Translink Pacific Shipping Ltd v Baltic Shipping Co

[1994] FCA 1095

BETWEEN: TRANSLINK PACIFIC SHIPPING LIMITED
and
BALTIC SHIPPING COMPANY
AND
THE SHIP KOMSOMOLSK AS THE SURROGATE FOR
THE SHIP DEKABRIST
No. WAG 107 OF 1994
FED No. 1095/94
Number of pages - 6
Shipping and Navigation

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY IN ADMIRALTY
LEE J

CATCHWORDS

Shipping And Navigation - Admiralty - proceedings in rem brought against vessel as a surrogate ship under s 19 of the Admiralty Act 1988 - application for release of vessel on the ground that arrest was unjustifiable and wrongful - ownership of vessel in issue - commencement of consecutive separate proceedings against defendant and arrest of second vessel - whether an oppressive step.

Admiralty Act 1988 ss 19, 19(b), 20
Admiralty Court Act 1861 (UK) s 5
Supreme Court Act 1981 (UK) sub-para 21(4)(b)(i)

Admiralty Rules

Kali Boat Building and Repair Pty Ltd v The Motor Fishing Vessel "Bosna" (1977) 19 SASR 112
Maritime Trader (1981) 2 Lloyds Reports 153

HEARING

PERTH, 6 October 1994
#DATE 6:10:1994
#ADD 4:6:1996 $NORDER THE COURT ORDERS THAT:

1. The ship MV Komsomolsk be released from arrest.

2. The defendant to file an undertaking in the terms stated by counsel for the defendant, such undertaking to be under the seal of the defendant and to be filed by 10 October 1994.

3. The proceeding be stayed until further order.

4. There be liberty to apply to remove the stay on presentation of appropriate affidavits in support of the application.

5. Costs reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Counsel for the Plaintiff : S J Archer

M G Pendlebury

Solicitors for the Plaintiff : Clayton Utz

Counsel for the Defendant : C L Zelestic, QC

K J Martin

Solicitors for the Defendant : Cocks Macnish

JUDGE1

LEE J On 30 September 1994 the ship MV Komsomolsk ("the Komsomolsk") was arrested in Gage Roads at the port of Fremantle pursuant to an action in rem for a general maritime claim commenced in the Admiralty jurisdiction of the Court by Translink Pacific Shipping Limited, ("TPS") against the Komsomolsk and Baltic Shipping Company ("Baltic"). The general maritime claim was said to be for the amount US$281,828.87 paid by TPS as "ship's husbandry agent" on behalf of the ship MV Dekabrist ("the Dekabrist") owned by Baltic. TPS claims that Baltic is the owner of the Komsomolsk and that TPS is entitled to commence an action in rem against the Komsomolsk as a surrogate ship under s 19 of the Admiralty Act 1988 ("the Act").

1. Baltic has made application for the release of the Komsomolsk under r 52 of the Admiralty Rules ("the Rules") on the ground that the arrest of the Komsomolsk was unjustifiable and wrongful. Baltic claims that it was not the owner of the Komsomolsk at the date of the commencement of the proceedings and, therefore, the Komsomolsk is not a surrogate ship of the Dekabrist. Baltic also seeks a stay of the proceeding commenced by TPS.

2. Baltic is the owner of a number of ships. In about 1993 it entered charter party agreements with a company associated with TPS, Translink Shipping Limited, ("Translink") under which Translink chartered from Baltic approximately 18 vessels.

3. Certain disputes under the charterparty agreements and ancillary agreements arose between Translink and Baltic between 1993 and 1994.

4. In July 1994, in response to Baltic's claim for the hire by Translink under the charterparty agreements and other claims, Translink claimed to set off a sum of US$1,027,027.56 as the amount of a claim assigned to it by TPS under which TPS claimed from Baltic payment of disbursements made by TPS on behalf of various ships owned by Baltic including the Dekabrist.

5. In August 1994 Translink and Baltic entered into a conciliation and arbitration agreement in an attempt to resolve their dispute. The agreement identified all disputes which fell within the terms of the agreement and it included the claim that Translink was entitled to set off against any sum found to be due from Translink to Baltic the amount of the claim against Baltic assigned to Translink by TPS.

6. The conciliation process commenced in London on 12 September 1994 and was terminated on 26 September 1994 at which point, pursuant to the terms of the agreement, the conciliators became arbitrators of the dispute and the arbitration was deemed to have commenced on the date of the agreement. Evidence received in the conciliation proceeding was evidence in the arbitration.

7. On 26 September 1994 Baltic sought an interim award in the sum of US$11,429,906.02. On the same day Translink advised the arbitrator that Translink had purported to reassign to TPS the claim against Baltic and that Translink did not wish to have the arbitrators determine that claim in the arbitration.

8. Baltic contends that as possessor of a claim by assignment Translink had submitted that claim to arbitration and could not unilaterally withdraw the claim from arbitration by purporting to assign it to TPS. Further, Baltic contends that if reassignment of the claim has been effected it is an assignment of the claim as determined by the arbitration. As will appear in these reasons it is unnecessary for me to determine whether those arguments will succeed.

9. I note that under an interim award made on 4 October 1994 the arbitrators have awarded Baltic US$7,610,732.70 against Translink and it found that the evidence put before the arbitrators did not support making an award on the claim assigned to Translink by TPS.

10. Rule 52 enables a party to a proceeding in Admiralty to apply to the Court for the release of a ship or other property that is under arrest in the proceeding. On such an application the Court "may order the release from arrest of the ship or property on such terms as are just" (sub-r 52(3)). The discretion of the Court in determining first, whether there should be a release and second, whether any conditions should be imposed on the release is unfettered.

11. The matters I have taken into consideration in determining what order, if any, should be made under r 52 are as follows.

12. First, the TPS has arrested recently three other vessels owned by Baltic, each arrest being based on part of the claim against Baltic assigned by TPS to Translink and reassigned from Translink to TPS. In particular, TPS has instituted a separate proceeding in this Court being a consecutive proceeding no. WAG108 of 1994 pursuant to which the MV Anatoliy Vassiliev ("the Anatoliy Vassiliev") has been arrested as a surrogate ship of the MV Warnemunde ("the Warnemunde"). I understand that the Anatoliy Vassiliev was arrested in the port of Adelaide yesterday. In support of the application for the arrest of the Anatoliy Vassiliev, and for the arrest of the Komsomolsk, it was deposed on behalf of TPS that a sum of US$1,027,027.56 was claimed to be owing to TPS by Baltic including US$281,828.87 for amounts paid by TPS on behalf of the Dekabrist, and US$218,910.96 for amounts paid on behalf of the Warnemunde.

13. On the face of this matter and matter no. WAG108 of 1994 there appears to be no reason why the claim in rem in this matter could not have been joined with the claim in matter no. WAG108 of 1994 for the arrest of a single surrogate ship likely to provide sufficient security for TPS in respect of its claim against Baltic.

14. Article 3(3) of the International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships made in Brussels on 10 May 1952 ("the Arrest Convention") provides that no more than one ship is to be arrested in respect of a single maritime claim. Section 20 of the Act does not appear to go as far as the Arrest Convention in that it only prohibits the service of an initiating process on a ship when such an initiating process in the same proceeding has already been effected on another ship. The initiating process served on the Komsomolsk and on the Anatoliy Vassiliev relate to different proceedings in this Court.

15. Second, on 5 October 1994 Baltic obtained an order from Justice Mance in the Queens Bench Division of the High Court of Justice in England restraining TPS and Translink from commencing any further legal proceedings against Baltic or against any other vessels owned by Baltic. I may assume that his Honour was satisfied on an ex parte application that the commencement of further proceedings and the arrest of other vessels owned by Baltic had been threatened by TPS or Translink.

16. Third, I am satisfied that in this proceeding a real issue exists as to the ownership of the surrogate vessel the Komsomolsk. Evidence adduced by Baltic in support of its application suggests that at the time this proceeding was commenced by TPS, Baltic was not the owner of the Komsomolsk but the bare-boat charterer of the ship. If so, the Komsomolsk was not liable to arrest in this proceeding. In other words there is a real argument that the arrest was not justified.

17. Section 19 of the Act requires the "relevant person" to have been the owner, charterer, or person in possession or control of the ship at the time the general maritime claim arose, and to be the owner of the surrogate ship at the time the proceeding is commenced. It would appear that the right to arrest a surrogate ship does not extend to a ship of which the relevant person is a charterer.

18. The term "owner" is not defined in the Act. In Kali Boat Building and Repair Pty Ltd v The Motor Fishing Vessel "Bosna" (1977) 19 SASR 112 Mitchell J held that "owner" in s 5 of the Admiralty Court Act 1861 (UK) referred to the "beneficial owner". In the Supreme Court Act 1981 (UK) sub-para 21(4)(b)(i) does not refer to the "owner" of a vessel but to a "beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise".

19. Assistance in construing the Act may be obtained from consideration of the Arrest Convention. Article 3(2) of the Arrest Convention provides in relation to the arrest of a surrogate ship that ships are to be deemed to be in the same ownership when all the shares therein are owned by the same person or persons. Article 3(4) provides that where a demise charterer of a ship is liable in respect of a maritime claim relating to that ship another ship in the ownership of the charterer may be arrested.

20. According to the evidence adduced by Baltic it was the owner of the Komsomolsk until October 1993 when it became necessary to undertake substantial repairs to the vessel. A party providing finance for that work required the ownership of the vessel to be transferred to a company carrying on business in Cyprus, the vessel registered on the Cyprus registry and a mortgage granted by the Cypriot company to the Union Bank of Finland Ltd. Baltic is the bare-boat charterer of the Komsomolsk from a Cypriot company which is a wholly-owned subsidiary of Baltic.

21. Even if the word "owner" in s 19(b) permits a court to inquire into the real and effective ownership of a ship, it may be that such an inquiry should only be commenced in circumstances that indicate that the arrangements made with respect to ownership are fraudulent or otherwise improper or merely colourable in an attempt by a defendant to evade the jurisdiction of the court. (See: Maritime Trader (1981) 2 Lloyds Reports 153.)

22. Fourth, Baltic has established that there is a real argument that the arbitrators have regarded themselves as seized of the claim the subject of the general maritime claim by TPS in this proceeding for determination by the arbitrators in the arbitration proceeding and that the arbitrators may proceed to determine that arbitration by an award that may be destructive of the claim by TPS against Baltic.

23. Fifth, counsel for Baltic has given an undertaking to the Court that the interim award obtained by Baltic in the arbitration referred to above will not be enforced against Translink to the extent of the amount which TPS has claimed from Baltic in this proceeding, such undertaking to continue until the effect of the assignment and/or reassignment of the TPS claim has been determined in the arbitration proceeding.

24. Having considered all of these matters I am satisfied that a proper exercise of the Court's discretion in this case would be to order a release of the vessel without the imposition of any conditions and in particular, without requiring the provision of any additional security. However, there will be a direction that the undertaking offered by counsel for Baltic be provided under the seal of Baltic and filed in Court by 10 October 1994.

25. With respect to the stay of the proceedings sought by Baltic I am satisfied that the stay should be granted for the reason that it is arguable that the outcome of the arbitration proceeding may remove the right of TPS to continue this proceeding but, more importantly, on the basis that the commencement of consecutive separate proceedings against Baltic and the arrest of the second vessel under those proceedings was, on its face, an oppressive step. In the absence of any evidence as to why that step has been taken, it is appropriate to order a stay of this proceeding it being apparent there is no apprehension of lack of security obtained by the arrest of the second vessel where it would appear there is no contest about the ownership of the vessel by Baltic, whereas in this proceeding it should have been obvious to TPS at material times that ownership of the Komsomolsk was in issue.

26. Therefore I will stay the present proceeding until further order. There will be liberty to apply to remove that stay upon presentation of affidavits in support. There will be an order that costs be reserved.