KMP Coastal Oil Pte Ltd v The Owners of Motor Vessel "Iran Amanat" & the 84 other vessels set out in the Application

[1996] FCA 664

CATCHWORDS

ADMIRALTY - application for release of arrested vessel - whether debts on which arrest is based were incurred by the "owner" - whether owner is a "relevant person" - no authority on charterer to make owner liable on contracts for supply of fuel - burden of proof of the facts on which jurisdiction depends to be on balance of probabilities - vessel released due to lack of jurisdiction.

Admiralty Act 1988 (Cth) ss 3, 17, 19
Law Reform Commission Report (1986) No 33

Shell Oil Company Ltd v The Ship Lastrigoni (1974) 131 CLR 1, distinguished

The Ripon City [1897] P 226, distinguished

Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal (The Hannah Blumenthal) [1983] 1 AC 854, distinguished

Owners of Ship Shin Kobe Maru v Empire Shipping Company Inc (1994) 181 CLR 404, applied

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, distinguished

KMP COASTAL OIL PTE LTD -v-
THE OWNERS OF MOTOR VESSEL "IRAN AMANAT" and the 84 other vessels set out in the Application

NO G 829 of 1996

Tamberlin J
Sydney
23 October 1996

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )    No. G829 OF 1996    GENERAL DIVISION                  )
IN ADMIRALTY                    )

BETWEEN:          KMP COASTAL OIL PTE LTD
  Plaintiff

AND:THE OWNERS OF MOTOR VESSEL "IRAN AMANAT" and the 84 other vessels set out in the Application

Defendants

CORAM:       TAMBERLIN J
PLACE:       SYDNEY
DATED:       23 OCTOBER 1996

REASONS FOR JUDGMENT

TAMBERLIN J:

Introduction
In this matter I ordered the release of the vessel "Iran Amanat" from arrest on Tuesday 22 October 1996. I now publish my reasons.

By writ filed on 15 October 1996 the plaintiff commenced action against the owner of 85 vessels claiming the arrest of motor vessel "Iran Amanat" ("the vessel") or other vessels named in the writ, and also judgment in the sum of US$150,399 together with security, damages, interest and costs.

The particulars show that the plaintiff's claim is for US$132,751 for goods or materials supplied to the defendant's ships ("Iran Chamran" and "Iran Adl") for operation or maintenance of the vessels during the months of April and May 1996.

The vessel "Iran Amanat" was arrested at the Port of Geelong, Victoria, on 16 October 1996. It is a surrogate ship of the vessels in respect of which the debts are said to have been incurred. It has already missed a number of voyages as a result of the arrest.

A Notice of Appearance has been filed by the Islamic Republic of Iran Shipping Lines, which describes its relationship with the ship as "owner".

On 18 October 1996 the owner applied to release the vessel from arrest. The ground for the application was want of jurisdiction under either s17 or s19 of the Admiralty Act 1988 (Cth) ("the Act"). That is the application before me. The matter first came on for hearing in the afternoon on Friday 18 October 1996. It was part-heard and was adjourned for further hearing to Monday 21 October 1996 of this week.

The short question for decision is whether the debts incurred in respect of the bunker fuel supplied by the plaintiff, on which the arrest application was based, were incurred by the owner. As it involves a question of jurisdiction, the plaintiff must establish that the owner is a "relevant person" within the meaning of ss3 and 19 of the Act.

At the time the fuel was supplied in April and May 1996 the vessels were under Time Charter from the owner.

The Time Charter was in the form approved by the New York Produce Exchange.

Clause 2 of that Charter provides:

"That the Charterers shall provide and pay for all the fuel except as (sic) otherwise agreed, lubricating oil, Port Charges, Pilotages, Agencies ... and all other usual expenses..."

Law Reform Commission Report

The Australian Law Reform Commission in its 1986 Report on Civil Admiralty Jurisdiction considered (at para 128), whether it should be possible to commence proceedings in rem against a ship where its owner is not the relevant person.

At paragraph 136 the Commission concludes that:

" ... on balance, it is not desirable at the present stage to go beyond the generally accepted scope of the statutory right of action in rem in comparable countries ... For these reasons a statutory right of action in rem with respect to any claim, other than a claim directly involving the possession of or a proprietary interest in the ship, should only be able to be brought where, when the action is commenced, the owner or demise charterer of the ship is a relevant person in respect of the claim."

The report refers to the judgment of Menzies J in Shell Oil Company Ltd v The Ship Lastrigoni (1974) 131 CLR 1 at 6 where Menzies J said:

"Proceedings in Admiralty are intended to facilitate the enforcement of liabilities, not to allow pressure to be put upon a person who is himself under no liability in respect of the liabilities of others."

His Honour held in that case that where necessaries are supplied to a ship under a Time Charter pursuant to a contract for supply to which the owners are not parties an action did not lie in rem.  However, in that case, as the plaintiff points out, the facts are distinguishable because it was common ground that the bunkers were provided under a bunker fuel price contract made between the plaintiff and the agent for the time charterer. There was no dispute as to the identity of the person liable under the supply contract.

In the course of his decision (at 6) his Honour further points out that the owner could not be liable under the contract because it was not a party and therefore there was no basis for an inference that the owner was affording the plaintiff the security of its ship for any bunkers supplied to the charterer in respect of it.

Evidence

In addition to the Time Charter there are in evidence further documents relating to both vessels but as they are substantially identical, in order to avoid duplication, I will refer to those relating to only one of the vessels, the "Iran Chamran".

The "Recapitulation" telex in respect of the charterer of the "Iran Chamran" is dated 26 March 1996. It is from United Bulk Brokers of India to the owner with a copy to Lofty Limited of Hong Kong. It is headed:

"REF: M/V IRAN CHAMRAN OR SIM SUB/ACCT HOVERTON INVESTMENTS"

The telex states that it is for the account of Hoverton  Investment Ltd (Performance to be "gteed" by Hong Kong [Lofty Limited]). It is for a Time Charter trip with a duration of about 30/35 days but with a minimum 28 days. Some specific terms of the charter are summarised, but otherwise the provisions are to be as for the vessel "MV Iran Jamal", a copy of which is in evidence, and an extract from which is set out above. The charterers are described as Hoverton Investment Ltd of the British Virgin Island with a corresponding address of "c/o Lofty Limited, Hong Kong."

On or about 23 April 1996, Trans-Tec Services (S/pore) Pte Limited ("Trans-Tec") as brokers, approached the plaintiff with a request to supply bunkers to MV "Iran Chamran". The details are contained in a telex of 24 April 1996 on the letterhead of Trans-Tec. It is addressed to the plaintiff. It is expressed to confirm an agreement. The facsimile describes the buyer as Lofty Limited and the seller as the plaintiff. It sets out prices and grades. It also specifies the supply location. At the end of the facsimile there is a reference to Trans-Tec, followed by the words "As Brokers".

The plaintiff responded by telex on the next day. It confirmed "the sales under the fllwg terms n conditions". However, while the telex confirmed the plaintiff as the seller, it described the buyer as "'Iran Chamran' and/or the Master Owner C/o Lofty Ltd". It then referred to other and additional terms and conditions in the form of the plaintiff's Standard Terms and Conditions, dated January 1994. The telex thanks Trans-Tec Services for "concluding the above order".

The plaintiff's Standard Terms and Conditions, which are in evidence, included the following paragraph:

"11. SECURITY

11.1Without prejudice to clause 9 above, deliveries and loading of marine fuel hereunder are made not only on the credit of the Buyer but also on the credit of the vessel which uses the marine fuel and it is agreed that the Seller will have and may assert a lien against such a vessel for the amount of the delivered price of the said marine fuel."

The bunker fuel was delivered to the vessel on 29 & 30 April 1996. There are two bunker requisitions and bunker delivery receipts in evidence. The delivery receipts of 29 April 1996 confirm that the product was delivered and the signature of the plaintiff's Cargo Officer is affixed.

The Master/Chief Engineer of the vessel acknowledged receipt of the product and confirmed that samples were taken, sealed and numbered.

The receipts are signed by the Master/Chief Engineer and a seal is affixed. The name "M.V. Iran Chamran" is on the seal. In the centre of the seal there appear the words "Chief Engineer."  The owner's name is also on the circumference of the seal.

Prior to delivery, on 28 April 1996, there were two  "Bunker Requisition" forms issued on stationary of the plaintiff addressed to the Chief Engineer. Immediately underneath this
address line the words "M.V. Chamran" appear. The material parts of the Requisition read:

"Dear Sir,

We have been nominated to supply you with the following grade(s) of bunkers:

.....

We undertake to supply you with the above grade(s) of bunkers. Some basic characteristics of the bunkers are as follows..."

There is then set out a reference to the product, viscosity, density, water content and flash point.

These documents are signed by a Cargo Officer, on behalf of the plaintiff. There is also an Acknowledgment by the Chief Engineer of the vessel "Iran Chamran" together with the seal which contains the name of the owner of the vessel in the centre of which there are the words "Chief Engineer".

On 30 April 1996 the plaintiff issued a document described as  "Tax Invoice". This was addressed to "Iran Chamran and/or the Master, Owner/Operators Lofty Ltd C/o Trans-Tec Services (S'pore) Pte Ltd".

There was also adduced in evidence, a facsimile dated 17 September 1996, from Lofty Limited to the brokers for the owner relating to the "Iran Adl" and to the "Iran Chamran" which reads:

"We refer to the telex 16/9/96 on the threat by Ince & Co of legal action for non-payment of bunker supplied. We have confirmed to the supplier involved that our principals had nominated those supplies and will be responsible for them, and we have further forwarded the proposals for payment to the suppliers for their confirmation. Please be assured that we are doing our utmost to resolve the matter with the suppliers without causing further inconvenience to you.

We deeply regret the inconvenience caused and hope for your kind understanding on the above.

Best regards

Lofty Ltd."

The facsimile is on a letterhead of Lofty Limited.

This was written well after the dates of supply and is unsigned. It does not carry any significant weight but it is consistent with the contention that Lofty Limited was not acting on behalf of the owner.

The Issue

The issue which arises is whether s19 of the Act can be invoked by the applicant. That section deals with the right to proceed in rem against a surrogate ship and provides:

"19. A proceeding on a general maritime claim concerning a ship may be commenced as an action in rem against some other ship if:

(a) a relevant person in relation to the claim was, when the cause of action arose, the owner or charterer of, or in possession or control of, the first-mentioned ship; and

(b) that person is, when the proceeding is commenced, the owner of the second -mentioned ship."

The expression the "relevant person" is defined in s3 of the Act in relation to a maritime claim to mean:

" ... a person who would be liable on the claim in a proceeding commenced as an action in personam; .."

The owner submits that the owner was never the "relevant person" and so there was no jurisdiction to arrest the surrogate vessel.

It is clear from the Time Charter form that there was no actual authority conferred on the charterer to make contracts or make representations so as to make the owner liable on contracts for the supply of fuel. Clause 2 of the Time Charter requires that the charterer not only to pay for all the fuel but also that it must provide the fuel.

Submissions

The plaintiff submits that the effect of the documents referred to above is that on 24 April 1996 Trans-Tec has offered to enter into a contract on terms which specify the plaintiff as seller and Lofty Limited as buyer. The reply telex from the plaintiff confirmed that the plaintiff was the seller but made what amounts to a counter-offer by varying the description of the buyer and introducing new terms. This counter-offer was, so it is said, then accepted by the owner by taking delivery of the bunker fuel after the counter-offer had been made. This is evidenced by the bunker requisition forms and bunker delivery receipts. It is said that the signature of the Chief Engineer and the seal with the names of the vessel and the owner upon it and the reference to Chief Engineer amounted to an acceptance or an acknowledgment, not only that fuel of specified grade quality and quantities had been supplied, but also that the owner was liable to pay for the bunker fuel.  It is said that this was further confirmed by the invoice sent to the plaintiff on 30 April to the Ship and the Master/Owner/ or Operators and to Lofty Limited

Alternatively, it is submitted that the conduct of, and the representations by, the owner are such that it should be estopped from relying on the argument that the contract was not with the owner or was otherwise than on the faith or credit of the vessel or that there was an implied contract that the owner would pay. The plaintiff refers to The Ripon City [1897] P 226 at 244-5 and Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal (TheHannah Blumenthal) [1983] 1 AC 854 at 916.

The plaintiff relied on the judgment of Gorrell Barnes J in The Ripon City in aid of a proposition that the Master or Engineer in the present case had committed the owners to the contract for the purchases of fuel. That decision, in my view, has no bearing on the present case.  In that case the Master drew a bill of exchange for the price of coal supplied. He gave the orders for the coal and he carried out the transaction in his capacity as Master at the request of his employers. These facts are significantly different.

In The Hannah Blumenthal (supra), Diplock J said:

"The rule that neither party can rely upon his own failure to communicate accurately to the other party his own real intention by what he wrote or said or did, as negativing the consensus ad idem, is an example of a general principle of English law that injurious reliance on what another person did may be a source of legal rights against him. I use the broader expression 'injurious reliance' in preference to 'estoppel' so as to embrace all circumstances in which A can say to B: 'You led me reasonably to believe that you were assuming particular legally enforceable obligations to me,' of which promissory ... estoppel ... affords another example; whereas 'estoppel', in the strict sense of the term, is an exclusionary rule of evidence, though it may operate so as to affect substantive legal rights inter partes."

This principle does not apply in the present case because nothing has been said or done by the owner to lead the plaintiff reasonably to believe that it was contracting to pay for the fuel.
The owner submits that the plaintiff had no authority to substitute the Vessel and the Owner as parties by way of counter offer so as to bind the owner upon delivery of the bunker fuel to the vessel during the term of the Time Charter. In substance, it is said that the plaintiff cannot confer authority on Lofty Limited or the charterer or Trans-Tec which was not shown to be an agent of the owner so as to bind the owner to terms and conditions of which the owner was unaware. On the evidence it has not been established that Lofty Limited or Trans-Tec were acting as agents, either actually or ostensibly for the owner in negotiating the arrangements for the supply of the bunker fuel.

Standard of Proof

In Owners of the Ship Shin Kobe Maru v Empire Shipping Company Inc (1994) 181 CLR 404 at 426-7, the Full High Court said:

"Where jurisdiction depends on particular facts or a particular state of affairs, a challenge to jurisdiction can only be resisted by establishing the facts on which it depends. And, of course, they must be established on the balance of probabilities in the light of all the evidence advanced in the proceedings held to determine whether there is jurisdiction."

When that matter was before the Full Federal Court, Lockhart J, with whom French J agreed, proceeded on the basis that it was necessary to show "a strong argument" on the part of the plaintiff that the Court had jurisdiction (Re Shin Kobe Maru (1992) 110 ALR 463 at 480).

At first instance [(1991) 32 FCR 78), Gummow J at 84, had accepted the submission that in order to establish jurisdiction, the plaintiff needed to show that on consideration of the material before the Court, there was a "strong argument" for the opinion that the Court had jurisdiction.

The High Court in Shin Kobe Maru at 426-7 applied the balance of probabilities standard enunciated in "The Aventicum" [1978] 1 Lloyd's Rep. 184, a decision which was specifically not followed by Gummow J in his judgment. See 32 FCR at 84.

It therefore seems to me that the standard which must be applied in the present case is whether the plaintiff has made out its jurisdictional case on the balance of probabilities.

The Present Case

In my opinion, the submissions for the owner are correct.  In order to bring home liability in the owner for the supply of the bunker fuel on the basis of a counter offer and acceptance of that offer, it must be established that the terms of the counter offer were accepted or acknowledged by either the owner or an authorised agent of the owner. No such authority has been shown in the present case. The evidence does not show for example that Trans-Tec or Lofty Limited acted in any way as agent or broker for the owner. In the telex of 24 April Trans-Tec purport to confirm an agreement. The inference is that they are confirming it on behalf of Lofty Limited.

The plaintiff referred to a citation in the judgment of McHugh JA in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535 to the following effect:

"Speaking for the Court of Appeals for Maryland, Judge Levine said (at 329):

'... Where the offeree with reasonable opportunity to reject offered services takes the benefit of them under circumstances which would indicate to a reasonable person that they were offered with the expectation of compensation, he assents to the terms proposed and thus accepts the offer.'

This formulation states acceptance in terms of a rule of law. However, the question is one of fact. A more accurate statement is that when an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate they were to be paid for in accordance with the offer, it is open to the tribunal in fact to hold that the offer was accepted according to its terms...."

This principle cannot apply in the present case because the "counter-offeree" was not on notice of the terms of the counter offer and cannot be said to have taken the benefit of the fuel in circumstances which indicate they were to be paid in accordance with the counter offer.
That there was confusion in the mind of the plaintiff as to the other contracting party or parties is demonstrated by its Invoice of 30 April 1996 which is addressed to "Iran Chamran and or the Master/Owner/Operators Lofty Ltd".  The invoice reflects an understanding that somehow Lofty Limited continued to be a responsible party along with the Vessel, the Master, and the Owner. 

The Bunker Requisition Forms and the Bunker Delivery Receipts, in my view, do not carry the matter any further. It is obvious that the fuel had to be delivered and supplied to the vessel. It is also apparent that the Chief Engineer was the appropriate officer to acknowledge receipt of the fuel and approve its qualities. I do not consider that the written Acknowledgments of delivery and the Seal affixed to these documents, constitute in any way an acknowledgment or confirmation of the terms of any contract to supply the fuel so as to make the owner liable in respect thereof. The effect of the bunker requisition form addressed to the Chief Engineer referring to the vessel, is simply to acknowledge that a quantity of fuel to a particular specification has been supplied or will be delivered to the vessel in a particular way.

Accordingly, the evidence does not persuade me either on the "balance of probabilities" or on the "strongly arguable case" standard that the plaintiff has established that the owner or
the vessels incurred any in personam liability to the plaintiff for the supply of the bunker fuel in question.

Conclusions

Accordingly, the arrest should be set aside and the vessel released from arrest on the ground of lack of jurisdiction under the Act.

I will hear the parties on costs.

I certify that this and
the preceding sixteen (16)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.

Associate:

Date:  23 October 1996  

Counsel for Plaintiff:           Mr P E King  

Solicitor for Plaintiff:              Phillips Fox

Counsel for Defendant:           Mr A W Street  

Solicitor for Defendant:              Norton Smith & Co

Date of Hearing:               18 & 21 October 1996  

Date Judgment Delivered:              22 October 1996  

Date Reasons Published:          23 October 1996