Loucas G Matsas Salvage and Towage Maritime Co v The Fund in Respect of the Proceeds of the Sale of the Ship 1997 FCA 1242
[1997] FCA 1242
•14 NOVEMBER 1997
FEDERAL COURT OF AUSTRALIA
SHIPPING AND NAVIGATION - Arrest and sale of ship - Salvage claim for services pre-dating arrest - limitation of actions - whether limitation period expires on anniversary of date when services rendered at place where they were rendered or of corresponding date in forum - whether action in rem available to enforce maritime lien against fund in court - Lloyd’s Open Form 1990 of salvage agreement - whether acceptance of security extinguishes maritime lien - supervening bankruptcy of guarantor - merger of cause of action in arbitral award - whether cause of action in rem extinguished.
Admiralty Act 1988, ss 4(2), (3) and 15
Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643, referred to
Bulk Chartering & Consultants Australia Pty Ltd v T & T Metal Trading Pty Ltd “The
Krasnogrosk” (1993) 31 NSWLR 18, referred to
“The Goulandris” [1927] P 182, distinguished
“The Rena K” [1979] 1 QB 377, distinguished
The Wild Ranger (1863) Br & Lush 84 at 87; 167 ER 310 at 312, referred to
The “William Money” (1827) 2 Hagg. Adm. 136; 166 ER 193, applied
Thomas Maritime Liens (1980) p 291, approved
STATUTORY INTERPRETATION - limitation period - “within 2 years from the date ... when the salvage services were rendered” - standard time in forum ahead of time in place where services rendered - whether period calculated from date in place where services rendered or corresponding later date in forum.
Acts Interpretation Act (1901), s 36(1)
Navigation Act 1912, s 396(1)
Reg v Logan [1957] 2 QB 589, applied
LOUCAS G MATSAS SALVAGE & TOWAGE MARITIME COMPANY v THE
FUND IN RESPECT OF THE PROCEEDS OF SALE OF THE SHIP “IONIAN
MARINER”
VG 655 of 1996
RYAN J
MELBOURNE
14 NOVEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 655 of 1996
BETWEEN:
LOUCAS G MATSAS SALVAGE & TOWAGE MARITIME
COMPANY
PlaintiffAND:
THE FUND IN RESPECT OF THE PROCEEDS OF SALE OF
THE SHIP “IONIAN MARINER”
DefendantJUDGE:
RYAN J
DATE OF ORDER:
14 NOVEMBER 1997
WHERE MADE:
MELBOURNE
MINUTES OF ORDER
THE COURT ORDERS:
That the questions directed by the order of Ryan J of 3 February 1997 to be tried on 17 February 1997 be answered as follows:
(a)No
(b)Unnecessary to answer
(c)No
That the costs of all parties of the trial of the said questions be reserved.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 655 of 1996
BETWEEN:
LOUCAS G MATSAS SALVAGE & TOWAGE MARITIME
COMPANY
PlaintiffAND:
THE FUND IN RESPECT OF THE PROCEEDS OF SALE OF
THE SHIP “IONIAN MARINER”
DefendantJUDGE:
RYAN J
DATE:
14 NOVEMBER 1997
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
On 22 May 1995, the M V “Ionian Mariner” (“the ship”) was arrested on the application of Marinis Ship Suppliers Pty Ltd and, on 4 September 1995, I ordered that the ship be valued and sold in accordance with the Admiralty Rules. Pursuant to that order, the ship was advertised for sale by tender in at least two editions of each the “Daily Commercial News”, “Lloyd’s List” and “The Australian”. Subsequently, an order was made on 24 November 1995 that the Marshal accept the highest tender and conclude the sale of the ship. A further order was made on 29 November 1995 for an advertisement to be published in the same publications together with the “Age” newspaper in the following terms:
1.The Ionian Mariner has been sold and the proceeds of sale, $2,800,100 (US) have been paid into the Federal Court of Australia.
2.Application will be made to determine the priority of claims against the proceeds of sale.
3.The application will not be determined until after twenty-one days have expired from the date of the advertisement.
4.Anyone who has a claim against the proceeds of sale should commence proceedings to enforce that claim within twenty-one days, and if necessary apply to the court to extend the period within which the order of priorities will not be determined, otherwise an order determining the priority of claims against the proceeds of sale may be made without further notice.
That advertisement was duly published on 7 December 1995. Subsequently, orders were made for an interim payment of part of the fund in Court to defray the costs of repatriating the master and crew of the ship and distributing to them the sum of $US300,000 on account of their claim against the ship for remuneration. Orders were then made on 1 March 1996 for the trial of a preliminary question of whether the amount of unpaid remuneration due to the master and crew should be calculated in accordance with the Greek Collective Agreement and that there be judgment in default of defence for the United States Trust Company of New York (“the US Trust Co”) as mortgagee of the ship for all moneys recovered from the sale of the ship after deducting the amount of each claim which might be adjudged to have priority over the claim of the US Trust Co as mortgagee. The preliminary question identified by the order of 1 March 1996 was heard and determined at first instance on 17 June 1996.
In the meantime, a salvage award had been made in London on 13 March 1996 by Ms Belinda Bucknall QC as arbitrator under a salvage agreement made on 21 October 1994 between a Mr Ch. Anninos on behalf of Loucas G Matsas Salvage & Towage Maritime Co (“the salvor”) and a Mr Giannis Fanargiotis on behalf of the owner of the ship. The salvage agreement was in the standard form of Lloyd’s Open Form 1990 (“LOF 90”). The arbitrator’s award fixed as the shipowner’s share payable in respect of the salvage of the ship off the coast of Chile between 21 and 24 October 1994, the sum of $US109,893 to which was added interest of $US12,063 and costs and fees of £11,332.
On 25 October 1994, Shaw and Croft, solicitors of London, on behalf of the salvor had made demands through the offices of Lloyd’s Salvage Arbitration Branch on the owner of the ship for security for salvaging her in the sum of $US375,000. Security was provided in that sum at Lloyd’s on 4 November 1995 by North American Fidelity & Guarantee SA of Brussels (“the guarantor”). That guarantee contained this endorsement:
PROPERTY TO WHICH THE GUARANTEE RELATES (THE PROPERTY SALVED)
One hundred per cent security in respect of ship, her bunkers, stores and any freight at risk of ship owners, if any.
On 23 November 1995 the guarantor was declared bankrupt by the Commercial Court of Brussels and M. Jean-Michel Derick was appointed liquidator.
On 24 October 1996 the salvor issued a writ in rem out of this Court claiming against the fund in Court in respect of the ship the amounts awarded by the arbitrator. On 3 February 1997 I ordered that there be a separate trial of the following issues raised by the salvor’s action:
(a)whether the plaintiff’s claim has been brought within the time fixed by s.396(1) of the Navigation Act 1912;
(b)whether the plaintiff should be granted an extension of time within which to institute its claim;
(c)whether the plaintiff’s claim is for a maritime lien ranking in priority above crew wages and the registered first mortgage of the US Trust Company of New York.
It is convenient first to consider question (a) before turning to question (c) the resolution of which has a bearing on the discretion involved in question (b) if it be necessary to resolve that question.
Has the plaintiff’s claim been brought within time?
Section 396(1) and (3) of the Navigation Act 1912 provide:
(1)No action shall be maintainable to enforce any claim or lien against a ship or its owners in respect of any damage or loss to another ship, its cargo or freight, or any property on board the ship, or damage for loss of life or personal injuries suffered by any person on board the ship, caused by the fault of the former ship, whether such ship be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within 2 years from the date when the damage or loss or injury was caused or the salvage services were rendered.
...
(3)Any Court having jurisdiction to deal with an action to which this section relates may, in accordance with the rules of court, extend any period mentioned in this section to such an extent and on such conditions as it thinks fit.
On behalf of the salvor, it was argued that s 396(1) embodies a procedural rule and not a principle of substantive law. Accordingly, it was submitted that it governs the present case as part of the Australian law of the forum; McKain v R W Miller & Co (SA) Pty Ltd (1991) 174 CLR 1 at 40-44. The salvor’s argument then proceeded on the assumption that the salvage of the ship off the coast of Chile had been completed at either 1600 or 1700 hours on 23 October 1994 according to Chilean local time. That assumption raises the question of whether the period “within 2 years from the date ... when the salvage services were rendered” stipulated by s 396(1) expired at midnight on 23 October 1994 or 24 October 1994 i.e. the date on which the present action was commenced in this Court.
Section 36(1) of the Acts Interpretation Act (1901) (Cth) provides:
Where in an Act any period of time, dating from a given day, act, or event, is prescribed or allowed for any purpose, the time shall, unless the contrary intention appears, be reckoned exclusive of such day or of the day of such act or event.
It is common ground that the time in Victoria corresponding to 1600 or 1700 hours on 23 October 1994 local Chilean time was 0600 or 0700 hours Eastern Standard Time on 24 October 1994. Accordingly, it was submitted by Mr N J Williams of Counsel for the salvor that the limitation period fixed by s 396(1) of the Navigation Act required that the proceedings be commenced in Victoria before midnight on 24 October 1996.
Reference was made first to Curtis v Marsh (1858) 28 Exch. 36 where a Judge sitting in an assize town opened the Court at 10.00 am Greenwich Time and, there being then no appearance for the defendant, entered a verdict for the plaintiff without any evidence. Counsel for the defendant appeared shortly afterwards, at the appointed time according to local time in the town. The Court of Exchequer set aside the judgment, Pollock C. B. observing, at 38:
It is doubtful whether the defendant was in default at all; for the true time at any place is the “mean time” (as astronomers say) at that place, not Greenwich time; and it is not competent to the authorities of a place to determine that the true time for legal purposes shall be the time at any other place. It becomes material for many purposes in law to ascertain the time at which an event happened, as a birth or a death, with reference to the right to an estate, or to the bonus or principal on a contract of life insurance. And it cannot be allowed that the true legal time is to be altered, and the legal rights of parties, affected by arbitrary regulations at particular places that Greenwich time shall be observed.
In White Cliffs Opal Mines Ltd v Miller (1904) 4 NSW(SR) 150, the government of New South Wales offered for sale a mine in New South Wales stating that the offer would remain open until 30 June 1902. An offer of acceptance dispatched by cablegram from London at 3.55pm on 30 June 1902 by Greenwich time was held too late, the view being taken that the reference to the time was to be construed according to the law of New South Wales as governing the contract. In Reg v Logan [1957] 2 QB 589, three British soldiers stationed in Hong Kong were charged with a civil offence contrary to s 70 of the Army Act 1955 which had been proclaimed to come into force on 1 January 1957. The assaults alleged to have constituted the offence were committed at 2.30 am Hong Kong standard time which was eight hours in advance of Greenwich mean time. The soldiers appealed contending that no offence could have been committed until after midnight Greenwich mean time on 31 December 1956. Lord Goddard CJ rejected that contention, observing at 591:
If an Act is said to come into force on January 1, it comes into force on the day which is January 1 in the particular place where the Act has to be applied. I can well understand that if an offence were committed in the Western Atlantic the Act might not be in force there on the same day as it would in London because the date might still be December 31 there, but the fact that it became January 1 in Hong Kong a few hours before the clock would actually show January 1 in England does not make any difference. As the Act comes into force on January 1, 1957, in Hong Kong, it comes into force on the day which is January 1 in Hong Kong.
A similar view was taken by the United States Court of Appeals for the Ninth Circuit in Sunday v Madigan 301 F 2d 871 (1962) where a US soldier was convicted of an offence against Art. 120 of the Uniform Code of Military Justice which came into effect on 31 May 1951. The offence was committed in Korea on the afternoon of 31 May 1951 according to Korean time which was fourteen hours ahead of US eastern standard time applicable in Washington DC. The Court found it unnecessary to fix the precise time at which the offence had been committed holding that Art. 120 became effective in Korea at midnight on the night of May 30-31, 1951 Korean standard time.
In my view, the authorities canvassed above to which I was referred by Mr Williams do not support the proposition that the time and day at which an event occurs for the purpose of s 396(1) of the Navigation Act is the time and day at which the event would have occurred had it taken place in the forum. Consistently with the view expressed by Lord Goddard CJ in Reg v Logan, I regard the expression in s 396(1) “the date when ... the salvage services were rendered” as referring to the date at the place where the services were rendered, i.e. in this case, 23 October 1994. Accordingly, the limitation period required proceedings to be commenced within two years from that date, that is to say by midnight on 23 October 1996; see e.g. Hingston v Katsikas [1963] VR 441 and Thomson v Les Harrison Contracting Co [1976] VR 238. It follows that the present proceedings were brought out of time.
Is the salvor’s claim one for a maritime lien ranking in priority above the claim of the Master and crew for remuneration and the claim of the mortgagee?
Mr Francis of Counsel for the US Trust Co made it clear that it was not conceded, as a matter of fact, that what happened between 21 and 23 October 1994 amounted to the provision of salvage, as distinct from towage, services. However, on the assumption that those services could be characterised as salvage services, it was contended that they were rendered pursuant to the LOF 90 Agreement concluded on 21 October 1994 and that any lien which could found an action in rem against the ship by the salvor arose only by virtue of that Agreement, cll 4 and 5 of which provided under the heading “PROVISIONS AS TO SECURITY”:
4. (a) The Contractor shall immediately after the termination of the services or sooner notify the Council and where practicable the Owners of the amount for which he demands security (inclusive of costs expenses and interest) from each of the respective Owners.
(b) Where the exception to the principle of “no cure - no pay” under Convention Article 14 becomes likely to be applicable the owners of the vessel shall on the demand of the Contractor provide security for the Contractor’s special compensation.
(c) The amount of any such security shall be reasonable in the light of the knowledge available to the Contractor at the time when the demand is made. Unless otherwise agreed such security shall be provided (i) to the Council (ii) in a form approved by the Council and (iii) by persons firms or corporations either acceptable to the Contractor or resident in the United Kingdom and acceptable to the Council. The Council shall not be responsible for the sufficiency (whether in amount or otherwise) of any security which shall be provided nor for the default or insolvency of any person firm or corporation providing the same.
(d) The owners of the vessel their Servants and Agents shall use their best endeavours to ensure that the cargo owners provide their proportion of security before the cargo is released.
5. (a) Until security has been provided as aforesaid the Contractor shall have a maritime lien on the property salved for his remuneration. The property salved shall not without the consent in writing of the Contractor (which shall not be unreasonably withheld) be removed from the place to which it has been taken by the Contractor under clause 1(a).
(b) The Contractor shall not arrest or detain the property salved unless:-
(i)security is not provided within 14 days (exclusive of Saturdays and Sundays or other days observed as general holidays at Lloyd’s) after the date of the termination of the services or
(ii)he has reason to believe that the removal of the property salved is contemplated contrary to clause 5(a) or
(iii)any attempt is made to remove the property salved contrary to clause 5(a).
(c) The Arbitrator appointed under clause 6 or the Appeal Arbitrator(s) appointed under clause 11(d) shall have power in their absolute discretion to include in the amount awarded to the Contractor the whole or part of any expenses reasonably incurred by the Contractor in:-
(i)ascertaining demanding and obtaining the amount of security reasonably required in accordance with clause 4
(ii)enforcing and/or protecting by insurance or otherwise or taking reasonable steps to enforce and/or protect his lien.
From that premise, it was argued on behalf of the US Trust Co that any right which the salvor may have acquired by the provision of salvage services had been extinguished by the arbitral
award of Ms Bucknall QC and replaced by a right to enforce that award of the kind described in s 4(3)(u) of the Admiralty Act 1988. Section 4(3) provides:
A reference in this Act to a general maritime claim is a reference to:
...
(u)a claim for the enforcement of, or a claim arising out of, an arbitral award (including a foreign award within the meaning of the Arbitration (Foreign Awards and Agreements) Act 1974) made in respect of a proprietary maritime claim or a claim referred to in one of the preceding paragraphs;
The preceding paragraphs of s 4(3) include:
(g)a claim relating to salvage (including life salvage and salvage of cargo or wreck found on land);
A “proprietary maritime claim” is defined in s 4(2) of the Admiralty Act as:
(2) A reference in this Act to a proprietary maritime claim is a reference to:
(a) a claim relating to:
(i) possession of a ship;
(ii) title to, or ownership of, a ship or a share in a ship;
(iii) a mortgage of a ship or of a share in a ship; or
(iv) a mortgage of a ship’s freight;
(b)a claim between co-owners of a ship relating to the possession, ownership, operation or earnings of the ship;
(c)a claim for the satisfaction or enforcement of a judgment given by a court (including a court of a foreign country) against a ship or other property in a proceeding in rem in the nature of a proceeding in Admiralty; or
(d)a claim for interest in respect of a claim referred to in paragraph (a), (b) or (c).
In support of his contention that the arbitrator’s award extinguished a cause of action based on the provision of salvage services, Mr Francis referred to Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643 where a clause in a guarantee given to the respondent bank provided that a certificate signed by the manager of the office at which the principal debtor’s account was kept should be conclusive evidence of his indebtedness at a particular date. After observing that a contract does not oust the jurisdiction of the courts to enforce it, Rich, Dixon, Evatt and McTiernan JJ noted, in a joint judgment at 653:
Accordingly, a contract providing for arbitration did not, apart from statute, prevent the institution of an action or suit, even although an actionable breach of contract was committed by the refusal to refer (In re Smith & Service and Nelson & Sons (1890) 25 Q.B.D. 454, at p. 554 per Bowen L.J.) But if, before the institution of an action, an award was made, it governed the rights of the parties and precluded them from asserting in the Courts the claims which the award determined. By submitting the claims to arbitration, the parties confer upon the arbitrator an authority conclusively to determine them. That authority enables him to extinguish an original cause of action. His award will do so if it negatives the existence of liability. It will do so if it operates, not merely to ascertain the existence and measure of the original liability, but to impose a new obligation as a substitute, whether the obligation results from the tenor of the award or from an antecedent undertaking of the parties to give effect to the determination it embodies (Crofts v. Harris (1691) Carth. 187; 90 E.R. 713; 12 Mod. Rep. 4 : 88 E.R. 1127; Allen v. Harris (1696) 1 Ld. Raym. 122; 91 E.R. 978; Freeman v. Bernard (1697) 1 Ld. Raym. 247; 91 E.R. 1061; Allen v. Milner (1831) 2 Cr. & J. 47; 149 E.R. 20; Commings v. Heard (1869) L.R. 4 Q.B. 669). The award given under authority of the parties operates as a satisfaction pursuant to their prior accord of the causes of action awarded upon (cf., per Fletcher Moulton L.J., Doleman & Sons v. Ossett Corporation (1912) 3 K.B., at p. 267. It is true that, apart from statute, such an authority was revocable. It must subsist up to the making of the award. The authority was by its nature countermandable and no act or contract of the party could make it otherwise (Vynior’s Case (1609) 8 Co. Rep. 80a; 77 E.R. 595). He might be bound by his own deed or agreement, or by a rule of Court, or a Judge’s order, not to revoke his submission, but the result was no more than to make it a breach of duty to countermand the authority of the arbitrator. None the less the arbitrator’s authority was revoked. But, when an arbitrator, exercising a subsisting authority, delivered his award, the law gave full effect to it. A valid award was recognized by the Courts as precluding recourse to the original rights the determination of which had been referred to arbitration.
See also Bulk Chartering & Consultants Australia Pty Ltd v T & T Metal Trading Pty Ltd “The Krasnogrosk” (1993) 31 NSWLR 18 per Sheller JA at 34-36 and 41.
The award of Ms Bucknall was said to have the same effect because it was made pursuant to the LOF 90 Agreement which provided by cl 9(c):
Any Award shall (subject to Appeal as provided in this Agreement) be final and binding on all the parties concerned whether they were represented at the Arbitration or not.
Clause 13(a) of the same Agreement was in these terms:
In case of Arbitration if no Notice of Appeal be received by the Council in accordance with clause 11(a) the Council shall call upon the party or parties concerned to pay the amount awarded and in the event of non-payment shall subject to the Contractor first providing to the Council a satisfactory Undertaking to pay all the costs thereof realize or enforce the security and pay therefrom to the Contractor (whose receipt shall be a good discharge to it) the amount awarded to him together with interest if any. The Contractor shall reimburse the parties concerned to such extent as the Award is less than any sums paid on account or in respect of Interim Awards(s).
I agree that the entry into the LOF 90 Agreement by the salvor and the master on behalf of the ship, the shipowners and others interested in the ship and her cargo embodied a reference to arbitration of any claim which might arise for salvage reward. The authority of the master was spelt out in cl 14 of the Agreement:
The Master or other person signing this Agreement on behalf of the property to be salved enters into this Agreement as agent for the vessel her cargo freight bunkers stores and any other property thereon and the respective Owners thereof and binds each (but not the one for the other or himself personally) to the due performance thereof.
The reference to arbitration was embodied in cl 1(c) of the LOF 90 Agreement which stipulated:
The Contractor’s remuneration shall be fixed by Arbitration in London in the manner hereinafter prescribed and any other difference arising out of this Agreement or the operations thereunder shall be referred to Arbitration in the same way.
It is not disputed, as I understand it, that Ms Bucknall’s award operated to determine, as between the salvor, the shipowners and the cargo owners, the extent of their respective entitlements to, and liabilities for, salvage remuneration. That much is acknowledged first by the salvor’s pleading in its statement of claim in this Court:
7.The remuneration of the plaintiff for the salvage services rendered by it was fixed by arbitration in the manner prescribed in the salvage agreement.
Accordingly the first claim in the prayer for relief is:
(a)A declaration that at the time the Marshal sold the ship there was attached to the ship a maritime lien in respect of the remuneration payable to the plaintiff for the salvage services rendered to the ship and/or the amount due by the owner to the plaintiff under the award.
It follows that question (c) posed by my Order of 3 February 1997 requires a resolution, not of whether Ms Bucknall’s award is binding on the parties, but of whether any lien which attached to the ship by reason of the rendering of the salvage services has been extinguished. Section 15 of the Admiralty Act recognises a claim for salvage as giving rise to a maritime lien. That section provides:
(1) A proceeding on a maritime lien or other charge in respect of a ship or other property subject to the lien or charge may be commenced as an action in rem against the ship or property.
(2) A reference in subsection (1) to a maritime lien includes a reference to a lien for:
(a)salvage;
(b)damage done by a ship;
(c)wages of the master, or of a member of the crew, of a ship; or
(d)master’s disbursements.
In my view, whether the lien acquired by the provision of salvage services has been extinguished or abandoned depends on the application to the events which have happened of the provisions of the salvage agreement properly construed. It is clear that cl 5(a) of the LOF 90 Agreement contemplated that the salvor would give up its maritime lien and its concomitant right to arrest the ship upon the shipowner’s providing security in accordance with cl 4. In “The Goulandris” [1927] P 182, salvage services were rendered on what was then Lloyd’s standard form of “No cure no pay” contract, cl 5 of which provided, similarly to the present cl 5:
... pending the completion of the security as aforesaid the contractor shall have a maritime lien on the property salved for his remuneration ... In the event of security not being provided as aforesaid or in the event of any attempt being made to remove the property salved contrary to this agreement, the contractor may take steps to enforce his aforesaid lien.
“The Goulandris” was arrested in Constantinople but released to allow her to proceed to Alexandria on a “saisie conservatoire”. Before her departure, the shipowner became bankrupt and she passed into the hands of a receiver in bankruptcy. In the course of his reasons for judgment upholding the plaintiff salvors’ assertion of a lien, Bateson J distinguished “The Solway Prince” [1896] P 120 as involving a contract for particular work at a fixed price and continued, at 191:
In the present case the contract was a contract to salve “No cure no pay,” with all the attending consequences, if salving services are performed, of there being a maritime lien on the property in favour of the salvors; and that maritime lien on the property has never been put an end to by any action of a competent Court or by any bargain which has been fulfilled between the parties. [emphasis added]
In my view, the words which I have just emphasised provide the essential point of distinction between “The Goulandris” and the present case. Here there was a bargain between the salvor and the master on behalf of the ship and shipowners which was fulfilled by the provision of acceptable security. The fact that the security proved unavailing through the supervening insolvency of the guarantor did not detract from the performance by the shipowner of the salvage agreement. The view that the bargain in “The Goulandris” was not fulfilled or implemented is reinforced by this further passage at p 192 of Bateson J’s judgment:
It is true that Lloyd’s “No cure no pay” form is an agreement to go to arbitration and have the matter settled by an arbitrator out of Court; but it seems to me that the basis of the contract, by clause 1 and clause 5 together, is that the owner of the salved property shall provide security in the terms of the contract, and if he does not provide security then the contractor may take steps to enforce his lien through the Court. There is no other way of enforcing his lien. The truth is that the salvors have a right against the ship which can only be defeated if the whole of the salvage agreement, “No cure no pay,” is carried out. I think the real answer to Mr. Balloch’s point here is that the owners of the salved property, as far as the ship is concerned, never put up any security at all in accordance with the terms of the contract. They did not implement the bargain.
It cannot be said in this case, as His Lordship concluded in “The Goulandris” at 193:
I think in this case the owner of the ship distinctly failed to make good his part of the bargain to give security for the plaintiff’s claim.
Mr Williams for the salvor referred to “The Rena K” [1979] 1 QB 377 where an action in rem for damage to a cargo of sugar was brought against the vessel which was arrested at Liverpool. The vessel was later released on security equal to her value being provided by the relevant P & I Club and one of the questions which arose for determination by Brandon J was whether, pending arbitration pursuant to a clause in the bill of lading, the shipowners were entitled to the unconditional release of the vessel from arrest. It was argued on behalf of the cargo owners that the possibility that the arbitrator’s award might be wholly or partly unsatisfied could justify the court in keeping the vessel under arrest or releasing her only on the provision of adequate security. His Lordship observed, at 403:
Mr. Howard for the shipowners contended that it was wrong to suggest that, if an award should be made against the shipowners and they should be unable to satisfy it, the cargo owners’ would then be in a position to have the stay of the action removed and to obtain a judgment in rem in it. It was wrong, he said, because, once an award was made, the cargo owners’ cause of action would become merged in the award and would therefore no longer be available to them for prosecution in the action. In these circumstances the whole argument for the cargo owners broke down, and the whole basis for keeping the ship under arrest, or only releasing her subject to a term for the provision of alternative security, disappeared.
This contention involves a consideration of the law of merger in relation, firstly, to arbitral awards, and, secondly, to causes of action in rem. I am prepared to assume, without finally deciding, that, just as a cause of action in personam which is adjudicated upon by an English court merges in the judgment of that court, so also a similar cause of action which is adjudicated upon by an English arbitral tribunal merges in the award of that tribunal. That is the view which is expressed in Spencer Bower and Turner, Res Judicata, 2nd ed. (1969), p. 362, and it appears to be supported at least by Gascoyne v. Edwards (1826) 1 Y. & J. 19, and possibly also by certain other cases to which I was referred.
It has, however, been held that a cause of action in rem, being of a different character from a cause of action in personam, does not merge in a judgment in personam, but remains available to the person who has it so long as, and to the extent that, such judgment remains unsatisfied: The Bengal (1859) Swab. 468; The John and Mary (1859) Swab. 471; The Cella (1888) 13 P.D. 82; see also The Sylph (1867) L.R. 2 A. & E. 24 (although this may have turned partly on an express reservation made in the submission to arbitration concerned) and Yeo v. Tatem (The Orient) (1871) L.R. 3 P.C. 696. The situation must, in my view, be the same in the case of an arbitral award, which is likewise based on a cause of action in personam.
It was argued for the shipowners that this exception to the general rule of merger applied only when the cause of action in rem was founded on a maritime lien, which the cargo owners’ claim in the present case is not. The first two cases referred to above, The Bengal, Swab. 468 and The John and Mary, Swab. 471, were certainly maritime lien cases, the claim in the former being for wages and in the latter for damages by collision. But the observations of Sir James Hannan P. in the third case, The Cella, 13 P.D. 82, 85 related to a claim for repairs and necessaries made under section 4 of the Admiralty Court Act 1861, in respect of which the plaintiff had no maritime lien, but only, like the cargo owners in the present case, a statutory right of action in rem. I cannot see any good reason in principle for distinguishing in this respect between a cause of action founded on a maritime lien and one founded on a statutory right in rem. It appears to me, therefore, both on principle and authority, that the distinction suggested is not a valid one.
The result is that I accept the argument of counsel for the cargo owners that, if an award should be made against the shipowners and they should be unable to satisfy it, the cargo owners would be entitled to have the stay of the action removed and to proceed to a judgment in rem in it.
Allowing full force to His Lordship’s conclusion that there is no valid distinction between a cause of action founded on a maritime lien and one founded on a statutory right in rem, “The Rena K” does not assist the present salvor because what was acknowledged to be a maritime lien was expressly extinguished by cl 5(a) of the LOF 90 Agreement. The only question which remains is whether the maritime lien revived, or some statutory right in rem came into being, upon the arbitrator’s award being unsatisfied from the security provided in accordance with the salvage agreement.
It is clear that a maritime lien is discharged by the provision of bail even if the bail-bond ultimately proves insufficient to satisfy the judgment in favour of the plaintiff; see e.g. The Wild Ranger (1863) Br & Lush 84 at 87; 167 ER 310 at 312. I can see no reason in principle why a ship should not similarly remain forever unencumbered by a particular lien if the parties agree that, upon the provision of a security by a third party, the lien should be extinguished. This accords with the view expressed by Thomas Maritime Liens (1980) p 291 where the learned author observes:
A security by way of guarantee for judgment as an alternative to bail is a relatively recent development. Although there are technical differences between it and bail it is nonetheless to the same effect as bail. Thus, subject to the qualifications which appertain to bail, a valid and sufficient security will operate to extinguish the lien of the claimant who in agreeing to the security waives his right in rem against the res. The guarantee however can only affect the rights of the lienee who is a party to it; all other liens are untouched by its existence.
My view also receives support from the “William Money” (1827) 2 Hagg. Adm. 136; 166 ER 193 where a seaman had taken in payment of wages a bill of exchange on the shipowners who became bankrupt and payment on the bill was refused. The Court upheld the contention that an action could not be maintained against the ship despite the argument of Dr Lushington for the seaman that, if his client “had chosen to take a bill of exchange on a firm not connected with the ship, it might be argued that he had preferred other security, and had quitted his remedy against the ship and her owners; but here the bill was drawn upon the owners themselves by their own agents.” That argument, of course, is not available here where the salvor has accepted security provided by a third party not connected with the ship.
It has also been noted by another learned commentator (Gaskell LOF 1990 [1991] LMCLQ 104 at 112) that the LOF 90 Agreement expressly incorporates parts of the International Maritime Organization’s International Convention on Salvage agreed in April 1989, suggesting that “in some cases Articles have been omitted because they would overlap with existing provisions in the LOF.” Among those indicated in a footnote as being in that category is Article 21 which provides:
(1) Upon the request of the salvor a person liable for a payment due under this Convention shall provide satisfactory security for the claim, including interest and costs of the salvor.
(2) Without prejudice to paragraph 1, the owner of the salved vessel shall use his best endeavours to ensure that the owners of the cargo provide satisfactory security for the claims against them including interest and costs before the cargo is released.
(3) The salved vessel and other property shall not, without the consent of the salvor, be removed from the port or place at which they first arrive after the completion of the salvage operations until satisfactory security has been put up for the salvor’s claim against the relevant vessel or property.
A similar observation can be made in respect of Article 20 which has a counterpart in cl 5(a) and (b) of the LOF 90 Agreement and provides:
(1) Nothing in this Convention shall affect the salvor’s maritime lien under any international convention or national law.
(2) The salvor may not enforce his maritime lien when satisfactory security for his claim, including interest and costs, has been duly tendered or provided.
For these reasons I consider that the salvor can no longer maintain a claim for a maritime lien against the fund in Court representing the proceeds of sale of the ship. Accordingly, the question of the priority of the salvor’s claim in relation to crew wages or the first mortgage of the US Trust Co does not arise.
Should the plaintiff be granted an extension of time within which to bring its claim?
Because of the conclusion which I have reached on the second question discussed above, it is unnecessary to answer this question. However, if I were wrong in concluding that the salvor’s cause of action in rem has been extinguished by the acceptance of security pursuant to the LOF 90 Agreement, I would regard the circumstances surrounding the acceptance of that security as strongly militating against an exercise of discretion in favour of the salvor by extending pursuant to s 396(3) of the Navigation Act the time for bringing its action.
Conclusion
In the results, the questions identified by my order of 3 February 1997 should be answered as follows:
(a)No
(b)Unnecessary to answer
(c)No
I shall make a declaration to that effect and shall hear Counsel on 25 November 1997 on the consequences of today’s declaration on the disposition of the salvor’s action and the costs of the separate trial of the said questions.
I certify that this and the preceding sixteen (16) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.
Associate:
Dated: 14 November 1997
Counsel for the Plaintiff: Mr N J Williams Solicitors for the Plaintiff: Ebsworth & Ebsworth Counsel for United States Trust Company
of New York:Mr J L R Francis
Solicitors for United States Trust Company
of New York:Mallesons Stephens Jaques
Counsel for the Officers
Andre Kharnitov and Serge Panfilov:Mr M Osborne
Solicitors for the Officers
Andre Kharnitov and Serge Panfilov:Purves Clarke Richards
Counsel for the Crew: Mr P Santamaria Solicitors for the Crew: Holding Redlich Date of Hearing: 17 February 1997 Date of Judgment: 14 November 1997
0
2
0