Bank of China Limited v The Ship “Hai Shi”

The Bank of China Limited brought proceedings against the ship "Hai Shi" in the Federal Court of Australia. The bank sought a debt of approximately USD 71.7 million which was secured by a mortgage registered against the ship. The bank filed a caveat to prevent the ship's release in earlier proceedings brought by International Bunker against the ship. The ship was eventually released from arrest in those proceedings and the bank sought orders for the valuation and sale of the ship to satisfy its debt. The bank's application raised issues as to the appropriate timing of such an order, the sufficiency of service of the application and the costs associated with maintaining the ship under arrest.

The court was required to determine whether the bank could proceed with the application for the valuation and sale of the ship despite the time charterer's claim of an interest in bunkers on board. The court also needed to assess the appropriate timing of the application given the lack of appearance by the relevant person and the potential costs associated with maintaining the ship under arrest. The court had to consider the effect of service of the application on the ship's master and whether this was sufficient to trigger the time for the entry of an appearance by the relevant person.

The court held that the master had received the application for valuation and sale in the emails on 5 February 2013. However, it would not be appropriate to hear and determine the bank’s application for valuation and sale or to enter judgment in its favour until the time for the relevant person to enter an appearance expired on 21 February 2013. The court found that the ship had been under arrest for a considerable time and that the relevant person had not taken any step to appear in these or International Bunker’s proceedings. The court ordered that the vessel be valued and, if no appearance was entered, that the orders for sale then take effect. The court also ordered that the bank deliver the application for valuation and sale and all the evidence in support on the relevant person at its physical office premises forthwith.

The court issued orders directing the bank to deliver the application for valuation and sale and all the evidence in support to the relevant person at its physical office premises. The court also ordered that the Marshal have the ship valued in writing and engage a ship broker to value the ship and advise on the method of sale. The court further directed that the Marshal and ship broker not disclose the valuation to the parties or anyone else apart from the Marshal’s delegates. The proceedings and interlocutory application were stood over to 22 February 2013.