Reiter Petroleum Inc v The Ship “Sam Hawk”

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FEDERAL COURT OF AUSTRALIA

Reiter Petroleum Inc v The Ship “Sam Hawk” [2015] FCA 1005

Citation: Reiter Petroleum Inc v The Ship “Sam Hawk” [2015] FCA 1005
Parties: REITER PETROLEUM INC v THE SHIP “SAM HAWK”
File number: NSD 1136 of 2014
Judge: MCKERRACHER J
Date of judgment: 11 September 2015
Catchwords:

ADMIRALTY – jurisdiction – whether the plaintiff’s writ ought to be set aside for want of jurisdiction and the action dismissed on the basis that the plaintiff’s claims do not satisfy the requirements of s 15 or s 17 of the Admiralty Act 1988 (Cth) (Act) – whether the Court has jurisdiction in respect of the asserted maritime lien, in rem, under s 15 of the Act – whether the plaintiff’s claim is a proceeding on a maritime lien which is of a character recognised by Australian law, including Australian rules of private international law – whether a foreign maritime lien, such as that alleged to have arisen pursuant to the alleged bunker supply contract and the law of Canada or the United States, is a maritime lien for the purposes of s 15 of the Act even though the supply of necessaries to a ship, including bunkers, does not give rise to a maritime lien under Australian law – whether the Privy Council decision of Halcyon Isle, which is authority for the proposition that questions as to the existence of an asserted maritime lien are procedural or remedial in nature and are therefore to be determined in accordance with the law of the forum, should be followed in Australia – whether the decision of the High Court of Australia in John Pfeiffer dictates that a claim based on a maritime lien is a substantive claim as to the existence, extent or enforceability of the rights or duties of the parties, not merely a procedural claim directed to governing or regulating the mode or conduct of court proceedings

ADMIRALTY – jurisdiction – whether the Court has jurisdiction in respect of a general maritime claim under s 17 of the Act – whether the owner is ‘a relevant person’ within the meaning of s 3 of the Act with respect to the claim under s 17 of the Act – whether the jurisdiction claim under s 17 goes to the merits of the dispute or jurisdiction

ADMIRALTY – application for summary judgment pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) and/or rule 26.01(1)(a) of the Federal Court Rules 2011 (Cth) – whether the plaintiff has a reasonable prospect of successfully prosecuting the proceeding under s 15 – choice of law – whether the law of Canada, United States, Hong Kong or Turkey is the proper law of the alleged bunker supply contract – whether in the circumstances United States law would recognise a maritime lien

ADMIRALTY – application for summary judgment – whether the plaintiff has a reasonable prospect of successfully prosecuting the proceeding under s 17 – whether the…

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Details
Case
[2015] FCA 1005
Decision Date

CaseChat Overview and Summary

Reiter Petroleum Inc initiated proceedings against the ship "Sam Hawk" seeking to enforce a maritime lien for the supply of bunkers. The primary dispute concerns the jurisdiction of the Federal Court of Australia under the Admiralty Act 1988 (Cth) to entertain the claim and the applicability of foreign maritime law to the asserted maritime lien. Reiter Petroleum argues that the Court should apply either Canadian or United States law to the question of the existence of the maritime lien, contending that these jurisdictions recognise a maritime lien for bunker supply contracts. Conversely, the ship’s owner contends that the Court should apply Australian law, which does not recognise a maritime lien for bunkers supplied under a charterparty agreement. The Court was required to determine whether it had jurisdiction under sections 15 or 17 of the Admiralty Act, and if so, which foreign law should apply to the maritime lien claim.

The Court examined whether the plaintiff's claims satisfied the jurisdictional requirements of sections 15 or 17 of the Admiralty Act. It assessed whether the asserted maritime lien was a proceeding on a maritime lien recognised by Australian law, including Australian rules of private international law. The Court considered the applicability of foreign maritime law and whether a maritime lien under Canadian or United States law would be recognised in Australia. Furthermore, it deliberated on whether the decision in Halcyon Isle, which supports the application of the law of the forum to determine the existence of a maritime lien, should be followed in Australia. The Court also examined if the decision in John Pfeiffer indicated that a maritime lien claim is substantive in nature, affecting the rights and duties of the parties, rather than procedural.

The Court found that the plaintiff had not established a reasonable prospect of successfully prosecuting the proceeding under section 15 of the Admiralty Act. It concluded that the asserted maritime lien did not meet the criteria for recognition under Australian law. The Court held that questions concerning the existence of a maritime lien are substantive and go to the merits of the dispute rather than merely procedural. It also determined that the plaintiff had not demonstrated a reasonable prospect of establishing the existence of an enforceable bunker supply contract that would entitle it to a maritime lien under section 17 of the Act. Consequently, the Court dismissed the application for summary judgment and reserved costs.

1. The application be dismissed.
2. Costs of the application be reserved.

Orders

Orders of the court

1. The application be dismissed.

2. Costs of the application be reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For other reasons, it cannot be said at this early stage that either claim should be summarily dismissed. As the application nevertheless was quite appropriately made, I consider that costs should be reserved. BACKGROUND The background is taken from affidavits filed by both parties and the statement of claim. The Vessel was registered in Hong Kong, is owned by SPV Sam Hawk Inc, a company incorporated in Hong Kong, is operated by Shipping Asset Management SA (SAM Shipping), which is based in Geneva, and managed by Venturi Fleet, a company operating from Greece. Unless it is necessary to be specific, the term ‘owner’ will be used to apply to these entities collectively. By a time charterparty dated 31 October 2013, Egyptian Bulk Carriers (EBC) time chartered the Vessel from the Owner. Clause 13 of the recap to the charterparty required EBC to bunker the Vessel during the charterparty. It was EBC, not the Owner, who was responsible for arranging and paying for the bunkers. The charterparty did not authorise EBC to contract for necessaries on behalf of the Owner or to bind the Vessel with a maritime lien for necessaries. On about 15 November 2013, EBC communicated with Reiter Petroleum to seek a quote for bunkers for the Vessel at Istanbul. It was anticipated the Vessel would dock on around 25 November 2013. Reiter Petroleum canvassed a quote by telephone from a Turkish company, KPI Bridge Oil Denizcilik ve Tecaret Ltd Sti, and passed on the quote to EBC. While there is no evidence of whether or not EBC accepted Reiter Petroleum’s quote, EBC informed the Vessel that it had arranged for bunkers at Istanbul on 16 November 2013. EBC sought confirmation on 20 November 2013 from Reiter Petroleum of the name of the supplier at Istanbul. After making those enquiries with KPI, Reiter Petroleum informed EBC that the supplier was ‘Socar Marine’. EBC then passed on this information to the Vessel. On the following day, the master of the Vessel issued a ‘no liability’ notice addressed to Socar and sent it to the shipping agent at Istanbul, Nakkas Shipping. The notice advised that the Vessel and Owner accepted no liability to pay for bunkers, and that such payment was the responsibility of the time charterer, EBC. By email dated 2 December 2013, the agent at Istanbul advised the master of the Vessel that Socar had received the ‘no liability’ notice, but had refused to sign the document. As the Owner points out, therefore, it is clear that by no later than 2 December 2013, the physical supplier, Socar, had received and was aware of the ‘no liability’ or ‘no lien’ notice issued by the master of the Vessel. Between 25 November 2013 and 2 December 2013, EBC and Reiter Petroleum renegotiated the price of the bunkers because the Vessel was to be delayed on its arrival to Istanbul, with the new expected arrival date being on or around 6 December 2013. On 28 November 2013, Socar cancelled the stem originally scheduled for 25 November 2013. On the present state of the evidence, there is no indication of any activity as between Reiter Petroleum and KPI between 28 November 2013 and 2 December 2013. On the latter date, however, three things happened. First, EBC confirmed the Vessel’s estimated time of arrival at Istanbul on 6 December 2013 and the quantity of bunkers sought (185 mt). Secondly, Reiter Petroleum sent EBC a revised quote of USD$655 per metric tonne for the bunkers. Thirdly, EBC accepted the increased price and Reiter Petroleum sent EBC an amended confirmation of the price and quantity. The document which contained the amended price was entitled ‘Amended Confirmation re ETA and PRICE’.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Rule 26.01(1)(a) of the FCR provides:26.01 Summary judgment(1)A party may apply to the Court for an order that judgment be given against another party because:(a)the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or(emphasis added) USC §31341 and §31342 of the United States Commercial Instruments and Maritime Lien Act (US) provide relevantly and respectively:§31341. Persons presumed to have authority to procure necessaries(a)The following persons are presumed to have authority to procure necessaries for a vessel:(1)the owner;(2)the master;(3)a person entrusted with the management of the vessel at the port of supply; or(4)an officer or agent appointed by-(A) the owner;(B) a charterer;(C) an owner pro hac vice; or(D) an agreed buyer in possession of the vessel. T(b)A person tortiously or unlawfully in possession or charge of a vessel has no authority to procure necessaries for the vessel.… With limited exceptions, the key facts are, at least for present purposes, agreed. The legal effect of those facts is very much in dispute. Which, if any, foreign law applies and what the consequence of that law will be are issues at the heart of the dispute. Mixed questions of fact and law arise. Even the effect of foreign law is a question of fact. A deal of evidence has been adduced on this issue. Mr Timothy Cox is an experienced Perth admiralty and maritime solicitor, who has been practising in that field for more than 40 years. His firm represents the Owner and the Vessel. He does not purport to be an independent expert, but does set the scene for the expert evidence which has been given. He explains that the time charter hire payable by the charterers to the Owner does not include a component for bunkers because, in most cases, it is for the time charterer to direct the deployment of the vessel. The time charterer accordingly assumes responsibility for the cost of bunkers consumed in the course of the vessel’s deployment. Both Mr Cox and Ms Angela Hunt, operations manager at SAM Shipping, give evidence that SAM Shipping, the operator, generally requires masters of vessels under its operation and under time charter to issue a ‘no lien’ notice to bunker suppliers at the port at which bunkers are intended to be stemmed. They are also instructed to stamp the bunker delivery notes with a ‘no lien’ stamp, which clearly states the name of the charterer who is responsible for the payment of the relevant bunkers. The apparent purpose of this practice is to clarify to the bunker suppliers at the port before the bunkers are stemmed, that neither the owner, nor the vessel, would be liable for the cost of the bunkers. Rather, the cost would be borne by the time charterer. There is documentary evidence supporting that standard practice. As a matter of fact, in the present case, that is what occurred. Affidavit evidence was given by Mr Marc de Man, a lawyer practicing in Quebec, as to the effect of Canadian law on the maritime law issues arising in this dispute. As an independent expert, he expresses the view that Reiter Petroleum’s claim would give rise to a maritime lien under the prevailing body of Canadian law. In reaching this conclusion, he took into account the fact that Reiter Petroleum was not aware of the contents of the charterparty agreement between the Owner and EBC and was ‘accordingly unaware of whether a “no lien clause” existed in the subject charterparty’. According to Mr de Man, until 2009 in Canada a Canadian supply of necessaries’ claim for unpaid services rendered to a vessel did not give rise to a maritime lien. Rather, only a statutory right in rem existed in the necessaries man’s favour. This meant that the supplier of necessaries were at a significant disadvantage, he says, compared to the American counterparts in the United States, where a claim for unpaid necessaries was attributed the status of a maritime lien. A change in Canadian maritime law occurred in 2009 with the passing of amendments to the Marine Liability Act, S.C. 2001, C.6 (MLA), including s 139, which provides for a maritime lien in favour of the Canadian supplier of necessaries services to a foreign vessel. Mr de Man notes that at the time of writing, there was no case law testing whether a Canadian necessaries man would benefit from a maritime lien if the necessaries at issue were ordered by the charterer and not the owner. In Norwegian Bunkers AS v Boone Star Owners Inc 2014 FC 1200, the Federal Court of Canada said (at [80]):Whether a Canadian maritime lien would flow from the purchase of bunkers by a charterer rather than by the owner is a question that remains to be decided (The Nordems, FC, at paras 27-28; Cameco Corporation v MCP Altona (The Ship), 2013 FC 23 (CanLII), at paras 49-54).

Ratio Decidendi

Legal Principle Established

The above are simply possibilities, and in the end it is unnecessary to make a determinative finding on this point to resolve the jurisdictional application because Reiter Petroleum bears the onus of establishing jurisdiction. Its argument is that jurisdiction arises because this Court should apply either United States or Canadian law to the question of the existence of a maritime lien ‘as such law governs the Bunker Supply Contract’. In doing so, it contends, that Halcyon Isle should not be followed. Consideration of the challenge to jurisdiction – s 15 of the Admiralty Act In his paper ‘The law of maritime liens and conflict of laws and customs’ (2003) 9(6) JIML 545, Dr PK Mukherjee notes (at 547) that first and foremost, the maritime lien is a species of maritime claims enjoying priority ranking as against other claims which are not recognised as maritime liens. The author goes on to discuss the other characteristics of the maritime lien in the following terms (at 547-548) (footnotes omitted):The second characteristic of the maritime lien is that it is a charge or encumbrance against maritime property and in that sense it is a proprietary interest similar to a maritime mortgage or hypothèque which is also a charge against the res. Maritime property has been jurisprudentially defined as basically comprising ship, cargo and freight. Generally speaking, only the particular res, can be encumbranced, and the property represents a security for the claim. The third characteristic of the maritime lien is that it accrues from the moment the event which triggered the claim actually occurred. A maritime lien could arise in respect of a service rendered to, or damage done by, the maritime property in question. Thus, maritime liens can be said to be ex contractu (for example, the wages lien), or ex delicto (for example, the collision lien), or quasi ex contractu (for example, the salvage lien). Perhaps the most unique attribute of the maritime lien is that having accrued, it travels with the res secretively and unconditionally. In other words, it is attached to the res and is not affected by change of possession or ownership. It does not require any form of notice or registration to subsist. Since the maritime lien is a secret encumbrance which travels with the res unconditionally, it has often been described as ‘indelible’. In practice this is not entirely correct. There are usually time limitations imposed by statute or Convention within which the ship must be arrested or seized for the claim to subsist. In common law jurisdictions, a maritime lien can be extinguished by the application of the equitable doctrine of laches which requires a lien holder to exercise reasonable diligence in the execution of his lien, especially where third-party rights are involved. It is also an inchoate right, at least in terms of English law; that is to say, it is incomplete or, to be more precise, dormant, until it is crystallised by the commencement of an action in rem. The inverse-order ranking of priorities between certain classes of maritime liens is another unique trait. The underlying rationale is that it is to the exertion of the claimant later in time that the res is preserved for the benefit of one whose claim accrued earlier. Therefore, the last in time is first in right. This is often referred to as the ‘beneficial service’ theory and is typical of salvage liens, whether inter se or vis-à-vis other classes of maritime liens. The principle of inverse order ranking is also sometimes rationalised by the so-called ‘proprietary interest’ theory which deems a prior lienholder to be, in a sense, a part-owner, with the attendant responsibility of protecting his interest against the risk of accrual of subsequent liens by exercising his right in a timely manner.Despite the fact that by and large, all of the abovementioned characteristics are universally recognised, substantial differences continue to remain in the way maritime claims are treated under various legal systems.