Patrick Stevedores No 2 Pty Ltd v The Ship "Turakina"

[1998] FCA 886

FEDERAL COURT OF AUSTRALIA

ADMIRALTY – application for order releasing owner’s solicitor from undertaking – undertaking given in respect of application for release of vessel from arrest – application for release unsuccessful – competing considerations – whether application for release prolonged period during which vessel was in custody – whether Marshal should have benefit of undertaking required by r 52 of Admiralty Rules (“the Rules”) and Form 19 notwithstanding application for release was unsuccessful – whether undertaking is exhausted once application for release is refused – proper construction of r 52 in context of other rules relating to undertakings.

Admiralty Rules r 52

Bayside Airconditioning Pty Ltd v The Owners of the Ship “Cape Don” (unreported, 15 May 1997, Cooper J), followed
Waitemata Stevedoring Services Pty Ltd v The Ship “Rangitata” (unreported, 16 March 1998, Lindgren J), distinguished

PATRICK STEVEDORES NO 2 PTY LIMITED v
THE SHIP MV “TURAKINA”

NG 114 OF 1998

TAMBERLIN J
SYDNEY
15 JULY 1998

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

IN ADMIRALTY

NG 114  of   1998

BETWEEN:	PATRICK STEVEDORES NO 2 PTY LIMITED (ACN 003 893 141) PLAINTIFF
AND:	THE SHIP MV "TURAKINA" DEFENDANT
JUDGE:	TAMBERLIN J
DATE OF ORDER:	15/07/98
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

The application for release from the solicitor’s undertaking be dismissed

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

IN ADMIRALTY

 NG 114 of 1998

BETWEEN:	PATRICK STEVEDORES NO 2 PTY LIMITED (ACN 003 893 141) PLAINTIFF
AND:	THE SHIP MV "TURAKINA" DEFENDANT

JUDGE:	TAMBERLIN J
DATE:	15/07/98
PLACE:	SYDNEY

REASONS FOR JUDGMENT

ON APPLICATION FOR RELEASE FROM SOLICITOR’S UNDERTAKING

An application has been made for an order that the solicitor for the owner of The Ship MV “Turakina” (“the ship”) be released from his undertaking given to the Court on 30 March 1998, at the time when the application was made for release of the ship from arrest.

Shortly stated, the basis for this application is that the release application was unsuccessful and that consequently the undertaking is no longer required, appropriate, or necessary.

The application is resisted by the Marshal for the reasons outlined later in the judgment.  It is for his benefit, of course, that the undertaking in question is required.

The undertaking given by the solicitor is in terms required by Form 19 of the Admiralty Rules (“the Rules”), namely:

“I undertake to pay the fees and expenses of the Marshal in connection with the custody of the ship MV “Turakina” while under arrest.”

The application for release of the ship was made by the owner of the ship Partenreederei MS “Turakina” (“the owner”) pursuant to r 52 which relevantly provides:

“Release from arrest by the Court

52.(1) A party to a proceeding may apply to the court in accordance with Form 19 for the release of a ship or other property that is under arrest in the proceeding.

(2) ….

… (3) On an application under subrule (1), the court may order the release from arrest of the ship or property on such terms as are just.”

Although the ship was arrested on 19 February 1998, no application for release was made until 30 March 1998.  The hearing on the release application was held on 10 and 23 April 1998 and final submissions were received on 5 May 1998.  Judgment refusing release was delivered on 11 May 1998 and the present motion was filed on 17 June 1998.  It was heard by me on 2 July 1998.

The Marshal has submitted to the Court a schedule which outlines what are claimed to be the estimated costs of arrest incurred during the period between the date of the owner’s application for release and my judgment refusing the application.  These estimates total $123,550.  They are to be treated as indicative only of the Marshal’s costs and have not been proven.  However, for the purposes of considering this application, I am prepared to accept that during the period 8 April 1998 to 11 May 1998, it is likely some substantial costs and expenses were incurred by the Marshal, although in amount they may be more or less than the present estimate.

It was submitted on behalf of the Marshal that the making of an application for release, regardless of its outcome, may have prolonged the period during which the vessel was in the custody of the Court and that, therefore, the making of the application gave rise to additional expense on behalf of the Marshal. Accordingly, it is said that the Marshal should continue to have the benefit of the undertaking required by r 52 and Form 19 as a condition of making the application, notwithstanding that the application was not granted.

In support of the present application, counsel for the owner refers to the structure of the Rules in relation to the protection of the Marshal with respect to (i) arresting ships; (ii) keeping them in custody; (iii) releasing cargo, and (iv) arranging for sale. In particular, reference is made to the following Rules:

• Rule 39(1); Rule 41 and Form 12 which require that on an application for arrest the applicant or its solicitor give an undertaking to the Court to pay to the Marshal, on demand, an amount equal to the amount of fees and expenses of the Marshal in relation to the arrest;

• Rule 49(2) which relates to the cargo discharge applications and calls for an undertaking in writing satisfactory to the Marshal to pay on demand to the Marshal the fees and expenses of the Marshal in connection with the discharge;

• Rule 51(1) and form 18 which empowers the registrar to release the vessel from arrest in certain limited circumstances and which require an undertaking to be given to pay fees and expenses of the Marshal in complying with the application;

• Rule 52(1) and Form 19 quoted above;

• Rule 53 which empowers the Marshal to refuse release of a ship from arrest unless arrangements satisfactory to the Marshal have been made for payment of fees and expenses in connection with the custody of the ship or property while it was under arrest;

• Rule 69(4) which provides that a party making an application for valuation or sale shall pay on demand to the Marshal an amount equal to the amount of fees and expenses of the Marshal in complying with the order;

• Rule 74 which provides that fees and expenses of the Marshal in complying with an order of a Court are part of the expenses of the sale of the ship or other property;

• Rule 75 which provides that any person who fails to comply with an undertaking given under the Rules is liable for committal;

• Rule 78 which empowers the Marshal to make demands for interim payments on account of fees and expenses which any person is liable to pay to the Marshal under the Rules.

The owner submits that these provisions, apart from r 52 and Form 19, cover the Marshal’s expenses during the period of custody and provide ample protection to the Marshal in respect of his fees and expenses. It is said, therefore, that there is no necessity for the solicitor’s undertaking to continue to apply in circumstances where the application for release of the ship is unsuccessful.

It is also said that on its proper construction, the language of the undertaking when referring to the period “while under arrest” indicates that the undertaking is only intended to operate in the event that the application is successful and the vessel is released.  This is said to be because the undertaking comes into operation upon release and is in respect of costs during a preceding period; namely, the period the vessel was under arrest. The owner says that the undertaking is clearly given on the basis of a successful application and that where an application is dismissed, the foundation for the undertaking disappears and its operation is spent or exhausted.

The owner also points to the harshness which it says will result from the operation of the undertaking if construed literally.  It is said that, so construed, it could lead to an applicant for release of the ship having to pay all the expenses of the Marshal during the whole period of the arrest and custody, regardless of whether that period was extended as a result of the application for release. Furthermore, reference is made to the contrast in wording between the undertaking given when an application is made under r 51 for release by the Registrar on limited grounds and the undertaking required under r 52 where the application is made to the Court in the exercise of a discretion. The latter is cast in the widest terms.

Reasoning

The starting point for  determining this application is that the Marshal, acting as an officer of the Court and not as a party, is charged with the care and custody of the arrested vessel.  He should therefore be fully indemnified for the costs incurred in discharging his duty and should not be required to incur fees and expenses without recourse to satisfactory reimbursement either before or after expenses are incurred: see the remarks of Cooper J to this effect in Bayside Airconditioning Pty Ltd v The Owners of the Ship “Cape Don” (unreported, 15 May 1997).

This approach is implemented in the Rules which give protection to the Marshal in respect of his fees and expenses. These Rules provide for a range of undertakings designed to protect the Marshal’s financial position arising from the arrest. These undertakings are cast in different terms; they are required from different parties, and they come into operation at different stages of the arrest and custody period.

The differences in the scope of the various undertakings is apparent on their face.  For example, the undertaking required on an arrest application covers all fees and expenses “in relation to the arrest”.  It is required from the applicant for arrest or the solicitor.  The scope of this undertaking is extremely broad.  In contrast, the undertaking required by an applicant for valuation or sale is much narrower in that it only refers to the fees and expenses of the Marshal “in complying with the order”.  If an application for sale is refused and no order is made then the latter undertaking does not operate because it is directed to the costs of complying with an order.

It is neither necessary nor appropriate, in my view, to approach the undertakings provided for in the Rules on the basis that they are mutually exclusive, or that they must be read down so as not to cover fees or expenses which may be encompassed by other undertakings and which might be given by different parties in respect of the same fees or expenses. It is not appropriate, for example, to read down the words “in relation to the arrest” in r 41 to necessarily exclude fees and expenses of the Marshal in connection with the custody of the ship, simply because the two undertakings are required in respect of different applications made at different stages of the arrest process.

The Rules do not attempt to establish a series of water-tight compartments with respect to undertakings. Merely because the Marshal may have the protection of two overlapping undertakings in respect of the same expenses from different parties does not mean that the language of those undertakings should be necessarily restricted. Obviously the Marshal may not claim double reimbursement in respect of the same fees or expenses. However, there is no reason why the language of the undertakings should not be given an ordinary or natural meaning. The working out of the relevant entitlements and obligations of the various parties providing the undertakings, as between themselves, is a matter for negotiation and resolution between those parties.

I do not accept the submission that the r 52 undertaking is conditional upon a release application being successful. Nor do I consider that it is somehow spent or exhausted if the application is refused. It may well be, for example, in a particular case, that the making of the application and the hearing of it will increase the period of custody and hence the consequential fees and expenses of the Marshal. In that situation there is room for the undertaking to operate to protect the position of the Marshal notwithstanding that the release of the ship has been refused.

Counsel for the owner further submits that the undertaking should be considered as the price which an applicant must pay in order to obtain the release of the ship. Therefore, if the ship is not released the undertaking does not come into effect: cf. the remarks of Lindgren J in Waitemata Stevedoring Services Pty Ltd v The Ship “Rangitata” (unreported 16 March 1998).  These remarks do not assist the owner on the present application because they were made in respect of the different undertaking given when a vessel is arrested.  Moreover, it is clear that in referring to the undertaking as the price of the benefit, his Honour did not intend to delimit the extent and operation of the in personam undertaking. Indeed, his Honour emphasises the importance of preserving the protection afforded to the Marshal by the Rules in respect of fees and expenses incurred.

I do not consider that there is any substance in the submission that, as a matter of construction, the undertaking in the present case will only apply where the vessel has been released.  The purpose of the undertaking and the terms in which it is expressed indicate that it is to be given a broad interpretation.  The Form 19 undertaking can be contrasted to that used in Form 18 where the release application is made to the Registrar for release on two limited grounds namely: where substituted security is provided and, secondly, where the parties consent to release.  The undertaking in Form 18 is considerably narrower than that required by Form 19.

Moreover, under r 52 the undertaking is not, in terms, limited to successful applications. It would have been a simple matter, had it been so intended, to frame the undertaking to make it clear that it only operates in circumstances where the ship is released.

A submission was also made that there is some significance in the circumstance that r 41 itself provides for and gives independent force to the undertaking given on arrest, in addition to the force provided by the fact that it is required by the wording of the application for arrest.  In contrast, it is pointed out that the undertaking in Form 19 is required in the Form and does not arise automatically on the making of the application by force of the rule as does the r 41 undertaking.  That rule provides that the making of the application constitutes an undertaking to the Court.  It was also suggested that because the present undertaking is required by the application Form, and not independently in a rule, the dismissal of the application carries with it the extinguishment of the undertaking provided for in the application.

In my view the above submissions should not be accepted because Form 19 derives its force and effect from r 52(1), which requires the application to be so provided. Because of this it cannot be said that the r 41 undertaking has any greater force or effect than the undertaking required under r 52.

In deciding whether the solicitor should be released from the undertaking in the present case, it is not necessary to decide upon either the precise meaning, scope, or application of the undertaking, nor to decide whether in the present circumstances any costs and expenses are, as a matter of fact, recoverable under it. The issue is simply whether the undertaking has ceased to operate or whether it should be released. Suffice it is to say that the r 52 undertaking in the present case, in my view, does have scope for operation and that in terms it affords significant protection to the Marshal from an additional party notwithstanding that the ship may not be released pursuant to the application. The quantum and extent of the security is a matter for determination at a later date when all the circumstances are known.

Accordingly, for the above reasons, as a matter of law and discretion, I refuse the application for discharge or release from the undertaking.  I will hear the parties as to costs at an appropriate time.  I grant to leave to apply on two day’s notice in relation to costs if the parties cannot agree.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin

Associate:

Dated:             15/07/98

Counsel for the Applicant:	Dr A  S Bell
Solicitor for the Applicant:	Michell Sillar
Counsel for the Plaintiff:	Mr G Nell
Solicitor for the Plaintiff:	Allen, Allen & Hemsley
Solicitor for the Admiralty Marshal:	Mr Douglas Coleman
Solicitor for the Master and Crew:	Mr J Levingston
Counsel for Bremer Landes bank Kreditanstalt Oldenburg	Mr A W Street SC
Solicitor for Bremer Landesbank Kreditanstalt Oldenburg	Norton Smith
Date of Hearing:	2 July 1998
Date of Judgment:	15 July 1998