine to raise, in March 2009, an invoice for the second instalment of hire accruing on 23 March 2009 and being for 30 days from that date to 22 April 2009. If some application is to be given to additional cl 32(b), TDJV would have been obliged to pay against that invoice within the month of March 2009, ie, by 31 March. 24 The focus of attention for present purposes must be on cl 28. That clause confers on the Owners the right to withdraw the vessel from the service of the Charterers and to terminate the charter with immediate effect by written notice to the Charterers if "(1) the Charterers fail to pay hire in accordance with Clause 11." 25 As Mr Trichardt, who appeared, after the first day's hearing, for APC Marine, pointed out, there is authority to the effect that a right to terminate a charterparty will not lightly be denied its operation: see Tankexpress A/S v Compagnie Financiere Belge des Petroles S A [1949] AC 76 at 94, 102; and Empress Cubana v Lagonisi Co [1971] 1 QB 488 at 503-4. In the former case, Lord Wright observed, at 94; 'The respondents had no intention of failing in their obligation to pay, which, as cl. II provided, was to be performed by payment in cash in London. The payment of hire was a vital matter, because if there was default of "such payment" (i.e., in cash monthly in advance in London) the owners were entitled to cancel the long and valuable charter. Default in payment, that is, on the due date is not in my opinion excused by accident or inadvertence. The duty to pay is unqualified so far as the express terms of the charterparty go. I think this is the true construction of the terms of the contract, and it is confirmed by the cases cited in argument.' 26 In the present case the absolute right of termination conferred by cl 11 is qualified by the proviso introduced by the words "However, where there is a failure to make punctual payment of hire due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers …". That qualification has been described as an "anti-technicality proviso". Its availability depends, in the first instance, on the Owners' being satisfied that the Charterers' default has been due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers. On being so satisfied, the Owners are obliged to give the Charterers written notice of 10 clear banking days in which to rectify the failure. 27 Here, however, APC Marine has adopted an intermediate course. It has not terminated the charter with immediate effect by written notice to TDJV for failure to pay the second instalment of hire on or after 23 March 2009 being the date on which APC contends it fell due. Nor has it given the ten days' notice required by the "anti-technicality proviso" in the event that APC Marine has formed the view that TDJV's default had been due to its "oversight, negligence, errors or omissions". Instead, as the recitals set out in the notice reproduced at [20] above make clear, it has given three clear days notice in which payment of the allegedly overdue instalment was to be made. 28 Assuming, in APC's favour, that the email of 3 April referred to at [16] above, constituted a notice under the "anti-technicality proviso" in cl 28, then the clear banking days began to run on 6 April and did not expire until 17 April. Issue of a notice of termination on 8 April therefore could not have terminated the charter in accordance with cl 28(i). 29 I have been confirmed in that conclusion by another decision of this Court in ASP Holdings Ltd v Pan Australia Shipping Pty Ltd (2006) 235 ALR 554. There, Finkelstein J set out his own view of the ingredients of an effective notice under cl 28. Several relevant principles can be distilled from his Honour's reasons. First, an effectual notice under cl 28 must unequivocally communicate the owner's intention to terminate the charter. In his Honour's view, the notice with which he was concerned did not satisfy that test because, as he said, at 560 [19]; 'Frontline's letter is plainly equivocal. It purports to cover two options but commits to neither. On one hand, it demands payment within ten days under threat of termination. On the other hand, it seeks to terminate the charter with immediate effect. The charterer is required to determine which of the options applies by reference to the application of the "anti-technicality" proviso.' 30 Secondly, whether there has been a breach which entitled the Owners to terminate the charter is not for the Charterers to determine. One reason for that, as his Honour explained, at 563 [29] is that; 'Often times it will be impossible for the charterer to determine whether the "anti-technicality" proviso applied. For one thing, difficult questions of construction can arise. What precisely is meant by "oversight", "negligence", "errors" or "omissions"? By way of example, is the word "negligence" used in its common law meaning or does it mean "careless"; is "error" confined to errors of fact or does it include errors of law? For another thing, it is easy to imagine circumstances in which the application of the proviso to the facts of a particular case will yield no clear answer to the question – Does the proviso apply? To my mind it is clear that this is not a form of notice where the equivocation can be cured by what a charterer is deemed to know or is required to find out.' 31 Here, the notice provisions of the charterparty make reasonably clear the purported effect of the notice of termination. However, the factual basis for a notice of termination with immediate effect was lacking. APC Marine elected to treat the anti-technicality proviso in cl 28 as applicable and upon the making of that election attracted the requirement to give 10 clear banking days notice in which TDJV might remedy its alleged default. Only after the giving of such a notice and the expiration of the ten clear banking days could APC Marine have terminated the charter without further notice. Conclusion 32 For the reasons which I have endeavoured to explain, the charter was not effectively terminated on 8 April 2009. The same reasoning underlay my order of 17 April 2009 in proceedings No VID 244 of 2009 that APC Marine be restrained until final judgment or further order from withdrawing the Ship from the service of TDJV. Correspondingly, I declined, also on 17 April 2009, to order in proceedings No VID 234 of 2009 the arrest of the Ship. In the result, there should be a declaration in the former proceedings that, as at 17 April 2009, the charter of the Ship to TDJV had not been validly terminated. The interlocutory injunction granted on that day should be dissolved and TDJV should be released from its usual undertaking as to damages. APC Marine must pay TDJV's costs of those proceedings including any reserved costs. The only orders necessary in the proceedings No VID 234 of 2009 are that those proceedings be dismissed and that APC Marine pay TDJV's costs of those proceedings. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. Associate: Dated: 25 June 2009 VID 234 of 2009 Counsel for the Plaintiff: Mr M Harvey; 9 April 2009 Mr A Trichardt; 15, 16 & 17 April 2009 Solicitor for the Plaintiff: Minter Ellison Counsel for the Defendant: Mr E N Magee QC with Mr B J Murphy; 9 April 2009 Mr R Manly SC with Mr B J Murphy; 15, 16 & 17 April 2009 Solicitor for the Defendant: Baker & McKenzie AND VID 244 of 2009 Counsel for the Plaintiff: Mr E N Magee QC with Mr B J Murphy; 9 April 2009 Mr R Manly SC with Mr B J Murphy; 15, 16 & 17 April 2009 Solicitor for the Plaintiff: Baker & McKenzie Counsel for the Defendant: Mr M Harvey; 9 April 2009 Mr A Trichardt; 15, 16 & 17 April 2009 Solicitor for the Defendant: Minter Ellison Dates of Hearing: 9, 15, 16 and 17 April 2009 Date of Judgment: 25 June 2009