Barde, a S v ABB Power Systems

[1995] FCA 828

CATCHWORDS

SHIPPING AND NAVIGATION - limitation of liability - effect of constitution of limitation fund - whether claimant wishing to establish matters disentitling shipowner from limiting liability is entitled to have that question determined prior to the constitution of a limitation fund.

Limitation of Liability for Maritime Claims Act 1989, Schedule 1
Convention on Limitation of Liability for Maritime Claims 1976, Articles 1, 2, 3, 4, 11, 13, 15.

Barde A.S. v ABB Power Systems, AB & ASEA Brown Boveri Limited & Ors

No. NG399 of 1995

CORAM:    SHEPPARD J

PLACE:    SYDNEY

DATE:     17 OCTOBER 1995

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG399  of 1995
  )
GENERAL DIVISION IN ADMIRALTY        )

BETWEEN:  BARDE A.S.
  Applicant

AND:

ABB POWER SYSTEMS, AB & ASEA BROWN BOVERI LIMITED

First Respondent

J.H. BACHMANN GMBH & CO
  Second Respondent

ABB POWER GENERATION LTD
  Third Respondent

CORAM:    SHEPPARD J
PLACE:    SYDNEY
DATE:     17 OCTOBER 1995

REASONS FOR JUDGMENT

HIS HONOUR:   This is an application brought by the applicant under the Limitation of Liability for Maritime Claims Act 1989 ("the Act") and the Admiralty Act 1988. The applicant seeks a declaration that it is entitled to limit liability for claims in respect of loss of or damage to property resulting from discharge operations of a vessel, the "Barde Team", at Timaru, New Zealand, on 12 May 1995. The application is opposed.

On 26 June 1995, I made an order, by consent, pursuant to Order 29 Rule 2 of the Court's rules, that prior to determining the other issues raised by the application, four questions be determined separately. The questions are:

(a)whether, as a matter of fact, there was an occurrence on board the "Barde Team" on 12 May 1995 or in direct connection with the operation of the ship whereby claims in respect of loss of or damage to property may be made against the owners of the ship, Barde A.S.;

(b)whether, as a matter of fact, any claims the respondents may have in respect of loss of or damage to property arise from the said occurrence;

(c)whether, in the circumstances, as a matter of law, upon depositing the sum calculated in accordance with Article 6 Rule 1(b), being 767,031 special drawing rights converted into Australian dollars as at the date of payment, together with interest thereon at the rate of 12% p.a. from the date of the said occurrence until the date of payment by payment into the Litigants Fund of the Federal Court of Australia, a limitation fund is constituted
within the meaning of Article 11 Rule 2 of the Convention in Schedule 1 of the Limitation of Liability for Maritime Claims Act 1989;

(d)whether, in the circumstances, as a matter of law, upon the deposit of the said sum together with interest, the release of the said vessel or any security given must be ordered pursuant to Article 13 Rule 2 notwithstanding that the Court has not yet heard and determined whether there is any conduct barring limitation within the meaning of the Article 4 of the said Convention, which conduct is denied by the applicant and that the Court has not yet heard and determined the said allegation that there has been misconduct.

It needs to be said that the last part of question (d), although clear in meaning, is in need of some amendment.  This is something which can be attended to when orders are being made.

There is no dispute that the first three of these questions should be answered in the affirmative.  The substantial issue between the parties arises in relation to question (d).

An order has been made for the separate determination of the same questions in associated but independent proceedings (NG 363 of 1995) in which the first respondents in these proceedings have sued the vessel, Barde Team, in an action in rem for damage occasioned to a transformer when the transformer was being unloaded at Timaru on 12 May 1995. A warrant of arrest was issued and the vessel was arrested at the port of Yamba on the north coast of New South Wales after its arrival there from Timaru. The applicant in the present proceedings made an application to the Court for the release of the vessel from arrest on the ground that it was entitled to obtain that release under Article 13 rule 2 of Schedule 1 of the Act.

Before I continue I should explain the standing of the second and third respondents.  The second respondent is a freight forwarder which issued the ocean bill of lading for the transport of the transformer from Sweden to New Zealand.  Counsel for the second respondent said that it was thus in a contractual relationship with the first respondent.  At the moment there was no claim made by the first respondent against the second respondent but, in the event that such a claim should be made, the second respondent would say that it had a claim for an indemnity against the shipowner.  In this way the second respondent claims to be a "potential claimant" against the ship.  It was on this basis that it lodged a caveat in the proceedings brought by the first respondent in rem.  The third
respondent was the consignee of an industrial boiler to be delivered to the third respondent in New South Wales.  The boiler was said to have been damaged in the unloading operation at Timaru and the third respondent also lodged a caveat in respect of its claim.

The matters raised by the principal application in this matter and particularly by question (d) of the questions reserved under Order 29 Rule 2 raise, in my opinion, questions of some difficulty. Because of the stand it takes in the matter, the applicant at first resisted agreeing to the usual course of providing security for the release of the vessel so that it could continue on its voyage. There were a number of interlocutory hearings. Eventually the applicant did provide security in the sum of $US2.5 million and the vessel was released from arrest by order made by consent on 21 June 1995. The security was in the usual form of an undertaking by a P & I Club. It is the applicant's contention, however, that it is entitled to have the arrest warrant set aside and the security released if it constitutes a limitation fund under the Act.

In order to answer question (d) of the reserved questions it is necessary to refer in detail to the terms of the Act and to the evidence of the occurrence in which the transformer was undoubtedly damaged.

Schedule 1 of the Act comprises the entirety of the Convention on Limitation of Liability for Maritime Claims 1976
adopted at London on 19 November 1976. Section 6 of the Act provides that, subject to the Act, the provisions of the Convention, other than paras 1(d) and (e) of Article 2, have the force of law in Australia. Paragraphs 1(d) and (e) have no relevance for present purposes. The central provisions of the Convention, and thus of the Schedule to the Act, in question in the present case are Article 11, which is entitled, "Constitution of the fund", and Article 13 which is entitled, "Bar to other actions". Both Articles are in Chapter III of the Convention which is entitled, "The Limitation Fund". Article 11, so far as relevant, is as follows:

"1.Any person alleged to be liable may constitute a fund with the Court or other competent authority in any State Party in which legal proceedings are instituted in respect of claims subject to limitation.  The fund shall be constituted in the sum of such of the amounts set out in Articles 6 and 7 as are applicable to claims for which that person may be liable, together with interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund.  Any fund thus constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked.

1. A fund may be constituted, either by depositing the sum, or by producing a guarantee acceptable under the legislation of the State Party where the fund is constituted and considered to be adequate by the Court or other competent authority."

I should say in passing that it is to be noted that the fund may be constituted either by deposit or by the production of a guarantee "acceptable under the legislation of the State
Party".  There is no such legislation in force in Australia and it would appear that the fund must be constituted by deposit.  There was at one stage some question about this but, as I understand the final position taken by counsel for the applicant, there is no issue about his client's being obliged, if a fund is to be constituted, to deposit money in order to establish it.

Chapter III of the Convention contains three further Articles, Article 12 dealing with the distribution of the fund, Article 13, to which I have referred, and Article 14 which provides for the law which governs the constitution and distribution of a limitation fund. Of these, the only significant article for this case is Article 13 which is as follows:

"1.Where a limitation fund has been constituted in accordance with Article 11, any person having made a claim against the fund shall be barred from exercising any right in respect of such claim against any other assets of a person by or on behalf of whom the fund has been constituted.

1. After a limitation fund has been constituted in accordance with Article 11, any ship or other property, belonging to a person on behalf of whom the fund has been constituted, which has been arrested or attached within the jurisdiction of a State Party for a claim which may be raised against the fund, or any security given, may be released by order of the Court or other competent authority of such State.  However, such release shall always be ordered if the limitation fund has been constituted:

(a)at the port where the occurrence took place, or, if it took place out of port, at the first port of call thereafter; or

(b)at the port of disembarkation in respect of claims for loss of life or personal injury; or

(c)at the port of discharge in respect of damage to cargo; or

(d)in the State where the arrest is made.

1. The rules of paragraphs 1 and 2 shall apply only if the claimant may bring a claim against the limitation fund before the Court administering that fund and the fund is actually available and freely transferable in respect of that claim."

Other provisions of the Convention to which it is necessary to refer are to be found in Chapters I, II and IV.   Article 1 of Chapter 1, which is entitled, "The Right of Limitation", provides that shipowners and salvors may limit their liability in accordance with the rules of the Convention for claims set out in Article 2.  The term "shipowner" means the owner, charterer, manager and operator of a seagoing ship.  Under Article 2 claims, inter alia, in respect of loss of or damage to property are to be subject to limitation of liability.  It should be noted, however, that Article 2 commences with the words, "Subject to Articles 3 and 4...".  Article 3 deals with claims excepted from limitation and Article 4 with conduct barring limitation.  Article 4 is as follows:

"A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result."

Article 5 provides for counterclaims.  I do not need to refer to the detail of it.

The limits of liability are dealt with in Chapter II.  The general limits are provided for in Article 6.  It is unnecessary to refer to the detail of that Article.  Article 7 deals with the limit for passenger claims.  This has no relevance to the present problem.  Article 8 defines "Unit of Account" referred to in Article 6.  Again it is unnecessary to go to the detail of that Article.  Article 9 provides for the aggregation of claims.  It provides that the limits of liability determined in accordance with Article 6 are to apply to the aggregate of all claims which arise on any distinct occasion.  The effect of this Article is that if a number of claims, although brought by different entities, arise out of the one incident, the limitation is in respect of the aggregation of those claims.  I should then note Article 10 which provides for limitation of liability without the constitution of a limitation fund.

Chapter IV is entitled, "Scope of Application".  Article 15 of Chapter IV provides that the Convention is to apply whenever any person referred to in Article 1 seeks to limit his liability before the Court of a State Party or seeks to procure the release of a ship or other property or the discharge of any security given within the jurisdiction of any such State.

Section 9 of the Act confers jurisdiction on the Supreme Courts of the States and Territories but the Section does not
affect the operation of s.25 of the Admiralty Act which confers jurisdiction on this Court. That section empowers this Court to determine whether the applicant's liability may be limited and, if it may be so limited, to determine the limit of that liability. It may order the constitution of a limitation fund for the payment of claims in respect of which the applicant is entitled to limit liability and make such orders as are just with respect to the administration and distribution of the fund. The provisions of s.25 of the Admiralty Act explain why this application was said to be made pursuant, not only to the Act, but also pursuant to the Admiralty Act.  In relation to the jurisdiction conferred on this Court by the section, reference may be made to the judgment of the High Court in Victrawl Pty Limited v Telstra Corporation Limited (3 October 1995 as yet unreported). I refer to the judgment of the majority at 16-20 and to the dissenting judgment of Brennan CJ (at 1) who agreed with the majority's views concerning s.25.

I next refer to the evidence concerning what occurred on 12 May 1995 when the discharge operations which led to the damage to the transformer were carried out.  Mr P.D. Murphy, who is the applicant's solicitor, said, in an affidavit sworn on 2 June 1995, that the applicant had an apprehension of claims for compensation being made arising out of the discharge operations.  He also said that the amount of the limitation fund calculated in accordance with Article 6 was
$US1,208,518.70; that is somewhat less than half the amount of security presently provided for the release of the vessel.

Mr Murphy said that the applicant sought to constitute a fund under Article 11 by depositing with the Court an Australian bank guarantee but, as mentioned, that was not a course pursued in argument.  Mr Murphy said that the persons which might have a maritime claim against the applicant arising out of or connected with the matter in respect of which liability was to be limited were the first respondent and also the second and third respondents.  The parties constituted by the first respondent were the owners or consignees of the transformer.  I have already explained that the second respondent was a freight forwarder engaged in the way that I have described and that the third respondent was the consignee of the industrial boiler which was to be delivered in Australia.

In an affidavit sworn on 6 June 1995, Mr Pedro Manalo, the second officer on board the Barde Team, said that he remembered the events of 12 May 1995 at Timaru.  He said that the vessel berthed starboard side to the wharf early in the morning.  Mr Manalo said that during the discharge of cargo from the vessel's "lower hold" later that day, he was standing on deck cargo signalling to the winch driver relaying the chief mate's instructions during the discharging operations.  The cargo he was standing on was the industrial boiler which
was to be discharged at Yamba, the vessel's next port of call.  During the discharging operations, he noticed that the vessel began to list to port.  He said:

"Naturally I was concerned.  My concern grew, when I heard the sound of the chain lashings snapping and breaking.  I ran up and down the boiler, looking to escape.  I heard the Master who was standing on the bridge, shout, 'Jump, Jump, Jump'.  I immediately jumped onto the hatch cover, and down onto the deck.  During this short time, I heard the continual sound of the lashings, holding down the boiler, break.

When I was in a position of safety, I turned round and noticed that the boiler had disappeared, and I realised that the boiler had slid across the deck, and fallen off the port side of the vessel into the harbour.

I was then instructed to assist other crew members in making fast additional mooring lines to the wharf."

Mr Manalo said that the boiler was retrieved from the harbour.  It was hosed with fresh water and reloaded on to the deck the next day.  The third respondent, for a time, participated in these proceedings but in the end withdrew because the boiler, upon examination after discharge, was apparently found not to have been as seriously damaged as was at first thought.  The concern was that the entry of salt water into it after it fell into the harbour might have damaged it beyond repair.  But that has not turned out to be the case.

Mr Edgar Monsale is an able seaman serving on the Barde Team.  In his affidavit he said that he was a Filipino citizen.  He said that the Barde Team berthed starboard side
to the wharf at the port of Timaru on 12 May 1995 at about 2.15 a.m.  He said that, prior to the discharging operations at approximately midday, he was ordered into the vessel's lower hold to hook the vessel's slings on to the cargo in the hold.  This was the usual procedure for lifting and discharging heavy cargo from the hold.  He said that the cargo to be discharged at Timaru was an industrial transformer.  He was assisted by another able seaman and the "Bosun".  After the slings were hooked on to the transformer, the other able seaman and the boatswain went on deck.  Mr Monsale was left alone in the lower hold.  He said that he was thrown a rope which he made fast to the cargo.  This was used for the purpose of guiding the cargo across the hold so that it could be lifted through "the top of the hold."  Thereafter the chief officer "shouted down the hold" that the lifting of the cargo was about to commence.  The lifting of heavy cargo on the vessel was carried out by the use of two derricks.  Mr Monsale heard the sound of the vessel's winch and noticed that the transformer began to move slowly vertically.  When it was approximately 10 centimetres above the tank top, it moved slowly across the starboard side of the hold to the centre of the hold so that it would be in a position to be lifted clear of the hatch coaming.  The transformer continued to move to port.  Mr Monsale said that he could feel the vessel begin to list to port and was concerned that the transformer would collide with other cargo in the hold.  He tried to pull it back, i.e. to starboard, with the rope attached to the transformer.  However, he could not stop it travelling to port.  He then saw the transformer make contact with a wooden crate on the port side of the hold.  He said that there was a jarring sound as the transformer hit the crate which had cargo inside.  The crate began to move to port as well because of the weight of the transformer pushing it.  He heard the sound of breaking wood.  He also noticed a forklift truck which was used for cargo movement in the hold begin to slide to port because of the list.  Mr Monsale ran to the front of the hold and up the stairs to the deck.  He noticed that the boiler was no longer on the deck.

Mr C.E. Boulton has been employed as a waterside worker since 1980.  At the relevant time he was employed by a stevedoring company in Timaru.  He commenced work on 12 May 1995 at 4 p.m.  There were three other waterside workers beside himself who were rostered to assist with the "hooking up" of the cargo.  The waterside workers did not drive or operate the vessel's cargo gear but carried out preparatory work including slinging prior to the discharge of the heavy lift cargo during the shift from the period 4 p.m. to 11 p.m. on 12 May.  At 5 p.m. on 12 May Mr Boulton said that he was sitting on the pontoons near the bow of the vessel on the port side.  The vessel was starboard side to the wharf.  The ship's crew were operating the cargo gear at the time.

There had apparently been an industrial dispute about who should operate it but this had been settled by allowing the crew to operate the cargo gear and allowing the four waterside workers to observe the cargo operations.  Two sets "of cargo gear", one forward and one aft were working in tandem.  He saw a person whom he took to be the chief officer signalling to the crew operating the cargo gear which was in the process of lifting the transformer.  He said that he was peering down the hatch at the time and saw the transformer lifted approximately 6 to 12 inches from the floor of the hold.  He then saw the chief officer give a signal to the operators to position the lift towards the centre line of the vessel.  He said that the lift moved in slow motion towards the centre line.  At the same time the vessel listed to port and away from the wharf "as the weight of the transformer seemed to take charge".  He did not see the transformer hit the port side of the vessel within the hold but he heard it as he "scrambled towards the vessel's starboard side."  At the same time he saw the boiler, which was on the aft deck, go over the vessel's port side into the water.

Mr G.M. Smith is a loss adjuster and marine surveyor.  He is employed by a firm, Flinders Cook Limited, of Wellington, New Zealand.  On 12 and 13 May 1995 he carried out a preliminary survey of the damage to the transformer.  He also took photographs of the vessel.  Mr Smith's report is dated 16 May 1995.  In his report he said that the full extent of the damage to the transformer was unknown but that the "Assured" intended, if at all possible, to repair it.  He said that at that stage no one could give a realistic estimate but he suggested a tentative provision of $US3 million.  He said that ABB Power Systems, the first of the parties named as first respondent in the proceedings, had sent two specialists into the transformer to carry out a thorough inspection while it was still on board the vessel.  They found no internal damage but there was a major variation in the resistance levels of the coils.  This information was sent to ABB Power Systems in Sweden for comment.  Further tests were suggested but, at the date of the report, it was not clear whether or not the extent of damage would warrant the return of the transformer to Sweden.  He said that the "Impact Indicator Chart" (I am not sure what this is) showed significant damage but not sufficient to preclude the possibility of economic repair.

It was decided to continue with the discharge of the transformer.  This was completed on 14 May 1995.  A further inspection and testing was completed and more information results were sent to Sweden.  After examining the results of the testing on 15 May, and in consultation with the transformer's designers, Mr Smith said that "the assured, had decided that the transformer should be returned to Sweden for repair".  Mr Smith said that this had been a very difficult decision because of the contractual pressure on ABB Power Systems from its client, Transpower New Zealand.  The transformer was urgently needed and without it Transpower had almost no "buffer" should a further breakdown occur at Benmore Power Station.  A significant proportion of the power supply for New Zealand came from this power station.  The winter months began in June so a period of peak demand was about to begin.  Mr Smith said that the issue was "highly political."

He also said that a number of packages besides the transformer had suffered damage.  Some apparently undamaged packages would need to be returned to Sweden with the transformer to enable the transformer to be repowered and tested when it reached Sweden.  It was understood that steps were being taken to locate a suitable "heavy lift vessel" but Mr Smith thought that it might be some months before the transformer was reshipped.  He thought that the correct decision had been made, but had asked ABB Power Systems to provide "us" with a full report on their findings inside the transformer at Timaru.  They proposed to have an independent consulting electrical engineer conduct a "desk audit of this detail".  This would ensure that the decision to incur the freight costs of return to Sweden was independently justified in preparation for the recovery action.

The transformer was very heavy.  It weighed approximately 212 tonnes.  In the evidence there is criticism of the way it was unloaded, some of this being directed at the chief officer who supervised the operation.  There was also criticism based on the failure to use a heavy lift shore based crane which was available instead of the two derricks on the ship.

It should be clear that this is not the final hearing of the matter but the determination of the four questions formulated in the consent order made by the Court. The evidence to which I have referred emerges from affidavits and survey reports. There was no cross-examination of the various witnesses all of whom were from New Zealand. The only purpose of the evidence was to establish a sufficient factual background to enable the Court to answer the questions. Plainly the evidence establishes that there are claims made against the applicant as the shipowner for damage to property; see Article 1, rules 1 and 2, and Article 2, rule 1(a) of the Convention. Plainly also the applicant wishes to constitute a limitation fund under Article 11 and to take advantage of Article 13 which provides a bar to other actions and entitles the shipowner to the release of the vessel or any security standing in its place upon the fund being constituted. On the other hand, the first and second respondents seek to rely on conduct which is said to disentitle the applicant from limiting its liability; see Article 4. In relation to this, it has to be said that, if the evidence when finally led in the case, does not establish more than the evidence presently does, it seems unlikely that the first respondents will succeed in discharging the onus which is cast upon them by Article 4. But it is reasonable that the first respondents have an opportunity of making further investigations into the matter and also have the benefit of discovery.

The question here to be decided is not affected by these considerations. It is the submission of the applicant that, upon the fund being constituted, Article 13 operates to entitle it to the release of the vessel or any security provided in its place so that claimants against the vessel in respect of the incident which occurred on 12 May 1995 must be content with the fund so far as it will extend. They may pursue their claim under Article 4, but if they succeed in discharging the onus cast upon them by that provision, they will not have access to any ready source of funds to satisfy their claims but will need to pursue the vessel or its owners, probably in the courts of another country. To my mind the proposition is a startling one, but it has weighty and highly persuasive authority to support it.

Before I come to the authorities there is one matter to which I should refer.  Counsel for the first respondent submitted that the Court should not determine the question to be decided until the fund was actually constituted.  As indicated earlier, the only way that a fund under the Convention can be constituted in Australia is by deposit of cash.  But counsel for the first respondent said that there was no certainty that, if the applicant were successful in having the questions answered favourably to it, it would in fact provide the moneys to constitute the fund.  So, in the submission of counsel for the first respondent, the point is moot or hypothetical and ought not be decided until moneys are actually deposited.  Until the appropriate security was provided for the release of the vessel, I was minded to think that there was something in the submission.  But security in the sum of $US2.5 million having been provided, albeit by the usual P & I Club letter of indemnity, I think I should take the view that it is more than likely the case that the applicant will constitute the fund if the questions are answered favourably to it.  I do not therefore regard the questions as hypothetical.  But I should also say that, because of the state of the evidence as to how the incident occurred and my reservation as to whether the first respondents will ever establish the matters which they need to establish in order to bring the case within Article 4, I think there is a degree of uncertainty whether the point requiring determination is, in a real sense, likely to be determinative of the ultimate issues between the parties.  There is no purpose in answering the questions if the likelihood is that the first respondent will not be able to discharge the onus which rests upon it under Article 4.  This is not, however, how the parties have approached the question.  Assuming one or other of them is dissatisfied with my decision, there will be a question whether there should be an appeal at this stage or whether the entirety of the facts of the matter should be gone into and a decision made on all issues before any appeal is heard.  That, however, is a matter for the court to which any appeal is brought.

I then come to the authorities there are in relation to the question.  I commence with the decision of Sheen J in the "Bowbelle" [1990] 1 Lloyd's Rep. 532. It involved a collision between the Bowbelle and another vessel, the "Marchioness" in the river Thames. The collision resulted in the loss of many lives and many persons suffered injury and loss. The collision occurred in darkness but the visibility was nevertheless good. The owners of the Bowbelle contended that by virtue of the Merchant Shipping Act 1979 (UK) they could not be compelled to give bail or any other security beyond that provided by the limitation fund which had been constituted by them.  They also said that, if any vessel owned by them were to be arrested in respect of a claim arising out of the collision, the court would be bound to order the release of that ship without further security being provided.  They said that they were therefore entitled to give warning to anyone contemplating such an arrest.  For this purpose they had entered a caveat against the arrest of the vessel.

The provisions of the Merchant Shipping Act in question had come into force on 1 December 1986 in order to give effect to the Convention on Limitation of Liability for Marine Claims.

There was no appearance for any party except the owners of the Bowbelle.  The judgment delivered was an ex tempore one. 

In the course of his reasons, Sheen J set out the principal provisions of the Convention, namely, Article 1, Article 2, Article 4, Article 11 and Article 13. He referred to the position which had prevailed under the older law which was based on the provisions of the 1957 Convention ("The International Convention relating to the limitation of the liability of owners of sea-going ships 1957", known as the Brussels Convention). He said (at 535) that, in respect of any claim arising before 1 December 1986, a shipowner who claimed that he was entitled to limit his liability by virtue of s.503 of the Merchant Shipping Act as it then was, had to discharge the burden of proving that the occurrence giving rise to the claim occurred without his actual fault or privity.  Sheen J continued (at 535):

"In 1976 a collision between a German ship and a Polish ship took place in fog in the Baltic Sea.  The owners of the Polish ship constituted a limitation fund in a Court in Poland.  In May, 1977 the ship Wladyslaw Lokietek, which was a sister ship of the Polish ship in collision, was arrested in this country. After security had been given the ship was released from arrest. Her owners applied for the release of the security, relying on s.5 of the 1958 Act. Mr. Justice Brandon held that on such an application the shipowner had to show that there was no serious question to be tried in relation to the absence of actual fault of privity on his part and it was not enough for him merely to show that he had a prima facie case or a reasonably arguable case on that issue. That decision frustrated the use of s.5. It appears to me that art. 13 of the 1976 convention was drafted with the intention of overcoming the effect of that decision and of ensuring that shipowners would only be compelled to provide one limitation fund, in respect of any one incident giving rise to claims."

The reference to the 1958 Act is a reference to the Merchant Shipping (Liability of Shipowners and Others) Act 1958 (UK).  The reference to the Wladyslaw Lokietek is a reference to the Wladyslaw Lokietek [1978] 2 Lloyd's Rep. 520.

The balance of Sheen J's judgment is of critical importance in relation to the present case.  I set it out in its entirety.  His Lordship said (at 535-6):

"I return to consider the 1976 Convention, under which shipowners agreed to a higher limit of liability in exchange for an almost indisputable right to limit their liability.  The effect of arts. 2 and 4 is that the claims mentioned in art. 2 are subject to limitation of liability unless the person making the claim proves (and the burden of proof is now upon him) that the loss resulted from the personal act or omission of the shipowner committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.  This imposes upon the claimant a very heavy burden.

But regardless of whether a claimant contends that he can prove that the shipowner was guilty of conduct barring limitation, the combined effect of arts. 2 and 13 is that a shipowner can only be compelled to constitute one fund in accordance with art. 11.  Article 2 sets out the categories of claims which are subject to limitation of liability.  The claims against the owners of Bowbelle come within par. (a). I turn now to art. 13. It is clear that any claimant may bring a claim against the limitation fund in Court. Therefore by virtue of par. 3 the rules set out in pars 1 and 2 apply.

Paragraph 1 makes it clear that any person who has made a claim against the fund in Court is not entitled to arrest any ship in the same ownership as Bowbelle.

Any person who has a claim against the owners of Bowbelle (but has not yet made a claim against the fund) has 'a claim which may be raised against the fund'.  The fund has been constituted in London which is 'the port where the occurrence took place'.  Accordingly, if one of the ships named in the praecipe were to be arrested the Court would be bound to order its release.  The fund has been constituted by the owners of Bowbelle in accordance with art. 11 in 'respect of claims subject to limitation'.  Those last six words clearly refer to the categories set out in art. 2.  The draftsman has omitted the words 'which appears to the Court to be founded on a liability to which a limit is set' which led to the decision in The Wladyslaw Lokietek, [1978] 2 Lloyd's Rep. 520. The Court is not required to investigate the question whether the shipowner has been guilty of conduct barring limitation. In these circumstances commonsense dictates that there should be some machinery by which warning can be given to would-be arresters that they should not arrest any of the ships belonging to the owners of Bowbelle.  The current Rules of the Supreme Court have not made provision for this situation.  Until such provision is made shipowners, who wish to provide some protection against unnecessary dislocation of trade caused by the arrest of their ships, should file in the Admiralty and Commercial Registry a praecipe which must be signed by their solicitor who must undertake to acknowledge service of the writ in any action which may be begun against the owners of the ship in question and state that a limitation fund in respect of damage arising from the relevant incident has been constituted by payment into Court of the appropriate amount.

Any person who has a claim arising out of the same incident and who wishes to contend that the conduct of the shipowner bars his right to limitation may nevertheless pursue that allegation but he will not have the security provided by the arrest of a ship."

The Bowbelle was cited by Clarke J in "The Capitan San Luis" [1993] 2 Lloyd's Rep. 573 at 576. The reference to it by Clarke J does not, I think, touch the question here to be determined. But the case he decided has, I think, an indirect relevance which I shall mention a little later.

Counsel for the applicant in the present case also relied on the judgment of Gummow J in Victrawl Pty Ltd v AOTC Limited (1993) 45 FCR 302. Gummow J was then a judge of this Court and wrote the principal judgment of the Full Court which was substantially upheld by the judgment of the High Court earlier referred to in Victrawl Pty Ltd v Telstra Corporation Limited. Counsel relied particularly on Gummow J's comments at 304-6 and at 311-3.  I have considered what his Honour said but the
present problem was not before the Court and I do not consider that his Honour's remarks bear on the question now to be decided.

The next authority to which I refer is the decision of the French Cour de Cassation of 23 November 1993 in a matter concerning the vessel "Heidberg".  The reports of the case with which I have been furnished are not comprehensive but a headnote to one of them says that the case is authority for the proposition that, after a limitation fund is constituted, the release of the vessel from arrest must be ordered.  The facts of the matter were that the Heidberg had collided with a pontoon at Pauillac which was owned by the Shell oil company.  The pontoon was damaged.  On 11 March 1991 the president of the Commercial Court, on the application of Shell, ordered the arrest of the vessel.  On 8 April 1991, at the request of the owners of the Heidberg, the president of the Commercial Court "started the procedure with constitution of a limitation fund" and stated that it would be validly constituted by the provision of a bank guarantee and that the limitation fund had been properly created thereafter by an order of 16 April 1991.  The vessel's owners "summonsed" Shell to release the vessel from arrest.  Shell counter-claimed for the withdrawal of the orders dated 8 and 16 April 1991 alleging that the conduct of those liable for the damage was such that, since it came within the ambit of Article 4 of the 1976 Convention, it would lead to the exclusion of the right to limit liability.  On 10 May 1991 the President of the Court of Appeal of Bordeaux made an order upholding the submissions made on behalf of the Shell company.

The translation of the copy of the report which I have contains the following paragraphs:

"Whereas by so deciding, even though the Limitation Fund had been created, and the release of the vessel from arrest should be granted, and consequently the shipowners were justified in filing an appeal on a serious and legitimate ground, the order under appeal was made in breach of the above-mentioned texts;

ON THESE GROUNDS, and without the need to decide upon the second limb of the sole ground [of appeal]:

[The Court] DISMISSES AND ANULS, in its entirety the Order of the first president made on 10th May 1991 by the Court of Appeal of Bordeaux; and therefore places the action and the parties back in the position in which they found themselves before the said Order was made; and refers them back to the first president of the Court of Appeal of Poitiers."

I have not found any other judicial authorities on the question.  At this point it must be said that the decision in the Bowbelle and, so far as I can tell from the report of the case, the decision in the Heidberg provide support for the applicant's submission.  There is no judicial authority to the contrary.

I should next say that counsel for the second respondent and his instructing solicitors through overseas agents made extensive enquiries concerning the practice in a number of countries which are parties to the Convention.  These were only completed last month and were reported to me in a letter

to my associate dated 27 September 1995. The letter was seen by counsel for the other parties, i.e. the applicant and the first respondent, who have indicated that they have no disagreement with it. The report discloses that there are no decisions relating to the effect of Article 13 of the Convention and its relationship with Article 4 in the Bahamas, Belgium, Croatia or Egypt. The position is similar in Germany, Greece, Japan, Norway, Poland and Spain.

New Zealand did not accede to the Convention until 14 February 1994.  I have been referred to the relevant New Zealand legislation, the Shipping & Seamen Amendment Act 1987 (NZ) which effected amendments to the Shipping & Seamen Act 1952 (NZ) and the Maritime Transport Act 1994 (NZ).  There are no New Zealand decisions dealing with the matter.  There are no decisions either in the Netherlands but the provisions of its legislation are such that, after an owner has petitioned the Court to limit liability, in the event that the right to limit is contested, the court may only order the lifting of any arrest for claims for which a fund is constituted after that contest has been determined in favour of the owner.  The report I have says that there are Dutch decisions giving effect to those articles of the Dutch Code of Civil Process in relation to the 1957 Convention (i.e. not under the 1976 Convention).  The position in France is thought to be that which emerges from the decision in the Heidberg.

It remains to say that the Convention has not been adopted either by the United States or Canada.  Whether it is to be adopted or not I have not been informed.

The remaining authorities are in texts and, perhaps, in the Convention debate (see the Official Records of the International Conference on the Limitation of Liability for Maritime Claims, 1976 published by the International Maritime Organisation in 1983).  In the course of his submissions counsel for the applicant referred me to a number of statements made by a variety of delegates participating in the debate which occurred and I have looked at others.  I have not found the reference to the debate, however, helpful in reaching a conclusion on what the outcome of the question to be decided should be.

Accordingly I go to the texts.  I refer first to Limitation of Liability for Maritime Claims, Griggs and Williams.  There have been two editions of this work.  The first was published in 1986 and the second in 1991.  In the introduction to the second edition, the authors say (at 1) that it was recognised that the previous system of limitation had given rise to too much litigation and that there was a desire that this should be avoided in future.  There was agreement that a balance needed to be struck between the desire to ensure on the one hand that a successful claimant should be suitably compensated for any loss or injury which he had suffered and the need on the other hand to allow shipowners, for public policy reasons, to limit their liability to an amount which was readily insurable at a reasonable premium.  The authors continued (at 1-2):

"The solution which was finally adopted to resolve the competing requirements of claimant and defendant was (a) the establishment of a limitation fund which was as high as a shipowner could cover by insurance at a reasonable cost, and (b) the creation of a virtually unbreakable right to limit liability.

The text of the 1976 Convention finally adopted by the conference therefore represents a compromise.  In exchange for the establishment of a much higher limitation fund claimants would have to accept the extremely limited opportunities to break the right to limit liability.  Thus the right to limit liability can no longer be lost as a result of negligence on the part of the person seeking to limit.  Under the 1976 Convention the right to limit liability is lost only when the claimant can prove wilful intent or recklessness on the part of the person seeking to limit (Article 4).

Chapter 3 of the work deals with the limitation fund. There is discussion of Article 13(2) in that chapter; see at 72-75. In the course of their discussion the authors say (at 73):

"[The] difficulties have been resolved by Article 13(2) of the 1976 Convention since the subsection provides expressly that the right (or obligation in certain circumstances) of the court to release a vessel or other property is triggered not so much by proof that the owner of the vessel or other property can limit his liability but by the establishment by or on behalf of such person of a limitation fund in accordance with Article 11 of the Convention. Furthermore, the presumption which existed under the previous limitation regime that a person was not entitled to limit his liability unless he proved such entitlement has been displaced by the presumption that a person is entitled to limit his liability under the 1976 Convention unless some other party proves that he is guilty of the conduct described in Article 4."  The emphasis is that of the authors.

I have omitted the footnotes from the quotation but one of the footnotes refers to the Bowbelle.  The authors say that, in that case, Sheen J held "that in an application for limitation the court is not required to investigate the question whether the shipowner has been guilty of conduct barring limitation."  With respect, that summary of what the case decides does not do justice to the far-reaching proposition with which Sheen J concluded his judgment to the effect that any person who has a claim arising out of the same incident and who wishes to contend that the conduct of the shipowner bars his right to limitation may nevertheless pursue that allegation, "but he will not have the security provided by the arrest of the ship."  (My emphasis)

In addition to looking at Griggs and Williams, I have considered an address given by Sheen J on his retirement as Chairman of the (British) Association of Average Adjusters on 14 May 1987.  The address was entitled, "Limitation of Liability:  The Law Gave and the Lords Have Taken Away" (1987) 18 Journal of Maritime Law and Commerce 473.  This was referred to by Gummow J in his judgment in Victrawl (45 FCR at 304-5). The address is perhaps noteworthy for the extensive criticism it made of the judgment of the House of Lords in "The Marion" (Grand Champion Tankers Limited v Norpipe A/S [1984] AC 563). The Marion is the last word of the House of Lords on the proper construction of the 1957 Convention.  No
doubt many will agree with Sheen J's criticism of the decision.  On the other hand, many will regard the decision as a timely reminder to the shipping community of the heavy responsibility which they bear in operating ships throughout the world.  The Bowbelle itself and the Herald of Free Enterprise have brought home to the world generally what mayhem may be caused by the operation of ships and the Exxon Valdez has reminded us all of the ever present danger of the pollution of the seas and the coasts and fishing grounds of each of our countries.

Other texts I have consulted include Admiralty Jurisdiction and Practice, Meeson at 230 et seq., Halsbury's Laws of England, 4th ed, Vol 1(1), para. 362 at 419-422, Berlingieri on Arrest of Ships (1992) at 156 (this work is a commentary on the 1952 Arrest Convention), and Maritime Law in Australia, Butler and Duncan (1992) (at 295-6).  I have also read a lecture given by Mr David Steel QC (who appeared as counsel in The Capitan San Luis) entitled "Ships are different: the case for limitation of liability", published in Lloyd's Maritime and Commercial Law Quarterly ((1995) LMCLQ 77).

The lecture is an interesting one, although not directly relevant for present purposes, because it deals with the question whether or not limitation in this day and age is justifiable.  It is worth, however, referring to some of the text of the lecture because it seems to me that the thoughts expressed by Mr Steel provide a background against which it is necessary to construe the 1976 Convention.  Under the heading, "The 1976 Convention", he said (at 79-80):

"Any discussion of this Convention must reflect the fact that harmonization and insurance are interdependent.  The cost and availability of insurance will vary according to the existence of rights of limitation, the ease with which those rights may be broken and the extent to which the maritime nations are at one on the topic.  As regards the first two parameters, the Convention marked two significant developments.

First, there was universal recognition that the underlying approach to the question as to whether limitation was desirable should be simply those of insurability and cost of insurance.  Owners must be able to obtain insurance cover and claimants must get adequate compensation.  As the legal committee of IMO put it:

'The earlier concept of limitation held that a shipowner should be able to free himself from liabilities which exceeded his total interest in a venture subject to marine perils.  The more modern view is that the shipowner should be able to free himself from liabilities which exceed amounts recoverable by insurance at reasonable cost.'

It is ironic that the figures put forward by the BLMA at the time as satisfying these criteria were considerably higher than the figures eventually approved by the Convention.  (This was a consequence of a Third World initiative led by India and puts down quite a good marker as to the likely reaction of many in the maritime community if abolition of limitation was proposed.)

As regards the second parameter, it was readily accepted that the entitlement to limitation must be guaranteed save in the most scandalous cases.  This had the immediate advantage of ending the uncertainties created by the differing interpretations of 'actual fault and privity'.  It also had the added attraction of bringing shipping into line with international Conventions on other modes of transport on this topic such as the Warsaw Convention.  Even the U.S. had adopted the phraseology 'wilful misconduct' in some statutes with a maritime application:  see the Clean Water Act."

The reference to the IMO is a reference to the International Maritime Organisation.  The words "actual fault and privity" come from the 1957 and earlier Conventions and provided the earlier standard by which a party seeking to limit his liability was judged, he then bearing the onus of proof.

Later when dealing with insurance, Mr Steel said (at 82):

"Limitation is one thing--global limitation is quite another.  It may be that some degree of consistency in the approach to passenger claims can be achieved outside the grasp of global limitation.  Indeed the BLMA committee recommended that it should not apply to passenger claims.  But this still leaves the greater issue of other third party claims.  It is striking that the Rome Conventions of 1933 and 1952, which sought to provide limitation in the airline field for all liabilities arising out of any one accident, never found favour.  Despite this, there appears to be no difficulty for the airline industry to obtain 'catastrophe' cover.  What makes ships different?  Indeed, shipowners need unlimited cover (if it be available) in any event either because it may be held that they are not entitled to limit (as a consequence, say, of actual fault or privity) or because there is no limit to pray in aid.  At the present moment, they get it:  clubs are in fact able to offer unlimited cover (save in respect of oil pollution) which they reinsure at a level in the region of U.S. $1.15 billion.  On pollution liability, cover is in broad terms only available up to $500 million (with perhaps a $200 million top up) the bulk of which is reinsured.

If limitation was not available, at least in most jurisdictions, would this level of cover remain available at an acceptable cost?  I personally do not know.  But, given that existing cover is clearly and firmly predicated on the availability of limitation, I accept that there is a serious risk it will not."

After some further discussion, Mr Steel said (at 82-83):

"But the question has to be posed:  despite the fact that the U.S. is out of step on limitation the roof has not fallen in:  does this not mean that there is no legitimate basis for the 1976 Convention?  I would have thought the obvious answer was no: (a) I cannot see the merit of testing the insurance market to breaking point.  Confidence is a tender plant and once capacity is lost, it is always difficult to retrieve at anything like the original cost.  (b) To permit the American experience to control the agenda is to allow the tail to wag the dog.  (c)  It does need saying, and saying loudly, that unlimited liability leads to unlimited or at least undisciplined claims.  The U.S. experiment is a warning to us all, not a system to adopt."

In the concluding paragraphs of the lecture Mr Steel said (at 87):

"Let me wind up by taking stock.  Taken solely within the context of the maritime industry, there is much to be said for the continuing availability of limitation:  (a) It still has a role to play in the encouragement of investment worldwide.  (b) It helps ensure a level playing field for international competition.  (c) It affords a considerable degree of comfort to the insurance industry that the catastrophe exposure will be capped.  (d) It tends to impose a discipline on claimants and discourages the development of a system of recovery based on punishment rather than compensation.

There is nothing to be ashamed about in repeating and acting on the truism that it is better for the victim to have a limited claim which he can be certain that can be paid than to have an unlimited claim against an insolvent party.  Many others are turning to the maritime example for help.  Ships are different but maybe not for long."

The relevance I think that the statements made by Griggs and Williams and by Mr Steel QC have for this case are the
emphasis that they place upon the very great nature of the change which was brought about by the coming into force of the 1976 Convention.  It changed the old law dramatically, firstly by placing the onus upon the person wishing to avoid the consequences of the Convention (the shipowner no longer had to discharge the onus of establishing absence of actual fault or privity) and, secondly, by establishing a much greater barrier to the breaking of the Convention provided for by Article 4.  In return for this, claimants against ships were provided with the benefit of a very much more generous fund from which their claims were to be met. 

To the shipowner, the reversal of the onus of proof and the limited circumstances in which a claimant would be likely to be able to establish that he should be denied the right to limit his liability, the coming into force of the Convention meant that, in the general run of cases, he could establish a limitation fund thus putting an end to the risk of the arrest of the wrong-doing vessel and of other vessels which were surrogates for it because they were in the same ownership.  This in turn meant that insurers could more confidently price insurance at manageable rates of premium.  Claimants against ships might have their entitlements reduced but they would know that they would receive something, usually something substantial, towards their loss.  The risks and uncertainties of litigation would be reduced and the disappointment of a dry or empty judgment would not be so likely to occur.  Those, such as cargo owners who invariably insure their interests, would probably not be much affected by this except to the extent that those insuring them might impose a higher rate of premium because of their inability, in the event of there being a loss, to recover a full indemnity.  Others such as passengers or their families and persons, e.g. fishermen, as happened in the case of the Exxon Valdez, might not be so fortunate because they would not usually be likely to insure against the sort of incident which caused their loss.  In the case of pollution claims, that is subject to the question whether the claim would fall within para. (b) of Article 3 which excludes certain claims for oil pollution damage from the operation of the Convention.

The Convention reflects a policy decision made by a number of governments to adopt the compromise to which it gave rise as an appropriate solution to a difficult problem. Plainly, I should take the view, in coming to the question of construction in which I must engage, that that must have been the view of the Australian Parliament when it enacted the Act in question in the present case. Many people will have their own views about the desirability or otherwise of what has been done, but for the purpose of the construction of the provisions in question, that is not a consideration which it is relevant to take into account.

The question which has to be decided in the present case is really in quite a narrow compass.  The question is whether in Australia a shipowner may, by establishing a limitation fund under the Convention, deny a claimant, who wishes to attempt to establish facts which will disentitle the shipowner from limiting his liability, an opportunity of having that issue determined by an appropriate court and, until that determination is made, cause the vessel to be arrested and detained (unless security for its value or the amount of known claims is provided in its place) until the limitation question has been determined.  The judgment of Sheen J in the Bowbelle and the decision of the Cour de Cassation in the Heidberg would tend to persuade one that the opportunity is denied.  That is the essence of the submission made by counsel for the applicant.  My task is to determine whether or not that approach is correct.

At the heart of the question is the relationship between Articles 11 and 13 on the one hand and Article 4 on the other.  In the submission of counsel here, there is no relationship.  He relies on Sheen J's judgment to support that submission.

The point at issue is well stated in one of the papers included in a selection of papers from a seminar organised by the Institute of Maritime Law held in September 1984, i.e. before the Convention became law in England.  The work in question is, Limitation of shipowners' liability; the new law, published in 1986 by Sweet & Maxwell. One of the papers is "Practice and Procedure" presented by Mr Richard Shaw (see at 113). Under the heading, "Bar to other Actions: Article 13" Mr Shaw said (at 122-3):

"Article 11 does not define 'constituted' and Article 14 merely states that the constitution and distribution of the limitation fund shall be governed by the law of the State Party in which the fund is constituted.  Does 'constituted' mean simply the deposit of the Limitation Fund, either by cash or guarantee, with the appropriate authorities, or does it also require a legal declaration that the limiting shipowner is entitled to limitation of liability, and is not guilty of conduct barring limitation within the meaning of article 4?  Both constructions can be deduced from the wording of the 1976 Convention and, alas, different jurisdictions may adopt different approaches.  Viewed simplistically, Article 11(2) explains how 'a fund may be constituted' by depositing cash or guarantee acceptable under the legislation of the State Party where the fund is constituted.

This wording does not contain any suggestion that a ruling as to entitlement to limitation or as to the absence of conduct barring limitation is a prerequisite to constitution of the fund.  Similarly, the wording of Article 14, which confers jurisdiction on the State Party in which the fund is constituted to make rules relating to the constitution and distribution of the limitation fund, would be meaningless if a formal declaration of entitlement to limit was necessary before the fund is constituted.  This would leave an apparent hiatus until such a declaration had been obtained with no provisions in the Convention as to which State Party is competent to rule on such an important issue.

On the other hand, if mere deposit of the amount of  a limitation fund is to be sufficient to 'constitute' the fund this equally means that the principal point decided in the Wladyslaw Lokietek by Brandon, J has been reversed, and that once a limitation fund has been 'constituted' a ship or other property which has been arrested or attached within the jurisdiction of a State Party, or any security given, may be released and must be released in the four instances specified."

The current English rules are to be found in Order 75 of the Rules of the Supreme Court (The Supreme Court Practice, 1995, at 1320 et seq.).  Rule 37A of the Order provides for the constitution of a limitation fund by the plaintiff paying into court the sterling equivalent of the number of special drawing rights to which he claims to be entitled to limit his liability.  Rule 38 provides for a summons for directions which must be served on any defendant who has acknowledged issue or service of the writ.  Subrule (5) provides that the registrar, if it appears to him that it is not disputed that the plaintiff has a right to limit his liability, shall make a decree limiting the plaintiff's liability and fix the amount to which the liability is to be limited.  By subrule (6), if it appears to the registrar that any defendant has not sufficient information to enable him to decide whether or not to dispute that the plaintiff has a right to limit his liability, shall give such directions as appear to him to be appropriate for enabling the defendant to obtain such information and shall adjourn the hearing.  By subrule (7), if on the hearing or resumed hearing of the summons, the registrar does not make a decree limiting the plaintiff's liability, he shall give such directions as to the further proceedings in the action as appear to him to be appropriate including a direction requiring the taking out of a summons for directions under Order 25.

These various provisions are referred to by Meeson (supra) at 238-241 and by Halsbury (supra) at 420.  It may be observed that in relation to cases where the plaintiff's right to limit his liabilities is disputed and the registrar gives directions as to the further proceedings in the action, the directions will normally provide for an order for pleadings and an order that the plaintiff take out a summons for directions.  Meeson says that, for convenience, it may be appropriate to make an order that the plaintiff's affidavit stand as a statement of claim and that the defendant plead thereto within an appropriate time.  Since discovery will normally have been given already, either voluntarily or as a result of an order to enable the defendant to decide whether to dispute the right to limit, the only other requirement will be for the plaintiff to take out a summons for directions before the Admiralty Judge to enable directions to be given for trial and a trial date to be fixed; see at 240.

It should be observed at this point that the English Rules and Meeson's comment on them do not suggest that a party disputing a shipowner's right to limit liability or to constitute a limitation fund before a vessel is released from arrest or the right to arrest it is lost by the creation of a limitation fund, is to be put out of court by the constitution of the fund with all the consequences that that has without being given an opportunity to establish the matters which a claimant disputing a shipowner's right to limit liability needs to establish under Article 4.  Clarke J in the Capitan San Luis presumably had these provisions in mind when he said (at 578):

"Under the 1976 Convention the position is in my judgment very different [from that which existed under the 1957 Convention].  The shipowner merely has to establish that the claim falls within art. 2 of the Convention.  Once he establishes that, he is entitled to a decree limiting his liability, unless the claimant proves the facts required by Article 4.  It is of course a matter for the claimant whether he wishes to investigate that question.  If he does so, he may persuade the Registrar in an appropriate case to make an order for discovery or interrogatories under O.75, r.38(6).  If, as a result, he obtains information which enables him to establish the facts which defeat the shipowner's right to limit, he will ordinarily be entitled to his costs."

The question in the Capitan San Luis was a question of costs.

I should say that the rules in question are not new rules; they were not made after the 1976 Convention came into force in England or beforehand with it in mind that it was likely to come into force.  But they have plainly been amended so as to provide a comprehensive procedure under the 1976 Convention.  That is demonstrated by the fact that rule 37A is a new rule which came into force in 1985.  Rule 37A is followed by rule 38 which was not amended, but applies to cases under the 1976 Convention.  I have earlier referred to its provisions and to Meeson's comment on them.  With respect, I do not understand how this fits in with the last paragraph of Sheen J's judgment in the Bowbelle.  My task, however, is to construe the relevant provisions of the Convention against the background to which I have referred and with its purpose and object in mind.

The problem I have with the applicant's submission stems from the particular wording of s.25 of the Admiralty Act and of Article 11 of the Convention.  But the starting point is
Article 2 which specifies the claims which are subject to limitation.  That Article is expressly made subject to Articles 3 and 4.

The relevant part of s.25 empowers this Court to order the constitution of a limitation fund "for the payment of claims in respect of which the applicant is entitled to limit liability..." Emphasis added.  These words are in conformity with Article 11 which, in rule 1, provides that any fund "thus constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked."  The word "only" lends emphasis to the point I am about to make.  These provisions demonstrate that those responsible for the drafting of the Convention and of Acts of Parliament such as the Admiralty Act here make it very clear that the fund, when constituted, is available only for the payment of claims in respect of which limitation of liability can be invoked. Furthermore, rule 1 of Article 13 provides that, where a limitation fund has been constituted in accordance with Article 11, any person having made a claim against the fund is to be barred from exercising any right in respect of such claim against any other assets of a person by or on behalf of whom the fund has been constituted. And there are the provisions of rule 2 in relation to release from arrest. Importantly, rule 3 of Article 13 provides that rules 1 and 2 shall apply only "if the claimant may bring a claim against the limitation fund before the Court administering that fund
and the fund is actually available and freely transferable in respect of that claim."

In passing I should mention that there was discussion during the argument about the words "freely transferable". It seems clear that this refers to the ability of parties to pay and receive moneys in the relevant countries. In other words, the Convention recognises that there may be cases in which currency regulations and the like may prevent the free transfer of money. The point I make is that rules 1 and 2 of Article 13 will not apply unless the claimant is able to bring a claim against the limitation fund before the court administering it. This is in conformity with both Article 11 and s.25 of the Admiralty Act to which I have referred. 

Article 3 excepts certain claims from limitation and Article 4, one of the critical articles for this case, deals with conduct barring limitation.  Plainly a claimant who successfully overcomes the barrier presented by Article 4 will not be claiming against any limitation fund because the very fact that the barrier has been surmounted will mean that the claim can be brought in the usual way either in personam or in rem against the ship for the full amount of it.  Of course, there may not be full recovery in either form of action because of the impecuniosity of the defendant or the value of the vessel not extending to the amount of the claim but that is by the way.

It is true that it is not suggested by Sheen J in the Bowbelle nor by counsel for the applicant in this case that the constitution of a limitation fund will prevent a claimant from seeking to dispute a shipowner's right to limit his liability, but if he does so, he will, if what Sheen J has said be correct, now have no access to the fund because it will be available only to meet those claims "in respect of which limitation of liability can be invoked"; rule 1 of Article 11.  This point is made clear by Sheen J in the Bowbelle when he says (at 535) that the words of Article 11 "in respect of claims subject to limitation" clearly refer to the categories which are set out in Article 2.  And, importantly, it follows from what Sheen J said in the concluding paragraph of his judgment that any person who has a claim arising out of the same incident and who wishes to contend that the conduct of the shipowner bars his right to limitation may nevertheless pursue that allegation but he will not have the security provided by the arrest of the ship nor, for the reasons I have given, would he have any right of access to the limitation fund.  If this approach be correct, there will be many cases in which he will be found to be under a positive disadvantage because of his decision to challenge the shipowner's right to limit.  The ship will be released and, if the judgment in the Bowbelle be right, may not be rearrested anywhere.  With very great respect, I do not see how this view can be correct.  To give effect to it is to deny any real place in the Convention to Article 4.  It is clear from some of the texts I have looked at that a number of commentators take the view that, for all practical purposes, every shipowner has at least a de facto right to limit because the barrier is so difficult to overcome.  I see the force of this but there will be cases in which it may be overcome and the Convention acknowledges this.  The Convention must be given effect to in all its aspects.

All that the first respondent here seeks to do is to have an opportunity to challenge the right of the applicant to limit his liability by constituting a limitation fund.  The first respondents want their day in court.  In my opinion they are entitled to have it.  It may be that their case will be found to be weak; it is possible that it may be summarily dismissed but the matter needs hearing.  This seems to me, with respect, to be entirely in accordance with the English practice itself as set out in the Annual Practice, Meeson and Halsbury to which I have referred.  If one gives effect to the Convention in this way, justice is done.  Obviously, a matter of this kind demands as expedited a hearing as it can be given and this matter will be given that treatment in this Court as I indicated to counsel.  But in the light of the stand taken by the first respondent, it would be quite inappropriate to make the declaration sought by the applicant at this stage.  It may be that that declaration will eventually be made, but until the question of the first respondent's entitlement to overcome the provisions of Article 4 has been determined, such a course is premature.

I propose to stand this matter over for a short time to enable counsel to consider what I have said.  When it is again in the list, counsel for the applicant is to bring in short minutes of order to give effect to my decision.  I shall then make directions for the further prosecution of the case.

I certify that this and the forty-five (45) preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice Sheppard.

Associate

Dated

APPEARANCES

Counsel for the Applicant:           Mr A.W. Street

Solicitors for the Applicant:             Norton Smith & Co.

Counsel for the First Respondent:     Mr J.B. Whittle

Solicitors for the First Respondent:  Levingstons Solicitors

Counsel for the Second Respondent:        Mr A.J. Meagher

Solicitors for the Second Respondent: Ebsworth & Ebsworth

Solicitors to the Third Respondent:   Phillips Fox

Dates of Hearing:  2, 5, 7, 9, 21 June 1995 and 6 July 1995

Place of Hearing:  Sydney

Date of Judgment:  17 October 1995