Bergensbanken ASA v The Ship "Aliza Glacial"

[1998] FCA 1322

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 53 of 1998

BETWEEN:	BERGENSBANKEN ASA Plaintiff
AND:	THE SHIP "ALIZA GLACIAL" Defendant
JUDGE:		RYAN J
DATE OF ORDER:		19 OCTOBER 1998
WHERE MADE:		MELBOURNE

MINUTES OF ORDER

THE COURT ORDERS:

1. That the Marshal engage South West Chartering Pty Ltd to act as brokers in the sale of the vessel “Aliza Glacial”.

1. That brokerage of South West Chartering Pty Ltd shall be as set out in the letter from South West Chartering Pty Ltd to the Marshal dated 22 July 1998.

1. That the Marshal through the said brokers advertise the vessel for sale by inviting sealed bid tenders and that the said advertising include at least two editions of the “Daily Commercial News”, “Lloyd’s List” and “The Australian” and that other marketing and advertising steps be as recommended by South West Chartering Pty Ltd in its letter to the Federal Court of Australia dated 8 April 1998.

1. That the date for close of tenders be 30 November 1998 and that the Marshal give the said brokers access to the ship’s records and permit physical inspection of the ship by or on behalf of any potential purchaser.

1. That the Marshal engage forthwith solicitors to prepare and settle a memorandum of sale and bill of sale and that in preparing the said documents direct that the terms of sale shall be as recommended by South West Chartering Pty Ltd and shall include such provisions as to the date or dates for payment of the purchase price as the said solicitors in consultation with South West Chartering Pty Ltd shall consider appropriate and shall include a term in a form to be recommended by the said solicitors that the ship is sold free of all prior liens and encumbrances.

1. That the application be adjourned before Ryan J at 10.15am on 14 December 1998 for disclosure of the highest or other tender bid upon such terms necessary to preserve the confidentiality of all or any of the said bids as the Court shall then direct and for further directions in respect of the sale.

1. That from the sale proceeds there may be paid forthwith by the Marshal the costs and expenses of arrest and sale and that the said amounts be included in the return of sale filed by the Marshal.

1. That after filing of the return by the Marshal the matter be relisted for appropriate directions for advertising of the intention to determine priorities and for directions relating to the bringing of proceedings by the caveators.

1. That notice of these orders be given to all caveators.

1. That liberty be reserved to any party or caveator or to the applicants in proceedings No VG 164 of 1998 to apply to Ryan J for such further or other directions as the party or caveator or the applicants in proceedings No VG 164 of 1998 may be advised.

1. That the costs of all parties and caveators appearing this day be reserved.

Note:Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 164 of 1998

BETWEEN:

PHILLIP READHEAD
First Applicant

AUSTRALIAN FISHERIES MANAGEMENT AUTHORITY
Second Applicant

COMMONWEALTH OF AUSTRALIA
Third Applicant

AND:

ADMIRALTY MARSHAL
WESTERN AUSTRALIAN DISTRICT REGISTRY
First Respondent

BERGENSBANKEN ASA
Second Respondent

RAVENOR OVERSEAS INC
Third Respondent

JUDGE:

RYAN J

DATE OF ORDER:

19 OCTOBER 1998

WHERE MADE:

MELBOURNE

MINUTES OF ORDER

THE COURT ORDERS:

1. That the costs of all parties of and incidental to this application, including any reserved costs, be taxed and paid or retained, as the case may be, out of the fund arising from the sale of the ship pursuant to the order made this day in proceedings No VG 53 of 1998.

1. That the application herein be otherwise dismissed.

Note:Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 53 of 1998

BETWEEN:	BERGENSBANKEN ASA Plaintiff
AND:	THE SHIP "ALIZA GLACIAL" Defendant

VG 164 of 1998

BETWEEN:

PHILLIP READHEAD
First Applicant

AUSTRALIAN FISHERIES MANAGEMENT AUTHORITY
Second Applicant

COMMONWEALTH OF AUSTRALIA
Third Applicant

AND:

ADMIRALTY MARSHAL
WESTERN AUSTRALIAN DISTRICT REGISTRY
First Respondent

BERGENSBANKEN ASA
Second Respondent

RAVENOR OVERSEAS INC
Third Respondent

JUDGE:	RYAN J
DATE:	19 OCTOBER 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

An order was made in this matter on 18 September 1998 that the following preliminary question be answered, no:

Do the rights asserted by the applicants in proceedings numbered VG 164 of 1998 constitute a defect of title to the ship which a purchaser will acquire upon the sale of the ship ordered by the Court on 20 March 1998 in proceedings numbered VG 53 of 1998?

In the course of reasons for judgment published on the same date, I concluded, at p 22:

...I consider that the legislature intended to leave to the Court of Admiralty, in the exercise of its discretion, the adjustment of the competing rights of the authorised officer under the Act on the one hand, and of the plaintiff in an action in rem and other persons interested in the resolution of that action on the other ... It also permits the Court, in an appropriate case, to defer the sale to preserve the utility of the detention of the vessel under the [Fisheries Management Act] (“the Act”) if those who would be entitled to claim on the fund in the event of a sale refuse to allow an order for forfeiture, if made, to attach to that fund in lieu of the vessel.

In rejecting, on 16 March 1998, an application by the present applicants to be joined as defendants to the action instituted in this Court by the present respondent, Bergensbanken ASA, (VG 53 of 1998) I adverted to their possibly intervening when the question of the sale of the ship is under consideration.  I there said:

...I have come to the clear view that a case has not been made out for the joinder of either the AFMA or the Commonwealth as a defendant to the action presently in this Court.  That is not to say that an occasion may not arise in the future for the joinder of the AFMA or the Commonwealth or both if and when an order for forfeiture is made by a court of competent jurisdiction.  Nor should I be taken as pre-empting an application by either or both of those entities to intervene when the Court is considering an application for the sale of the ship or the terms on which any such sale should be advertised or effected.

The conclusion which I have formed in considering the preliminary question strengthens the present applicants’ claim to be heard as interveners when the Court is exercising the discretion which, I consider, has been left to it by the operation in conjunction of the Fisheries Management Act and the Admiralty Act.  That discretion could well be influenced by whether the plaintiff in VG 53 of 1998 and the other persons interested in the disposition of the ship pursuant to that action are prepared to agree that the AFMA or the Commonwealth should have recourse to the fund arising from the sale in the event that an order for forfeiture is subsequently made by the Court of Petty Sessions at Perth.

When the hearing of these matters resumed on 9 October 1998 after the publication of those reasons Mr Berkeley QC who appeared with Mr M Thompson for Bergensbanken ASA (“the Bank”) moved for judgment in proceedings No VG 164 of 1998 on the basis of my answer to the preliminary question and sought, in proceedings No VG 53 of 1998, an order in the usual form for the sale of the ship.

There is evidence before the Court that complaints were filed by the Director of Public Prosecutions for the Commonwealth (“the DPP”) in the Court of Petty Sessions at Perth on 17 October 1997 against the ship’s Master, Jakup Andrias Andreassen, and her Fishing Master, Fernando Gabriel Miranda. Those complaints alleged offences against ss 100 and 101 of the Act and were returnable in the first instance on 21 November 1997.  On that date the defendants entered a bail undertaking and, on 11 December 1997, were given bail “without condition” until 5 February 1998 when bail was extended, again “without condition”, to 6-8 July 1998.  There was no appearance by either defendant on 6 July and the presiding magistrate issued bench warrants for their arrest.

Since the ship was arrested on 23 February 1998 she has been berthed at the premises of Total Marine Services Pty Ltd at Rous Head in the Port of Fremantle and has been kept in “dead ship mode” with only a shore power connection.  Effectively, she has been in the joint custody of the Fisheries Officer under the Act and the Admiralty Marshal.  On 30 June 1998 a report was provided to the Marshal by Kayel & Associates Pty Ltd (“KLA”) which had been engaged to assist with maintenance of the ship.  That report included these passages:

As you are aware, a vessel in a lay-up situation will deteriorate more rapidly than when the vessel is working and machinery run constantly.

When the machinery is not running, warmth soon dissipates from the machinery spaces. The moisture prevalent in the damp atmosphere can reduce the insulation values of electric motors, alternators and other electrical/electronic components. To restore the insulation values once they are down is a costly exercise.

DIESEL ALTERNATORS

If these are not run frequently the alternators can lose their permanent magnetism, the alternator then fails to excite and no power can be produced.  This has already occurred in the Port alternator.  In addition moving parts in the diesel engine are normally kept lubricated with oil (an effective barrier to corrosion) by splash or force fed lubricating systems. This oil film is only kept intact by regular running of engines.

COOLING WATER CIRCULATING SYSTEMS

The pipe work in these systems is more vulnerable to corrosion when not in use.  Entrapped oxygen in the cooling water has time to liberate from suspension and form a corrosion process by setting up cells on the interior walls of the pipework.  Chemical tests on cooling water should be carried out weekly, to check levels of water treatment.

VALVES

Associated with machinery operation become frozen through lack of use.  All valves should be opened and closed fully at least once per week, and valve spindles (in the case of threaded valve spindles) greased regularly.

FUEL SYSTEMS

The fuel which invariably has a slight water content, provides the system with the perfect environment for the growth of bacteria when not in use, causing filter blockage and other problems when the system is placed back in service.

KLA has recommended that various items of equipment, including the main engine, be run at regular intervals, in most cases once a week, although it recommended that the diesel alternators be run as often as possible, but not less than every two or three days for a minimum of one hour on each occasion.  The Marshal has arranged to have that maintenance work carried out by KLA at an estimated cost of up to $400 a week.

The ship is now out of class and the surveyor for Det Norske Veritas can only carry out an annual survey for a laid-up vessel which requires that certain pumps and bilge alarms be put into operational condition.  Since the arrest on 23 February 1998, fees and expenses of the Marshal including jetty, berthage and security fees, power charges, repairs and maintenance have amounted to $125,948.71.

On 29 April 1998, the Marshal procured a valuation of the ship from Peter Nicol Marine Services which estimated that a price reasonably obtainable from a willing buyer would be approximately $US6 million.

On 9 October 1998 the proceedings were adjourned for a week to enable the parties to consider matters which had emerged in the course of discussion as to what should weigh with the Court in the exercise of its discretion as to whether, and if so when, to give directions effectuating the sale of the ship. In the intervening period there was an exchange of letters between the solicitors for the Fisheries Officer and the Commonwealth and the solicitors for the Bank. That correspondence canvassed the possibility that the ship might be sold as soon as practicable and that the proceeds of sale stand until 7 February 1999 or further order in place of the ship for the purposes of s 19(1)(a) of the Proceeds of Crime Act 1987 (“POCA”). However, it was noted on behalf of the Commonwealth that what had been proposed did not take account of the interests of the owners of the ship. Secondly, a concern was expressed on behalf of the Commonwealth that the court considering whether or not to order the forfeiture of the ship under the Act might be influenced to exercise its discretion against forfeiture after it had been informed that the ship had been sold by order of this Court with a clear title and that the Commonwealth’s rights under the Act had been converted contractually into rights against a fund representing the proceeds of sale. As to the possibility of orders being made on the basis that the Commonwealth might proceed to seek forfeiture under POCA, the letter from the solicitors for the Commonwealth concluded:

...These orders are not acceptable. They falsely assume that the DPP will proceed under POCA. This is not correct. The DPP presently intends and remains committed to obtaining a forfeiture order under the Fisheries Management Act. Only if this course of action proves not to be feasible would the DPP contemplate action under POCA. If that were to occur, I would envisage problems in accepting these proposed orders. My advice is that, other issues aside, the sale proceeds are not “tainted property” for the purposes of POCA. Further, the Commonwealth would not necessarily accept that your client’s costs of the proceeding to date should be paid from any proceeds of sale.

Despite that indication, when the hearing resumed on 16 October 1998 Mr Cosgrave of Counsel for the Commonwealth requested that any sale of the ship be deferred until not earlier than mid-February 1999. Such a deferral would, it was submitted, allow time for the institution of proceedings under s 17 of the POCA which provides:

Where a person is, by reason of paragraph 5(1)(d), to be taken to have been convicted of an indictable offence, a court shall not make a confiscation order in reliance on the person’s conviction of the offence unless the court is satisfied, on the balance of probabilities, that the person has absconded and:

(a)the person has been committed for trial for the offence; or

(b)the court is satisfied, having regard to all the evidence before the court, that a reasonable jury, properly instructed, could lawfully find the person guilty of the offence.

By s 5(1) of the POCA:

For the purposes of this Act, a person shall be taken to be convicted of an offence if:

...

(d)the person absconds in connection with the offence.

The concept of absconding is developed by s 6 of the POCA in these terms:

For the purposes of this Act (except section 17), a person shall be taken to abscond in connection with an offence if and only if:

(a)an information is laid alleging the commission of the offence by the person;

(b)a warrant for the arrest of the person is issued in relation to that information; and

(c)one of the following occurs:

(i)the person dies without the warrant being executed;

(ii)at the end of the period of 6 months commencing on the day on which the warrant is issued:

(A)the person cannot be found;

(B)the person is, for any other reason, not amenable to justice and, if the person is outside Australia, extradition proceedings are not on foot;

(iii)at the end of the period of 6 months commencing on the day on which the warrant is issued:

(A)the person is, by reason of being outside Australia, not amenable to justice; and

(B)extradition proceedings are on foot;

and subsequently those proceedings terminate without an order for the person’s extradition being made.

The Court has also been provided with a copy of a letter dated 7 July 1998 from Captain Miranda from an address in the Province of Buenos Aires in Argentina to the Court of Petty Sessions at Perth apologising for his inability to attend on 7 July 1998.  In effect, Captain Miranda explained that the owners of the ship, Ravenor Overseas, had failed to contact him or supply him with a ticket to Australia.  As well, it was indicated that the same owners owed Captain Miranda some months’ unpaid salary.  His letter concluded:

My wish is to appear under the court in order to fulfil with the law.  I waiting yours instruction about what to do as soon as possible in order do not have any problems in the future.

It seems to be common ground that the trial of Captain Miranda and the other defendant for offences against ss 100 and 101 of the Act has to be on indictment unless the defendants consent to a summary hearing. Therefore, the only prospect of the trial being brought to a conclusion and an application for forfeiture of the ship under the Act being made depends on the defendants’ returning to Australia. The remoteness of that prospect and the many difficulties which stand in the way of the ship’s being confiscated under the POCA have influenced me not to defer any further the sale of the ship.

One of the principal features of the relevant provisions of the POCA is that, before making an order for confiscation of tainted property, the court considering the application may have regard to, pursuant to s 19(3):

(a)any hardship that may reasonably be expected to be caused to any person by the operation of such an order; and

(b)the use that is ordinarily made, or was intended to be made, of the property.

As well, by s 21(1):

Where an application is made for a forfeiture order against particular property, a person who claims an interest in the property may apply, before the forfeiture order is made, to the court for an order under subsection (6).

Section 21(6) provides:

If a person applies to a court for an order under this subsection in respect of the applicant’s interest in property and the court is satisfied that:

(a)the applicant was not, in any way, involved in the commission of an offence in respect of which forfeiture of the property is sought, or the forfeiture order against the property was made, as the case requires; and

(b)if the applicant acquired the interest at the time of or after the commission of such an offence – the applicant acquired the interest:

(i)for sufficient consideration; and

(ii)without knowing, and in circumstances such as not to arouse a reasonable suspicion, that the property was, at the time of the acquisition, tainted property;

the court shall make an order:

(c)declaring the nature, extent and value (as at the time when the order is made) of the applicant’s interest; and

(d)either:

(i)if the interest is still vested in the Commonwealth – directing the Commonwealth to transfer the interest to the applicant; or

(ii)declaring that there is payable by the Commonwealth to the applicant an amount equal to the value declared under paragraph (c).

There has been no suggestion in the course of the present proceedings that the Bank has been in any way involved in the commission of any offence against the Act.  I have also been influenced by the rapidly accumulating costs of detaining the ship at Rous Head and the likelihood of a significant diminution in the price obtainable if the sale is deferred even for the limited period of about six months suggested on behalf of the Commonwealth.  As well, it is not to be forgotten that the interest on the loan secured by the mortgage over the ship in favour of the Bank is continuing to accrue and no proposal has been made to defray that accruing interest during the period for which any sale of the ship is deferred.  The principal amount of that loan, I have been told, is of the order of $US3.2 million.  In these circumstances, I shall make an order for the sale of the ship in these terms:

1. That the Marshal engage South West Chartering Pty Ltd to act as brokers in the sale of the vessel “Aliza Glacial”.

1. That brokerage of South West Chartering Pty Ltd shall be as set out in the letter from South West Chartering Pty Ltd to the Marshal dated 22 July 1998.

1. That the Marshal through the said brokers advertise the vessel for sale by inviting sealed bid tenders and that the said advertising include at least two editions of the “Daily Commercial News”, “Lloyd’s List” and “The Australian” and that other marketing and advertising steps be as recommended by South West Chartering Pty Ltd in its letter to the Federal Court of Australia dated 8 April 1998.

1. That the date for close of tenders be 30 November 1998 and that the Marshal give the said brokers access to the ship’s records and permit physical inspection of the ship by or on behalf of any potential purchaser.

1. That the Marshal engage forthwith solicitors to prepare and settle a memorandum of sale and bill of sale and that in preparing the said documents direct that the terms of sale shall be as recommended by South West Chartering Pty Ltd and shall include such provisions as to the date or dates for payment of the purchase price as the said solicitors in consultation with South West Chartering Pty Ltd shall consider appropriate and shall include a term in a form to be recommended by the said solicitors that the ship is sold free of all prior liens and encumbrances.

1. That the application be adjourned before Ryan J at 10.15am on 14 December 1998 for disclosure of the highest or other tender bid upon such terms necessary to preserve the confidentiality of all or any of the said bids as the Court shall then direct and for further directions in respect of the sale.

1. That from the sale proceeds there may be paid forthwith by the Marshal the costs and expenses of arrest and sale and that the said amounts be included in the return of sale filed by the Marshal.

1. That after filing of the return by the Marshal the matter be relisted for appropriate directions for advertising of the intention to determine priorities and for directions relating to the bringing of proceedings by the caveators.

1. That notice of these orders be given to all caveators.

1. That liberty be reserved to any party or caveator or to the applicants in proceedings No VG 164 of 1998 to apply to Ryan J for such further or other directions as the party or caveator or the applicants in proceedings No VG 164 of 1998 may be advised.

1. That the costs of all parties and caveators appearing this day be reserved.

Orders in proceedings No VG 164 of 1998
The Commonwealth, the Fisheries Officer and the AFMA have effectively assumed the role of interveners in proceedings concerning the disposition of the ship although, as I have earlier indicated, in order to achieve that position in the face of opposition from the Bank, it was necessary for them to institute the further proceedings numbered VG 164 of 1998.  In the course of those further proceedings, questions of importance to the proceedings numbered VG 53 of 1998 under the Admiralty Act 1988 were resolved concerning the power of the Marshal to sell the ship with a clear title and the existence of a discretion in this Court to defer a sale until it had been determined whether an order would be made under s 106 of the Act for forfeiture of the ship. Although the applicants in proceedings numbered VG 164 of 1998 did not persuade the Court that the preliminary question there identified should be answered in the way pressed in their submissions, those submissions were not without force. In particular, the applicants in the later proceedings established, as I indicated in my reasons for judgment published on 18 September 1998, p 22, that the Commonwealth “legislature has not provided that the general power of sale exercisable by a Court of Admiralty, including conveyance to a purchaser from the Marshal of a clean title to the vessel, should, in all cases, override the right of detention under the Act and the inchoate right of the Crown to the forfeiture of the vessel”.

In these circumstances, I consider that the appropriate order as to the costs of all parties including the Marshal, of the proceedings numbered VG 164 of 1998 is that those costs, including any reserved costs, be paid out of the fund arising from the sale of the ship ordered in proceedings numbered VG 53 of 1998.  The proceedings numbered VG 164 of 1998 shall be otherwise dismissed.

I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.

Associate:

Dated:             19 October 1998

Appearances in VG 53 of 1998

Counsel for the Plaintiff:	Mr H Berkeley QC with Mr M Thompson
Solicitors for the Plaintiff:	Mallesons Stephen Jaques
Counsel for the Defendant:	No appearance
Solicitors for the Defendant:	No appearance
Mr J Wood, Deputy Marshal Represented the Marshal

Appearances in VG 164 of 1998

Counsel for the First, Second and Third Applicants:	Mr P Cosgrave
Solicitors for the First, Second and Third Applicants:	Australian Government Solicitor
Appearance on behalf of the First Respondent:	Mr J Wood, Deputy Marshal
Counsel for the Second Respondent:	Mr M Thompson
Solicitors for the Second Respondent:	Mallesons Stephen Jaques
Counsel for the Third Respondent:	No appearance
Solicitor for the Third Respondent:	No appearance
Dates of Hearing in VG 53 and 164 of 1998:	9 and 16 October 1998
Date of Judgment in VG 53 and 164 of 1998:	19 October 1998