Sea Containers Ltd v Owners of Vessel "Seacat 031"

[1993] FCA 1080

IN THE FEDERAL COURT OF AUSTRALIA	) )
NEW SOUTH WALES DISTRICT REGISTRY )	No. NG 345 of 1993
GENERAL DIVISION	)
-	)

BETWEEN:  SEA CONTAINERS LIMITED

Plaintiff

AND :  OWNERS OF VESSEL "SEACAT 031"

Defendant

7 June 1993

REASONS FOR JUDGMENT

LOCKHART J.

This is a motion to set aside the arrest of a vessel ("Seacat 031") pursuant to an arrest warrant issued on the order of another judge of the Court on Tuesday, 1 June, 1993. The motion to the judge was made ex parte by counsel for the plaintiff, Sea Containers Limited. The warrant was executed on 2 June and is still in force.

managing director of a number of companies known as the Incat	Group of companies which are the relevant companies in this case.
The litigation has taken place in circumstances of great urgency. The vessel is the subject of an agreement for sale by its owner to a private Uruguayan shipping company and it seems from the evidence that although the date for delivery has passed it has been extended until Thursday, 10 June. There is no evidence that any further extension will be granted by that company. The owner of the vessel says that unless it is able to sail from Hobart, where it presently is, on the arranged date, it will be unable to be used on the sea route, for which its use
has apparently been proposed, in sufficient time to be of benefit to the charterer or the purchaser. The sea route is from Holyhead to Dunlaogharie.
On 3 June an appearance was entered by Incat Chartering Pty Limited, presumably on behalf of the ship. The appearance states that Incat Chartering is registered on the ship's registry in the Commonwealth of the Bahamas as owner of the ship. There is evidence, to which I shall refer in a moment, as to the ownership
conscious of the circumstances of urgency and of the importance of the ship at relevant times. In view of the hour, though
of the matter to the parties, I shall not recite all the relevant
facts. They are set out in the affidavits and in a volume of material, in particular, correspondence which has passed between the parties and others and which is in the main annexures to Mr Clifford's affidavit. It is also tendered as separate exhibits and is in the annexures to other affidavits filed on behalf of the plaintiff.
The Incat companies have been engaged for some 12 years in building vessels and since 1988 in building car carrying passenger catamarans. The vessels are built in Tasmania. They employ some 350 people in the relevant yard. On a date, which is not completely certain from the evidence, but which probably is a date during October 1988, an agreement was entered into between International Catamaran Designs Pty Limited (the designer); International Catamarans Tasmania Pty Limited (the builder); and the plaintiff, as buyer.
Reference will be made to three of Mr Clif ford's companies. One is International Catamarans Tasmania Pty Limited, the builder, to which I shall simply refer as "Tasmania"; Incat Chartering Pty Limited, to which I shall refer as "Chartering" and Incat Australia Pty Limited, to which I shall refer as "Australia"; in each case for reasons of convenience. The agreement was described as a commercial protection agreement. It contains some eight clauses and is brief: it occupies a page and a half. Its terms are, in some respects, not very clear, but
in other respects, reasonably clear.
The critical clauses for present purposes are clauses 1, 2 and 4 though I have looked at the other clauses, but those are the clauses to which I have been taken by counsel in argument. The first clause reads as follows:

This morning I commenced the hearing of a motion by the defendant for an order that the arrest be set aside and that the order for the issue of the arrest warrant be discharged. The motion is opposed by the plaintiff. Evidence was led by both parties and there was oral evidence from Mr Clifford who swore an affidavit in support of the defendant's case. He is the

" 1 . The Designer and the Builder will not

sell a similar ferry to any competitor of

t h e Buyer for operation on any route t o and from t h e United Kingdom, or t o and from

Spain f o r a period o f two years from t h e	I t a l y , or t o and from Greece, or t o and from
date o f a second f e r r y designed by Internat ional Catamaran Design Pty Limited, t h e designer, and b u i l t by Tasmania coming i n t o serv ice .
2 . Once a f e r r y has been put i n t o serv ice
on a route a s re ferred t o i n paragraph 1
above, t h e Designer and t h e Builder w i l l not
s e l l a s imi lar f e r r y t o a competitor o f t h e buyer operating a serv ice from ports w i th in 100 naut ical mi les o f t h e ports served by
t h e buyer as long as t h e f e r r y ( s ) continue
t o operate on t h e r o u t e ( s ) . A f e r r y shal l be deemed not t o be operating on a route when it has ceased t o do so f o r a period o f 12 calendar months unless advised o f an
e a r l i e r date b y t h e buyer.
4. The Builder w i l l give the Buyer a f i r s t f e r r i e s s imi lar t o t h e subject v e s s e l s . The Builder t o advise t h e buyer three months i n advance o f ant ic ipated a v a i l a b i l i t y o f r i g h t o f r e f u s a l t o buy a l l i t s output o f
capaci ty . T h i r t y days be fore actual
a v a i l a b i l i t y o f capaci ty t h e Builder shal l
n o t i f y t h e Buyer who shal l then have 30 days
i n which t o take up t h e option f o r t h e next
c r a f t .

Curiously the writ describes the defendant as the owners of the vessel Seacat 031 and I have already referred to the form of the notice of appearance by Chartering, appearing on behalf of the vessel itself. It is not suggested that the action is other than one in rem and plainly that is what it is. I shall use the expression sometimes "the defendant" which is simply intended to encapsulate all that I have just said in relation to the joining of the owners of the vessel Seacat 031.

The case for the defendant is put on two essential bases. First, it was argued that there was a non disclosure of material facts to the learned judge who heard the ex parte application for the issue of the arrest warrant on 1 June, such as to vitiate the order. That alone, it was argued, calls for the discharge of the order or the setting aside of the arrest. The Court is not today hearing the question of the final setting aside of the writ.

The second basis on which the case is put for the defendant is independently of the first, that in any event it has not been established on the material put before the Court today, that there is any reasonable prospect of success on the part of the plaintiff, or any reasonably arguable case.

Cases of this kind are not the same as motions to discharge ex parte injunctions in equity proceedings, though there are certain similarities. But there are also certain dissimilarities which are well established and to which I need not refer. The relevant principles have been referred to in many of the cases including, for example, fairly recently the judgment of a Full	Court of this Court in The Owners of the Ship "Shin Kobe Maru"	v Empire shipping Company Inc ( 1993) 38 FCR 227 and the judgment
at first instance of Gumrnow J, reported at (1991) 32 FCR 78.
Reference was made in argument to the analogy between matters of this kind and cargo claims, where the threshold of requirements of proof of a plaintiff are probably, if not the minimum in this area of the law, certainly do not require a very
high onus of proof or the establishment of many matters. This
case is analogous to that, although it is not the same. But it is nevertheless a claim under the Admiralty Act 1988 (to which I shall refer as "the Act") with all that that involves.
Clause 4 of the Commercial Protection Agreement, to which I shall refer for convenience as "the agreement", has been the subject of considerable argument but, I shall deal with it on the basis of whether a reasonably arguable case has been established. The plaintiff argues that the clause gives the plaintiff a first right of refusal to buy vessels, in effect at the same price as others may be interested in buying them. The defendant argues that it is simply a clause conferring upon the plaintiff the right to purchase the capacity of Tasmania as builder to build vessels during the currency of the agreement.
In my view, as presently advised, what clause 4 does is to give the plaintiff a first right of refusal to buy, during the
by Tasmania that are similar to what are described as "the currency of the agreement, such of the vessels that may be built
subject vessels", but the right arises in the following circumstances. Tasmania is to inform the plaintiff three months in advance of any anticipated availability of capacity. That is
to say, when Tasmania is in a position in the course of its building construction program to know that it will be ready to build another vessel of the relevant kind, it informs the plaintiff of that fact, three months ahead of the date of that anticipated availability of capacity. Thirty days before the actual availability of that capacity, Tasmania must notify the plaintiff of that fact thereupon the plaintiff has the following 30 days in which to exercise its right of first refusal described as an option in the last part of the clause, a little curiously I think, but ultimately I do not think anything turns on that fact. It is certainly a right of first refusal and as I read it, it is a right of the plaintiff of first refusal to purchase a vessel in respect of which the anticipated capacity has been relayed to it by Tasmania. But the right is to be exercised, plainly enough it seems to me, before Tasmania has embarked upon the commitment of building that vessel. It is not a right of first refusal of a vessel once completed or almost completed. It is a clause which enables Tasmania to know whether or not it will have a committed buyer in the plaintiff before it embarks on an expensive, elaborate and time-consuming building program of a particular vessel and also gives the plaintiff the satisfaction of knowing whether or not it will be entitled to the ownership of the vessel in due course.
There is debate as to whether the agreement, in particular clause 4, is still on foot. There is conflicting evidence upon this as I read the material; but, although the point is by no means free from doubt, I propose to approach the case on the basis that the agreement is still on foot.
As presently advised I do not myself see how the right that is enjoyed or could be enjoyed under the agreement by the plaintiff could answer the description of a beneficial interest in the vessel, an interest which was regarded in "Shin Kobe Maruu by Gummow J as an essential prerequisite to a proprietary maritime claim under S. 4 ( 2 ) of the Act. That was a point that was not decided by the Full Court in that case and I do not propose to decide this case on the footing that it is essential that there be an interest of that kind established by the plaintiff before it can make out such a claim. Certainly for the plaintiff to succeed in relation to its argument on clause 4, it must establish that it is a proprietary maritime claim and therefore satisfy the tests of S. 4(2)(a)(i) or (ii) of the Act.
The problem in the present case is that there is no evidence that Tasmania has given the notice to which clause 4 of the agreement refers. But what is plain is that the plaintiff, on two occasions before the relevant times, has had submitted to it
by the relevant company of Mr Clifford, an offer to sell the ship. Twice this offer was refused.
The parties have proceeded on that basis. Later in the piece, indeed not long before the commencement of this proceeding, for reasons that I need not go into, the plaintiff expressed interest in purchasing the ship and it is that expression of interest and the plaintiff 'S pursuit of it that has led to this litigation. There is therefore, in front of me, no evidence that would justify a finding that the plaintiff is entitled to a right of the kind which in my view clause 4 creates. Whether that be a right that could give rise to a beneficial interest or interest of any other kind, contractual or otherwise; I am not persuaded that there is a reasonably arguable case that clause 4 is its foundation. Nor am I persuaded that it is a claim answering the description of a proprietary maritime claim within the meaning of S. 4(2)(a)(i)
or (ii).
Much of the material to which I have been referred on this clause 4 point, and indeed on other points, was not before the judge who ordered the issue of the writ on 1 June. The impression created by the evidence before the judge was that there had been no prior offers made to the plaintiff to sell this vessel, still less that the plaintiff had twice refused to purchase it pursuant to offers from the relevant company of Mr Clifford. In my view that information should have been pl'aced before the Court, as it had a material bearing on the establishment of the cause of action. It was not so placed and
the result, in my opinion, is that that alone should, so far as
clause 4 is concerned, lead to the discharge of the arrest warrant.
The principles in this area of the law are clearly established and I need only refer to the judgment of Sheen J in The "Stephan J N [l9851 2 Lloyds Law Reports, 344 at 346. There
his Lordship was speaking of the duty of a solicitor who swears affidavits in support of annexed party applications, to make full disclosure, but the principle is of wider ambit than that. I should say in this case that there is no material upon which I would be prepared to rely to find that the solicitor or solicitors who act for the plaintiff failed in their requisite duty to the Court. But when ex parte applications are made, even in this area of the law, the party who seeks it must put to the Court all relevant material that could bear upon a right to ex parte relief.
The principles expressed by Isaacs J, although in a different context, in Thomas A Edison Limited v Bullock ( 1913)
15 CLR 679 are applicable: in general terms they are not as high
a degree of duty as his Honour referred to there, because he was speaking in a different context. Had the material relating to clause 4 that is presently before the Court been before the Court on 1 June, I would strongly suspect that the arrest warrant would
matter (clause 4). It remains to see what effect the other two not have issued, at least in relation to this aspect of the
clauses of the agreement and the arguments with respect to them would have in relation to the issue of the arrest warrant.
I turn to paragraphs 1 and 2 of the agreement. They are puzzling clauses and there are certain arguable questions of construction of their provisions. What, to my mind, is of importance however, is that, for the case to succeed on the part of the plaintiff, it must establish that the claims based on those clauses of the agreement constitute a general maritime claim within the meaning of that expression in the Act. That is to say, so far as presently relevant, that it must be a claim arising out of an agreement that relates to the use of a ship, see S. 4(3)(f). A proceeding shall not be commenced in a maritime jurisdiction as an action in rem against a ship, except
as provided by the Act (S. 14). Section 17 states:

"Where, in relation to a general maritime claim concerning a ship or other property, a relevant person

(a)	was, when the cause of action arose, the owner or charterer of, or in possession or control of, the ship or property; and
(b)	is, when the proceeding is commenced, the owner of the ship or property;

a proceeding on the claim may be commenced as an action in rem against the ship or

property. M

The expression, "a relevant person", is defined in S. 3(1)

of the Act, the interpretation section, as follows:

" 'relevant person', in relation to a

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

It follows that for the plaintiff to succeed in relation to clauses 1 and 2, which found the action in rem in the nature of a general maritime claim, the Court must be satisfied that there

is a reasonably arguable case that a relevant person was, when the cause of action arose, the owner of the ship and is, when the proceedings is commenced, the owner of the ship.

On the evidence before the Court, the owner of the ship has since 5 May been Chartering. The relevant cause of action appears to have arisen on 26 May. But the party to the agreement is Tasmania, not Chartering. In my opinion, the claim propounded by the plaintiff cannot answer the description of a claim against a relevant person at the two relevant dates within the meaning of S. 17 and on that ground alone, it seems to me the action so far as it is based on those clauses of the agreement, has no reasonable prospect of success. I am disposed to give a wide interpretation to the language of S. 4 ( 3 ) (f), as to what constitutes a claim arising out of an agreement to the use of a ship.

I certainly do not approach the case with any narrow construction in mind, but reading clauses 1 and 2, and indeed, those clauses in the context of the agreement as a whole, I am not persuaded that the claim is one that arises out of an agreement that relates to the use of a ship, though I recognise that there is some argument to that effect to avail the plaintiff, but I do not regard it as a reasonably persuasive one.

Clause 1 is a clause whereby Tasmania agrees that it will not sell a similar ferry to any competitor of the plaintiff for operation on any route to and from certain places within a stipulated period. Clause 2 says once a ferry has been put into service on a route referred to in paragraph 1, then Tasmania will not sell a similar ferry to a competitor of the plaintiff operating a service from ports within 100 nautical miles and certain other places.

I pause to observe that there is some evidence that the relevant service would be not within 100 but within 105 nautical miles of the relevant ports, but that is a very contentious matter and I do not propose to make any findings with respect to that; nor do I think the evidence really enables me to do so with any degree of confidence. But I do not think that the agreement relates to the use of a ship within the meaning of paragraph F.

The reason for there having been a sale of the ship by Australia is set out in paragraph 23 of the affidavit of Mr	Clifford of 6 June 1993; and although the matter is not being	heard on a final basis, I see no reason not to accept it. There
was an argument put on behalf of the defendant that clause (1) upon its proper construction means that the restraint on sale therein mentioned does not operate unless the sale of a similar vessel is made within the period of two years after the date specified, so that it could not apply here as the ship could not be delivered so as to be in service (that is, operating between the United Kingdom and Ireland) until after what is said to be the last date that could be relevant, that is, 18 June.
That may or may not be the correct construction of the agreement but I do not propose to shut out any other construction that may be reasonable and I do not necessarily accept that as the true construction, nor do I reject it. There is some other evidence that the relevant two year period to which clause (1) is directed has already expired though only recently, but I make no findings with respect to that. I am also of the view that there was non-disclosure of certain matters in relation to clauses (1) and ( 2 ) , but they do not seem to me to be as material as the events that were not disclosed in relation to clause (4). Nevertheless, there axe material matters that should have been put and were not.
The initial affidavit in support of the motion for ex parte relief said nothing about when the period of two years might
expire (clause (1)); nor was there evidence as to the proposed operation of a ferry operating from ports within 100 nautical
miles of the relevant ports referred to in clause (2), but I do not regard those as being matters of such importance as non- disclosure was with respect to clause (4) of the agreement.
The Court discharges the arrest warrant in respect of the vessel, Seacat 031 presently known as Incat 031, to operate from 5 pm tomorrow, 8 June 1993. The Court also orders that the costs of the defendant of the motion today be paid by the plaintiff.
I further order that the plaintiff pay the costs of the Marshal1 of or incidental to the arrest of the ship, and order that the balance of the notice of motion in so far as the same remains alive, of the defendant dated 6 June 1993 be stood over to a date to be fixed.

I certify that this and the

preceding fourteen (14) pages are a true copy of the reasons for judgment herein of the Wnourable Mr Justice ~0ckhart.f /

Date: 7 June 1993

Counsel for the Plaintiff	W Caldwell QC with C Nell
Solicitors for the Plaintiff :	Norton Smith & CO

Counsel for the Defendant : . A Meagher

Solicitors for the Defendant :	Harris & Company
Date of Hearing	7 June 1993
Date of Judgment	7 June 1993