CMC (Australia) Pty Ltd v Ship “Socofl Stream”

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FEDERAL COURT OF AUSTRALIA

CMC (Australia) v “Socofl Stream” [1999] FCA 1419

ADMIRALTY - application to strike out proceedings for want of jurisdiction - whether a person nominated as a "relevant person" in relation to a maritime claim was such a person so as to found a right to proceed in the Court in rem under s 18 Admiralty Act 1988 (Cth) - issue of whether a nominated person was a demise charterer at the date proceedings were commenced in the Court - question of whether relevant demise charterparty agreement had been terminated prior to that date - meaning of "person who would be liable" in the definition of "relevant person" under the Act - effect of filing an unconditional appearance in the proceedings and whether it amounts to submitting to the Court's jurisdiction.

WORDS & PHRASES - "relevant person" - "demise charterer".

Admiralty Act 1988 (Cth) ss 3, 4, 18
Admiralty Rules r 23(2)
Federal Court Rules O 9 r 7

Owners of the "Iran Amanat" v KMP Coastal Oil Pte Ltd (1999) 161 ALR 434, considered
Owners of the Ship "Shin Kobe Maru" v Empire Shipping Company Inc (1994) 181 CLR 404, considered
Patrick Stevedores No 2 Pty Ltd v MV "Turakina" (1998) 154 ALR 666, considered
The "Guiseppe di Vittorio [1998] 1 Lloyd's Rep 136, considered
Baumvoll Manufactur von Scheibler v Gilchrest [1892] 1 QB 253, considered
Baumvoll Manufactur von Scheibler v Gilchrest [1893] AC 8, considered
Kaleej International Pty Ltd v Gulf Shipping Lines Ltd (1986) 6 NSWLR 569, considered
The "St Elefterio" [1957] P 179, considered
Ocean Industries Pty Ltd v Owners of the Ship MV "Steven C" [1994] 1 Qd R 69, considered
Robinson v Kuwait Liaison Office (1997) 145 ALR 68, considered

CMC (AUSTRALIA) PTY LTD v THE SHIP “SOCOFL STREAM”

N 80 of 1999

MOORE J

18 OCTOBER 1999

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

 N 80 of 1999

BETWEEN:

CMC (AUSTRALIA) PTY LTD 
ACN 002 007 427
Plaintiff

AND:

THE SHIP "SOCOFL STREAM"
Defendant

JUDGE:

MOORE J

DATE OF ORDER:

18 OCTOBER 1999

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.        The strike out application is dismissed with costs.

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

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

 N 80 OF 1999

BETWEEN:

CMC (AUSTRALIA) PTY LTD 
ACN 002 007 427
Plaintiff

AND:

THE SHIP "SOCOFL STREAM"
Defendant

JUDGE:

MOORE J

DATE:

18 OCTOBER 1999

PLACE:

SYDNEY

REASONS FOR JUDGMENT

Introduction

  1. On 5 February 1999 proceedings were commenced by CMC (Australia) Pty Ltd (“CMC”) as proceedings in rem under the Admiralty Act 1988 (Cth)(“the Act”) against the ship “Socofl Stream” (“the Vessel”). The relevant persons named in the writ were Kamchatka Shipping Company (“Kamchatka”), Sovremenniy Kommercheskiy Flot (“Sovcomflot”) and Aurora Navigation S.A. (“Aurora”).

  2. An amended writ was filed by CMC on 9 February 1999.  On 18 February 1999 an…

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Details
Case
[1999] FCA 1419
Decision Date

CaseChat Overview and Summary

The case before the court involved a dispute concerning the ownership and control of a vessel named the "Socofl Stream." The parties involved were CMC (Australia) Pty Ltd, Sovcomflot, Aurora, and Kamchatka. The legal issues centered on whether the Federal Court had jurisdiction over the matter and, if so, whether the claims made by CMC could proceed. The court had to determine the status of Kamchatka in relation to the vessel and whether the 1993 sub-demise charterparty had been effectively terminated before the proceedings began.

The court's reasoning involved a detailed examination of the agreements and events leading up to the commencement of the proceedings. It found that the 1993 sub-demise charterparty allowed for termination by Sovcomflot if Kamchatka defaulted on payments, but no such termination had been properly effected before CMC commenced its proceedings. The court also considered the effect of Sovcomflot's appearance in the case and found that it did not constitute an unqualified submission to the court's jurisdiction. The court concluded that jurisdiction was properly invoked by the claims made by CMC and that the claims could proceed on their merits.

The final orders of the court were that the application to strike out the proceedings was dismissed with costs. The court found that it had jurisdiction to hear the case and that the claims made by CMC could proceed, despite the arguments raised by Sovcomflot regarding jurisdiction and the status of Kamchatka.

Orders

Orders of the court

1. The strike out application is dismissed with costs.

Background

Background to the litigation

The following is the background against which these proceedings were commenced and continued. On 24 April 1990 Sovcomflot entered an agreement (“the 1990 demise charterparty ”) to demise charter the Vessel from Aurora though the agreement also provided for the ultimate purchase of the Vessel by Sovcomflot. On 31 August 1993 Kamchatka entered an agreement (“the 1993 sub-demise charterparty ”) to sub-demise charter the Vessel from Sovcomflot and this agreement provided for the transfer of the title of the Vessel to Kamchatka at the conclusion of the agreement after all payments under the agreement had been made. A further agreement was entered into on 14 October 1997 (“the 1997 agreement”) by Aurora, Sovcomflot and Kamchatka which modified the 1993 sub-demise charterparty. This agreement concerned a number of vessels including the Vessel. During 1998, the commercial arrangements between these parties started to unravel. In December 1998, at a time when Kamchatka had failed to make two quarterly payments under the 1993 sub-demise charterparty, Sovcomflot purported to terminate that agreement. Kamchatka remained in physical possession of the Vessel. On 6 January 1999 bills of lading issued in Singapore in relation to certain steel products. They were issued on behalf of the master of the Vessel. On 9 January 1999 further bills of lading issued in Port Kelang. Again they were issued on behalf of the master of the Vessel. On 22 January 1999 Sovcomflot commenced proceedings in the Queensland Registry of this Court. The Vessel was arrested on 25 January 1999. On 29 January 1999 Kiefel J refused to make orders permitting the vessel to sail to Newcastle to discharge cargo. On 3 February 1999 three faxes, to basically similar effect, were sent to Kamchatka by Thynne & Macartney, solicitors acting for Sovcomflot. Each fax purported to accept the repudiation by Kamchatka of the 1993 sub-demise charterparty. The first two faxes erroneously described the vessel as the “Socofl Wind”. The last fax correctly identified the Vessel. On 5 February 1999 at least one meeting took place between interested parties in Moscow concerning the future arrangements about the Vessel and other vessels in the same fleet. On 18 February 1999 Spender J ordered that Sovcomflot be entitled to possession of the Vessel and that it be released from arrest upon payment of a satisfactory amount to the Marshal. On 1 March 1999 a club letter of undertaking was provided to various cargo owners including CMC. Admitted facts Prior to the hearing, Sovcomflot was asked to make certain admissions. In the result the following formal admissions were made:1. That as at 6-9 January 1999 the [Vessel] was owned by [Aurora];2. That as at 5 February 1999 the [Vessel] was owned by [Aurora];3.That as at 6-9 January 1999 the Master and crew of the [Vessel] were employed by [Kamchatka];4.That as at 5 February 1999 the said persons employed by [Kamchatka] remained on board the [Vessel], but Sovcomflot did not otherwise admit the facts alleged in paragraph 4 of the notice to admit which was in the following terms:...at the date of the commencement of the proceedings [5 February 1999] the master and crew of the [Vessel] were employed by [Kamchatka]. The Evidence in detail

Evidence

Evidence Before The Court

Prior to the hearing, Sovcomflot was asked to make certain admissions. In the result the following formal admissions were made:1. That as at 6-9 January 1999 the [Vessel] was owned by [Aurora];2. That as at 5 February 1999 the [Vessel] was owned by [Aurora];3.That as at 6-9 January 1999 the Master and crew of the [Vessel] were employed by [Kamchatka];4.That as at 5 February 1999 the said persons employed by [Kamchatka] remained on board the [Vessel], but Sovcomflot did not otherwise admit the facts alleged in paragraph 4 of the notice to admit which was in the following terms:...at the date of the commencement of the proceedings [5 February 1999] the master and crew of the [Vessel] were employed by [Kamchatka]. The Evidence in detail I turn to consider the evidence in more detail though in view of the conclusions I have reached on a number of legal issues, it is unnecessary to descend into great detail about some events occurring in January and February 1999. Unless I indicate otherwise, the following are findings of fact on that evidence. The 1993 sub-demise charterparty together with the 1997 agreement required Kamchatka to pay Sovcomflot periodic payments twice a year during the currency of the agreement. The 11th and 12th instalments were to be paid to Sovcomflot in April 1998 and October 1998 respectively. They were not paid. It was common ground that a sum of $960,250.44 US had not been paid by Kamchatka up to and including 8 December 1998. On 2 December 1998 a telex was sent by the General Director of Sovcomflot, Mr V. Kornilov, to the President of Kamchatka, Mr Yakov D. Potylitsyn (at the telex address of Kamchatka – 244112 which was one of the addresses for service in the 1993 sub-demise charterparty ) demanding payment of the 11th and 12th instalment totalling $960,250.44 US and interest. Notice was also given that if payment was not made within seven business days, Sovcomflot might teminate the charterparty pursuant to article 11(2)(a) of the 1993 sub-demise charterparty . Another telex was sent to similar effect on 8 December 1998. I infer from documents in evidence, which were tendered by CMC without objection, that the 11th and 12th instalments remained unpaid after 8 December 1998. On 15 December 1998 a further telex was sent by Mr. Komilov on behalf of Sovcomflot to Kamchatka. It read in part: “… and (sic) “event of default” under Article 11(1)(A) of the bareboat charter has occurred by reason of the charterers’ non-payment. You, the charterer, have failed to remedy that “event of default” within 7 (seven) business days from the date of our telex notice of default dated 2nd December 1998. Therefore, we hereby declare and give notice that the bareboat charter is forthwith terminated under Article 11(2)(A) of the bareboat charter.As a result, we hereby call upon you pursuant to Article 11(2)(A) of the bareboat charter, to forthwith pay to us a sum equal to the outstanding charter hire principal amounting to USD 5.956.015.57 together with interest overdue with regard to 11th charter hire amounted to USD (amount unclear in exhibit) and the default interest calculated at the default rate (libor + 1.5% as per item 3 of the Schedule A to the bareboat charter) which we calculate as USD 24,713.00 up to the date of this notice and an additional USD 100.97 per day for each day hereafter together with interest overdue with regard to 12th charter hire amounting to USD 194,466.67 and the default interest calculated at the default rate (libor + 1.5% as per item 3 of the Schedule 4 to the bareboat charter) which we calculate as USD 6.118.00 up to the day of this notice and an additional USD 97.11 per day for each day hereafter together with interest accrued with regard to 13th charter hire which we calculate as USD 61,886.72 up to the date of this notice and an additional USD 982.33 per day for each day hereafter. We are prepared to allow you 7 (seven) business days from today’s date for you to pay such sums.” (Emphasis added)

Decision

Reasons for decision

I discussed what is comprehended by the notion of unconditional and conditional appearances in Robinson v Kuwait Liaison Office (1997) 145 ALR 68 at 75:“A person may appear in a court by announcing an appearance or, if the Rules of the Court so provide, by filing a notice of appearance. The appearance may be unconditional in which case it generally amounts to a submission to the jurisdiction of the court and a waiver of any irregularity such as one concerning the manner of service: see Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 at 539; 11 ALR 227, per Gibbs J. A conditional appearance constitutes an appearance for the purposes of the litigation, subject to a right to apply to set aside the originating process: see Trade Practices Commission v Gillette Co (No 1) (1993) 45 FCR 366 at 369-70; 118 ALR 280; Westpac Banking Corp v P&O Containers Ltd (1991) 105 ALR 90 at 93-4; for reasons relating to service or other reasons: see Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 58 FCR 365 at 370; 136 ALR 733.If the court does not have rules regulating the manner of appearing, then issues will arise about the consequences of a party appearing before articulating an objection to jurisdiction. In Lindgran v Lindgran [1956] VLR 215, Smith J concluded that a party had not waived an objection to jurisdiction arising from defective service of the originating process by consenting to an adjournment and, on a later occasion, by appearing through counsel who announced an appearance before raising an objection to jurisdiction. His Honour said at 220 that to waive objection to jurisdiction:[There] must at least be words or conduct of such a nature that an inference can properly be drawn therefrom that the party alleged to have waived the objection does not intend to rely upon it: cf Ray v Justices of Melbourne (1981) 17 VLR 186; Brokenshire v Bacon (1895) 1 VLR 273; Re Melbourne Democratic Club (1901) 27 VLR 88; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326; see also Hampden v Wallis (1884) 26 Ch D 746; Rein v Stein (1892) 66 LT 469, per Cave J at 471-2.The prosecution of an application to set aside orders on ground that the court did not have jurisdiction to make them because there had been ineffective service of the originating process, while raising grounds touching the merits, does not constitute a waiver of the right to object to jurisdiction: see Laurie v Carroll (1958) 98 CLR 310 at 335-6; see also National Commercial Bank v Wimborne (1979) 11 NSWLR 156 at 176-83. A recent example of the application of these principles is found in Williams v Society of Lloyds [1994] 1 VR 274 in which McDonald J concluded that a request for particulars of a claim did not constitute a waiver of the right to object to jurisdiction.” In the present case the unconditional appearance was filed after the lodgment of the notice of motion to strike out the proceedings. In filing the appearance in the terms they did, the solicitors for Sovcomflot simply did as r 23(2) of the Admiralty Rules directed. The direction in r 23(2) to file an appearance in accordance with Form 9 (which is an unconditional appearance) is, on a literal reading, inconsistent with O 9 r 7 of the Federal Court Rules which allows for the filing of a conditional appearance. Compliance with r 23(2) should not be taken to be an unqualified submission to jurisdiction. Even if, however, a conditional appearance can be filed in proceedings such as these under the Federal Court Rules, it is plain that Sovcomflot was not submitting to the jurisdiction of the Court given that over a week earlier it had filed a notice of motion seeking to have the proceedings struck out. Conclusion

Ratio Decidendi

Legal Principle Established

The first submission of CMC was that by merely asserting a claim in documents regularly filed and identifying Aurora, Sovcomflot and Kamchatka as relevant persons the jurisdiction of the Court was invoked so as to authorise, notwithstanding the challenge to jurisdiction, the Court embarking upon a hearing of the claim on its merits. It was also submitted by CMC that Kamchatka was a relevant person (a matter not in issue) and that Kamchatka was either a charterer or in possession or control of the Vessel in January 1999 and was a demise charterer on 5 February 1999. That latter matter raises the issue of whether the 1993 sub-demise charterparty was terminated before 5 February 1999 and the nature of Kamchatka’s possession of the Vessel. CMC puts in issue that the charterparty had been terminated though bears the burden of establishing it was not: see Lloyd Werft Bremerhaven GmbH v Owners of Ship Zoya Kosmodemyanskaya (1997) 79 FCR 71. A further submission of CMC was that on Sovcomflot’s contentions, Sovcomflot was a demise charterer in both January 1999 and on 5 February 1999. The claims made by CMC are not restricted to actions on the bills of lading themselves. The failure to deliver the goods in question in accordance with the terms of the bills arose from the conduct of Sovcomflot in arresting the Vessel in Brisbane. That constituted conduct actionable as a general maritime claim of the type identified in s 4(3)(d) or (e). Moreover, Sovcomflot and Aurora may be liable on the bills if entered into on their behalf by the master. Jurisdiction arises from the making of the claim and not the strength of the claim: The “Iran Amanat” especially at paras 17 to 21. Consideration of the principal issues (a) The status of Kamchatka for the purposes of s 18. A central issue in these proceedings was whether, for the purposes of s 18, Kamchatka was the charterer or in possession or control of the Vessel when CMC’s cause of action arose and a demise charterer when the proceedings commenced. Counsel for CMC contended the cause of action arose on or shortly after 22 January 1999 when Sovcomflot commenced the proceedings in the Queensland registry leading to the arrest of the Vessel which prevented delivery of CMC’s goods in accordance with the bills of lading. What was the relevant time for the purposes of s 18(a) and Kamchatka’s status at that time was not the focus of the submissions of the parties. Rather the focus was on whether, on 5 February 1999 when CMC commenced these proceedings, Kamchatka was a demise charterer of the Vessel: see s 18(b). It is to this issue that I now turn. To resolve that question it is first necessary to consider the effect of the notices given by Sovcomflot in December 1998. In my opinion, the 1993 sub-demise charterparty was intended to operate in this way. First Kamchatka was by operation of articles 4(3), 5(1) and 6(1) to have possession and exclusive control of the Vessel throughout the charter period (defined in article 2) which is the period commencing from the delivery of the Vessel to the date of the last payment in accordance with the payment schedule. If Kamchatka defaulted, Sovcomflot could terminate the agreement (article 11(2)(a)) with at least four possible consequences. The first was that payment was immediately made by Kamchatka of all outstanding amounts and title to the Vessel would be transferred to Kamchatka (article 11(2)(a)). That obligation to pay was a continuing one (article 3(4)(i)). Second Sovcomflot could exercise its power to sell free of any charter (article 11(2)(b)(i)) and pending such sale, hold, use, operate, charter, lease or keep idle the Vessel (article 11(2)(c)). Third Sovcomflot could demand redelivery at a nominated port though if the demand was not complied with, exercise a right to enter upon and reposses the Vessel (article 11(2)(d)). A fourth consequence was that none of these events occured as happened in the present case. That is, Kamchatka did not pay all outstanding amounts, Sovcomflot did not purport to exercise a power of sale and Sovcomflot did not demand redelivery at a nominated port. The question that then arises is the nature of the relationship between Sovcomflot and Kamchatka and whether Kamchatka remained a demise charterer when Kamchatka remained in at least physical possession and control of the Vessel.