BHP Trading Asia Ltd v Oceaname Shipping Ltd

Re: BHP TRADING ASIA LTD; BHP MATERIALS TRADING PROPRIETARY LIMITED trading as
BHP INTERNATIONAL GROUP and JOHN LYSAGHT (AUSTRALIA) LTD
And: OCEANAME SHIPPING LIMITED and SCOTTISH SHIP MANAGEMENT (AUSTRALIA) PTY
LTD
No. G141 of 1990
FED No. 568
Admiralty

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
IN ADMIRALTY
Morling J.(1)

CATCHWORDS

Admiralty - writ in personam - service outside Commonwealth - leave of Court to serve - delay in serving writ - possible effect of delay on limitation of liability - leave to serve writ given ex parte - whether leave properly given - discretion - matters relevant to exercise of discretion

Admiralty Act, 1988, s.4(3); s.9(1); s.25(4)

Admiralty Rules, Part I, rule 6; Part IV, rule 20; Part XII, rules 79 and 83

Limitation of Liability for Maritime Claims Act, 1989, s. 2

Federal Court Rules, Order 4, rule 12; Order 8, rules 1, 2

HEARING

PERTH

#DATE 19:9:1991

Counsel for the 2nd, 3rd and : W. Caldwell QC with A. Street
4th plaintiffs (and
respondents to the motion)

Solicitors for the 2nd, : Mills Oakley McKay
3rd and 4th plaintiffs

Counsel for the 1st defendant : A. Ashburner
(and applicant to the motion)

Solicitors for the 1st : Norton Smith and Co. defendant

ORDER

Application dismissed.

Costs of the application to be costs in the cause.

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

JUDGE1

This is an application to set aside orders made by me ex parte, including an order granting leave to the plaintiffs to serve initiating process on the first defendant ("Oceaname Shipping") outside the Commonwealth and in Cyprus. Oceaname Shipping is the owner of the vessel "Arawa Bay". The order was made under Order 8, rule 2 of the Federal Court Rules. Other relief is sought, but it is unnecessary to refer to the nature of it for the purpose of deciding the present application. If the application to set aside the ex parte orders fails, the other relief must necessarily be refused. (The relief sought includes an order that Oceaname Shipping be permitted to withdraw an unconditional appearance entered on its behalf, but I did not understand the application for that order to be pressed in the event that the other relief is refused.)

In their statement of claim the plaintiffs allege that at all material times Oceaname Shipping was the owner of the "Arawa Bay" and that the second defendant was the charterer of the vessel. It is alleged that by a clean bill of lading the defendants or one of them acknowledged the receipt in good order and condition of a substantial quantity of galvanised steel sheet and agreed to carry it from Taiwan to Port Kembla on the "Arawa Bay" and to deliver it in the same good order and condition. It is alleged that the plaintiffs or one of them were the owners of the steel and/or the consignee or endorsee under the bill of lading and that the property in the steel passed to them by reason of the consignment or endorsement of the bill of lading. It is claimed that in breach of their duty the defendants failed to deliver the steel in the same order and condition, it being affected by salt water and oxidation.
Other causes of action are pleaded in the statement of claim, including claims that the bill of lading incorporated the Hague Rules and that the defendants or one of them were in breach of their duties arising under the Rules. Claims in bailment are also pleaded. The damage to the steel is alleged to have exceeded $1,075,000 and loss of profit and surveyor's fees are also claimed as part of the damages.
Oceaname Shipping is a corporation having its registered office in Nicosia, Cyprus. The second defendant is a corporation registered in Australia.
This Court has jurisdiction to hear and determine the plaintiffs' claims: Admiralty Act, 1988, s.4(3)(a), (d), (e), (f), and (w) and s.9(1).
There is no special provision in the Admiralty Rules dealing with service outside the Commonwealth of process in Admiralty proceedings. This being the case, the Federal Court Rules apply to the service of such process: see Admiralty Rules, Part I, rule 6.
The cases in which the Court's originating process may be served outside the Commonwealth are referred to in Order 8, rule 1 of the Federal Court Rules and include the following:
"(e) where the person to be served is domiciled, incorporated or

ordinarily resident in the Commonwealth, or being a corporation carries on business in the Commonwealth or is registered in any State or Territory as a foreign company; ...

(g) where the proceeding is properly brought against the person served or to be served in the Commonwealth and the person to be served outside the Commonwealth is properly joined as a party to the proceedings;"

Order 8, rule 2(1) provides that service outside the Commonwealth of originating process is not valid unless, relevantly for present purposes, the service is in accordance with prior leave of the Court given under rule 2(2) which provides as follows:

"(2) Where the Court is satisfied of the following matters -

(a) the proceeding is a proceeding in which the Court has jurisdiction;

(b) the proceeding is a proceeding to which rule 1 applies; and

(c) the applicant has prima facie case for the relief which he seeks,

the Court may, by order, grant leave to serve originating process outside the Commonwealth under this Order."

When the application came before me on 4 March 1991, I was satisfied that the evidence justified the making of an order granting the plaintiffs leave to serve initiating process on Oceaname Shipping outside the Commonwealth and in Cyprus.
It was not contended on the hearing of the present application that the evidence before the Court on 4 March 1991 did not justify me in being satisfied of the matters referred to in Order 8, rule 2(2). Rather, Oceaname Shipping's contention was that, because of certain facts to which I shall presently refer, the Court should either have refused to exercise its discretion to make the orders sought, or should have made the orders conditionally upon the plaintiffs submitting to terms that at the trial of the suit any question of limitation of liability based upon tonnage should be dealt with by the application of the law in force in Australia as at 23 March 1990. The significance of this date is that it is the date when the writ commencing these proceedings was issued.
The "Arawa Bay" completed discharging its cargo at Port Kembla on 25 March 1989. On 30 November 1989 the Limitation of Liability for Maritime Claims Act 1989 received the Royal Assent. Section 2(1) of the Act provides that it is to come into force on a day fixed by proclamation. Section 2(2) provides that if the Act does not commence within eighteen months from when it receives the Royal Assent it will come into force on the day after the eighteen months period. In effect, therefore, the Act provides that it is to come into force at the latest by 30 May 1991 unless proclaimed earlier.
When the writ was issued on 23 March 1990 it was given an endorsement that a directions hearing in the matter would be listed on 25 May 1990. Such an endorsement was required by Order 4, rule 8, of the Federal Court Rules which provides that, subject to rule 9 (which deals with claims for interlocutory relief) an application shall state a date for a directions hearing. The date for a directions hearing is to be obtained from the Registry: Order 4, rule 10(1). The time to be limited for entering an appearance shall be not later than the date for the directions hearing: rule 11. An application or statement or claim shall, unless the Court otherwise orders, be served upon the respondent not less than five days before the date appointed for the directions hearing: rule 12. Where a date for a directions hearing has been obtained the Court or the Registrar may alter the date to a later date and may authorise the solicitor for a party to make corresponding alterations in any copy for service of any application: rule 13(1).
On 24 May 1990 the plaintiffs' solicitors wrote to the List Clerk to confirm that the matter had been taken out of the list for 25 May "... as we advise that none of the Defendants have been served yet". The solicitors stated in the letter that they understood that the Court would re-issue "the writs" with a new return date upon request. The reference to "writs" was occasioned by the fact that, as well as the writ in personam, a writ in rem had been issued on 23 March but this writ had also not been served. It appears that the vessel has not come within Commonwealth waters since the issue of the writ in rem.
In February 1991 the solicitors for Oceaname Shipping received a communication from the solicitors for the plaintiffs asking whether they acted for the owner of the "Arawa Bay". They informed the plaintiffs' solicitors that they acted for the owners of the vessel and would seek instructions as to whether they could accept service of the writ on behalf of the owners. The first defendant's solicitors had become aware of the commencement of the proceedings as early as 28 June 1990 when a representative of the firm attended at the Federal Court Registry and observed from a search of the register that the proceedings had been commenced on 23 March 1990. The information obtainable from a search of the register is extensive: see Admiralty Rules, Part XII, rules 79 and 83 and Form 29.
After the making of the order on 4 March 1991 the plaintiffs' solicitors approached a Deputy Registrar of the Court and obtained a new date for the directions hearing, which was fixed for 6 June 1991.
No steps were taken to obtain the leave of the Court to serve the writ outside the jurisdiction until the making of the application on 4 March 1991. After that application was granted, the writ was served on the defendant in Nicosia on 14 March 1991. On 11 April 1991, a Notice of Appearance was filed on behalf of Oceaname Shipping. The appearance was unconditional.
On 30 May 1991 the Limitation of Liability for Maritime Claims Act 1989 commenced, it not having been proclaimed earlier.
On 23 March 1990 in London, and on 24 March 1990 in Hong Kong, the plaintiffs also commenced in rem proceedings against the "Arawa Bay" and in personam proceedings against the defendants. According to the plaintiffs, their ability to obtain security for their claim by arresting the vessel in England or Hong Kong would have been prejudiced by the service of in personam proceedings in Australia. The solicitor for the plaintiffs gave evidence, which was not challenged, that the delay in effecting service of the in personam writ in the present proceedings was for the purpose of obtaining appropriate security and was not designed to frustrate any right the defendants may have to limit their liability.
It appears that the "Arawa Bay" did not call at Hong Kong from the time the in rem proceedings were issued there up to 14 March 1991, when the writ in the present proceedings was served upon Oceaname Shipping. Although the vessel was in port at Liverpool in England for one day in mid-October 1990, the plaintiffs were not aware that the vessel was to call there until after it had left port.
Subsequent to the service of the writ issued by this Court pursuant to the orders made on 4 March 1991, no steps were taken to renew the in personam writs issued in the United Kingdom and Hong Kong and those writs expired on 24 March 1991.
Mr Ashburner, counsel for Oceaname Shipping, submits that there was unreasonable delay on the plaintiffs' part in serving the writ. He argues that the coming into force of the Limitation of Liability for Maritime Claims Act on 30 May 1991 may have the effect, if the Act is held to have a retrospective operation, of increasing the damages which his client may be ordered to pay to the plaintiffs. He submits that the plaintiffs should not be permitted to gain a possible advantage from this delay and that when the application was made on 4 March 1991 it should have been either refused or, alternatively, granted conditionally upon the plaintiffs submitting to a term that at the trial of the action any question of limitation of liability based upon tonnage should be determined by applying the law in force as at the date of issue of the writ.
I do not think I should accede to these submissions. A number of considerations lead me to this view. In the first place, there was no statutory requirement that the writ be served within twelve months from the date it was issued. (The position is otherwise in respect of a writ in rem: Admiralty Rules, Part IV, rule 20.) It is true that Order 4, rule 12 required service of the writ at least five days before the date of the directions hearing, unless the Court otherwise ordered. But the rules do not require that the first directions hearing of a matter be within any particular time after the issue of the writ. It was almost inevitable that the date initially fixed for the first directions hearing would have to be postponed because a directions hearing could not sensibly be fixed before the expiration of a reasonably lengthy period after the grant of leave to serve the writ out of the Commonwealth. On 23 March 1990 when the directions hearing was originally fixed for 25 May 1990, leave had not been obtained to serve the writ out of the Commonwealth. In the present case it was not improper for the plaintiffs to ask for a postponement of the first directions hearing, particularly because they were bringing proceedings in other jurisdictions. I think it would have been preferable for the matter to have been listed for a directions hearing on a reasonably proximate fixed date after it was taken out of the list on 25 May 1990. But the rules did not require the plaintiffs' solicitors to ensure that that was done.
Secondly, Oceaname Shipping, through its legal advisers, knew of the existence of the writ by June 1990 and were content to take no steps to ensure that the matter was brought before the Court. It could have instructed its solicitors to accept service of the writ and/or to ensure that the matter was listed for a prompt directions hearing. Its solicitors must have been aware of the provisions of the Limitation of Liability for Maritime Claims Act 1989 and of the latest date when the Act would come into force. Indeed, the contrary was not suggested in argument. I shall assume for the purpose of deciding the present application that the Act has a retrospective operation and that the delay in serving the writ may enable the plaintiffs, if they are successful in the action, to recover more substantial damages than would have been the case if the action had been heard before the Act came into force. Even if this be the case I do not think it was obligatory upon the plaintiffs to conduct the various proceedings in Australia, Hong Kong and the United Kingdom in such a manner as to ensure that the defendants' position in the Australian litigation would not be adversely affected by the coming into force of the Act.
Oceaname Shipping's solicitors knew of the nature of the claim likely to be made by the plaintiffs as early as 6 June 1989 when they received a surveyor's report on the damage to the cargo. Had Oceaname Shipping been concerned that it would be prejudiced by the coming into force of the Limitation of Liability for Maritime Claims Act it could have taken steps to commence limitation proceedings pursuant to s.25 of the Admiralty Act immediately it apprehended that the plaintiffs might bring a claim against it: vide s.25(1) of the Admiralty Act. That apprehension was probably entertained upon receipt of the surveyor's report in June 1989, and must certainly have been confirmed when the register was searched in June 1990. The failure to commence limitation proceedings suggests that the solicitors took the view (which may well turn out to be correct) that the Limitation of Liability for Maritime Claims Act does not have a retrospective operation and that therefore their client would not be prejudiced by the delay in the service of the writ.
Mr Ashburner submitted that by virtue of s.25(4) of the Admiralty Act it was not obligatory upon his client to commence a limitation action as it was entitled to raise the limitation issue by way of defence to the writ. I agree, but it was for Oceaname Shipping itself to decide whether to have limitation proceedings heard before the Limitation of Liability for Maritime Claims Act took effect or to raise the issue by way of defence, thus running the risk that the defence might be lost if the Act should be found to operate retrospectively.
Moreover, having served the writ on Oceaname Shipping on 14 March 1991, it was not unreasonable for the plaintiffs to allow the in personam writs issued in the United Kingdom and Hong Kong to expire, as they did, on 24 March 1991. To revoke the order made on 4 March 1991 would subject the plaintiffs to a prejudice which, under all the circumstances, would be unreasonable.
Mr Ashburner relied upon dicta in the judgment of Sheen J in The "Mouna" (1990) 2 Lloyds LR 7. In that case the plaintiffs had obtained an order extending the validity of a writ in rem which would otherwise have expired at the expiration of twelve months after it was issued. The delay in service of the writ was explained by discussions which had taken place between the solicitors for the parties. At p 8 Sheen J said:

"The time within which an action must be commenced is limited for the protection of defendants, who are entitled to know whether or not a claim will be brought against them, and also for the proper administration of justice. Evidence must be collected and preserved before the memories of witnesses fade or documents are lost. When a writ has been issued it is the duty of the plaintiff's solicitors to serve the writ without delay. A defendant may be totally unaware that a claim is being made until a writ has been issued and it has been served. The effect of allowing a plaintiff 12 months in which to serve the writ is to extend by a year the time during which a defendant may be wholly unaware that proceedings are being brought against them. In the vast majority of actions it is only when a defendant has been served with a writ that he has an opportunity of involving the assistance of the Court in order to make the plaintiff define and quantify his claim."

In The "Mouna" it was a requirement that the writ in rem be served within twelve months. There is no such requirement in either the Federal Court Rules or the Admiralty Rules qua a writ in personam. I do not think Order 4, rule 12 should be given the same effect as a rule requiring a writ to be served within twelve months after it is issued. There is no real equivalence in the special rule applicable to service of a writ in rem and the requirements of Order 4, rule 12.
For relevant purposes, what is important in Sheen J's judgment in "The Mouna" is the point made by his Lordship that delay in the service of a writ may prejudice a defendant if he is unaware that proceedings are being brought against him. I respectfully agree with his Lordship. It is to be observed that his actual decision was that the validity of the writ in the case before him should be extended since the defendants had acquiesced in the delay. In the present case there can be no suggestion that Oceaname Shipping was unaware of the proceedings being brought against it since its solicitors were aware as early as June 1990 of the existence of the writ.
The material which was before me when I made the order on 4 March 1991 disclosed that Oceaname Shipping had retained solicitors who, although not authorised to accept service on their client's behalf, were watching its interests. I think, upon reflection, that I ought to have required the plaintiffs to serve those solicitors with notice of the application so that they could have opposed the application. However, even if the arguments now advanced by Mr Ashburner had been put to me on 4 March, I would nevertheless have granted the application for leave to serve the writ outside the jurisdiction and would not have made the leave subject to the condition which he seeks to have imposed.

For these reasons the application is dismissed. In all the circumstances the costs of the application should be costs in the cause.

[1991] FCA 568

19 SEPTEMBER 1991