Sirius Shipping Corporation v The Ship Sunrise

[2006] NSWSC 398

CITATION:	Sirius Shipping Corporation v The Ship Sunrise [2006] NSWSC 398
HEARING DATE(S):	13, 14 and 15 March 2006
JUDGMENT DATE :	10 May 2006
JURISDICTION:	Equity Division Admiralty List
JUDGMENT OF:	Young CJ in Eq
DECISION:	Finance company held to have greatest interest in ship.
CATCHWORDS:	CONTRACTS [145]- Attempted rewriting after other parties took interest in subject matter- Attempt to include retention of title clause after title passed- Invalid. - SHIPPING & NAVIGATION [5] & [6]- Sale of unregistered ship- Transfer of property- Possession passed to buyer in 2001- Buyer entered into hire purchase agreement with financier- No evidence of transfer of ownership from seller to financier- Intention of parties- Whether sale completed and property passed.
LEGISLATION CITED:	Sale of Goods Act 1923, ss 22, 23 Rule 1, 24(1), 28(2)
CASES CITED:	Aichhorn & Co KG v The Ship MV Talbot (1974) 132 CLR 449 Bank of NSW v Palmer (1970) 91 WN (NSW) 580 Behnke v Bede Shipping Co Ltd [1927] 1 KB 649 City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477 Commonwealth v Mort's Dock and Engineering Co Ltd (1962) 80 WN (NSW) 89 Dennant v Skinner [1948] 2 KB 164 Devine Shippping Pty Ltd v BP Melbourne (1994) 3 Tas SR 456 Gamer's Motors Centre (Newcstle) Proprietary Limited v Natwest Wholesale Australia Pty Limited (1987) 163 CLR 236 Hooper v Gumm (1867) 2 Ch App 282 Interco Pty Ltd v Schiavello Systems (NSW) Pty Ltd [2006] NSWSC 58 Lucas v Smith [1926] VLR 400 Manchester Ship Canal Company v Horlock [1914] 2 Ch 199 Naamlooze Vennootschap Vredobert v European Shipping Co Ltd (1924) 20 Ll LR 296 Patten v Thomas Motors Pty Ltd (1965) 66 SR (NSW) 458 Re Anchor Line (Henderson Bros) Ltd [1937] Ch 1 Re Five Steel Barges (1890) 15 PD 142 The Dictator [1892] P 304 The James W Elwell [1921] P 351 The Winkfield [1902] P 42 Tisand Pty Ltd v The Cape Moreton (2005) 143 FCR 43
PARTIES:	Sirius Shipping Corporation (P) The Ship Sunrise (D) Richard Evans (First Relevant Person) Capital Finance Australia Limited (Second Relevant Person) Hunt Pacific Finance Pty Ltd (Third Relevant Person)
FILE NUMBER(S):	SC 6/2003
COUNSEL:	I H Wallach (P) No appearance for First Relevant Person P T Russell (2nd Relevant Person) J M White (3rd Relevant Person)
SOLICITORS:	Prider & Co Lawyers (P) Bartier Perry (2nd Relevant Person) Swaab Attorneys (3rd Relevant Person)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
ADMIRALTY LIST

YOUNG CJ in EQ

Wednesday 10 May 2006

6/2003 – SIRIUS SHIPPING CORPORATION v THE SHIP "SUNRISE"

JUDGMENT

1 HIS HONOUR: These are proceedings in rem as to who owns the Ship “Sunrise”.

2 The plaintiff, Sirius Shipping Corporation (“Sirius”) is controlled by Mr Peter Sirius (“Mr Sirius”): it is duly incorporated in Vanuatu. It claims ownership of the Sunrise.

3 The writ gave the second relevant person, Capital Finance Australia Limited (“Capital Finance”), notice to surrender possession. Capital Finance is in possession of the ship.

4 I may commence the recitation of the facts with the common fact that, as at 21 December 2000, the plaintiff was the owner of the ship.

5 On or about 21 December 2000 an agreement for sale (“December agreement”) of the ship was made between Sirius and the first relevant person, Mr Richard Evans (“Mr Evans”). The agreement defined the completion date as meaning 15 January 2002. The agreement relevantly included terms as to purchase price and completion, as set out below:

“3. PURCHASE PRICE

3.1 Amount

The Purchase price for MV Sunrise is $1,000,000.

3.2 Payment
Evans will pay the Purchase Price to Sirius (or as Sirius otherwise directs) as follows:
(a) $400,000 on signing this document;
(b) $600,000 at Completion.”

6 Completion was agreed to take place on or before the completion date at Minter Ellison, 88 Phillip Street, Sydney or such other place or time as the parties agree.

7 The December agreement was duly executed by Mr Sirius in his hand, on behalf of Sirius and by Mr Evans.

8 Sirius was initially to provide Mr Evans $150,000 as part of the purchase price for the ship in the form of a loan. The loan was to be accompanied by a mortgage over the ship.

9 Mr Evans failed to pay any part of the purchase price by the completion date of January 15, 2001. The explanation in part appears to be that the loan agreement between Sirius and Mr Evans was not completed.

10 In correspondence to their client, Mr Sirius, dated 16 January 2001, headed "Sale of MV Sunrise", Ralph Ayling and Neroli Butt of Minter Ellison, state inter alia:

“We note that we have not yet received information from you or Richard regarding the investment entities and so are unable to complete the Loan Agreement. While this document is not a condition precedent in the Agreement for Sale, we note that you are lending part of the purchase price to Richard Evans. It would, therefore, be in your best interests to have the Loan Agreement completed as soon as possible.
The sale of the MV Sunrise was due to complete on Monday under the Agreement for Sale. However, it appears that neither party is in a position to complete the sale. Please let us know if that is not the case. We would suggest that a further agreement be executed extending the time for completion. Please note that the customs control over MV Sirius (sic) expires on 21 January 2001.”

11 The Minter Ellison file also contains a note recording a telephone interview with Mr Sirius, dated 16 January 2001, which states in full:

“Richard Evans is waiting to hear from his bank. The further info (sic) has not been provided – so settle or sale and take mortgage but don’t finalise the loan until the loan agreement can be completed properly. No funds will be advanced.
Peter (ie Mr Sirius) will import the boat into Australia and pay duty if the sale doesn’t settle this week.”

12 Mr Evans continued to negotiate with the National Australia Bank to raise a loan of $600,000. The bank required a mortgage over the ship. Thus in correspondence dated 29 January 2001 addressed to Richard Evans, Ralph Ayling or Neroli Butt of Minter Ellison stated:

“Finally, we understand that ownership of MV Sunrise will now be transferred to your bank and then you will lease the yacht back from the bank. This means it is impossible for our client to take a second mortgage over MV Sunrise to secure money to be lent to you by our client. Accordingly, please let us know what alternative security you are to provide.”

13 Negotiations concerning the manner of payment of the purchase price continued into February 2001, with Baker & McKenzie acting for Mr Evans. In correspondence dated 2 February 2001, addressed to Adrian Lawrence of Baker & McKenzie, titled "Sale of MV Sunrise", Neroli Butt of Minter Ellison stated inter alia:

“We also understand that the structure of the sale has changed and that our client is to purchase shares in ACT at the time of sale to the value of $400,000.”

14 The abbreviation “ACT” may be understood as a reference to Australian Communications Territories, of which Mr Evans was at all relevant times a director.

15 Ms Butt also pointed out that Sirius was not registered for GST in Australia, stating:

“…we understand that it is not required to pay GST on the on-sale to ACT… We will therefore not be providing a tax invoice.”

16 On 7 February 2001 Mr Evans sent a “draft letter” to Mr Sirius purporting to set out the manner of payment of the $400,000 part of the purchase price as agreed between the parties “pending completion”. The letter stated inter alia:

“We have agreed as follows:
(a) on completion, I will provide you with a cheque for $400,000 (in addition to the remainder of the purchase price);
(b) you will hold this cheque pending the issue to you of units to the value of $400,000 in the unit trust which you are aware I am currently establishing (“the Trust”);
(c) I will establish the Trust as soon as possible, and transfer into it the assets which we have previously discussed, including my shares in:
(i) Australian Communications Territories;
(ii) ACN Communications; and
(iii) Global Communications Network; and
(d) you will be issued with units to the value of $400,000 as agreed once the Trust is established and the relevant assets transferred into it.
Please confirm that these arrangements are appropriate for the settlement of the sale.”

17 In response to this draft letter, on 7 February 2001 Ralph Ayling of Minter Ellison, wrote on behalf of Sirius Corp to Adrian Lawrence of Baker & McKenzie, on behalf of Mr Evans, concerning "Sale of MV Sunrise", stating inter alia:

“We refer to the draft letter from Richard Evans attached to your email. As discussed, our clients (sic) position is as follows:
1. Our client requires that consideration for the $400,000 part of the purchase price for MV Sunrise, whether in the form of a bank cheque or transfer of shares, be given at settlement. If the payment is not to be by bank cheque, then our client must be provided with a satisfactory valuation in relation to the shares and all legal issues surrounding the transfer are to be satisfactory to our client.
2. As you are aware, a contract for sale between Richard Evans and Sirius Shipping Co was executed by the parties and was due to settle on 15 January 2001. This did not occur and since then the parties have been in negotiations with a view to signing a revised agreement. This has not yet occurred. Our client requires that settlement occur by 16 February 2001. If settlement has not occurred by this date, our client will rescind the contract, and if so, will reserve all his rights in relation to it".

18 As to financing the purchase on 12 February 2001 Ralph Ayling and Neroli Butt of Minter Ellison wrote to Adrian Lawrence of Baker & McKenzie, asking inter alia:

“What is the status of your client’s financing of the acquisition of MV Sunrise. Please send us a copy of his offer of finance.”

19 The result of these and similar communications at this time, concerning the manner of payment of the $400,000 part of the purchase price, was that a second agreement for sale of the ship was made on or about 21 February between Mr Evans and Sirius Corp (“February agreement”).

20 On 21 February Mr Sirius executed the agreement for sale of MV Sunrise, between Sirius Corp and Mr Evans. Recital C stated:

“On 21 December 2000, the parties executed a contract for the sale of MV Sunrise. The parties wish to vary that contract and this agreement varies the earlier contract and replaces it entirely.”

21 The agreement relevantly included the following terms:

Sirius as beneficial owner agrees to sell MV Sunrise to Evans and Evans agrees to buy MV Sunrise:

(a) for the Purchase Price;

(b) free from any Encumbrance;

(c) with effect from Completion

4. PURCHASE PRICE

The Purchase Price for MV Sunrise is A$1,000,000 to be paid to Sirius as follows:

(a) $600,000 by way of bank cheque; and

(b) $400,000 to be by way of transfer of the Shares

Evans will pay the Purchase Price to Sirius (or as Sirius otherwise directs) at Completion.

5.1 Time and place

Completion will take place on or before the Completion Date at Minter Ellison, 88 Phillip Street, Sydney or such other place or time as the parties agree.

Clause 5.1 above is conditional upon Sirius being able to complete the importation of MV Sunrise prior to the Completion Date.

22 While this negotiation, contracting and adjusting contractual rights was going on between Sirius and Mr Evans, Mr Evans was endeavouring to obtain finance for the purchase. He was unsuccessful in his initial attempts, including an attempt to raise finance from the National Bank of Australia. As a result, he sought the assistance of a finance broker, Hunt Pacific Finance Pty Limited (“Hunt Pacific”). Hunt Pacific became the third relevant person/ third cross-defendant in these proceedings.

23 Hunt Pacific introduced Mr Evans to Capital Finance. Having been refused a loan by National Australia Bank, a loan application to Capital Finance was arranged for Mr Evans by Hunt Pacific. A document titled application for finance was in fact made out on behalf of Mr Evans, addressed to Capital Commercial Finance Limited, by Adam Tilley of Hunt Pacific.

24 In setting out the facts it is sufficient to note that the identity or even the existence of a company known as Capital Commercial Finance Limited has not been ascertained in these proceedings. It is not a party to the introducer agreement relied on by Capital Pacific in its claim for indemnity against Hunt Pacific. For the present purposes I will assume that the relevant finance company that Hunt Pacific dealt with was Capital Finance.

25 Hunt Pacific carried out the credit and background check on Mr Evans, but never performed a title check, leaving that task to Capital Finance.

26 Capital Finance paid out $600,000 in respect of the transaction. It would seem that it made this payment in the belief that there was to be a sale from Sirius to Capital Finance and then a hire purchase agreement between itself and Mr Evans. However, the documentation of such a transaction is incomplete.

27 The $600,000 was paid to Minter Ellison’s trust account and, in due course, less proper deductions found its way to Sirius.

28 A fax without date from Robynne Girvan of Hunt Pacific to Mr Sirius, states:

“This is to confirm that we have received the settlement advice from Capital Finance for $600,000 to be paid into your elected account (Minter Ellison Trust Account).”

29 On 21 February 2001 Ralph Ayling of Minter Ellison wrote to Adrian Lawrence of Baker & McKenzie stating:

“I confirm we have now received $600,000. Attached is a clean copy of the Agreement for sale of MV Sunrise for execution by Richard Evans. Please call me when it has been signed so we can arrange for exchange and settlement.”

30 The ship was subsequently delivered to Mr Evans, by Sirius authorising the keeper of the relevant marina to hold it in accordance with Mr Evens’ instructions. The exact date is unclear, but it appears to be about 26 February 2001. This is the date of delivery noted in the Deed of 11 March 2003 to which I will subsequently refer.

31 There is no evidence of any delivery or constructive delivery of the Sunrise to Capital Finance.

32 On 26 February 2001 Ralph Ayling or Neroli Butt of Minter Ellison were able to write to Mr Sirius, concerning "Sale of MV Sunrise", confirming receipt of the “original agreement for sale executed by Richard Evans”, although the document itself is not in evidence. This may explain why the February agreement is referred to by the parties to the deed of 2003, referred to below as an oral agreement.

33 The evidence shows that by the end of February 2001, Sirius was able to confirm that settlement had taken place. However, it is clear that the $400,000 part of the purchase price, in the form of shares due on settlement, was never paid by Mr Evans.

34 Mr Evans completed an individual motor term purchase with Capital Finance with the commencement date of 16 February 2001. The terms of the agreement provide for the hire of the ship from Capital Finance. The “drawdown amount” was stated as $600,515.

35 Capital Finance claims that it obtained title pursuant to a valid agreement with Sirius to sell the ship to Capital Finance, as evidenced by a tax invoice which appears to have been issued by Mr Sirius on behalf of Sirius. On what appears to be the letterhead of Sirius Shipping Co (which is denied by Mr Sirius), the contents of the copy of the tax invoice purport to record the sale of the ship to Capital Finance by Sirius as follows:

15 February 2001

TO: Capital Finance Australia Limited
A.B.N. 23 069 663 136
Level 1, 88 Phillip Street
PARRAMATTA NSW 2150

TAX INVOICE

SUPPLY: Used 1994 Marubeni Symbol twin-screw flybridge motor yacht. Length 20.7m beam 4.7m. Reg no. KR1172 (1999) Hull No. MML66001A393.

Total Price G.S.T Inc. (AUD) $1,000,000.00
Less Deposit Paid (AUD) $400,000.00

AMOUNT PAYABLE (AUD) $600,000.00

FOR DELIVERY TO: Richard Evans

3/156 Canterbury Rd.

Canterbury NSW 2193

To be moored at: Elizabeth Bay Anchorage – Mooring No. 8

Account Details: Minter Ellison Trust Account

ANZ Bank Cnr. Pitt and Hunter

BSB: 012-003

Account No: 5932317

36 Two copies of the tax invoice are in evidence, PX46A and PX46B, neither is an original, neither is signed, nor is there any obvious provision for signature. 46B appears to be a copy that was faxed through to Capital Finance. It is identical to 46A save for (a) a fax line at the top showing it came from 9365 6350; (b) a hand written number 9232-1799; and (c) ticks against the details.

37 The tax invoice is headed in bold type “Sirius Shipping Co” and then follows in about 10 point type:

ABN10094824923
c/o Minter Ellison Lawyers
Level 14 Lumley House, 309 Kent St,
Sydney NSW 2000
Ph [phone] Fax [phone]

38 At the relevant time, Minter Ellison conducted their Sydney practice at 88 Phillip Street, Sydney and did not have the telephone or fax numbers quoted on the tax invoice.

39 In affidavit evidence and under examination Mr Sirius has denied issuing, authorising or having any knowledge of the Tax Invoice. He denied that the letterhead was his company’s letterhead. However, it would seem that Sirius did not have a stock of printed letterheads as one might do in the middle of the 20th Century, but computer generated a letterhead when required.

40 On 11 March 2003 Sirius Corp executed a deed with Mr Evans, containing a retention of title clause. The deed also usefully summarizes events that took place following the February agreement. It relevantly provides:

A. A written Agreement dated December 2000, was subsequently varied by an oral agreement in or about January 2001 (Agreement).

B. Sirius has alleged certain breaches of the Agreement by Evans.

C. Evans denies these breaches.

D. The parties wish to settle this dispute and mutually agree that the Agreement is to be interpreted on the following terms and conditions.

………………………………………………

2. Original Agreement

2.1 Sirius agreed to sell Richard Evans in his personal capacity, and Richard Evans agreed to purchase a motor vessel registered number KR1172 hull number MML66001A393 (Vessel).

2.2 Payment was to be in two parts. One payment of $600,000 and another of $400,000. It is agreed that Sirius received the payment of $600,000, but did not receive the payment of $400,000.

2.3 Sirius and Evans further agreed, that Sirius would loan Evans an amount of $160,000. On or about 20th March 2001 Sirius caused $160,000 to be transferred to an account nominated by Evans.

2.4 Sirius further agreed with Evans, and Evans agreed with Sirius, that Sirius would loan Evans an amount of $12,000. On or about 20th September 2001 Sirius caused $12,000 to be transferred to an account nominated by Evans.

2.5 Sirius and Evans further agreed that Evans would give Sirius 9% in voting rights of the shareholding in any company Evans develops, including but not limited to Sacret Pty. Limited, Sacret Communications Pty. Limited, Australian Communications Territories Pty. Limited.

(a) That Sirius would first offer for sale the shares Sirius held to Evans;

(b) That Sirius would not dilute the shareholding held by Sirius.

2.6 Evans agreed with Sirius, and Sirius with Evans, that Evans would pay Sirius an amount of $630 per week commencing 21 days after delivery of the Vessel until the debt is paid in full, including all interest whether current or accrued. Evans and Sirius agree for the purpose of this deed that the Vessel was delivered on 26th February 2001.

2.7 Evans agreed with Sirius, and Sirius agreed with Evans, that the said $630 per week was interest on all moneys from Sirius to Evans. Including, but not limited to, the unpaid $400,000 on the vessel and on the $160,000 to be advanced. It is agreed that there was no additional interest on the $12,000 advanced.

2.8 Evans agreed with Sirius, and Sirius with Evans, that the Vessel would remain as security for Sirius. That is to say, Sirius has and is entitled to retain the title on the Vessel (commonly known as a retention of title clause) until all finds are paid from Evans to Sirius in full, including interest.

3. RETENTION OF TITLE

3.1 Notwithstanding delivery of the Vessel to Evans, until Evans’ debt with Sirius is paid in full:

(a) legal title to the Vessel will remain with Sirius;

(b) the risk in the Vessel will pass to Evans on delivery to Evans or his agent;

(c) the relationship between Evans and Sirius will be fiduciary;

(d) Evans will:

(i) Hold the Vessel as bailee for Sirius;

(ii) Keep the Vessel separate from other goods; and

(iii) Label the Vessel so that it is identifiable as Sirius’;

(e) with Sirius’ consent (which is given), Evans is at liberty to sell the Vessel, in the ordinary course of business, provided that the money resulting from the sale will:

(i) be held in a separate account, Sirius Lawyers trust account for Sirius;

(ii) not be mingled with other money; and

(iii) not be placed into an overdrawn account; and the sale price be agreed to in writing by Sirius.

3.2 Evans is not an agent of Sirius in any sale of the vessel by Evans.

3.3 Evans and Sirius agree that Sirius has, and is entitled to, a registrable interest as defined in section 3 of the Registration of Interests in Goods Act 1986, and any agreement, including this deed, is to be interpreted so that Sirius’ registrable interest is maintained.

………….

41 In cl 3.5 of the deed, Evans and Sirius agreed that Sirius has, by way of security, an interest in the Vessel and Intellectual Property developed and any interpretation of this deed shall be interpreted so that Sirius secured interest is maintained.

42 Clause 4 of the deed sets out a “Payment structure” in relation to the shares, the types of interest in Mr Evans’ companies, and intellectual property rights granted by Mr Evans to Sirius.

43 In relation to the ship, sub-clauses 5.4 and 6.2 relevantly state:

5.4 Upon full and final payment Sirius shall release Evans, from the secured Interests on the Vessel …
6.2 …Sirius may without demand retake possession of the Vessel … and may without notice sell the Vessel …

44 On 17 June 2003 Sirius issued a notice of default to Mr Evans pursuant to the deed for failure to meet payment and accounting obligations. Sirius gave notice it would terminate the agreement and recover the property secured by the deed.

45 On 27 August 2003, Sirius through its lawyers gave notice to Richard Evans that it was terminating the deed for breach, and demanded the immediate return of the ship.

46 Previously, and on 17 April 2003 Capital Finance issued a notice after taking possession of goods as a result of default by Mr Evans under the hire purchase agreement. The Notice shows the date custody was taken as 16 April 2003.

47 On 18 July 2003, Sirius Corp through its lawyers gave notice to Capital Finance of its proprietary interest in the ship.

48 Further and in the alternative to its claim as purchaser as evidenced by the tax invoice which I have set out above, Capital Finance says that Sirius is estopped from asserting legal title in the ship as a result of representations that were made to Capital Finance, specifically the tax invoice, that title to the ship would be transferred upon payment of the $600,000, or that Sirius is estopped by failing to inform Capital Finance of the truth when it was aware of the assumption as to title upon which Capital Finance relied in making the payment.

49 Finally, that Capital Finance seeks repayments under the principles of restitution of the $600,000 as a mistaken payment.

50 Sirius says that it was the intention of the parties to an agreement for the sale of the ship that property was not to pass until payment to it in full of the purchase price of $1,000,000. Sirius further relies upon the retention of title clause contained in the 2003 deed.

51 Sirius maintains that it is the true owner of the ship and denies making any representations that would found an estoppel preventing it asserting title in the ship and recovering possession from Capital Finance.

52 As to the claim for restitution of the $600,000, Sirius says that if Capital Finance is prima facie entitled to recover the mistaken payment, it has a valid defence of change of position.

53 Although Mr Evans was duly served, he did not appear. However, in a note tendered in evidence, he renounces any claim he might have upon the ship in favour of Sirius.

54 The only additional fact to which I need refer at this stage is that an agreement called an “Introducer Agreement” had been entered into between Hunt Pacific and Capital Finance. Hunt Pacific was joined by Capital Finance in order to claim an indemnity pursuant to this introducer agreement. If, of course, Capital Finance succeeds in its claim against Sirius, the issue of the indemnity does not arise.

55 As is obvious from the above, quite difficult questions of fact arise. First, there are multiple versions of the arrangement between Sirius and Mr Evans added to which is the 2003 deed which may be an afterthought or may represent what actually occurred.

56 Then there is the allegedly forged tax invoice and the presentation of a scenario that a finance company would pay out $600,000 when there was no proper documentation and no check as to title to the ship.

57 I consider that I can best deal with the matters arising in this case under the following heads:

1. Threshold Issues.

2. What was the legal situation between Sirius and Mr Evans as at 26 February 2001?

3. What, if anything, is the effect of the tax invoice?

4. Does Capital Finance have a better title than Mr Evans?
5. What, if any, is the effect of the 2003 deed?

6. Is there an effective retention of title clause by virtue of the deed?

7. Can Capital Finance assert a better title to the ship than Sirius Corp?

8. Other issues.

9. What is the overall result of the case?
I will deal with these issues in turn.

58 1. Threshold Issues. A matter which initially concerned me was that this is an action in rem, yet I am asked to consider questions of estoppel and other personal factors. What place do these matters have in an action in rem?

59 However, these problems vanish once one realises what an action in rem in Admiralty really is. It is not like a Probate suit where the court is making a declaration as against all the world as to what was the last will of a testator. The action is called an action in rem, because the Admiralty Court only had jurisdiction if the res, ie the ship, was within the jurisdiction when the writ was served on the ship: see The Dictator [1892] P 304 and Aichhorn & Co KG v The Ship MV “Talbot” (1974) 132 CLR 449.

60 Traditionally a writ in Admiralty is directed to “The owners and all others interested in the ship X” (though the modern form as issued in the present case merely says “By this Writ the plaintiff commences action against the ship”). That is why the various parties are referred to as “First Interested Party” etc.

61 However, if a ship and all claimants to the ship are within the jurisdiction, either a an action in rem or a personal action at common law can be commenced with the same result (save for those caused by procedural differences): see The Dictator at p 310 and Re Five Steel Barges (1890) 15 PD 142.

62 Thus, the approach I must take to the problems in the instant case are in no wise affected by the form of the action.

63 The next matter of concern is how one transfers the legal ownership of a ship.

64 A ship is a unique piece of property. Most transactions involving transfer of property in a ship refer to a registered ship and are dealt with under the relevant statute. However, the Sunrise is unregistered.

65 Transfer of property in physical personal property is usually by delivery. However, it has been held that this is impracticable in the case of a ship. In Hooper v Gumm (1867) 2 Ch App 282, 290, Turner LJ said:

“I am of opinion that the purchaser is bound to make enquiry into the title. A ship is not like an ordinary personal chattel: it does not pass by delivery, nor does possession of it prove title to it.”

66 It must be remembered, as Zeeman J pointed out in Devine Shipping Pty Ltd v BP Melbourne (1994) 3 Tas R 456, 465, the Hooper case was decided before the enactment of the Sale of Goods Act and cannot represent the modern law. See also Naamlooze Vennootschap Vredobert v European Shipping Co Ltd (1924) 20 Ll LR 296, 300. See also Tisand Pty Ltd v The Cape Moreton (2005) 143 FCR 43, 76.

67 Furthermore, in the case of an ordinary chattel, possession is prima facie evidence of title: The Winkfield [1902] P 42. It is difficult to see why possession is not at least some evidence of title, even if one has to make allowances for the inherent nature of a ship.

68 There is very little learning in the books as to how one passes property in an unregistered ship. There is authority that the transaction should be carried out by bill of sale, but that this is not absolutely necessary and that property may pass without writing: see Davies & Dickey, Shipping Law 3rd ed (Law Book Co, Sydney, 2004) p 91 and cases there cited.

69 In Manchester Ship Canal Company v Horlock [1914] 2 Ch 199, 207, Swinfen Eady LJ said that property would pass by contract and an order for delivery by the seller and in The James W Elwell [1921] P 351, 368 Hill J said that a sheriff could sell an unregistered ship and sell and transfer it just like any other chattel at common law.

70 In Gamer’s Motors Centre (Newcastle) Proprietary Limited v Natwest Wholesale Australia Pty Limited (1987) 163 CLR 236 at 255, Brennan J noted that at common law, property in personal chattels passed upon the delivery of possession, actual or symbolic.

71 There is abundant modern authority for the propositions that a ship is “goods” and that the Sale of Goods Act applies to sale of a ship; see eg Tisand Pty Ltd v The Cape Moreton (2005) 143 FCR 43, 76; Behnke v Bede Shipping Co Ltd [1927] 1 KB 649, 659; Commonwealth v Mort’s Dock and Engineering Co Ltd (1962) 80 WN (NSW) 89, 91; Bank of NSW v Palmer (1970) 91 WN (NSW) 580 and Devine Shipping Pty Ltd v BP Melbourne (1994) 3 Tas R 456. No-one has argued to the contrary in the present case.

72 Section 22(1) of the Sale of Goods Act 1923 provides that property passes when the parties intend it to pass. Section 22(2) states that in determining the intention of the parties “regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.” Section 23 further states:

“Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which property in the goods is to pass to the buyer.
Rule 1. Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed."

73 Capital Finance and Hunt Pacific contend that the intention of the parties was for property to pass according to rule 1, when the contract was made. Sirius contends that rule 1 does not apply by virtue of a different intention appearing.

74 The machinations of Sirius and Mr Evans in endeavouring to reach some finality as to the sale agreement, make it difficult to divine their intention as to when property was to pass. One’s best guess is that it was to pass on completion.

75 It seems to me that the situation is not unlike that commented upon by Windeyer J in City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477, 488, where he said:

“The parties contemplated that upon receiving 1,250 [pounds] the appellant would transfer its ownership to the vehicle to whoever paid the money, a finance company or the respondent.”

76 The question might well be asked as to whether completion ever did take place.

77 Normally, completion would involve payment or the securing of the whole purchase price: part payment is normally insufficient; see the City Motors case and Re Anchor Line (Henderson Bros) Ltd [1937] Ch 1. However, in the instant case, the balance of the purchase price was to be made in the transfer of shares and the parties actively pursued this in February-May 2001. The shares later were found to be worthless, but this seems immaterial on this aspect of the case.

78 It may well be that the parties left the transaction in March 2001 in a state less perfect than Sirius would have wished at the commencement of the transaction. However, it was making it would seem a considerable profit on the deal and seemed to have secured its purchase price. It received $600,000 cash, it was to receive shares and it handed over the keys to the ship to the order of Mr Evans. I consider that this amounted to completion.

79 However, the payment made to Sirius and the constructive delivery on 26 February (or mid March), would indicate that, unless the 2003 deed bears on the issue, that property in the Sunrise passed to Mr Evans at that time.

2. What was the legal situation between Sirius and Mr Evans as at 26 February 2001?

80 The answer to this question is complicated by the fact that agreements were drawn up and signed and then apparently superseded by other agreements when Mr Evans could not comply with them.

81 One starts with the proposition that as at the beginning of 2001, no-one disputes that Sirius had the best title to the Sunrise. Thus any title to the ship must be derived from some transaction with Sirius in 2001 or later or claim the benefit of some estoppel or other presumption that operates against Sirius.

82 A further complication for the court is that Mr Evans did not give evidence, Capital Finance appears to have left over much to Hunt Pacific and there is virtually no evidence to explain the documents that came into Capital Finance’s possession before it paid out $600,000.

83 It is common knowledge that the way the present sort of transaction proceeds is that the seller sells the goods to the financier, the financier pays the seller for the goods and then leases or lets them out on hire purchase to the buyer.

84 The documents produced to the court in the instant case suggest that, after some failed attempts at other arrangements, the ship was to pass to Capital Finance and would then be let to Mr Evans on hire purchase.

85 Unfortunately, Capital Finance appears to have left too much to the finance broker and, did not itself deal with Sirius except that it received the tax invoice to which I have already referred and paid $600,000 to Minter Ellison’s trust account.

86 The hire purchase agreement bears date 16 February 2001 and is PX54. It is an odd document, the form chosen for use is a form for hire purchase of a motor vehicle to an individual.

87 Most of the relevant part of the agreement is a printed set of conditions to which it is unnecessary to refer. I will, however, mention a few of them.

88 Clause 3 of the terms and conditions is headed "Hirer’s Option To Purchase During Term" and reads:

"3. Hirer may at any time during the term, provided it is not in default, purchase the Goods by paying Capital the Early Termination Amount, whereupon the hiring will end.”

89 Clause 7 headed "Capital’s Title to the Goods", states in sub-cl 7.1:

"7.1 Apart from the right of property or interest accruing to Hirer by operation of clause 3, Hirer acknowledges that the Goods remain Capital’s property at all times, that Hirer’s rights hereunder are personal and as bailee only, and that it has no authority to deal with, and agrees not to purport to deal with, or share or transfer possession of the Goods…”

90 Clause 8 headed "Rights & Obligations Upon Expiration of Term", states in sub-clause 8.1:

"8.1 If, at the end of the term, Hirer has paid all moneys due under this Agreement, title to the Goods will then vest in Hirer."

91 The crucial point to my mind was that the Sunrise was constructively delivered to Mr Evans. Indeed in cl 2.6 of the 2003 Deed it was noted that:

"Evans and Sirius agree for the purpose of this deed that the Vessel was delivered on 26th February 2001."

92 26 February 2001, may not be the actual date of delivery. Sirius had imported the ship from Hong Kong and the Australian Government required a Quarantine inspection and customs duty to be paid. These matters were completed by mid March 2001 and the marina was instructed to hold the ship for Mr Evans from that time.

93 Had it not been for the various changes in the agreements drafted to effect the transaction between Sirius and Mr Evans, one would be able to draw the inference from Sirius receiving the $600,000 from its solicitors and delivering to the keeper of the relevant marina an authority to hand the Sunrise over to Mr Evans, that it must have concurred in the sale of the Sunrise to Capital Finance so that it could let it on hire purchase to Mr Evans.

94 It is difficult to see why those machinations should affect the result as Sirius received the $600,000 and handed over the Sunrise to Mr Evans.

95 Thus, in my view, as at 26 February 2001, subject to there being a retention of title clause, Mr Evans had the better right to the Sunrise than Sirius.

96 3. The Tax Invoice. I need to determine whether I should accept this document at its face value or else accept Mr Sirius’ denial of the document.

97 Mr Sirius was cross-examined at some length. Unfortunately some of that cross-examination was misdirected as the cross-examiner had in mind that Sirius had a sheaf of pre-printed letterhead, whereas Mr Sirius repeatedly said that he created a piece of letterhead when it was needed.

98 The details as to Sirius and Minter Ellison on the invoice make it unlikely that the document was generated by either of these two entities.

99 Mr Sirius was a believable witness. I find no reason to doubt his evidence that the tax invoice was not Sirius’ document. Indeed this fits in with other evidence referred to in the preceding paragraph.

100 However, Miss Girvan, a former employee of Hunt Pacific was convinced that she had spoken to Mr Sirius over the telephone and that she had direct contact with him. Miss Girvan presented well and gave her evidence clearly and confidently. Counsel opposing Sirius submitted that I should prefer her evidence to that of Mr Sirius, particularly as she was more or less independent being a former employee. However, my view is that Mr Sirius’ evidence accords more with the document and I think Miss Girvan’s memory must be faulty.

101 How then did the tax invoice come to be generated?

102 There is insufficient material to answer this question beyond reasonable doubt. However, on the balance of probabilities, having accepted Mr Sirius’ denials, the most likely answer is that it came from Mr Evans.

103 The document would thus not have any value so far as the title to the ship is concerned.

104 It follows that insofar as Capital Finance relies on the tax invoice to make out its claim to have taken good title directly from Sirius Corp (as opposed to Mr Evans), this claim cannot be sustained. However that may not be the end of the matter as appears in subsequent paragraphs.

105 4. Does Capital Finance have a better title than Mr Evans? This raises several sub-issues:

(a) The hire purchase agreement;

(b) Does s 28(2) of the Sale of Goods Act 1923 (NSW) protect Capital Finance?

(c) Did delivery of the ship to Mr Evans on 26 February 2001 feed title to Capital Finance?

106 (a) I have already set out the key points of the hire purchase agreement. The agreement clearly identifies the goods and Mr Evans clearly acknowledges that he is the hirer of the Sunrise and that Capital Finance is the owner.

107 (b) Section 28(2) of the Sale of Goods Act, provides that if a person with the seller’s consent obtains possession of goods, the delivery of such goods to another in good faith and without notice shall have the same effect as if that other obtained the goods through a mercantile agent.

108 The operation of s 28 can be most complicated. However, in the present case it operates so that if Mr Evans had possession with the consent of Sirius then he could validly transmit the Ship to Capital Finance even if he did not have title.

109 In my view, the entering into the hire purchase agreement (at least after mid March 2001) had the effect of acknowledging that there had been a transfer of the ownership of the Sunrise to Capital Finance.

110 (c) Did delivery of possession of the ship to Mr Evans feed title to Capital Finance? A common law exception to the nemo dat rule, unaffected by the Sale of Goods Act or the Factors legislation, is that where a seller without good title subsequently acquires title to the chattel, the seller’s title is fed to the second person, and any subsequent purchaser: Patten v Thomas Motors Pty Ltd (1965) 66 SR (NSW) 458.

111 The requirements are that the purchaser (Capital Finance) must act without notice of the defect in title, and the seller (Mr Evans) must acquire a clear title prior to the termination (by Sirius) of the contract between the original seller (Sirius) and the first buyer (Mr Evans): Lucas v Smith [1926] VLR 400.

112 It would seem to me that this principle also applies to protect Capital Finance.

113 Thus whichever way one looks at the matter, Capital Finance has a better title than Mr Evans who has a better title than Sirius.

5. What, if any, is the effect of the 2003 deed ?

114 As I noted in Interco Pty Ltd v Schiavello Systems (NSW) Pty Ltd [2006] NSWSC 58, there is no use parties, after a contract has been made and partly or fully executed, later attempting to rewrite it.

115 Insofar as the 2003 seeks to reverse passing of property effected in 2001, the 2003 deed has virtually no effect, particularly as regards a third party. The deed is limited to clarifying and settling disputes as to personal rights between the parties and the deed can also operate by way of creating admissions against interest or raising estoppels.

6. Is there an effective retention of title clause by virtue of the deed?

116 The principal effect of the deed, if efficacious to do this, is to say that the possession of Mr Evans of the Sunrise was subject to retention of title in Sirius until full payment has been made.

117 Section 24(1) of the Sale of Goods Act permits the seller to:

“Reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are met.”

118 Sirius claims that the retention of title clause contained in the deed made 11 March 2003 has this effect.

119 In Dennant v Skinner [1948] 2 KB 164 it was held that where property passed pursuant to the equivalent provision to s 23, Rule 1 of the Sale of Goods Act upon the making of the contract, it was not possible for the seller to make a post-contractual reservation of title. Thus H Hallett J stated (at 172):

“...in my judgment it [ownership] had passed upon the fall of the hammer, and if subsequently the bidder executed the document acknowledging that ownership of the vehicle would not pass to him, that could not have any effect on what had already taken place. ”

120 There is no material to suggest that there was any concluded agreement between Sirius and Mr Evans prior to 26 February 2001 that Sirius would retain title until paid in full. The involvement of a financier who provided the $600,000 demonstrates that this must have been the case.

121 Although Sirius may not have been aware of the existence of Capital Finance, it must have recognized from the whole tone of the negotiations that Evans was unable to pay the $600,000, the fairies did not put it into Minter Ellison’s trust account, therefore it probably came from a financier and that that financier would take security.

122 Indeed, the whole of the evidence (with some minor exceptions) suggests that in all the circumstances, title to the ship was intended to pass to Mr Evans (or perhaps the financier) no later than "completion" which, as I have said, was treated for all practical purposes as having occurred when the possession of the ship was passed over after the $600,000 had been paid.

123 Thus the retention of title clause in the 2003 deed cannot affect the legal position.

7. Can Capital Finance assert a better title to the ship than Sirius ?

124 It follows that as Mr Evans had a better title than Sirius and Capital Finance has a better title than Mr Evans and the 2003 deed does not assist Sirius, that Capital Finance must have the best title to the Sunrise.

125 8. Other issues. In view of my findings and analysis, it is unnecessary to deal with questions of estoppel, subrogation, restitution or any liability of Hunt Pacific obliged to indemnify Capital Finance for not obtaining good title. In particular, I need not consider the extensive submissions as to whether there can be estoppels against Sirius in favour of Capital Finance when Sirius may well not have known of its existence. I am also absolved from examining closely the rather irregular way in which Capital Finance repossessed the ship.

126 9. The overall result of the case. The claim by Sirius must be dismissed and a declaration made on the first cross claim in accordance with prayers (a) and (b) that Capital Finance is the owner of the Sunrise and for encumbrances to be removed. The second cross claim is dismissed as being otiose.

127 As to costs, the plaintiff and the first interested party must jointly and severally pay the costs of Capital Finance.

128 As to the second cross claim, I will reserve costs. It may be that there is some commercial arrangement between the parties which makes consideration of the question unnecessary. In any event, I have not heard the parties on the issue.

129 The exhibits may be returned to the party producing them after 28 days or, if an appeal is lodged they are to be retained pending the determination of the appeal.

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