Lloyd Werft Bremerhaven Gmbh v The Owners of the Ship Zoya Kosmodemyanskaya as Surrogate for the Ships Taras Shevchenko, Delphin and Kazakhstan and Tor Shipping Company
[1997] FCA 1162
•31 OCTOBER 1997
FEDERAL COURT OF AUSTRALIA
Admiralty practice & procedure - jurisdiction of the Federal Court - action in rem - allegation of failure to pay under repair contracts - application by demise charterer of a ship for release of that ship from arrest - whether the arrest was made without jurisdiction - meaning of “owner” in s 19 of the Admiralty Act - onus of proving jurisdiction - whether demise charterer had submitted to the jurisdiction of the Court - no appearance filed on behalf of the ship’s putative owner - time constraints in admiralty arrest proceedings.
Practice & Procedure - objection to competency of appeal - whether decision as to jurisdiction final or interlocutory - whether orders of the trial Judge finally determined all of the rights of the parties that were at issue in the proceedings - whether orders of trial Judge merely released the vessel and discharged the warrant or dismissed the whole proceedings - whether demise charterer a “party” to the proceedings - significance of filing an unconditional appearance - inferences to be drawn from failure of putative owner to file appearance.
Evidence - tender of foreign experts’ legal opinions - application of the rules of evidence at interlocutory or final stages of proceedings - final decision as to jurisdiction where evidence in informal state - whether trial Judge received evidence in proper form.
Admiralty Act (1988) - ss 3(1), 10, 14, 19, 34
Admiralty Rules - Part VI
KMP Coastal Oil Pte Ltd v Owners of MV Iran Amanat (1997) 144 ALR 720 - cited
The Shin Kobe Maru ((1994) 181 CLR 404 (at 426) - appl.
Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767 - appl.
The I Congreso del Partido [1978] 1 QB 500 at 535-7 - appl.
Port of Melbourne Authority v Anshun Pty Ltd (No.1) (1980) 147 CLR 35 - appl.
The Mardina Merchant [1975] 1 WLR 147 - cons.
Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 - cons.
Cell Tech Communications Pty Ltd v Nokia Mobile Phones (U.K.) Ltd (1995) 58 FCR 365 - cons.
Malaysia Shipyard v “Iron Shortland” (1995) 59 FCR 535 - cons.
Bridge Oil Ltd v The Owners of the Ship ‘Giuseppe Di Vittorio’, unreported, Clarke J, Queen’s Bench Division, 15 July 1997 - cited
Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1996) 64 FCR 79 - appl.
LLOYD WERFT BREMERHAVEN GmbH v THE OWNERS OF THE SHIP ZOYA KOSMODEMYANSKAYA AS SURROGATE FOR THE SHIPS TARAS SHEVCHENKO, DELPHIN AND KAZAKHSTAN and TOR SHIPPING COMPANY
NG 405 OF 1997
JUDGES: BEAUMONT, BURCHETT AND LINDGREN JJ
PLACE: SYDNEY
DATE: 31 OCTOBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 405 of 1997
IN ADMIRALTY
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
LLOYD WERFT BREMERHAVEN GmbH
APPELLANTAND:
THE OWNERS OF THE SHIP ZOYA KOSMODEMYANSKAYA AS SURROGATE FOR THE SHIPS TARAS SHEVCHENKO, DELPHIN AND KAZAKHSTAN
FIRST RESPONDENTS
TOR SHIPPING COMPANY
SECOND RESPONDENTJUDGES:
BEAUMONT, BURCHETT AND LINDGREN JJ
DATE OF ORDER:
31 OCTOBER 1997
WHERE MADE:
SYDNEY
ORDERS:
Second respondent’s objection to competency overruled, with costs.
Appeal allowed in part.
Orders made at first instance, except the orders in respect of the Marshall’s fees and expenses, set aside.
A fresh hearing to be held of the second respondent’s application for orders setting aside the writ and the arrest.
Costs of the hearing at first instance to abide the order of the Judge conducting the fresh hearing of the second respondent’s application.
No order as to costs of the appeal.
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
NG 405 of 1997
IN ADMIRALTY
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
LLOYD WERFT BREMERHAVEN GmbH
APPELLANTAND:
THE OWNERS OF THE SHIP ZOYA KOSMODEMYANSKAYA AS SURROGATE FOR THE SHIPS TARAS SHEVCHENKO, DELPHIN AND KAZAKHSTAN
FIRST RESPONDENTS
TOR SHIPPING COMPANY
SECOND RESPONDENT
JUDGES:
BEAUMONT, BURCHETT AND LINDGREN JJ
DATE:
31 OCTOBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
THE COURT:
INTRODUCTION
By a writ in rem issued in the Court’s Admiralty jurisdiction on 24 April 1997, the appellant, Lloyd Werft Bremerhaven GmbH (“Lloyd”), commenced an action against the vessel Zoya Kosmodemyanskaya (“Zoya”), said to be registered at the Port of Odessa, Ukraine, as surrogate for the ships Taras Shevchenko (“Taras”), Delphin and Kazakhstan. Lloyd claimed the following relief:
Arrest of Zoya.
Judgment in the sum of DM18,673,177.00
Security for the claim in the sum of $A16,798,474.99
Damages for breach of contract and interest.
In the writ Lloyd provided particulars of its claim as follows:
“1.[Lloyd], pursuant to an agreement dated 12 December 1991 between itself and the Owners (Black Sea Shipping Co of... Odessa... Ukraine [‘BLASCO’] of the vessels Zoya..., Delphin..., Kazakhstan and Taras..., performed work and provided services for the alteration, repair or equipping of the vessel ‘Taras’...
2.[Lloyd], pursuant to an agreement dated 6 February 1993 between itself and [BLASCO], performed work and provided services for the alteration, repair or equipping of the vessel ‘Delphin’....
3.[Lloyd], pursuant to an agreement dated 25 September 1992 between itself and [BLASCO], performed work and provided services for the alteration, repair or equipping of the vessel ‘Kazakhstan’.
4.The agreements dated 12 December 1991, 6 February 1993 and 25 September 1992 (‘the Agreements’) provided that [Lloyd’s] charges for the work performed and services provided by [Lloyd] under the Agreements (‘[Lloyd’s] Charges’) would be paid by [BLASCO] to [Lloyd].
5.In breach of the Agreements [BLASCO] has failed to pay to [Lloyd] all of [Lloyd’s] Charges.
6.By Minutes of a Meeting held on 1 February 1995 between representatives of [BLASCO] and representatives of [Lloyd] and signed by those representatives on behalf of [BLASCO] and [Lloyd] respectively, [BLASCO] acknowledged that it is indebted to [Lloyd] for the outstanding amount of [Lloyd’s] Charges, then exceeding the sum of DM17,013,753.00.
7.The outstanding amount of [Lloyd’s] Charges is DM 17,013,753.00.
8.[Lloyd] claims interest on the outstanding amount of [its] Charges at the rate of 5% p.a. from 12 May 1995, totalling DM1,659,424.00.”
The writ was addressed to “The Owners of the vessel ‘Zoya...’, namely Black Sea Shipping Co” (“BLASCO”).
On the same day, 24 April 1997, Lloyd filed an application for a warrant for the arrest of Zoya. The application was supported by an affidavit sworn on 24 April 1997 by Elizabeth Jacqueline Rusiti, Lloyd’s solicitor, stating, inter alia, that the claim:
“concerns moneys owing by the owner of the vessel ‘Zoya...’ to [Lloyd] for repair and maintenance services provided by [Lloyd] to the vessels ‘Delphin’... ‘Kazakhstan’ and ‘Taras...’. The owner of the vessels ‘Zoya...’, ‘Delphin’, ‘Kazakhstan’ and ‘Taras...’ is [BLASCO]. [BLASCO] has failed to pay the moneys owing to [Lloyd] in breach of its agreements with [Lloyd].”
On 24 April 1997, the Registrar issued the warrant. Zoya was then arrested.
On 30 April 1997, Tor Shipping Limited (“Tor”) filed an unconditional appearance, claiming to be a demise charterer of Zoya. On the same date, Tor filed an application for the release of Zoya. Tor claimed: (1) lack of jurisdiction; and (2) failure by Lloyd to make a full and frank disclosure in applying for the arrest. The application for release was presumably brought under Admiralty Rule 52(1), which provides that a “party” to a proceeding may apply to the Court for such release. On 1 May 1997, a Judge of the Court commenced the hearing of this application, but for reasons to be explained later, and over Tor’s objection, adjourned the further hearing to 7 May 1997.
On 7 May, Tor filed a notice of motion seeking orders, inter alia: (1) that the writ be set aside; (2) that liberty be reserved to Tor, or to any person who had an interest in Zoya, to claim damages for unjustified arrest under s 34 of the Admiralty Act 1988 (“the Act”); and (3) that the proceedings be otherwise dismissed.
Although the ship was served, neither BLASCO, nor any other person claiming to be the owner of the ship, sought to appear in the proceedings below.
Tor’s application for release and its notice of motion were heard by the learned primary Judge on 7 and 8 May 1997. On 15 May 1997, his Honour published reasons for judgment, to which further reference will be made later, which concluded with the statement that he “propose[d] to make an order for release” and would hear the parties on costs or as to any further or other orders which may be considered appropriate having regard to the above reasons.
On 16 May 1997, having heard submissions on the form of the orders to be made, his Honour delivered further reasons. In those reasons, the primary Judge noted that he had “found that... ‘Zoya...’ was arrested without jurisdiction”. After dealing with costs and expenses, his Honour said:
“Finally, Tor submits that the writ for arrest should be set aside. It seems to me that the writ was taken out without there being any jurisdiction under the Admiralty Act 1988 (Cth) for this to be done. Accordingly it is appropriate in the interests of completely adjudicating on the issues between the parties, for the reasons which I have given in the principal judgment, that the writ be set aside. Accordingly, I set aside the writ taken out for the arrest of the vessel.”
His Honour then made, inter alia, the following orders:
“1.The vessel be released subject to satisfactory arrangements being made with the Admiralty Marshal (‘the Marshal’) for the payment of all the fees and expenses of the Marshal.
...
5.The writ for arrest be set aside.”
Lloyd now appeals against the judgment delivered on 15 May 1997 and these orders.
THE LEGISLATIVE SCHEME
Jurisdiction is relevantly conferred upon the Court in proceedings in rem by ss 10, 14 and 19 of the Act. The nature of this jurisdiction was explained by the Full Federal Court in KMP Coastal Oil Pte Ltd v Owners of MV Iran Amanat (1997) 144 ALR 720 (at 723-7).
The right to proceed in rem against a surrogate ship is dealt with by s 19 of the Act as follows:
“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." (Emphasis added).
Where, under s 19, a proceeding on a maritime claim may be commenced against some other ship, the other ship is, in relation to the claim, a surrogate ship (s 3(6)).
A “general maritime claim” includes (see s 4(3)(m)) a claim in respect of goods, materials or services supplied or to be supplied to a ship for its operation or maintenance.
In relation to a maritime claim, “relevant person” means a person who would be liable on the claim in a proceeding commenced as an action in personam (s 3(1)).
There is no statutory definition of “owner”, but reference will be made later to the authorities which explain its meaning in the present context.
It was common ground at first instance that BLASCO was “the relevant person” at the time when the cause of action arose, so that s 19(a) was satisfied. In issue was whether, for the purposes of s 19(b), BLASCO was the owner of Zoya when these proceedings were commenced.
Mention should also be made of s 8(2) of the Act, dealing with “government” ships or property. It is there relevantly provided that the Act does not authorise a proceeding to be commenced as an action in rem against a government ship, or its arrest. “Government ship” is defined (s 8(4)) to mean a ship that belongs, or is for the time being demised or sub-demised, to a government, but does not include a ship that belongs, or is for the time being demised or sub-demised, to a trading corporation that is an agency of government.
Arrest of a ship is dealt with in Part VI (rr 39-50) of the Admiralty Rules. By r 39(1) it is provided that a party to a proceeding commenced as an action in rem may apply for an arrest warrant. The application is to be supported by an affidavit of the applicant, or of a solicitor or agent, of the applicant in accordance with Form 13 (r 39(2)). By that Form, the claim made is to be identified and a statement must be made that “[t]he aid of the court is necessary to enable the claim to be satisfied”.
THE REASONING AT FIRST INSTANCE
As has been noted, his Honour concluded that the arrest was “without jurisdiction”, that is to say, the requirement of s 19(b) that Lloyd, as the “relevant person”, be the “owner” (meaning the “beneficial” owner), was not satisfied as at 24 April 1997.
The learned primary Judge noted, in accordance with the reasoning in The Shin Kobe Maru (1994) 181 CLR 404 (at 426), and The Aventicum [1978] 1 Lloyd’s Rep. 184 (at 186), that Lloyd bore the onus of proving jurisdiction and that this must be established on the balance of probabilities.
His Honour said:
“The question as to the identity of the owner of the Zoya as at 24 April is not simple. The complexity arises as a consequence of the demise of the USSR and the steps subsequently taken by the Republic of the Ukraine to reorganise the shipping fleet of that State. Of particular relevance are certain measures taken in July 1996 and thereafter...”
The primary Judge referred to, and appears to have accepted, documentary evidence which indicated that, at least until the fleet reorganisation in July 1996, BLASCO owned Zoya.
His Honour referred to a Cabinet Order No. 420-r of the Presidium of the Supreme Council of the Ukraine, dated 3 July 1996, translated as follows:
“In order to increase the effectiveness of the use of a fleet and to further improve the management structure of the state merchant fleet, to establish market basis and necessary prerequisites for demonopolisation of the industry, and to prevent significant losses to the economy of Ukraine, Mintrans [Ministry for Transport] should ensure, in the prescribed manner, the hand-over of vessels (according to the Addendum) which belong to the ‘Chornomorske morske paroplavstvo’ [Black Sea Steamship-line] State Shipping Company, to the ‘Ukrainske morske paroplavstvo’ [Ukrainian Steamship-line] State Shipping Company.”
Zoya was mentioned in the Addendum.
The primary Judge then referred to an Order of the Ukrainian Minister for Transport, dated 15 July 1996, translated thus:
“RE: Handover of vessels
Following the Order No 420r of the Cabinet of Ministers of Ukraine, dated 03.07.96, in order to increase the effectiveness of use of the fleet, and in accordance with the ‘About Management of the All-State Assets’ Decree of the Cabinet of Ministers of Ukraine, dated 15.12.92,
I hereby order:
1.O.M. STOGNIYENKO, the President of the ‘Chornomorske paroplavstvo’ State Shipping Company in the prescribed manner, to take the vessels (as per Addendum) off the shipping company account.
2.O.L. SANITSKIY, the President of the ‘Ukrainske morske paroplavstvo’ State Shipping Company:
2.1To accept the abovementioned vessels on the account of the ‘Chornomorske morske paroplavstvo’ State Shipping company.
2.2To ensure an effective use of the vessels.
3.Handover to be completed within one month.”
Again Zoya was named in the Addendum.
After considering other documentary material and foreign experts’ legal opinions in evidence, his Honour concluded:
“While some criticisms can be levelled at several apparent inconsistencies in the language of the documents as to where property or ownership, in a legal or beneficial sense, resides, the preponderance of the documentary evidence persuades me that the vessel is no longer owned, in any sense, by BLASCO. The beneficial ownership, on the evidence, appears to reside in either the Ukrainian State or in Ukrainian Shipping Company. Probably the former. I am satisfied on the balance of probabilities that as at 24 April 1997 the plaintiff has not proven that the beneficial or legal ownership resided in BLASCO.”
Although it was not strictly necessary to do so, his Honour went on to reject, on the facts, an alternative argument advanced on behalf of Tor that release should be ordered because in its ex parte application for arrest, Lloyd had withheld information as to ownership.
The foregoing is a summary of the essential steps in the reasoning at first instance. It will be necessary later to describe the course of the proceedings and to refer to further aspects of his Honour’s reasons.
LLOYD’S GROUNDS OF APPEAL
In its grounds of appeal, Lloyd contends, in the main, that the primary Judge should have drawn the inference that BLASCO was the beneficial owner of Zoya at the time the litigation was commenced, with the consequence that the jurisdictional requirements of s 19 were satisfied. Other grounds of appeal were also advanced, but it is not necessary to mention them for present purposes.
TOR’S OBJECTION TO THE COMPETENCY OF THE APPEAL
On behalf of Tor, it is contended that the appeal is incompetent since the orders made by the primary Judge were merely interlocutory, so that Lloyd must first obtain leave to appeal. Reliance is placed, in particular, upon the following observation made by the primary Judge:
“For the purposes of this interlocutory proceeding as to jurisdiction there is no issue as to the in personam liability of BLASCO on the claim. The merits of that claim arise at a later stage.” (Emphasis added).
CONCLUSIONS ON TOR’S OBJECTION TO COMPETENCY
In Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767, Gibbs CJ said (at 767-8):
“The test for determining whether a judgment is final... is whether the judgment finally determines the rights of the parties, and the authorities have held that the court in applying the test must have regard to the legal rather than the practical effect of the judgment. So that the question in the present case is whether the whole judgment finally determined, in a legal sense, all the rights of the parties that were at issue in these proceedings. And the answer is, plainly, that it did not, because it left undetermined the question whether any, and what, damages were payable.”
It will be recalled that by the orders dated 16 May 1997, the primary Judge relevantly ordered first, that the vessel be released, secondly, that Lloyd pay Tor’s costs of “the application for release of the vessel” and thirdly, that the “writ for arrest” be set aside.
In order to address the question whether these orders “finally determine[d], in a legal sense, all the rights of the parties that were at issue in the proceedings”, it will be necessary to consider the true nature of the issue dealt with by his Honour.
In The Shin Kobe Maru, above, the Full High Court said (at 426):
“Standard of proof and jurisdictional facts
The argument that Empire was required ‘to show, on the balance of probabilities, that its claim was within jurisdiction’ was made by reference to the decision in The ‘Aventicum’. That case was concerned with jurisdiction under s. 3(4) of the Administration of Justice Act 1956 (U.K.) which operated in a manner similar to that in which ss. 17 and 18 of the Act now operate. The effect of s. 3(4) in that case was that jurisdiction existed if the person against whom the Admiralty jurisdiction was invoked was ‘the person who beneficially own[ed] all shares and... the same person... was the owner at the time the cause of action arose’. Much the same question arose in The ‘I Congreso del Partido’. The effect of the decisions in the latter case and in The ‘Aventicum’ was that jurisdiction had to be determined as a preliminary issue and on the balance of probabilities.
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.”
In the passage then cited from The I Congreso del Partido [1978] 1 QB 500 at 535-7, Robert Goff J was dealing with motions for relief similar to the application made by Tor in this litigation. In that case there was a motion by Mambisa to set aside the writ and all subsequent proceedings for want of jurisdiction, on the ground that Mambisa was not the owner of the Congreso, but simply in possession of her as operators and managers.
Robert Goff J said (at 535):
“The question raised by Mambisa’s motions is one of jurisdiction. Jurisdiction in Admiralty actions is statutory, and is defined by the Administration of Justice Act 1956. Section 3 of the Act lays down the circumstances in which an action in rem may be brought; if the case is not within the section then the court has no jurisdiction in respect of an action in rem, and the writ and all subsequent proceedings should be set aside. It follows that if a defendant wishes to have the writ and all subsequent proceedings set aside he must apply to do so before entering an unconditional appearance.”
Slynn J dealt with a similar motion in The Aventicum, holding (at 190) that, on the evidence before him as to ownership, he “would accede to the defendants’ application and [that] therefore [the] proceedings should be set aside”. Earlier Slynn J had said (at 186):
“The question has arisen initially in this case as to when this matter has to be decided. It is quite plain on authority that it is appropriate for defendants whose ship has been arrested to apply to set aside the proceedings including the arrest in the way in which the defendants have applied in this case. They in the course of the actual hearing are entering a conditional appearance to the writ in order to contest the jurisdiction of the Court.”
It should also be noted here that in Shell Oil Company v The Ship “Lastrigoni” (1974) 131 CLR 1, Menzies J concluded (at 6), in an action in rem, that “the proceedings instituted in Admiralty and the arrest of the ship as part of those proceedings should be set aside.” The order then made was in these terms (at 7):
“Writ of summons herein and all proceedings thereunder (including but not limited to the arrest of the defendant ship pursuant to the warrant of arrest issued 18th June 1974) set aside.”
The question thus arises in the present case whether the orders of the primary Judge not only released the vessel and set aside or discharged the warrant, but also set aside, that is, dismissed the whole proceedings; in other words, to use the language of Robert Goff J, did the orders purport to set aside the writ and all subsequent proceedings (including the arrest)?
Before coming to this question, one should bear in mind that in, for instance, Port of Melbourne Authority v Anshun Pty Ltd (No.1) (1980) 147 CLR 35, it was held that an order permanently staying proceedings as an abuse of process was a final order. Gibbs CJ said (at 38):
“...as a matter of reality, the order made does finally dispose of the rights of the parties, and on that ground I would consider it to be a final order so that the objection to competency in my opinion ought to be overruled.”
In Torrens Aloha Pty Ltd v Citibank NA (1997) 144 ALR 89 (at 91), following Anshun, above, the dismissal of proceedings on the taking of a preliminary point was regarded as a final order. It is true that if the outcome of the stay application in Anshun and of the taking of the preliminary point in Citibank had been different, the orders in both cases may then have been interlocutory only, but that is another question.
Can it be said, “as a matter of reality”, that the orders made here “finally dispose of the rights of the parties”?
In order to consider this question, it is necessary to say something more about the nature of the principal proceedings themselves. As Gibbs J remarked in Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 (at 538), although an action in rem is an action against the ship itself, when the defendants have entered an appearance, judgment may be enforced against them personally. As we have seen, although Zoya was served, only Tor, claiming a relationship with the ship as “demise charterer”, entered an appearance. In The “Willemstad”, Gibbs J went on (at 539) to observe, citing The Mardina Merchant [1975] 1 WLR 147, that the Supreme Court of New South Wales had inherent jurisdiction to allow the intervention in an action in rem of a party who has no interest in the property arrested, when the effect of the arrest is to cause that party serious hardship, difficulty or danger.
The Mardina Merchant was a special case. There, the presence of the arrested ship was a source of disruption to the smooth running of the port. The port authority applied for leave to intervene under RSC Ord. 75 r 17(1), which provides that a person with an interest in arrested property, but who is not a defendant in the action may, with the leave of the court, intervene in the action. Brandon J held (at 149) that although Ord. 75 r 17(1) was not available, since the authority had no interest in the ship -
“... there must be an inherent jurisdiction in the court to allow a party to intervene if the effect of an arrest is to cause that party serious hardship or difficulty or danger. One can visualise cases where the presence of a ship in a particular place might cause not merely financial loss or commercial difficulty but even danger to persons or property. In all such cases it seems to me that the court must have power to allow the party who is affected by the working of the system of law used in Admiralty actions in rem to apply to the court for some mitigation of the hardship or the difficulty or the danger. If it were not so, then there would be no remedy available for such persons at all.”
It was suggested on behalf of Tor that this inherent jurisdiction was the jurisdiction invoked by it in the present case. But, if Tor bona fide claimed an interest in the ship as charterer, it could claim to be a party to the proceedings and thereby to have standing to seek an order setting aside the whole of the principal proceedings (including but not limited to the arrest), for want of jurisdiction. If, on the other hand, all that Tor sought was administrative relief on an interim basis, as was sought in The Mardina, the interlocutory character of Tor’s application would be more readily understood. As has been seen, Tor sought orders, in its notice of motion filed on 7 May, not only that the writ be set aside, but also that the proceedings be otherwise dismissed.
Admiralty Rule 52(1), as has been mentioned, provides that a “party” to a proceeding may apply to the Court for release of a ship under arrest.
Was Tor in truth a “party” to the proceeding?
It will be recalled that Tor filed an unconditional appearance. In The “Willemstad”, Gibbs J noted (at 539) the general rule that an unconditional appearance amounts to a submission to the jurisdiction of the court; that only a defendant can enter an appearance; and that in an action in rem the persons who may become defendants, if they choose to appear, are the owners and others interested in the ship, such as charterers. As has been said, Tor claimed, as its relationship with the ship, that it was a demise charterer. In that capacity (notwithstanding a challenge by Lloyd to the form of execution of the charter instrument) Tor was entitled to appear and upon doing so, in our view, it became a party to the proceeding.
Did the fact that the appearance filed was unconditional have any significance?
Whilst the Admiralty Rules do not address the question (see Damien J Cremean, “Admiralty Jurisdiction” at 114-5), the provisions of O 9 rr 6 and 7 of the Federal Court Rules are applicable (see r 6(1) of the Admiralty Rules). So, although Tor could have entered a conditional appearance, this would have been treated as unconditional, unless the Court otherwise ordered under O 9 r 6(2). It would then have been open to Tor to move, under O 9 r 7, to set aside the originating process. Its notice of motion for an order setting aside the writ was filed on 7 May 1997 but it will be recalled that earlier on 30 April 1997, it had filed, not only its notice of appearance but also, simultaneously, an application for release on grounds that included an absence of jurisdiction. In those circumstances, the filing of the appearance should not, we think, be treated as a submission to the jurisdiction of the Court. (cf. Trade Practices Commission v The Gillette Company (No.1) (1993) 45 FCR 366 at 367-370.)
The result, in our view, was that Tor became a party to the proceedings, claiming an interest in the ship and sought not only the release of the ship, but also, in its notice of motion filed on 7 May 1997, an order setting aside the writ and an order that “[t]he proceedings be otherwise dismissed”.
As has been noted, in making his orders, the primary Judge spoke in his reasons for doing so of “completely adjudicating on the issues between the parties...”
The reality, in our view, is that, when considered in context, the orders made finally disposed of the whole of the proceedings for want of jurisdiction. It is true that the wording of the orders may not be the same as the language used in some of the authorities. But it appears clearly enough that his Honour held, as in Partido (at 543) that Lloyd was “not... entitled to invoke the Admiralty jurisdiction of the... Court by an action in rem against [the ship]”.
It is also true, as has been seen, that in its notice of motion, Tor sought the reservation of liberty to apply for damages for unjustified arrest under s 34(1) of the Act. His Honour did not deal with this, and we think properly so. Any claim made under s 34(1), for which jurisdiction is conferred by s 34(2), should be brought as a cross-claim in these proceedings, or as separate proceedings. Such a claim was not appropriate to be dealt with in Tor’s notice of motion. In any event, all that was sought in that notice was the strictly speaking unnecessary reservation of liberty to make that claim.
The objection to the competency of the appeal should be overruled. In any event, having regard to the effective finality of his Honour’s disposition of the matter, if leave to appeal were required, it would be appropriate to grant it, provided we find substance in the appellant’s arguments.
THE COURSE OF THE PROCEEDINGS AT FIRST INSTANCE
In order to understand the contentions of the parties on the appeal, it will be necessary to say something about the course of the proceedings before his Honour.
(a) The hearing on 1 May 1997
The hearing of Tor’s application for release filed on 30 April began on 1 May. At the commencement of that hearing, Senior Counsel for Lloyd foreshadowed an application for an adjournment of Tor’s application until the next week so that Lloyd would have the opportunity to gather further evidence. The adjournment was opposed by Tor.
In support of the adjournment application, Lloyd relied upon the evidence of Ms Rusiti in her affidavit, sworn on 1 May 1997, that:
"2. In order for [Lloyd] to properly respond to and defend the Application for Release... [Lloyd] requires sufficient time to:
2.1Arrange for translation into English of documents in German upon which [Lloyd] relies.
2.2Obtain instructions and further material from Europe regarding [Lloyd’s] allegations of an intention on the part of [BLASCO] to defeat its creditors and on an issue of estoppel.
2.3Obtain evidence under a Notice to Produce to Tor...
2.4Obtain evidence as to Ukraine law.”
Ms Rusiti was cross-examined on her affidavit by counsel for Tor. In the course of cross-examination she said that in the preparation of the writ, she had relied upon a statement in an extract from the Lloyd’s Register for 1996/7 that BLASCO was the owner of Zoya. She acknowledged that she had since learned that Lloyd issued supplements periodically, although she was unaware of that practice at the time the writ was issued. She further acknowledged that the December 1996 supplement stated that Zoya then had another owner.
As has been mentioned, his Honour granted the adjournment until 7 May. On that day, the Judge published his reasons for doing so. In those reasons, his Honour said:
"As a practical matter, applications for arrest are usually brought before the Court urgently in circumstances where all the facts are not fully known with precision and it has not been possible to make a complete and detailed inquiry into ownership of the vessel.
There have been a number of recent cases in Australia and overseas involving the confusing position which currently prevails as to ownership in relation to Ukrainian and Russian vessels.
In my view, it would be oppressive to require [Lloyd] to proceed this morning without providing a brief period for it to collect some further evidence. A brief adjournment is appropriate notwithstanding the urgency alleged. I note that this was the course which appears to have been followed by Clarke J in the The ‘Nazym Khikmet’ [1996] 2 Lloyd’s Rep. 362 at 363, which also involved an ownership dispute as to whether [BLASCO] owned the vessel, although it does not appear there was any contest as to the appropriateness of the procedure. His Honour there pointed out that the question must be determined on the balance of probabilities with the burden of proof being on the plaintiff: see also The ‘I Congreso del Partido’ [1977] 1 Lloyd’s Rep. 536 at 561.”
(b) The hearing on 7/8 May 1997
At the commencement of this hearing before his Honour, counsel for Tor sought leave to file its notice of motion. Senior Counsel for Lloyd said that Lloyd had come to meet the application for release under Admiralty Rule 52, but was not prepared to meet a case for summary dismissal of the whole proceedings, as was sought in the notice of motion.
The transcript then records the following:
"MR STREET [Senior Counsel for Lloyd]:... Your Honour, I do not consent to the motion being heard at the same time.
HIS HONOUR: No. Well, I will allow the motion to be filed. I think there is substance in what you say. The matter of great urgency that is on today is the release application. I think these matters can be dealt with at a later stage. But that could be filed. I will hear what you have to say, Dr. Bell.
DR BELL [Counsel for Tor]: Your Honour, the intention of the notice of motion was consequential depending on what your Honour ruled on the release.
HIS HONOUR: Yes.
DR BELL: I do not want to waste time making submissions.
HIS HONOUR: No, it seems to me it is consequential and the urgent thing is the release.
DR BELL: That is right, and if your Honour comes to a decision at some stage today about the release, then it might be time to debate whether it is appropriate to make the consequential orders as a matter of course or whether...
HIS HONOUR: Yes, well I will only hear evidence and argument up to this stage, anyway.”
Senior Counsel for Lloyd read a further affidavit by Ms Rusiti, sworn on 5 May. In her affidavit she referred (at par 2) to the following annexed documents: (i) Lloyd’s Register searches in respect of vessels owned by BLASCO; (ii) repair contracts and Lloyd’s invoices in respect of certain of those vessels; (iii) judgments, and reasons for judgment, of the Regional Court at Bremen in proceedings between Lloyd as plaintiff and BLASCO as defendant; and (iv) agreements between Lloyd and BLASCO for the payment by instalments of amounts due to Lloyd.
In her affidavit Ms Rusiti further referred (at par 3) to a facsimile from Ukrainian Shipping Company to Patrick Sleigh Agencies (apparently Ukrainian Shipping Company’s agent) dated 24 April 1997 in these terms:
"We would like to introduce ourselves as the original Owners of m/v ‘Zoya Kosmodemjanskaja’. According to the information received from the BareBoat Charter of the vessel it was arrested by Lloyds Werft under the claim against BLASCO. We inform you that we are the Ukrainian State Shipping Company which was established by Ministry of Transport of Ukraine on 8th of April, 1996. According to the Governmental Order 11 vessels which previously belonged to... (BLASCO) were transferred to our company. M/v ‘Zoya...’ is one of these 11 vessels. Thus we would like to underline once again that we are an independent company which has nothing in common with BLASCO..."
The facsimile was signed by Mr A Savitskiy, the President of the Ukrainian Shipping Company.
Ms Rusiti said (in par 3):
"I am informed by Dr Drumm, a partner of Dr Schackow & Partner, the German lawyers of [Lloyd], and verily believe that Capt. Savitskiy appears to have been a former employee and Vice President of [BLASCO] and may still hold those positions."
Counsel for Tor, Dr Bell, objected to this sentence. The transcript records the following:
"DR BELL: The next objection in paragraph 3, the sentence beginning ‘I am informed by Dr Drumm’ the entirety of that sentence.
HIS HONOUR: Yes. Dr Bell, what is the standard of - what is the principle of evidence that applies in these? It is hearsay.
DR BELL: The objection, I should say, is not a hearsay objection but I should say, your Honour, in our submission this is an interlocutory hearing---
HIS HONOUR: And therefore hearsay is admissible.
DR BELL: And therefore hearsay evidence is admissible if the source is identified. The objection is not on the grounds of hearsay. I take your Honour to section 55 of the Evidence Act...”
Counsel for Tor then referred to s 55(1), which provides that relevant evidence is evidence “that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding”.
The transcript then records the following:
"[DR BELL]:... This second hand statement in my submission could not assist your Honour directly or indirectly rationally in relation to any matter. The first point is that it is second hand pure speculation on two bases: ‘appears to have been a former employee and vice president’ and ‘may still hold those positions’. So there are two elements of speculation in it.
HIS HONOUR: Yes, that really goes to weight I would think, it is tentative. But what about relevance? Do you say it is irrelevant?
DR BELL: Well, yes.
HIS HONOUR: Captain Savitskiy, is he putting on an affidavit or he is being quoted?
DR BELL: He is indirectly in Mr James’ affidavit. He is the president of the Ukrainian [S]hipping [C]ompany. I take your Honour’s point about weight, but if the test is whether it is capable of rationally affecting the assessment of probability of a question in issue, I suppose Mr Street should identify the fact and issue he says it goes to. My submission is that the nature of this evidence is so uncertain, so speculative that it could not assist the court in any rational way.
The court would be doing nothing more than adopting speculation and there are a number of cases that I can take your Honour to. It is one thing to draw an inference which is permissible on established evidence. It is not appropriate however to simply engage in guess work or speculation. It simply cannot assist.
I also draw your Honour’s attention to section 135 of the Evidence Act...”
Counsel then referred to s 135 which provides that the Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time.
The transcript then records that Dr Bell submitted that the contested sentence in Ms Rusiti’s affidavit was “apt to be misleading or confusing” and that his Honour said:
"It is very early stages Dr Bell. I think I will allow it in subject to relevance. I will hear any argument as to weight. It is very tentative.”
It is apparent from the foregoing that Tor contended, and that his Honour accepted, that for the purposes of the reception of evidence, the application for release then before the Court was an interlocutory and not a final proceeding. For that reason, both Tor and his Honour accepted that hearsay evidence, which could not normally have been admitted at a final hearing, could be received at the interlocutory stage.
Mr Street next read an affidavit sworn on 2 May 1997, by Dieter Haake, General Manager of Lloyd.
Mr Haake said (at par 1):
"1.... When Lloyd... entered into the three repair contracts, I was fully aware of the vessels listed in Lloyd’[s] Register as owned by Blasco. I was therefore under the impression that Blasco had a fleet large enough to generate sufficient income to cover the costs of the repairs of the three ships.”
Dr Bell objected to the last sentence of par 1. The transcript then records the following:
"MR STREET: In relation to the issue on, it really is one which goes to any suggestion, if it be advanced, that it is not Blasco that is... the owner.
HIS HONOUR: What can the state of mind of Dieter Haake in Bremerhaven have to do with this case?
MR STREET: It goes to estoppel, your Honour.
HIS HONOUR: Estoppel? It actually should have had pleadings and some issues in this because it is really---
MR STREET: Your Honour, I do not disagree that on a final hearing that may well emerge. I think I did flag on the last occasion a question relating to estoppel. Indeed, your Honour will recall perhaps in the affidavit relating to an adjournment there was reference to estoppel.
HIS HONOUR: Maybe there was, but I do not know Mr Street, I think perhaps we should adjourn this case for an hour or two so you can draw up some issues and we know what we are embarking on here because this is getting to be an extraordinary state of events.
MR STREET: No, your Honour it is not right, with greatest respect, because in fact I am seeking to read material to meet what is in essence a challenge to jurisdiction. Now I understand that your Honour may not in every jurisdictional case be met with estoppel issues, but in this case it is one where there may be need for the plaintiff to rely, and I do not say there is necessarily, but there may be a need for the plaintiff to rely in answer to the defendant’s case upon estoppel. Now I am simply seeking to read the whole of my evidence now rather than read it in reply.”
Mr Street went on to submit that the evidence went to an assumption that BLASCO was the beneficial owner of the vessels and that Lloyd acted on that assumption in providing repairs, so that BLASCO should not be permitted to depart from the assumed state of affairs.
The transcript then records the following:
"[MR STREET]: Your Honour, the alleged owner has not appeared. The only entity that has filed an appearance to move for this application is a so-called demise charterer. No appearance has been put on by the putative owner.
HIS HONOUR: Is this referred to in your argument, your outline of argument?
MR STREET: Yes, your Honour.
HIS HONOUR: All right, I will allow it. Yes, I will allow it, Dr Bell.”
Dr Bell then objected to other paragraphs (2, 3, 4, 5, 6, 7 and 8) in the affidavit which were similar, in form and substance, to par 1. His Honour said:
"I will allow the material. Senior Counsel assures me that he is making a responsible argument in relation to this question. I think it is relevant and I will allow it.”
Paragraph 9 of the affidavit was as follows:
"I strongly believe that practically all transfers of vessels previously owned by Blasco were made with the intention of preventing, hindering or delaying Blasco’s creditors. I am aware that Blasco has started to flag out ships to St. Vincent and the Grenadines, the Liberian Registry, the Bahamas and other flags of convenience. I am also convinced that the Ukrainian Shipping Company is nothing but another branch of the Ukrainian Ministry of Transport of which Blasco was and is the main branch. I am convinced that the Ukrainian Shipping Company was founded for the sole purpose of creating a shell so to hide the same economical interests behind another alleged entity. Both companies are 100% state-owned and there can be no reason for the founding of the Ukrainian Shipping Company other than perporting [sic] to the world that Blasco ships can not be attached anymore, since they belong to a different legal entity.”
Dr Bell also objected to this evidence. The transcript records the following:
"DR BELL: ...I do press the objection to the first sentence of paragraph 9.
HIS HONOUR: 9 - ‘I strongly believe that practically all transfers,’ - yes.
DR. BELL: I do so on a number of grounds. It is quite misleading - I mean, it is apt to mislead and be confusing within section 135.
HIS HONOUR: I do not think so. We do not have a jury here.
DR. BELL: But when he says ‘all transfers.’
HIS HONOUR: Yes - or practically all but that does not matter. But I will allow, Dr Bell. If this were a final hearing it would face formidable problems but given the time constraints and given the fact that it is interlocutory and it does involve an amorphous area in some respects, I think, I will allow quite a degree of latitude.”
Later, Dr Bell read an affidavit by Drew Scott James, Tor’s solicitor, sworn on 6 May 1997. In his affidavit, Mr James said (at par 3):
"3.I am informed by Captain A Savitsky, President of the Ukrainian Shipping Company, and verily believe, that:
(i)Ukrainian Shipping Company is the sole beneficial owner of the Zoya...;
(ii)Ukrainian Shipping Company was established by the Ministry of Transport Ukraine on 8 April 1996;
(iii)In accordance with a Government Order, 11 vessels previously owned by Black Sea Shipping including the Zoya... were transferred to Ukrainian Shipping Company;
(iv)Ukrainian Shipping Company is an independent company and has nothing to do with Black Sea Shipping Company.”
The transcript records the following:
"HIS HONOUR: Mr Street, can I just clarify one point at this stage. Mr Street, you have seen some - if not all - of the affidavits and material Dr Bell proposes to rely on. Are you requiring anyone for cross-examination?
MR STREET: No, your Honour.
HIS HONOUR: Yes, I just want to get that clear because I do not think it is desirable you should have.
MR STREET: No. I understand that from the nature of the application its present case I entirely understand that. But in relation to Mr James’s affidavit of 6 May, I have a number of objections. I do not wish to take too much time on it, I note what your Honour has said and I anticipate the position your Honour may take on it. But in relation to paragraph 3, for example, I would object to the information and belief materials set out---
HIS HONOUR: I will allow it, Mr Street.”
Dr Bell next sought to read an affidavit sworn by Mr James on 7 May 1997. Annexed to the affidavit was a facsimile letter dated 6 May 1997 addressed to Tor’s solicitors from Sergei Ivaniuk, a member of the firm Frishberg & Partners of Kiev, Ukraine. Also annexed was a certificate dated 6 May 1997 by the Secretary, Australian Department of Foreign Affairs and Trade certifying that the Government of Australia recognised the Republic of the Ukraine as an independent state on 26 December 1991. There was further annexed a facsimile letter dated 6 May 1997 addressed to Tor’s solicitors from Oleg Alyoshin, a member of the firm Vasil Kisil & Partners, Attorneys and Counsellors at law, Kiev. In his affidavit, Mr James said (at par 5) that he was informed by Frishberg & Partners (“Frishbergs”) and Vasil Kisil & Partners (“Kisils”), and verily believed that the state of ownership of Zoya was as set out in the facsimile letters in the annexures mentioned.
Mr Street objected to the reception of Mr James’ affidavit on several grounds. One of them was that the Ukrainian expert evidence went beyond the relevant fact, that is, the identification of the foreign law, and instead purported to apply that law. Mr Street relied upon the following statement of the position by Gummow J in National Mutual Holdings Pty Limited v Sentry Corporation (1989) 87 ALR 539 (at 556):
"Evidence as to the law in force in the State of New York
The existence, the nature and the scope of any rules and principles of the law of a foreign jurisdiction is to be treated as an issue of fact upon which evidence is receivable; on the other hand, the effect of the application of those rules and principles, as so ascertained, to the particular facts and circumstances of the instant case is a question of law for the court of the forum, upon which evidence is not receivable: United States Surgical Corp v Hospital Products International Pty Ltd (Supreme Court of New South Wales, McLelland J, 19 April 1982, unreported).”
In expressing their opinion, Frishbergs stated that they had examined: (i) six documents, including the Cabinet Order dated 3 July 1996 and the Minister’s Order dated 15 July 1996 (“the Relevant Documents”); and (ii) “such provisions of Ukrainian law and (subject to the assumptions and qualifications set out below) such other documents as we have deemed necessary”. They added: “We have not made any investigation of the laws of any jurisdiction other than Ukraine.”
Frishbergs expressed their conclusion as follows:
"Conclusion:
After examination of the Relevant Documents we have come to the conclusion that the vessel ‘Zoya...’ has been lawfully transferred to the balance sheets of the ‘Ukrainian Shipping Company’, a legal entity different from Blasco. The Relevant Documents serve as evidence that the title to the vessel vests with the State of Ukraine. The Relevant Documents serve as confirmation that the vessel has been lawfully transferred with subsequent registration in the balance sheets of Ukrainian Shipping Company and with deletion of the registration from Blasco’s balance sheets.
The qualifications to which this opinion is subject are as follows:
This opinion is addressed to you on condition that it shall be treated as being solely for the benefit of Ukrainian Shipping Company and shall not be relied upon by anyone else...”
In their letter, Kisils expressed an opinion on (i) the status of a Ship’s Certificate under the Merchant Shipping Code of Ukraine; and (ii) the “legal status” of the Ukrainian Shipping Company and of BLASCO.
On the taking of Mr Street’s objection to this evidence, the transcript records the following:
"HIS HONOUR: Mr Street, did you say on the last occasion you were going to get evidence of Ukrainian law?
MR STREET: Yes, and your Honour, I indicated on the last occasion that we were taking steps and I identified the nature of it. None of this evidence goes to, if I can put it in this way, that area that I identified. I think I have also stated just earlier your Honour, my instructing solicitors will indicate that despite having taken steps we have not yet had any response.
HIS HONOUR: Yes.
MR STREET: Now your Honour, I appreciate the urgency of the matter and no doubt there are consequences in terms of what the court will do in respect of the approach on foreign law and I will take your Honour to the cases in that regard. But so far as concerns the issues that these go to, these are matters that we have not got the opportunity to respond to; the foundational assumptions are not provided in relation to the documents and they do not comply with the principles identified by his Honour Gummow J in the case I have given your Honour reference to and seek to address application of Ukraine law. What I was going to do if it was helpful, your Honour, was actually to identify why that is so.
HIS HONOUR: Mr Street, I propose to allow this in. I will allow you to make submissions as to what, if any, weight I should give to it, but I will allow the material in as a question of admissibility.”
In the course of his submissions to the learned primary Judge, Mr Street said:
"In this type of application where the plaintiff is faced with what I might describe as sudden death in respect of the release of the vessel, it is inexplicable as to why the Ukrain[ian] Shipping Company did not appear to support its ownership unless it be the case that it is in fact not the owner.
Your Honour, can I just remind your Honour what Mr James’s affidavit purports to say for information and belief, is the proposition in (1): ‘Ukrain[ian] Shipping Company is the sole beneficial owner of Zoya K’ that is what is provided by Captain Savitskiy, the assertion that they are the sole beneficial owner. Your Honour, one asks oneself why Captain Savitskiy would not seek to go on oath to advance that contention when he could have done so. One asks why Ukrain[ian] Shipping Company have avoided the well of the court by appearing.
The only inference that is available and the inference that should be drawn favourable to the plaintiff in this type of application, is in fact that Ukrain[ian] Shipping Company is not the owner and could not have sustained the assertion and the hearsay evidence put on through Mr James.”
Mr Street then relied upon observations in the authorities considered by Lindgren J in Cell Tech Communications Pty Ltd v Nokia Mobile Phones (U.K.) Ltd (1995) 58 FCR 365 (at 372) to the effect that an application for leave to serve outside the jurisdiction involves only a preliminary inquiry, so that a court, at this stage, might draw inferences more readily in favour of an applicant (that is, Lloyd), bearing in mind that the applicant will not have had the advantage of discovery “and other procedural aids to the making out of a prima facie case at trial.”
The transcript then records the following:
"HIS HONOUR: But this is not a prima facie case; this is balance of probabilities according to the High Court.
MR STREET: But no different principle in my respectful submission could possibly apply in respect of this application so far as what the inference is concerned. It is drawing of the inference---
HIS HONOUR: Yes, I think Sheppard J said, was it in Sanko or one of the---
MR STREET: In the other - I will take your Honour to in a moment.
HIS HONOUR: Yes, but he did say that one more readily draws inferences.
MR STREET: Yes, in this application.
HIS HONOUR: He was faced with balance of probabilities.”
As foreshadowed in his submissions, Mr Street also relied upon the following observations made by Sheppard J in Malaysia Shipyard v “Iron Shortland” (1995) 59 FCR 535, an application to set aside an arrest warrant. His Honour said (at 554-5):
"There is no appearance by Everbird and there is no appearance by Capeco Maritime. Yet plainly the vessel which has been arrested is owned by one or other of them. Furthermore, Everbird is controlled by Capeco Maritime which owns 100 per cent of its shares. What was not discussed with counsel during the argument was the question whether I could the more readily draw inferences adverse to Capeco Maritime because no appearance had been entered in the matter by it or by its subsidiary and no evidence had been led by or on its behalf. It seems unlikely to me, bearing in mind that the vessel is owned by Capeco Maritime or its subsidiary, that the proceedings in relation to the vessel have not come to the notice of Capeco Maritime. It appears that a deliberate decision has been made not to participate in the proceedings. That is an inference which I draw.
Of course Jones v Dunkel will not help the plaintiff unless the plaintiff provides the Court with some evidence that the state of affairs for which the plaintiff contends does exist. Here counsel for BHPT went so far as to submit that there was no evidence upon which I could find that Capeco Maritime was the owner of the Iron Shortland. The submission is undoubtedly a formidable one.”
Sheppard J went on to say (at 558):
"If there had been any evidence at all of beneficial ownership by Capeco Maritime I would not have hesitated to find the issue of ownership favourably to the plaintiff. For reasons earlier mentioned, I would have had every confidence in doing so because of the absence from the case of both Capeco Maritime and Everbird. But, regrettable though it may be from the plaintiff’s point of view, I do not regard any of the material as establishing or tending to establish beneficial ownership by Capeco Maritime. Accordingly the evidence does not establish that Capeco Maritime was the owner of the Iron Shortland at the time the proceedings were instituted and the motion to set aside the arrest warrant taken by BHPT must succeed.”
THE PRIMARY JUDGE’S REASONS FOR HOLDING THAT LLOYD HAD NOT PROVED, ON THE BALANCE OF PROBABILITIES, THAT BLASCO WAS THE LEGAL OR BENEFICIAL OWNER OF ZOYA ON 24 APRIL 1997
His Honour’s conclusions have already been summarised. It is necessary at this stage to refer to some of the detail of his reasons on the ownership issue.
(a) The affidavit evidence
Having noted that arrest applications are dealt with urgently, frequently when “all the relevant information is not available to the plaintiff”, and that “often a decision as to jurisdiction will need to be taken where the evidence is in a relatively imperfect state”, his Honour assessed the weight of the affidavit evidence as follows:
(i) Mr Haake’s affidavit
After summarising Mr Haake’s affidavit, his Honour said:
"In my view, this affidavit based as it is on conjecture and surmise does not significantly advance the plaintiff’s case. It is a collection of largely unsupported assertions.”
(ii) The affidavit of Ms Rusiti sworn 5 May 1997
With respect to this affidavit, his Honour said:
"She states that she was informed by a partner of the German lawyers of the plaintiff that Capt Savitskiy ‘appears’ to have been a former employee and vice-president of BLASCO and that he ‘may’ still hold those positions. Again, this is remote hearsay and is cast in tentative terms.”
The primary Judge went on to note, as has been mentioned, that the Lloyd’s Register had been amended by supplements issued in 1997 to show the Ukrainian Shipping Company as the owner.
(iii) Mr James’ affidavit
His Honour noted the statement made by Mr James on the information of Captain Savitskiy to the effect that the vessels had been transferred from the ownership of BLASCO to the Ukrainian Shipping Company.
(b) The documentary evidence
The primary Judge set out translations of the Cabinet Order dated 3 July 1996 and of the Minister’s Order dated 15 July 1996. His Honour also referred to, inter alia, (i) an undated document in evidence signed on behalf of the Ukraine Ministry of Transport purporting to “confirm... that MV ‘Zoya...’ is the property of State of Ukraine and... is in [the sphere] of ma[n]agement of State Ukrainian Shipping Company...”; (ii) a Classification Certificate in evidence dated 15 March 1997, issued by the “Russian Maritime Register of Shipping”, recording the Ukrainian Shipping Company as the owner of Zoya; and (iii) a letter in evidence dated 1 May 1997 from Lloyd’s Maritime Information Services Limited stating, subject to a disclaimer, that as at 1, 24 and 30 April 1997, Ukrainian Shipping Company was the registered owner of Zoya.
(c) The legal opinions
His Honour summarised the opinions expressed by Frishbergs and Kisils previously mentioned, noting that in the former case “a series of disclaimers” followed the expression of the opinion.
(d) The reasoning on the ownership issue
His Honour, citing The Saudi Prince [1982] 2 Lloyd’s Rep. 255, noted that although the Lloyd’s Register “has no official or binding status”, it is “a convenient reference point, affording some indication of ownership”.
The primary Judge then considered the effect of the Cabinet Order dated 3 July 1996 and in particular the possible different meanings, in the translated version, of the terms “hand-over” and “belong to”. His Honour said:
"In my opinion, it is clearly not appropriate to construe this document in isolation. Some initial indication may be gleaned from the language but reference must be made to other evidentiary material and to legal opinion where it is available.
The Order of the Minister for Transport of 15 July 1996 refers to the Cabinet Order of 3 July and appears to be part of the process involved in the implementation of that Order. It requires the President of BLASCO to take the Zoya off the shipping company account. It then orders the President of Ukrainian Shipping Company to accept the Zoya on the account of the Ukrainian Shipping Company.” (Emphasis added).
(As has been seen, however, the last reference there to the Ukrainian Shipping Company is not correct: the Minister’s Order directed that the vessel be accepted “on the account of” BLASCO).
But his Honour went on to say:
"This language in the Minister’s Order, because of the reference to the company account, is consistent with a view that the intention and effect was to procure a transfer of an asset, namely ownership of the Zoya.” (Emphasis added).
His Honour then analysed the other documentary evidence, noting that aspects of it were “somewhat vague”; that some of it indicated that Zoya was in the management of the Ukrainian Shipping Company but the property of the state of Ukraine; and, however, that none of the documents indicated that BLASCO remained the owner of Zoya.
His Honour continued:
"The documents, of course, must be considered together with the material provided by the two Kiev law firms. These letters indicate that Ukrainian Shipping Company is the ship owner and that it is a separate legal entity under Ukrainian law from BLASCO. In addition, the Frishberg letter indicates that the documents confirm that the vessel has been lawfully transferred to the balance sheets of the Ukrainian Shipping Company.”
The primary Judge then referred, in the passage cited earlier in our summary of his reasons, to “several apparent inconsistencies in the language of the documents”, and concluded that beneficial ownership was “probably” in the Ukrainian State.
After observing that Lloyd relied heavily on inferences that it submitted should be drawn from the failure of the Ukrainian Shipping Company to appear, his Honour went on to say:
"While I respectfully agree with the observations of Sheppard J in Malaysia Shipyard and Engineering SDN BHD v ‘Iron Shortland’ [above] at 554-555, and 558, to the effect that the absence of the alleged owner would incline the Court to more readily infer ownership, that consideration is outweighed, in this case, by the documentary evidence and legal opinions which strongly point away from ownership by BLASCO.
The plaintiff also seeks further inferential support from the fact no documents evidencing the transfer of the vessel to the alleged owner were produced in circumstances where it might be expected that such documents might be in the possession of Tor or at least accessible to them. Again, this is a consideration to take into account but, when read in the light of all the other countervailing evidence, particularly the evidence of the Ukrainian lawyers who treat the transfer as valid, it is not persuasive.
In my view, the plaintiff has failed to establish that BLASCO was the beneficial owner of the Zoya on 24 April 1997.”
It should also be mentioned here that, later in his reasons, his Honour made reference to the reliance by Lloyd upon the presumption, in the absence of proof to the contrary, that foreign law is the same as the law of the forum. The primary Judge then said:
"In the present case that presumption has effectively been rebutted. The principle cannot apply. There is evidence here from Ukrainian law firms that under the law of the Ukraine ownership of the vessel resides in either the Ukraine state or the Ukrainian Shipping Co. These statements of legal opinion are on the clear basis that under Ukrainian law the transfers are lawful and effective.”
LLOYD’S SUBMISSIONS IN SUPPORT OF THE APPEAL ON THE ISSUES OF JURISDICTION AND OWNERSHIP
On behalf of Lloyd the following was submitted:
Ownership within s 19 of the Act includes beneficial ownership. Reliance is placed upon “Iron Shortland”, above. The Court can look behind the registered owner to determine the true beneficial ownership: see The Maritime Trader [1981] 2 Lloyd’s Rep. 153 (at 157); The Saudi Prince, above; and The Aventicum, above.
No appearance has been made on behalf of the owner. Tor, describing itself as “demise charterer”, applied for release of the vessel. Tor alleged that it had chartered the vessel from the Ukrainian Shipping Company, which it maintained was the new owner of the vessel. The Ukrainian Shipping Company, although aware of the proceedings from the commencement and in communication with the “charterers” during the proceedings, did not appear.
As of 24 April 1997 BLASCO was the beneficial owner of the vessel. It is common ground that the vessel was owned by BLASCO until at least August 1996. BLASCO held itself out to Lloyd to be the owner of a large fleet of vessels, including Zoya.
The beneficial ownership of the vessel remains with BLASCO. The evidence relied upon by Tor in seeking release of the vessel establishes, at best, a transfer of bare legal title but not the beneficial interest in the vessel. The Cabinet Order dated 3 July 1996 provides for “the hand-over of vessels” which “belong to” Black Sea Shipping Company. However, the order on which Tor relies as affecting transfer demonstrates a “hand-over” of legal title or operational responsibility, rather than beneficial ownership. The order relied upon by Tor provides not for a transfer of beneficial ownership, but rather that the Ukrainian Shipping Company “take the vessels off the [BLASCO] Shipping Company account” and accept them on the account of BLASCO. Further, the hand-over was designed to ensure the effective use of the vessels. The trial Judge misconstrued the words “on the account of”. The words do not support an intention to transfer an asset, nor do they support the proposition that ownership did not remain with BLASCO. The order speaks of the “hand-over” rather than the transfer of property, either legal or beneficial. BLASCO erroneously represented the transfer as passing property to Victory Maritime, which was only a management company, and only (belatedly) nominated the Ukrainian Shipping Company as the alleged new owner.
Official records of the Ministry of Transport of Ukraine demonstrate that it is the management of the vessel, rather than its beneficial ownership, which has been transferred. The 6 August 1996 addendum to the Barecon charter dated 10 February 1995, describes the Ukrainian Shipping Company as bareboat charterers and suggests that Tor signed the addendum for and on behalf of the owner as agent only.
BLASCO, and those claiming through it, are estopped from denying ownership of Zoya by BLASCO. Lloyd extended credit to BLASCO on the basis of ownership by BLASCO of a large fleet of vessels, including Zoya. Mr Haake put on sworn evidence in this interlocutory application within the time constraints that applied to an urgent arrest. That evidence was given no weight by the learned Judge despite evidence explaining the absence of the witness. Reliance is placed in the estoppel argument on Bridge Oil Ltd v The Owners of the Ship ‘Giuseppe Di Vittorio’, unreported, Clarke J, Queen’s Bench Division, 15 July 1997 (at 36-39).
Lloyd accepts that it bears the onus of proof of establishing ownership of the vessel. However, the level of proof is that appropriate to an interlocutory application only. Because speed may often be of the essence in arresting a ship, evidentiary difficulties are to be expected. Procedures normally employed for the mustering of evidence are simply not available at the earliest stages of arrest.
The failure of either BLASCO, as owner, or the Ukrainian Shipping Company, as putative owner, to appear in the action shields them from discovery but leads to a powerful inference, favourable to Lloyd regarding the beneficial ownership of the vessel. The Ukrainian Shipping Company responded immediately and in writing to challenge the arrest, but avoided submission to the Court’s jurisdiction by declining to appear in the litigation. Reliance is placed upon Cell Tech, above, and The “Iron Shortland”, above.
The material admitted into evidence, taken into consideration and relied upon by the learned Judge as to the law of the Ukraine, should not have been admitted. The material was not in admissible form. The underlying legal principles were not set out. This circumstance, compounded with the belated service in an application of the kind being dealt with, was a substantial injustice, which Lloyd could not meet in the time allowed. Reliance is placed upon Sentry, above. The two legal opinions were inconsistent as to ownership and so heavily qualified as to be incapable of reliance. One opinion expressly noted that it was not to be relied upon.
The documents relied upon by Tor as demonstrating transfer of title would be ineffective under Australian law. There being no proper evidence of foreign law on the issue, the law of Ukraine is presumed to correspond to Australian provisions. The purported transfer is ineffective.
CONCLUSIONS ON THE APPEAL
It follows from our earlier conclusion that the objection to the competency of the appeal should be overruled that the hearing before the primary Judge was in the nature of a final hearing, albeit on a preliminary question of jurisdiction, namely whether BLASCO owned Zoya when the writ issued. There was a final determination of that question (cf. Re Martin; Ex parte Amtron Australia Pty Ltd (1996) 62 FCR 438 at 442-3; Leppington Pastoral Company Pty Ltd v Commonwealth of Australia, Full Federal Court, 29 April 1997, unreported, per Beaumont J at 57). It must follow, in our view, that the adjectival rules to be applied at the hearing were those appropriate to a final hearing, so that the Court’s power to dispense with the rules of evidence, which is available on an interlocutory hearing, was not available. The requirements of the rules of evidence as to the form of evidence that may be received, subject to relevance, on a final hearing had to be observed. Yet, as the record shows, they were not complied with. The reason for the reception of informal evidence was the assumption, apparently made during the course of the hearing of Tor’s application, that the hearing was no more than an interlocutory hearing. But, in our opinion, the assumption should not have been made. Evidence that was led in a form which was objected to should have been rejected as inadmissible on a final hearing.
It is true that some matters were not in issue. As has been said, it was common ground first, that BLASCO was indebted to Lloyd; and secondly, that BLASCO was the owner of Zoya at the time the cause of action arose. What was really in issue was whether the evidence disclosed circumstances which would displace the ordinary presumption of continuance for the purposes of determining whether BLASCO still owned Zoya as at 24 April 1997. This question was one of “mixed fact and law” in the sense described in Shin Kobe Maru, above, (at 426-7).
As has been seen, this question involved first, the proof of the primary facts alleged by Tor to be the subsequent events which displaced the presumption of continuance; and secondly, proof of facts, in that connection, to displace the presumption that foreign law is not materially different from Australian law. It would then be a matter for the primary Judge to apply the rules or principles of foreign law so established (see Sentry, above; Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1996) 64 FCR 79 per Lindgren J (at 82) and the cases there cited). It was not suggested that the relevant foreign law here was something taken to have been established by a previous case (see “Cross on Evidence”, Fifth Australian ed., J D Heydon QC, (at par 41010); cf. The “Nazym Khikmet”, above; Haslam, “The Odessa File: Post Socialist Property Rights in English Courts” (1997) 60 MLR 710).
The position is that the evidence before his Honour was in a form appropriate only for an interlocutory hearing. It consisted, so far as Mr Haake was concerned, of generally expressed conclusions in a form that, if objected to, could not be received at a final hearing. The evidence from the solicitors for both sides also suffered serious defects. Their evidence was largely hearsay. So far as concerns the important evidence of the foreign lawyers, there was the additional problem that, even if it had been given by the foreign experts’ own affidavits, the opinions provided failed to distinguish between evidence as to the existence, nature and scope of the rules and principles of the law of the Ukraine, which would have been admissible on a final hearing, on the one hand, and evidence as to the effect of the application of those rules and principles, which would not, on the other.
Regrettably, and no doubt because of the time constraints imposed, it must follow that the trial of the preliminary jurisdictional issue of ownership as at 24 April 1997 miscarried, for the inadmissible evidence went to the root of the decision. It is not a case, such as Ward v Williams (1955) 92 CLR 496 (at 514-5), where this could be in doubt.
Prima facie then, in the absence of any other consideration, the orders at first instance should, we think, be set aside.
Is there any other consideration to be taken into account for our purposes?
As has been mentioned, Lloyd also raised at first instance a collateral issue in the form of its estoppel argument, now relying upon Bridge Oil, above, a decision given after the primary Judge’s judgment here. Clarke J there held (at 38) that “the evidence shows that the [Ukrainian] Republic permitted BLASCO to represent to the world, including the plaintiffs, that it was the owner... of the vessel...”. Lloyd also sought, in this connection, as we have said, to rely upon observations made by Sheppard J in “Iron Shortland”, as to the inferences available where a putative owner fails to appear. But on the approach we take, it is not possible for us to express a view on these matters, since they depend upon proof, in an admissible way, of the material facts. This did not occur.
In our view, in the absence of material evidence in proper form, it is not open to an appellate court to venture an opinion on the question whether, in the circumstances, the presumption of continuance was displaced. It is, accordingly, inevitable that there be a fresh hearing of the jurisdictional question. To this extent, the appeal should be allowed.
For completeness, we should note that the parties sought to agitate several other questions before us. We need mention only one. Tor sought to challenge his Honour’s rejection of its alternative argument, which had been based on an alleged failure by Lloyd, when applying ex parte for the arrest of the ship, to disclose information held, not by Ms Rusiti, but by Mr Haake. We see no ground for our intervention in this connection. His Honour was not satisfied that either Lloyd or its solicitor withheld information. Ms Rusiti was cross-examined, and Mr Haake was in Germany. As has been seen, the ultimate question whether BLASCO was the beneficial owner at particular times was especially complex, both factually and in terms of the identification and the application of foreign law. On this alternative argument, questions of credit were central. We see no reason to interfere with the primary Judge’s conclusions on this aspect.
ORDERS
Tor’s objection to competency should be overruled, with costs. The appeal should be allowed in part. The orders made at first instance (except the orders in respect of the Marshal’s fees and expenses) should be set aside. A fresh hearing should be ordered of Tor’s application for orders setting aside both the writ and the arrest. The costs of the previous hearing at first instance should abide the order of the Judge conducting the fresh hearing of Tor’s application. There should be no order for the costs of the appeal. This reflects the complex discretionary factors, pointing in each direction, in this case and the circumstance that, although Lloyd succeeded in having the orders at first instance set aside, it did not obtain the orders sought in its notice of appeal, including the granting of leave to re-arrest Zoya.
I certify that this and the preceding thirty-five (35) pages are a true copy of the Reasons for Judgment herein of the Court
Associate:
Dated: 31 October 1997
Counsel for the Appellant: Mr A W Street SC with Mr P W Larkin Solicitor for the Appellant: Phillips Fox Counsel for the Respondents: Dr A S Bell Solicitor for the Respondents: Norton Smith & Co Date of Hearing: 22-23 September 1997 Date of Judgment: 31 October 1997
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