Westpark Boar Builders Ltd v The Ship "Bayliner 38"
[2013] NZHC 1690
•4 July 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
IN ADMIRALTY
CIV 2013-404-1483 [2013] NZHC 1690
BETWEEN WESTPARK BOAT BUILDERS LTD Plaintiff
ANDTHE SHIP "BAYLINER 38" First Defendant
MARK BRYAN HILLS Second Defendant
Hearing: 12 June 2013
Counsel: S W B Foote and S J M Tolich for Plaintiff
G I Seagar for Defendants
Judgment: 4 July 2013
JUDGMENT OF HEATH J
This judgment was delivered by me on 4 July 2013 at 11.00am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
WESTPARK BOAT BUILDERS LTD v THE SHIP "BAYLINER 38" [2013] NZHC 1690 [4 July 2013]
Introduction
[1] On 21 March 2013, a warrant issued out of this Court directing the Registrar (or his or her appointed agent) to arrest a pleasure craft named Bayliner 38. The warrant was issued based on a claim in debt, for services undertaken by Westpark Boat Builders Ltd (Westpark) to modify the vessel.1
[2] On 22 March 2013, the Registrar of this Court gave notice that Bayliner 38 had been taken into his custody. There followed an application on behalf of the ship to set security for its release.2 The application was made by Mr Hills, as owner of the vessel, on the grounds that the claim was for $19,221.54 plus interest and costs and that counterclaims would be made for inadequate workmanship or breaches of either the Fair Trading Act 1986 or the Consumer Guarantees Act 1993.
[3] A directions hearing took place before Keane J on 15 April 2013. Mr Hills was joined as a second defendant to the proceeding and a fixture was allocated to resolve:
(a) Mr Hills’ proposed application to set aside the in rem proceeding, on the ground that the claim could only be brought in personam.
(b) the amount of security to be paid for the release from arrest of
Bayliner 38,
(c) Mr Hills’ proposed application for security for costs.
Directions were then made for the filing and service of documents to allow those issues to be resolved at a hearing on 12 June 2013. All were argued before me on that day.
[4] In its Statement of Claim, Westpark puts its case against the vessel and its owner in this way:
1 Admiralty Act 1973, s 4(1)(m); set out at para [7] below.
2 High Court Rules, r 25.14.
3.On or about 17th of September 2012, Mark Hills, who is the owner of “Bayliner 38” entered into a partly written partly verbal contract with Stephenson Holdings 2012 Limited now Westpark Boat Builders Limited to undertake modifications to the “Bayliner 38”.
4.From September 2012 to October 2012 the Plaintiff duly provided the services pursuant to the contract and the owner made payments totalling $18,000.00 up to the 19th of October 2012 to the Plaintiff which were agreed progress payments for the services provided.
5.By the end of October 2012 the words were practically completed by the Plaintiff who provided an invoice to the owner dated 23 October
2012 in the sum of $22,221.54.
6.The owner told the plaintiff that he could not afford to pay this amount due and asked whether he could have a discount and pay the amount in instalments. The Plaintiff agreed and an agreement was signed dated the 23/10/2012 for a reduction of the price of the invoice to $20,000.00 in consideration for progress payments being made according to this agreement (marked “A” annexed to the Affidavit of Alan Stephenson) and in consideration of the Plaintiff waiving its contractors lien over the vessel, by launching the said vessel.
7. The owner made one payment of $3000.00 on the 23rd of October
2012 but despite repeated requests for payment and demand having been made payment has not been received by the Plaintiff for any of the other instalments. Due to this breach by the owner this agreement is now at an end and the full amount is now due which totals $19,221.54.
8.The owner has refused to pay the amount outstanding and has also refused to secure payment.
9.Pursuant to the clause 4 of the terms of trade of Westpark Boat Builders Limited the Plaintiff is entitled to full legal and collection costs in respect of unpaid accounts.
[5] On the basis of that pleading, judgment in the sum of $19,221.54 was sought, together with interest and full indemnity costs.
[6] No particulars are given, in the Statement of Claim, of the terms of the “partly written partly verbal” agreement between Mr Hills and Westpark to modify Bayliner 38. However, the “agreement” to which para 6 of the Statement of Claim refers is in evidence. It states:
Invoice No 00089 23/10/12
Mark Hills
7 Anne McLean DrGlenfield
Without Prejudice
I, Mark Hills in regard to my account with Westpark Boat Builders undertake to pay $3,000 on the 23.10.12 and then to pay $2,000 per week to a total of $20,000
Comprised of ....
$3,000 on the 23/10/12
8 x weekly payments of $2,000
1 x payment of $1,000
This will constitute full and final payment of the account. Signed by Alan Stephenson for Westpark boatbuilders
[Signed] 23/10/12
Signed by Mark Hills 1. 30/10/12 $2000 [Signed] 23/10/12 2. 6/11/12 $2000
3. 13/11/12 $2000
4. 20/11/12 $2000
5. 27/11/12 $2000
6. 4/12/12 $2000
7. 14/12/12 $2000
8. 18/12/12 $2000
9. 25/12/12 $1000
Witness [Signed]
Is the in rem jurisdiction of the Admiralty Act available?
(a) Section 4(1)(m) of the Admiralty Act 1974
[7] Section 4(1) of the Admiralty Act 1973 (the Act) specifies those claims which may be brought in rem under this Court’s Admiralty jurisdiction. The present claim must fall within s 4(1)(m) to be brought on that basis:
4 Extent of admiralty jurisdiction
(1) The Court shall have jurisdiction in respect of the following questions or claims:
...
(m) Any claim in respect of the construction, repair, or equipment of a ship or for dock or port or harbour charges or dues:
....
[8] Mr Seagar, for Mr Hills and the vessel, submits that the claim is brought on the basis of the written agreement.3 He submitted that was one which had the effect, in law, of extinguishing rights under the original arrangements, on the basis of an accord and satisfaction.4 On the other hand, Mr Foote, for Westpark, contends that the pleaded claim is based on the original contract (partly written/partly unwritten) which had not clearly been superseded by the terms of the second “agreement”.
[9] In Baltic Shipping Co Ltd v Pegasus Lines SA,5 the Court of Appeal held (adopting an approach taken by the High Court of Australia) that there was a burden on a plaintiff to establish, on a balance of probabilities, those underlying facts required to invoke the in rem jurisdiction.6 In The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc,7 the High Court of Australia had said:
Where jurisdiction depends on particular facts or a particular state of affairs, a challenge to jurisdiction can only be resisted by establishing the facts on which it depends. And, of course, they must be established on the balance of probabilities in the light of all the evidence advanced in the proceedings held to determine whether there is jurisdiction.
[10] In order to come within s 4(1)(m) of the Act, the claim must be “in respect of” the work or charges identified.8 The words “in respect of” suggest the need for a practical approach, which requires consideration of facts that go beyond the precise nature of the work undertaken. Such an approach found favour with this Court, in McMullen & Wing Ltd v Condor Yachts (Bermuda) Ltd.9 Anderson J said:10
It is to be observed that the relevant statutory provision is not expressed as a claim “for the cost or payment of ...”, but for claims “in respect of”. There is, in my judgment, a conceptual generality implicit in the use of that term.
...
It is in the nature of vessels that they can slip away covertly beyond the jurisdiction. It is also in the nature of vessels that they require emergency repairs and provisioning. The purpose behind the Admiralty jurisdiction is to
3 See para [6] above.
4 Generally, see Humphries v Carr [2012] 1 NZLR 742 (CA) at para [20].
5 Baltic Shipping Co Ltd v Pegasus Lines SA [1996] 3 NZLR 641 (CA).
6 Ibid, at 644 (McKay and Henry JJ) and 654–655 (McGechan J).
7 The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 (HCA) at 426.
8 Section 4(1)(m) is set out at para [7] above.
9 McMullen & Wing Ltd v Condor Yachts (Bermuda) Ltd HC Auckland AD577/91, 29 August
1991.
10 Ibid, at 4–5.
provide judicial control over the chattels and human activity in connection with them which have those features of elusiveness and vulnerability. ... It is sometimes easy to overlook important elementary principles in the forest of detailed principles. Section 5(j) [of the Acts Interpretation Act 1924] enjoins the Court to give statutes relevantly fair, large and liberal interpretation.
[11] Mr Seagar relied on two decisions in the Admiralty jurisdiction to support his proposition that Westpark’s claim could only be brought in personam. They were UAB Garant v The Ship “Aleksandr Ksenofontov”11 and The Dilmun Fulmar.12 In particular, Mr Seagar cited the following passages from the judgment of Hugh Williams J, in UAB Garant:
[55] Turning to the validity of all the arrests after the first, the subsequent arrests were all following agreement between the parties for payment of the outstanding balance by instalments with provisions intended to preserve the right to re-arrest for breach of the payment programme, breaches which eventuated. The question is whether agreements of that nature convert a claim for the balance owing for repairs to a ship which would clearly be within s 4(1)(m) of the Admiralty Act 1973 into a claim for debt. Also to be borne in mind in that regard is that the original arrest of the ship provided the res as security for a claim clearly within the Admiralty jurisdiction and that the “power to exact security is a very strong power and must not be used oppressively” as noted in The “Clarabelle”. As the authorities reviewed in that case show, re-arrest is permissible to top up security or to rectify clerical errors (The “Arctic Star”, The “Hero”) or “where the actions of the owner have rendered originally adequate security inadequate” (The “Clarabelle”) at p 60 para [32]) or in other limited circumstances. Exceptional circumstances do not need to be demonstrated provided oppression and unfairness to owners is avoided.
[56] The agreement between UAB Garant and the owner made on 21
December 2006 was for payment of the balance then owing of “debts for the repair of the vessel ‘Aleksandr Ksenofontov’” in instalments with the agreement expressly providing that, in the case of breach by the owner, UAB Garant “reserves the right to undertake any necessary legal measures to protect its own interests including, but not restricting re-arrest of the vessel”. The parties expressly stated that “the legal procedure started in New Zealand
18-07-2006 remains valid and, in the case of breach of the present
agreement, mighty [sic] be renewed at any moment”.
[57] The learned author of Foskett The Law and Practice of Compromise
(5th edn para 8-07 p 150) says:
Generally speaking, therefore, an agreement of compromise will discharge all original claims and counterclaims unless it expressly provides for their revival in the event of breach. Where a party wishes to be able to revive his original claim in the event of the other
11 UAB Garant v The Ship “Aleksandr Ksenofontov” HC Auckland CIV-2006-404-4167, 21
December 2007 (Hugh Williams J).
12 The Dilmun Fulmar [2004] 1 SLR 140 (High Court of Singapore).
party’s failure to comply with his obligations under the compromise, he would be well-advised to insist that a term to that effect should be incorporated.
[12] Mr Seagar’s approach draws a sharp distinction between the work originally undertaken (which he accepts falls within s 4(1)(m)) and the ability to sue on a settlement agreement, in circumstances where the original debt (resulting from work undertaken on the vessel) has been discharged (which he submits does not).
[13] In my judgment, the present state of the pleadings and evidence does not go far enough to find that there has been a compromise that brings the claim into the latter category. It is not possible to conclude with confidence that the debt in respect of the work on the vessel was discharged by the compromise agreement, to which
para 6 of the statement of claim refers.13 First, the so called “agreement” to
compromise has been signed on a document headed “without prejudice”. Second, it does not make it clear that the obligation to pay moneys owing in respect of the work undertaken on the vessel has been discharged. Third, on one view, the document can be seen purely as an arrangement that allowed the debtor to make payment over time. The “agreement” is equivocal as to whether default would reignite the obligation to pay the full cost of work, or the lesser settlement sum.
[14] For those reasons, I am not prepared to hold that the proceeding was incapable of being brought in the Admiralty jurisdiction of this Court. On the pleadings and evidence adduced to date, the claim made by Westpark is one “in respect of the ..., repair” of the vessel, for the purposes of s 4(1)(m) of the Act.
(b) Section 5(2)(b) of the Admiralty Act 1973
[15] The second strand of Mr Seagar’s argument was based on s 5(2)(b) of the
Act:
5 Actions in rem
...
(2) In addition to the rights conferred by subsection (1) of this section, the admiralty jurisdiction of the High Court may be invoked by an action in
13 See paras [4] and [6] above.
rem in respect of all questions and claims specified in subsection (1) of
section 4 of this Act …:
Provided that—
...
(b) In questions and claims specified in paragraphs (d) to (r) … of subsection (1) of section 4 of this Act arising in connection with a ship where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the jurisdiction of the High Court may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against—
(i) That ship if, at the time when the action is brought, it is beneficially owned as respects all the shares therein by, or is on charter by demise to, that person; or
(ii) Any other ship which, at the time when the action is brought, is beneficially owned or on charter by demise as aforesaid.
....
[16] Mr Seagar submits that all owners of the vessel (whether legal or beneficial) should be joined to the proceeding. He points to evidence that he contends demonstrates that Mr Hills’ fiancée, Ms Kamerman, had a beneficial interest in the vessel. Mr Foote submits that the pleaded claim against Mr Hills alone cannot be impugned on that ground, as it is dependent upon acceptance of Ms Kamerman’s affidavit evidence, not yet tested by cross-examination.
[17] In The “I Congreso del Partido”,14 Robert Goff J held that the words “beneficially owned”, in the English equivalent to s 5(2)(b) of the Act, referred “only to such ownership as is vested in a person who, whether or not he is the legal owner of the vessel, is in any case the equitable owner ...”.15 In doing so, a wider approach to the interpretation of the words that found favour with Brandon J, in The Andrea
Ursula,16 was rejected.17 It is unnecessary for me to review the authorities or to
14 The “I Congreso del Partido” [1978] QB 500 (QB).
15 Ibid, at 538.
16 The Andrea Ursula [1973] QB 265 (QB).
17 The “I Congreso del Partido” [1978] QB 500 (QB) at 537–539.
express my opinion on which approach is preferable. In my view, the issue must be decided in favour of Westpark, on application of either approach.
[18] For all practical purposes Westpark dealt with Mr Hills, as owner. Mr Hills did not disclose that his partner, Ms Kamerman, had any interest in the vessel. The vessel is not registered in her name. The only real evidence to suggest joint ownership is that the money used to purchase the vessel came from a joint bank account. That, in itself, is far from conclusive.
[19] On a summary application challenging the basis on which the jurisdiction could be invoked, I am not prepared to rely only on Ms Kamerman’s affidavit evidence that she is a joint owner, when the contemporaneous documents point in a different direction. It may be arguable that Ms Kamerman has an inchoate interest in the pleasure craft as a result of a potential claim that may be brought under the Property (Relationships) Act 1976. But, as between the party undertaking work on the vessel (Westpark) and Mr Hills (the only person who was held out as an owner, despite the fact that Ms Kamerman was present on some occasions when work was being done), the latter’s conduct suggests that he was the sole owner.
[20] On the present state of the pleading, it is inappropriate for me to rely on untested evidence to support the joint ownership point, particularly when it is evidence that could only be within the knowledge of Mr Hills and Ms Kamerman and is self serving in nature.18 This part of Mr Seagar’s jurisdictional argument also fails.
Release of vessel on terms requiring security
[21] A vessel may be released from the Registrar’s custody on the giving of security in an amount that will meet a plaintiff’s “best reasonably arguable case”.19
[22] Westpark submits that the sum of $65,972.05 should be given as security for
release of the vessel, whereas Mr Hills’s position is that $25,000 is sufficient.
18 The approach to be taken in cases of this type where summary remedies are sought is discussed in CED Distributors (1988) Ltd v Computer Logic Ltd (in rec) (1991) 4 PRNZ 35 (CA) at 41.
19 Det Norske Vertas AS v The Ship “Clarabelle” [2002] 3 NZLR 52 (CA).
Westpark’s calculations include interest on the underlying debt, calculated on a
monthly basis, and legal costs incurred.
[23] The principles for calculating security are set out in The “Moschanthy”.20 It is normally done on the basis of a plaintiff’s reasonably arguable best case, together with interest and costs. That approach was confirmed by our Court of Appeal in Det Norske Vertas AS v The Ship “Clarabelle”.21
[24] In this case, a sense of proportion is necessary. While Westpark was justified in invoking the Admiralty jurisdiction, the consequence is that a claim that would otherwise be tried in the District Court (or, by consent, before a Disputes Tribunal) must be litigated in this Court.
[25] A broad judgment is required. The principal sum claimed is $19,221.54. Allowing for interest (at Judicature Act 1908 rates) and costs, I consider that the vessel should be released on payment of security in the sum of $30,000.
Security for costs
[26] If unsuccessful on all other applications, Mr Hills seeks security for costs on Westpark’s claim. It is one that seeks a relatively modest sum of money, well within the jurisdiction of the District Court if brought in personam.
[27] Rule 5.45 of the High Court Rules provides:
5.45 Order for security of costs
(1) Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a) that a plaintiff—
(i) is resident out of New Zealand; or
(ii) is a corporation incorporated outside New Zealand;
or
20 The “Moschanthy” [1971] 1 Lloyd’s Rep 37 (QB).
21 Det Norske Vertas AS v The Ship “Clarabelle” [2003] 3 NZLR 52 (CA) at para [31].
(iii) is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b) that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding.
(2) A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
(3) An order under subclause (2)—
(a) requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—
(i) by paying that sum into court; or
(ii) by giving, to the satisfaction of the Judge or the
Registrar, security for that sum; and
(b) may stay the proceeding until the sum is paid or the security given.
(4) A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.
(5) A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.
(6) References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.
[28] The principles on which security for costs will be ordered are well settled. The Court has a discretion, if the threshold in r 5.45(1)(b) is met, to order such amount as the Court thinks fit in all circumstances.22
[29] I am satisfied that the threshold is met in this case. No financial statements were put in evidence by Westpark. I am not satisfied that the evidence provided through GST returns compensates adequately for that omission. Those factors taken together with Westpark’s director’s history of association with companies that have been put into liquidation mean that the threshold has been crossed.
[30] If a claim for under $20,000 is to be pursued in this jurisdiction, security for costs likely to be awarded should be provided. Although high, when measured against the amount of the claim, I consider that security in the sum of $15,000 should be given. Having regard to the costs to which Mr Hills will be put if the claim is litigated, the amount ordered is not disproportionate.
[31] The proceeding will be stayed until such time as Westpark gives that security.23
Result
[32] For those reasons:
(a) The application to set aside the in rem proceeding for lack of jurisdiction is dismissed.
(b)The vessel shall be released from the Registrar’s custody on security being given by Mr Hills to the Registrar’s satisfaction, in the sum of
$30,000
(c) An order for security for costs is made. Westpark shall pay to the Registrar of this Court the sum of $15,000, to be held on interest bearing deposit pending determination of this proceeding. Pending the giving of security in that sum, the proceeding is stayed.
[33] Because both parties have succeeded to some extent and there are a number of aspects of this proceeding that require investigation and testing of evidence, I reserve costs for the determination of the trial Judge.
[34] The proceeding shall be listed in the Duty Judge List, for mention, at 10am on 15 August 2013. I expect that the presiding Judge will review steps taken since this judgment and (if necessary) make timetabling orders to enable the case to be tried promptly. Memoranda shall be filed and exchanged no less than three working
days before the mention date, setting out the positions taken by each party and the
directions they seek.
Delivered at 11.00am on 4 July 2013
Solicitors:
Richard Allen Law Ltd, Auckland Jeff Ussher, Pt Chevalier, Auckland Counsel:
G I Seagar, Ponsonby, Auckland
P R Heath J
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