Glencore Grain BV v The Ship Lancelot v (IMO 9128439)
[2015] NZHC 1874
•10 August 2015
IN THE HIGH COURT OF NEW ZEALAND IN ADMIRALTY
AUCKLAND REGISTRY
CIV-2015-404-1387 [2015] NZHC 1874
BETWEEN GLENCORE GRAIN BV
First Plaintiff
GLENCORE GRAIN (NZ) LIMITED Second Plaintiff
AND
THE SHIP LANCELOT V (IMO
9128439) Defendant
Hearing: 3 August 2015 Appearances:
A S Olney and A McDuff for Plaintiffs
P Barratt for Master and Crew of the Ship Lancelot V M Flynn for the Ship Lancelot V
Interim Judgment:
10 August 2015
INTERIM JUDGMENT OF DAVIDSON J
Introduction
[1] This Interim Judgment is given with urgency and full Reasons will follow after 3 September 2015 as I will be unavailable until then.
[2] The immediate issue is whether the Master and crew should be paid wages up until 21 June 2015 as costs of arrest, these being wages unpaid pre-arrest of the M.V. Lancelot V.
[3] On Friday 7 August 2015 the Registry referred to me an amended application for appraisement and sale of the ship Lancelot V, with affidavits in support, and an
amended commission of appraisement and sale, in form AD16.
GLENCORE GRAIN BV v THE SHIP LANCELOT V (IMO 9128439) [2015] NZHC 1874 [10 August 2015]
[4] The Orders are sought, expressed as a matter of urgency, relating to the “significant ongoing costs relating to the arrest and the humanitarian issues in relation to the crew on board the vessel”.
[5] The hearing was requested to be brought on early this week.
[6] As I am unavailable as from mid-day 10 August 2015, I have asked the
Registrar to arrange that another Judge of this Court address these urgent issues.
[7] However, the application before the Court is that the Lancelot V be appraised and sold forthwith, with advertising as soon as reasonably practicable for sale, with associated Orders including payment to the plaintiffs as a first priority of all amounts paid by the plaintiffs to the Registrar in the proceeding, and all payments made by the plaintiffs and approved by the Registrar in connection with the vessel under arrest for the benefit of claimants against the fund.
[8] The grounds include that the costs of arrest are heavy and ongoing and diminishing the security available for the benefit of all claimants, and the value of the Lancelot V will diminish significantly if she remains under arrest for a lengthy period of time. Humanitarian considerations in relation to the Master, the crew and their families would be best served by the establishment of a fund from which all claims may be met, with reference to the fact that wages have not been paid since April 2015. The inability of the Owners to put forward a proposal for a speedy resolution is recognised, given the capital controls in Greece.
[9] Finally, it is said that the interests of justice require the creation of a fund earning interest for the benefit of all claimants while the claims are litigated or otherwise resolved.
[10] The plaintiffs will also seek an Order that Judgment by default be granted on various grounds which I do not set out fully here, but which include that the defendant did not apply within five working days to have the notice of proceeding set aside. The plaintiffs plead that the defendant has failed to make that application.
[11] Mr Geoffrey Fraser has sworn an affidavit in support of the urgent applications, which has some information relevant to the disposition of the application which came before me on 3 August 2015. He gives expert evidence, which I recognise so far has not been tested, in relation to appraisal and sale of vessels in New Zealand. The Lancelot V is a “Handymax” size vessel, with which he is familiar, and he says it is important that the ship be maintained by it being kept crewed and the crew being properly directed to maintain the vessel. That should preserve its condition while under arrest. If it became a “dead ship” it would deteriorate in condition and value. He proposes that “all of the crew have stated that they are not prepared to stay with the ship if it is returned to the Owners”. The vessel is currently “out of class”, and it is not clear what work is needed to have the vessel’s classification certificates renewed and the crane certificates have also expired and none of the cranes can be used. It is likely that a purchaser of the vessel would obtain a single voyage permit to sail the vessel to another destination which may include it being scrapped or brought within class.
[12] It seems to me this potentially bears on the matter for my determination arising from the hearing on 3 August 2015 as to payment of pre-arrest wages of the Master and crew.
[13] There is likely to be a response by the defendant, and I will not anticipate that and I have decided that in this fluid setting I should dispose of the application before me on an interim basis, as follows.
Narrative
[14] These proceedings in admiralty concern the Ship Lancelot V, registered in Panama and owned by a company having its place of business in the Marshall Islands.
[15] Under a Bill of Lading issued by the Owners on 28 February 2015, Glencore Grain EOOD, shipped Bulgarian corn in bulk on the Lancelot V, for discharge in New Zealand.
[16] The first plaintiff, Glencore Grain BV is a grain trader and marketer incorporated in The Netherlands.
[17] The second plaintiff, Glencore Grain (NZ) Limited is the receiver and consignee of the cargo (the corn) as notified to the Lancelot V and the lawful holder of the Bill of Lading.
[18] The Lancelot V arrived in Auckland on 30 April 2015 at which time the plaintiffs say there were operational difficulties which complicated discharge of the cargo. On 9 June 2015 the Lancelot V proceeded to Tauranga arriving on or about 10
June 2015, where discharge was delayed due to the same difficulties alleged in
Auckland.
[19] The plaintiffs say the defendant ship is in breach of obligations arising under the Bill of Lading and the Charter Party and the first and second plaintiffs have suffered loss and damage for which they claim against the Lancelot V under the Admiralty Act 1973.
[20] A warrant for arrest was sealed on 22 June 2015, dated 17 July 2015 and a request for commission for appraisement and sale was filed by the plaintiffs.
[21] On 17 July 2015, the plaintiffs applied for orders for entry of default judgment and for appraisement and sale of the vessel. On 30 July 2015, the Owners of the vessel filed a notice of opposition to that application.
The indemnity to Registrar
[22] The second plaintiff, Glencoe Grain (NZ) Limited provided the Registrar of the High Court at Auckland an indemnity dated 17 July 2015 for “any fees and expenses that may be incurred by you in the appraisement and sale of the ship Lancelot V IMO 9128439”. This is in addition to the indemnity provided to the Registrar on 22 June 2015 in relation to the execution of the warrant of arrest.
Interim hearing 16 July 2015
[23] On 16 July 2015 this Court ordered that the Master and crew of the ship Lancelot V may intervene in the proceedings, and by consent Orders were made that the Registrar release from funds held up to NZD$35,000.00 for distribution between the Master and crew, as costs of arrest, in the Registrar’s discretion.
[24] A further Order was made that the Registrar consider the appropriate payment to the Master and crew since the date of arrest, as costs of arrest, with credit allowed for the NZD$35,000.00 distributed in terms of the first Order.
[25] The Registrar agreed to implement these Orders and proceedings were adjourned part heard for a resumed hearing on Monday 3 August 2015.
Hearing 3 August 2015
The Owners – The Ship Lancelot V
[26] The Owners had been served with a notice of proceeding on 23 June 2015 and they were required to enter an appearance on or before 7 July 2015. They filed a conditional memorandum of appearance one day late on 8 July 2015. The Owners did not apply within five working days to have the notice of proceeding set aside, so the conditional appearance became unconditional, as acknowledged at the hearing on
16 July 2015. The applications filed on Friday 7 august 2015 bear on the status of the defendant, discussed in the Introduction.
[27] Mr Flynn addressed the Court in opposition to the application by the plaintiffs for summary judgment, and in particular opposed the making of Orders in paragraphs 2(b)(i), 2(b)(ii) and 2(b)(iii) of the application of 17 July 2015.
[28] The grounds of opposition are that the defendant and the plaintiffs were discussing the terms of security and a draft escrow agreement was being circulated, and if leave is granted, the defendant is required to file a statement of defence within
20 working days, such time not to expire until 14 August 2015. The defendant having applied for leave to enter an appearance out of time should have the opportunity to defend the substantive claim against it.
[29] Mr Clive Aston swore an affidavit in support of the application for leave. He explained that the managers of the vessel responsible for the day-to-day operations are based in Greece, and give their instructions to him.
[30] Mr Flynn addressed Mr Aston’s affidavit on behalf of the Owners, and said the problem was one of practicality, based on the constraints derived from Greek capital controls.
[31] The Owners sought to clarify and discuss the security demands made by the claimants, initially between the parties themselves and then the claimants’ London solicitors, Reed Smith, and through Mr Aston. The vessel was detained by Maritime New Zealand as a result of the arrest and the Owners did not have the means to secure the claim immediately. The claimants are owed unpaid freight and demurrage which is not disputed in itself, but the exact amount remains in question.
[32] The Owners’ initial concerns about the New Zealand proceedings in Admiralty related in part to London arbitration clauses in the Charter Party and the Bill of Lading with English law to apply, and on advice the Owners’ initial instructions were to file a conditional appeal, to give additional time to consider any further application. There was a short delay in confirming instructions and McElroys did not receive instructions to file an appearance until one day after the last date to file as of right. A conditional memorandum of appearance was entered immediately on receiving instructions.
[33] The Owners also face the problems of operational uncertainty and how security might be given at such short notice, and did not give instructions within the next five working days as to whether it sought to set aside the proceedings on the basis of jurisdiction. The financial crisis in Greece has led to capital controls which prevent the remittance of funds by the Owners.
[34] The Owners have continued to discuss the provision of security, including arrangements for reimbursement of the Registrar’s costs of the arrest, as well as the claimants’ legal costs, and the Owners want to make the necessary deposit of funds as soon as practically possible. The crew are acknowledged to have been
inconvenienced by the arrest and the Owner’s Superintendent has arrived in New
Zealand to attend to the crew’s concerns and arrange for any necessary repatriation.
[35] The application for an Order that time be extended for the Owners to enter an appearance is founded on there being an acceptable explanation for the delay, that there was no prejudice to any other party, and it would be unduly prejudicial for the Owners to be precluded from having the opportunity to defend the claim involving the seizure and detention of their vessel in New Zealand.
[36] In short, these defaults were sought to be excused, and as there is no prejudice to the plaintiffs, an Order extending time for entering an appearance is warranted in my view but that will be referred to the assigned Judge given the applications filed on Friday 7 August 2015 (now 50 days).
The application before the Court
[37] Ms Barratt advised that the ship remains under arrest, as of 3 August 2015 some 43 days since the hearing on 16 July 2015.
[38] The Registrar made arrangements for the crew to receive payment on account of post arrest wages, and agreed that ongoing wages be paid. The crew have received the minimum International Transport Federation rates, instead of the contract rate. Most of their wages have been remitted back to their families, with some exceptions through banking problems. Four crewmen have repatriated at their request on 31 July
2015, concerned about their families in the Ukraine.
[39] The wages paid and the repatriation costs have all been treated as costs of arrest and are being paid for by the Registrar from funds provided by the plaintiffs.
[40] The issue before the Court is whether the wages owed as of 21 June 2015 should be paid by the Registrar at the direction of the Court. There is some doubt about the exact wage arrears and this Interim Judgment does not address that with finality.
[41] Ms Barratt submitted that jurisdiction under the Admiralty Act 1973 is in addition to all other civil, common law and equitable remedies exercisable by the Court. The Court has jurisdiction in respect of any claim by a Master or member of a crew of a ship for wages under s (4)(1)(i) of the Act. Further, any other admiralty jurisdiction vested in the Court before the passing of the Admiralty Act is available to the Court under s 4(2) of the Act.
[42] While there is no doubt about the entitlement of the Registrar to pay wages for the post arrest period, in the context of the Registrar having custodial responsibility for the ship, and any need to maintain the crew on board for safety or preservation, there are two possible approaches to payment of wages in the pre-arrest period.
[43] If a party is given leave to pay the crew claims, including repatriation, subrogated rights arise. Claims by the Master and the crew for wages give rise to maritime liens with first priority after reimbursement of the Registrar’s expenses, the costs of sale and the plaintiff’s costs.
[44] Ms Barratt submits that as the Admiralty Courts claimed jurisdiction to make such orders in 1921, s 4(2) of the Act means the jurisdiction is retained. Ms Barratt refers to this passage from respected commentary:1
In order for the crew to leave the vessel, provision has to be made for their repatriation and their wages. In some cases repatriation will be arranged by the shipowner’s protection and indemnity association, or by a body such as the International Transport Workers Federation. Where such assistance is not forthcoming, the plaintiff should make an application to the court for liberty to pay the repatriation expenses and outstanding wages of the crew and to stand in their shoes in respect of any sums paid.
[45] Alternatively, the Registrar can be directed to make the payment and treat it as a cost of arrest, reimbursable as a first priority from the proceeds of sale.
[46] Ms Barratt acknowledges that this jurisdiction has tended to be exercised in the context of a sale pendente lite, but no authority has expressly limited it in this
way. While it is submitted that the Registrar has paid the crew wage arrears with the
1 Meeson Admiralty Law and Practice (Lloyd’s London Press, London, 1993) at 139.
consent of the arresting party, such an arrangement does not commit the Court, nor the parties to the Directions sought here.
[47] In a recent case, Babcock Fitzroy Limited v the Ship “The M/V Southern Pasifika” the Registrar made such payment without considering it necessary to apply for directions as permitted under Rule 25.55(1), but the Court could have made “any orders it thinks just concerning the performance or exercise of that function, duty, right or power” – Rule 25.55(2). On review of a Registrar’s decision, Rule 25.56
allows for review whereupon “the Court may make any orders it thinks just”.2
[48] Ms Barratt submits this Interim Judgment comes down to the justice of the case. The Master and crew have gone without their wages for May and until 21 June
2015. This has had consequences for most of the crew and their families, and while the monthly payments may be as little as USD$600, these are significant fund repatriations to their families. Ms Barratt submits that it is unreasonable for the crew to have to wait until the vessel is sold in order to receive payment.
[49] Expressed broadly, Ms Barratt submitted that the Admiralty Courts have adopted a “benevolent and protective attitude towards seamen” citing Udovenko v The Ship: MV Pelican.3 The maritime lien was developed in this context. Ms Barratt submits that the concern must be for safety and welfare of seafarers, especially when the ship has been arrested, and there is need for guidelines to be developed for humanitarian principles to be taken into account.
[50] In looking at the justice of the case, Ms Barratt submits that the plaintiffs have had the benefit of the ship bringing the cargo to New Zealand, although they have not been paid for part of that voyage. The plaintiffs have the benefit of the crews’ services. Ms Barratt puts it that “The humanitarian view is that the crew should be able to assist their families by catching up on their arrears of wages”.
[51] The relief sought is that judgment by default be entered in accordance with the statement of claim filed with Interveners for the sum set out in the schedule to
the memorandum and directing the Registrar to pay all of the Interveners the
2 Babcock Fitzroy Limited v The Ship “The M/V Southern Pasifika” [2012] 2 NZLR 652 at [28].
3 Udovenko v The Ship: MV Pelican, HC Nelson, CIV-2009-442-000514, 8 November 2010 at para [21].
Judgment sums for wages and overtime owed to them up to and including 21 June
2015, together with ancillary orders for repatriation and associated costs.
[52] The last of the directions sought is that all amounts expended by the Registrar pursuant to the Orders otherwise sought should be treated as costs of arrest and reimbursed by the Registrar from the proceeds of sale of the defendant’s ship, as first priority over the claims of other claimants.
[53] Ms Barratt points out that in the event that this matter proceeds to sale, a lengthy period will pass before proceeds of sale are available to meet the wages of the crew, and they should not have to wait for that. This may be tempered by the applications filed on 7 August 2015.
Opposition to Judgment and Directions sought
[54] Mr Olney and Mr McDuff for the plaintiffs opposed such directions. I
address pre-arrest wages only given the time constraints.
[55] The second plaintiff has provided an indemnity for the Registrar’s costs in the required form and that does not contemplate “significant post arrest costs”, but rather the fees and expenses in execution of the warrant of arrest and any liability arising out of or incidental to any act lawfully done by the Registrar in executing that warrant. To date, the plaintiffs have paid into Court some NZD$350,000.00 by way of security.
[56] Mr Olney described the status quo as follows:
In summary, the present position is as follows:
(a) Those crew who wished to be repatriated have been.
(b) The other crew are content to remain with the vessel for the time being. Their needs have been catered for by the Registrar as a cost of arrest. Counsel also understands that extended visas have been arranged for them.
(c) The defendant has sent a superintendent to New Zealand with the purpose of attending to crew concerns (which we understand to include payment of wages), and specifically repatriation of those crew members who wish to be repatriated.
[57] The Registrar has a full discretion, as an Officer of the Court, in the way he preserves the vessel, and keeps her under arrest, and may seek directions from the Court. The “costs of arrest” are not specified by the High Court Rules, but a link to the purpose of execution of the warrant is usually required.
[58] The Registrar thus may provide provisions for the crew on board as part of the costs of arrest. The crew has a claim for wages which is supported by a maritime lien, giving a higher priority against the proceeds of sale.
[59] However, the Registrar does not simply assume the employer’s responsibilities for past wages when exercising a warrant of arrest and the plaintiffs do not become guarantors for the Owners obligations. As Mr Olney puts it, the Orders sought by the Interveners by way of direction of the Registrar would have what he describes as the ”odd consequence” of putting the Interveners in a better position than if the vessel had not been arrested.
[60] As put by Mr Olney, the question thus becomes whether pre-arrest wages may be a cost of arrest in this case. This was tested in discussion with counsel as to whether the issue is one of jurisdiction, or the exercise of discretion. Mr Olney contemplated that sometimes the Registrar may need to engage a crew to carry out a duty to preserve the ship and keep her safe pending release or sale. That may involve a contractual arrangement with the crew, or contracting outside of that.
[61] That course would create an obligation on the Registrar and arguably falls within the costs of arrest. However, Mr Olney distinguishes that position from the claim to unpaid wages which predates the arrest, and may have nothing to do with it as such. Those wages are not a liability of the Registrar and do not fall within the terms of the indemnity provided to the Registrar by the second plaintiff.
[62] I consider Mr Olney responsibly addressed the possibility that if the Registrar thought it appropriate in the discharge of his duties to preserve the ship and keep it safe to pay pre-arrest wages, incurred by the Owner for its commercial benefit, then that properly may be described as a cost of arrest.
[63] However addressed as a matter of discretion, Mr Olney’s position was that the Interveners’ claims are already secured by a maritime lien with a high priority, with a caveat against release of the vessel under arrest, and the Interveners are willing to remain with the vessel for the time being (some of them), and are being paid for their services and provided for. The Superintendent has flown in from Greece to attend on the vessel and address their concerns and Mr Olney thus crystalises his argument that the understandable impetus for the application is not concern for preservation and safe keeping of the vessel through payment of wages, but the Interveners desires for early satisfaction of their claims. Mr Olney submits there are more appropriate means for that and two other means by which that may happen in the near term, either by the Owners stated intention to make good and put up security for the plaintiffs’ claims and satisfy the Interveners’ claims, or the plaintiffs or Interveners may apply for sale of the ship pendente lite. Mr Olney submits they have strong support for granting such an application.
[64] Mr Olney also recognised that it could not be ruled out that the Registrar may decide to pay these wages for reasons associated with his fundamental role in preservation of the ship and responsibility for its crew.
Reasons for Interim Judgment
[65] Behind the scenes there are attempts to provide security which may meet the concerns of the Interveners.
[66] The Owners’ position has been properly put by Mr Flynn, and I accept the serious impediments to their taking practical steps which would provide the necessary security to the plaintiffs, and probably to meet the Interveners’ claims.
[67] I have decided that I should give this Interim Judgment on the single issue of whether the Registrar should be directed to pay the arrears of wages to the Interveners for the period up until 21 June 2015.
[68] This Interim Judgment does not do justice to the full argument presented with cogency for the parties by counsel, and in particular I am not in a position to write a Final Judgment on the question whether the pre-arrest wages on the facts put to me
on 3 August 2015 fall within the “costs of arrest” or may be paid on humanitarian grounds.
[69] I have decided that the appropriate way to deal with this interim issue is to recognise the fundamental nature of the Registrar’s role, and that if he considers that there is a proper warrant to pay the arrears of wages then he should do so. For example, while there is no indication that the crew is doing other than its job, for which it should be commended in these circumstances, should the issue of arrears be affecting the crew so as to alter their attitude to performance of their duties, then the Registrar is in my view entirely within his rights to pay the arrears of wages. No one should ultimately be out of pocket by his so doing, given the priority ranking that would be held by any person making such payments.
[70] As such, this Interim Judgment is not to be treated as final with regard to the more stark question of whether pre-arrest wages are payable on humanitarian grounds alone but I hold that on the material before me that they may be properly “costs of arrest”. It is not a simple matter of directing that the Registrar pay arrears of wages to 21 June 2015, but a Direction that if the Registrar should consider that such payment is appropriate having regard to his fundamental responsibilities, then he is authorised, and if he seeks it, directed in those circumstances to do so.
[71] As such I do not finally determine whether on humanitarian grounds alone the pre-arrest wages should be paid. There are compelling grounds for such direction and I will set that out more fully after 3 September 2015. Those humanitarian grounds seem to me to coalesce with the Registrar’s undisputed role. If the crew are unsettled so as to jeopardise the preservation of the vessel with a competent and working crew then he should pay the wages, as set out below.
[72] I adjourn all other applications before the Court.
Disposition by Interim Judgment
(a) The Registrar may pay the pre-arrest wages of the crew to 21 June
2015 should he consider that necessary in his fundamental role of preservation and safety of the vessel, such to fall entirely within his
discretion. Judgment as to payment on humanitarian grounds alone is adjourned for further consideration by the Judge newly assigned or in my final Judgment.
(b)I consider there are prima facie proper grounds for the defendant to be given leave to enter an appearance out of time but that is for the judge newly assigned.
(c) All other applications stand adjourned, including the question of costs.
……………………………………..
Davidson J
Solicitors:
Russell McVeagh (Wellington) for First Plaintiff
McElroys (Auckland) for DefendantJones Fee (Auckland) for Interveners
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