Freshpac Machinery Pty Ltd & Anor The Ship Joana Bonita
[1994] FCA 661
•16 SEPTEMBER 1994
FRESHPAC MACHINERY PTY LTD AND LACTEOS DE POBLET S.A. v THE SHIP "JOANA
BONITA"
No. NG594 of 1994
FED No. 661/94
Number of pages - 5
Shipping and navigation
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
IN ADMIRALTY
SHEPPARD J
CATCHWORDS
Shipping and navigation - admiralty jurisdiction law and practice - release from arrest (of a ship) - provision of security by way of PandI Club letter of undertaking - consideration of relevant principles.
Admiralty Rules, r. 52.
HEARING
SYDNEY, 6 September 1994
#DATE 16:9:1994
Solicitor for the Plaintiffs: Mr. R.B. Conway (of Levingstons)
Counsel for the Defendant: Mr. A.W. Street and Mr. T. Castle
Solicitors for the Defendant: Norton Smith and Co.
JUDGE1
SHEPPARD J On 6 September 1994 an application for the release of the ship, "Joana Bonita", came before this Court as a matter of urgency. The ground of the application was stated to be, "the provision of security by way of P and I Club letter of undertaking in the sum of $A181,166.90". The application contained the usual undertaking given personally by the solicitor for the defendant to pay the fees and expenses of the Marshal in connection with the custody of the ship while under arrest.
An appearance has been entered in the proceedings on behalf of Curvet Transport SA as owner of the ship.
Initially the issue between the parties concerned the question whether the plaintiffs were bound to accept a PandI Club letter of undertaking by way of security. That matter was not, however, eventually pressed and the issue became the amount of the security to be provided. On 6 September I made an order the effect of which was to release the vessel from arrest upon the provision of an undertaking by Britannia Steamship Insurance Association Limited (known as the Britannia P and I Club) in the sum of $A275,000.00.
Because the matter raised some matters of contention and there was some argument about the way in which the Court's jurisdiction in a matter of this kind should be exercised, I thought I should publish reasons for my decision to make the order that I did. The power of the court to release a vessel from arrest is dealt with in r. 52 of the Admiralty Rules which enables a party to a proceeding to apply to the court for the release of a ship or other property which is under arrest. On such an application, the court may order the release from arrest of the ship or property on such terms as are just.
The evidence in support of the application is contained in an affidavit sworn by Mr. P.D. Murphy, a member of the firm of Norton Smith and Co., which appears for the defendant. He said that on the morning of 5 September 1994 his firm was advised by the owners of the vessel that she had been arrested at Fremantle in Western Australia. In personam proceedings had already been instituted by the plaintiffs. No notice of the arrest of the vessel was given. After the arrest, Mr. Murphy received a facsimile transmitted from the plaintiffs' solicitors requesting security for the release of the vessel in the sum of $A181,166.98. The plaintiffs' solicitors said that they required security in the form of cash in an interest bearing deposit account at the A.N.Z. Bank in the joint names of the solicitors for the plaintiffs and the solicitors for the defendant.
There was then a conversation between Mr. Murphy and Mr. Conway, one of the solicitors for the plaintiffs. Mr. Murphy informed him that it was intended to put in place by way of security "a Britannia PandI Club Letter of Undertaking". Mr. Conway said that he had instructions only to accept security in the form of cash and added that the Britannia PandI Club had no assets within the jurisdiction which could be attached as a result of any court order or judgment. Mr. Murphy said that the Britannia PandI Club was one of the largest and most respected of the PandI Clubs.
Annexed to Mr. Murphy's affidavit was a copy of a proposed letter of undertaking to be provided by the Britannia PandI Club by way of security. The undertaking was in the following form:
"In consideration of, and upon condition that, you refrain from arresting or otherwise detaining the "JOANA BONITA" or any other ship or property in the same or associated ownership or management in connection with your claim against the Owners of the "JOANA BONITA" relating to the above incident we, The Britannia Steam Ship Insurance Association Limited, hereby undertake to pay to you such sum as may be agreed between the parties to be due to you as a result of an amicable settlement, or as may be found and adjudged to be due to you from the Owners of the "JOANA BONITA" by a Court of competent jurisdiction, provided always that our liability hereunder shall not in any circumstances exceed (including interest and costs) the sum of AUS$ 181,166.98 or the limit of liability of the Owners of the "JOANA BONITA" under the provisions of the applicable law whichever may be the less."
Also annexed to Mr. Murphy's affidavit were copies of the reports of Britannia Steam Ship Insurance Association Limited which is the company which uses the name, The Britannia PandI Club, and copies of extracts from Standard and Poor's Marine Mutual Report dated July 1994. It is not necessary to refer to these documents because the issue between the parties concerning cash rather than a letter of undertaking from a PandI Club disappeared from the case. It is nevertheless worth observing that the method of providing security suggested by the defendant's solicitors is a well accepted one. In the report of the Australian Law Reform Commission (Report No. 33) on Civil Admiralty Jurisdiction, reference is made (at 253) to the widespread use of PandI Clubs whose guarantees can be used to prevent threatened arrests or ensure the quick release of any property that is arrested, thus reducing the need for any formal means of protection.
The issue which had to be decided was the amount in which security should be provided. Although the plaintiffs' solicitors had agreed in their letter of 5 September 1994 to accept security by way of a cash deposit in the sum of $A181,166.98, when the matter came to be argued, a very much increased sum - $350,000.00 - was claimed. The sum of $A181,166.98 was said to be made up of the claim, which then amounted to $A138,424.35, an amount for interest amounting to $A12,742.63 and an amount for costs amounting to $A30,000.00. It may be observed that the amount claimed in the writ as damages is $A138,424.35.
I directed the plaintiffs' solicitor to provide a statement showing the detail of the amount that was required for security together with a statement showing how the amount claimed was made up. The statement claimed by way of damages, not $A138,425.35 as claimed in the writ, but the sum of $A199,079.32 the make up of which is shown in a schedule to the statement. The schedule is detailed in the sense that it contains twenty-three separate items beside each of which is a figure said to be the amount of damage suffered in respect of it. The case apparently concerns a shipment of a vegetable processing system sent from Australia to Buenos Aires in a container. It is alleged that, during a transhipment of the container at Santos in Brazil, the container was dropped and the damage occurred in that way. It is not possible at this stage to pronounce upon the likelihood or otherwise, assuming the plaintiffs be entitled to succeed, of its recovering damages in respect of the particular items listed in the schedule or the amounts of the damages which are claimed in respect of each such item. On the other hand, I do not feel disposed, as I was asked to do by counsel for the defendant, to restrict the plaintiffs' claim to the figure in the writ. It is well known that plaintiffs not infrequently, when a case undergoes investigation, find it necessary to amend claims for damages sometimes to increase them and sometimes to reduce them. I therefore took the view that I should accept as the prima facie amount of the claim the sum of $A199,079.32 which was claimed in the schedule. For purpose of ease of calculation I rounded the figure off to $A200,000.00.
It was clear that the claim for interest made in the original request for security was understated because interest was calculated only up to 5 September 1994. No provision had been made for interest which would accrue between 5 September 1994 and the date when the matter was finally disposed of. That date, of course, is uncertain. It may not be very far in the future because the matter may be settled. On the other hand, it may be a little time before the case is ready for hearing and a hearing date allotted to it. The date which is specified in the statement prepared by the plaintiffs' solicitors, 1 March 1996, does not seem to me to be unreasonable. In those circumstances the amount of interest now claimed of $A49,423.49 is itself not unreasonable.
That leaves the costs. Originally the plaintiffs' solicitors had nominated the sum of $A30,000.00. That sum has been increased to $A100,000.00. I regard that sum as totally unrealistic. Indeed, without sounding over critical, it has the hallmarks of extravagance. I put these matters to the plaintiffs' solicitor during the course of the argument and was told that the costs had been calculated on the indemnity basis. That is not the basis upon which it is likely that the costs will be recovered. Normally costs are recovered on the party and party basis. In the circumstances, I reached the conclusion that the original $A30,000.00 was nearer the mark but reduced it to $A25,000.00 which seemed to me to be a reasonable estimate of what the likely costs on a party and party basis taxation would be. The amounts were therefore, in round figures, $A200,000.00 for the claim, $A50,000.00 for interest and $A25,000.00 for costs, a total of $A275,000.00.
It may be, of course, that the amount I have determined will be found to be over generous. I do not think that it will be found to be insufficient even if one or other of the items which make it up is not in accordance with the estimates which have been given. I think that in the circumstances of the case a total sum of $A275,000.00 is reasonable.
In reaching my conclusion, I had regard to a number of authorities which were referred to me by counsel for the defendant. The first of these was The "Moschanthy" (1971) 1 Lloyd's Rep. 37. There Brandon J (as he then was) said (at 44) that the plaintiff was entitled to sufficient security to cover the amount of his claim with interest and costs "on the basis of his reasonably arguable best case". That passage is well known and has been applied in many cases since the decision in The "Moschanthy".
In a later decision, The "Polo II" (1977) 2 Lloyd's Rep. 115, Brandon J said, having referred to The "Moschanthy", (at 119).
"I took the view in that case that the Court had power to control the amount of security demanded by a plaintiff in an action in rem and that the control should be exercised on the principle that a plaintiff was only entitled to demand such an amount as security as would cover his reasonably best arguable case, that is to say cover the amount of the claim, the amount of any interest that might be recoverable and the amount of any costs. And I took the view that the power of the Court to control security in that way was derived from the inherent jurisdiction of the Court to prevent any abuse of the process of the Court, or the use of Court procedure in an oppressive way. As I pointed out in that case the power to arrest a ship is a very drastic power. And the power to insist that she shall remain under arrest unless security of a certain amount is given is equally a drastic power, and my view, which I expressed in The Moschanthy and which I repeat now, is that that power must not be exercised oppressively, and if it is exercised oppressively then the Court can and should interfere to prevent conduct of that kind. At the same time the Court must make sure that the plaintiff is not left without sufficient security to cover his reasonably best arguable case."
I should also refer to The "Gulf Venture" (1984) 2 Lloyd's Rep. 445 where Sheen J said (at 449):
"When plaintiffs are entitled to keep a ship under arrest until her owners provide security for their claim, that security must be for such sum of money as represents their reasonably arguable best case, including interest, and their costs of the action. There is plenty of scope for debate as to what sum should be secured in respect of this claim. I do not propose to analyse the evidence: it is incomplete. Such a procedure would be entirely inappropriate on a motion such as this. Although the claim endorsed on the writ is, as I have already said, for a sum in excess of 400,000 pounds, I was satisfied that the claim will not succeed in full. After some discussion with Counsel, the plaintiffs expressed their willingness to accept security in the sum of 300,000 pounds. I reached the conclusion that a lesser sum would be adequate and fixed the amount in the round sum of 250,000 pounds."
It remains to say that The "Moschanthy" and The "Gulf Venture" are referred to in the Law Reform Commission Report (supra); see at 252, note 185. They are also referred to in the comment to r. 51 in Annotated Admiralty Legislation, Hetherington (1989) at 120.
I was not referred to any reported case in which the principles enunciated in these various authorities have been applied in Australia. It is clear, however, that they have been applied in practice and have been understood by the profession and judges dealing with applications for the release of vessels from arrest as being applicable. I have endeavoured to apply them in this case. The only caution I would sound is that two of the cases were concerned with suggested abuses of process because the plaintiffs sought an excessive amount of security. The judges in the cases therefore were concerned to make it clear that that was not a course which the court would allow to occur. Of course I respectfully share that view. This, indeed, was also a case of that kind.
On the other hand, the other side of the picture must not be lost sight of. The plaintiffs, in either willingly accepting, or being required to accept, security for their claim in lieu of the vessel which has been arrested, are running a risk. The security may be insufficient. The court determining the amount of security should be comfortably satisfied that the amount which is to be provided is likely to be sufficient to meet the claim; cf. The "Bazias 3" (1993) 1 Lloyd's Rep. 101 per Lloyd LJ at 105. If it errs on the side of caution and is found to have provided for a greater sum than was actually necessary for this purpose, that, I am afraid, is one of the incidents of the exercise which is involved. It occurs not only in this area but where courts have to make an estimate of costs where an order for security for costs is made or where security has to be given in support of an undertaking as to damages given, for instance, by a plaintiff outside the jurisdiction. All these exercises require a balancing of the relevant factors. As Sheen J pointed out in The "Gulf Venture", the court cannot make a really accurate assessment of a claim or of costs. It can only do its best to take into account all relevant circumstances. Usually this has to be done as a matter of urgency because it is important that the vessel be released as soon as reasonably possible.
For the reasons I have given, I made an order requiring the provision of security in the sum $A275,000.00.
0
0
0