FEDERAL COURT OF AUSTRALIA
Ships “Hako Endeavour”, “Hako Excel”, “Hako Esteem” and “Hako Fortress” v Programmed Total Marine Services Pty Ltd [2013] FCAFC 21
IN THE FEDERAL COURT OF AUSTRALIA | |
in admiralty | |
| Appellant | |
AND: | PROGRAMMED TOTAL MARINE SERVICES PTY LTD Respondent |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. The applicant/appellant be granted leave to appeal and the appeal be treated as instituted instanter.
2. The appellant file a notice of appeal in the form annexed to its application for leave to appeal on or before 5 March 2013.
3. The appeal be dismissed.
4. The appellant pay the respondent’s costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA | |
in admiralty | |
WESTERN AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | WAD 190 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | THE SHIP “HAKO EXCEL” Appellant |
AND: | PROGRAMMED TOTAL MARINE SERVICES PTY LTD Respondent |
JUDGES: | SIOPIS, RARES AND BUCHANAN JJ |
DATE OF ORDER: | 26 FEBRUARY 2013 |
WHERE MADE: | SYDNEY |
THE COURT ORDERS THAT:
1. The applicant/appellant be granted leave to appeal and the appeal be treated as instituted instanter.
2. The appellant file a notice of appeal in the form annexed to its application for leave to appeal on or before 5 March 2013.
3. The appeal be dismissed.
4. The appellant pay the respondent’s costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA | |
in admiralty | |
WESTERN AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | WAD 191 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | THE SHIP “HAKO ESTEEM” Appellant |
AND: | PROGRAMMED TOTAL MARINE SERVICES PTY LTD Respondent |
JUDGES: | SIOPIS, RARES AND BUCHANAN JJ |
DATE OF ORDER: | 26 FEBRUARY 2013 |
WHERE MADE: | SYDNEY |
THE COURT ORDERS THAT:
1. The applicant/appellant be granted leave to appeal and the appeal be treated as instituted instanter.
2. The appellant file a notice of appeal in the form annexed to its application for leave to appeal on or before 5 March 2013.
3. The appeal be dismissed.
4. The appellant pay the respondent’s costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA | |
in admiralty | |
WESTERN AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | WAD 192 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | THE SHIP “HAKO FORTRESS” Appellant |
AND: | PROGRAMMED TOTAL MARINE SERVICES PTY LTD Respondent |
JUDGES: | SIOPIS, RARES AND BUCHANAN JJ |
DATE OF ORDER: | 26 FEBRUARY 2013 |
WHERE MADE: | SYDNEY |
THE COURT ORDERS THAT:
1. The applicant/appellant be granted leave to appeal and the appeal be treated as instituted instanter.
2. The appellant file a notice of appeal in the form annexed to its application for leave to appeal on or before 5 March 2013.
3. The orders made by the primary judge on 1 August 2012 be set aside and in lieu thereof it be ordered that:
1. The proceedings be dismissed for want of jurisdiction.
2. The plaintiff pay the defendant’s costs.
3. Any security provided by the defendant or on its behalf to secure the release of Hako Fortress from arrest be delivered up forthwith to the defendant or its solicitors.
4. The respondent pay the appellant’s costs of the appeal including the application for leave to appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
in admiralty | |
WESTERN AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | WAD 189 of 2012 WAD 190 of 2012 WAD 191 of 2012 WAD 192 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | THE SHIPS "HAKO ENDEAVOUR", "HAKO EXCEL", "HAKO ESTEEM" AND "HAKO FORTRESS" Appellant
|
AND: | PROGRAMMED TOTAL MARINE SERVICES PTY LTD Respondent
|
JUDGES: | SIOPIS, RARES AND BUCHANAN JJ |
DATE: | 26 FEBRUARY 2013 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
SIOPIS J:
1 I have the advantage of reading the reasons of each of Rares J and Buchanan J. Subject to what follows, I agree with the reasons of their Honours and the orders proposed.
2 In my view, the respondent is not entitled to be subrogated to the maritime lien of the crew in this case. Subrogation is an equitable doctrine which affords an equitable remedy which has as its basis the redress of unconscionable conduct (Bofinger v Kingsway Group Limited (2009) 239 CLR 269 at 280 281 and 300-301). The facts in this case cannot support a contention that it would be unconscionable if the respondent was restricted to its contractual rights against Hako Offshore Pty Ltd (Hako) in respect of its claims to be paid by Hako for the provision of crewing services. This is not a case where the crew were paid by the respondent as a surety for Hako. Hako never had any contractual obligation to pay the wages of the crew. It was the respondent that was primarily liable in contract to make those payments. Nor is this a case where the crew’s wages were paid by a person who was not in contractual relations with either the owner or the crew, and so would need to appeal to equity to redress any unconscionability which might arise from the circumstances of the payments. Rather, here the respondent made the payments to the crew pursuant to pre existing contractual arrangements negotiated with both the crew and Hako, where it was open to the parties to define their relationship exhaustively in contract. In my view, there is no room for the intervention of equity by way of a remedy in subrogation.
3 It is, therefore, not necessary to consider whether as a matter of law a maritime lien for seamens’ wages can ever be the subject of subrogation. However, in my view, the fact that the maritime lien is discharged on the payment of the seaman’s wages would not in itself stand as an obstacle to subrogation, if it was otherwise available. In providing a remedy by way of subrogation, equity will, where it is necessary to do so, deploy the fiction of deeming a discharged security still to be in existence.
I certify that the preceding three (3) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. |
Associate:
IN THE FEDERAL COURT OF AUSTRALIA | |
in admiralty | |
WESTERN AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | WAD 189 of 2012 WAD 190 of 2012 WAD 191 of 2012 WAD 192 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | THE SHIPS “HAKO ENDEAVOUR", "HAKO EXCEL", "HAKO ESTEEM" AND "HAKO FORTRESS” Appellant
|
AND: | PROGRAMMED TOTAL MARINE SERVICES PTY LTD Respondent
|
JUDGES: | SIOPIS, RARES AND BUCHANAN JJ |
DATE: | 26 FEBRUARY 2013 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
RARES J:
4 On 2 April 2012, Programmed Total Marine Services Pty Ltd (PTMS) issued four writs against, and applied for the arrest of, respectively four ships, Hako Fortress, Hako Endeavour, Hako Excel and Hako Esteem. Arrest warrants were issued for each ship on the same day. Each ship was a newbuild tug registered to different owners in Singapore. The ships were arrested progressively during April 2012. The respective dates of arrest and names of the owners (the shipowners) are as follows:
Ship | Date of Arrest | Owner’s name |
Hako Fortress | 11 April 2012 | Dolphin 2 Pte Ltd |
Hako Endeavour | 16 April 2012 | Eagle 3 Pte Ltd |
Hako Excel | 6 April 2012 | Eagle 2 Pte Ltd |
Hako Esteem | 5 April 2012 | Eagle 1 Pte Ltd |
5 Each writ claimed that PTMS was owed varying amounts, totalling approximately $1.2 million, in relation to the costs of providing, to the relevant ship, goods, and services, in the form of a master and crew, pursuant to a deed dated 7 April 2011 between PTMS, Boskalis Australia Pty Ltd (Boskalis) and Hako Offshore Pte Ltd (Hako Offshore). PTMS asserted in each writ that Hako Offshore was the demise charterer of each ship and that each claim fell within ss 4(3)(m) and 18 of the Admiralty Act 1988 (Cth). Alternatively, PTMS asserted that it had been subrogated to each master’s and crew’s maritime lien for their wages that it had paid and so it had a maritime lien for the amount of each claim under s 15(2)(c) of the Act.
6 Boskalis had chartered each ship together with a barge from Hako Offshore under time charterparties dated 6 April 2010 in the Supplytime 89 form. Boskalis employed the tugs and barges in moving rocks from Henderson to Barrow Island for the purposes of development of an LNG plant on Barrow Island as part of the Gorgon gas project on the North West Shelf off Western Australia. On 29 March 2012, Boskalis gave PTMS notices of redelivery of each of the ships at Dampier that would occur on dates that corresponded approximately with the dates of their respective arrests.
7 On 10 April 2012, PTMS amended the writs to increase its claims to a total of about $7.5 million. On 4 May 2012, the shipowners filed conditional appearances and interlocutory applications challenging the Court’s jurisdiction. Subsequently, the owners provided security for PTMS’ claims and on 17 May 2012, the day of the hearing before the primary judge, the ships were released from arrest.
8 Each of the shipowners applied to the primary judge to set aside the writs and sought summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) on the bases that:
Dolphin 2, as owner, had withdrawn Hako Fortress and terminated the demise charter for her by a notice dated 1 March 2012 and served on Hako Offshore before the proceedings against her were commenced (the Hako Fortress termination issue);
Hako Offshore was not a demise charterer for the purposes of s 18 because it was not in possession and control of each ship since it did not employ, and PTMS did employ, the master and crew (the demise issue);
the goods and services for which PTMS’ claims were made, were not supplied to the ships but rather were supplied to Hako Offshore and so did not satisfy the jurisdictional requirement of s 4(3)(m) that they be supplied to the ship (the supply issue);
each debt on which PTMS relied for its claims under s 4(3)(m) was not owed to it but had been assigned under the deed to Boskalis (the assignment issue);
no maritime lien under s 15(2)(c) could be asserted by PTMS because it had engaged the masters and crews as its servants or agents and they, having being paid under their contracts with PTMS, had no lien for their wages (the lien issue).
9 The primary judge rejected each of those challenges and refused to set aside the writs: Programmed Total Marine Services Pty Ltd v The Ship “Hako Fortress” (2012) 293 ALR 139. Each of the owners sought leave to appeal from that decision and those applications were referred to this Full Court which heard full argument on them as if on the appeals.
The statutory context
10 Relevantly, the Admiralty Act provided that the time “when a proceeding is commenced” was when the initiating process was filed in or issued by a court (s 3(2)) and:
“4(3) A reference in this Act to a general maritime claim is a reference to:
…
(m) a claim in respect of goods, materials or services (including stevedoring and lighterage services) supplied or to be supplied to a ship for its operation or maintenance;
…
14 Admiralty actions in rem to be commenced under this Act
In a matter of Admiralty or maritime jurisdiction, a proceeding shall not be commenced as an action in rem against a ship or other property except as provided by this Act.
15 Right to proceed in rem on maritime liens etc.
(1) A proceeding on a maritime lien or other charge in respect of a ship or other property subject to the lien or charge may be commenced as an action in rem against the ship or property.
(2) A reference in subsection (1) to a maritime lien includes a reference to a lien for:
…
(c) wages of the master, or of a member of the crew, of a ship; or
…
18 Right to proceed in rem on demise charterer’s liabilities
Where, in relation to a maritime claim concerning a ship, a relevant person:
(a) was, when the cause of action arose, the owner or charterer, or in possession or control, of the ship; and
(b) is, when the proceeding is commenced, a demise charterer of the ship;
a proceeding on the claim may be commenced as an action in rem against the ship.”
Background
The relevant terms of the Barecon charterparties
11 Otto Marine Ltd, a Singaporean company was the owners’ managing agent for each ship. On 27 April 2009, each of the then owners of the ships entered into a BIMCO Standard Bareboat Charter in the Barecon 2001 form. Some original owners subsequently transferred their interests to the current owners: see [1] above.
12 Each of the Barecon charterparties was relevantly in the same form. Box 11 stated that tug was a newbuilding. The charters were for various periods and at different daily hire rates, the highest being for Hako Fortress of USD7,500.00. Relevantly, the Barecon charterparties provided:
“10 Maintenance and Operation
(a)(i) Maintenance and Repairs – During the Charter Period the Vessel shall be in the full possession and at the absolute disposal for all purposes of the Charterers and under their complete control in every respect. The Charterers shall maintain the Vessel, her machinery, boilers, appurtenances and spare parts in a good state of repair, in efficient operating condition and in accordance with good commercial maintenance practice and, except as provided for in Clause 14(1), if applicable, at their own expense they shall at all times keep the Vessel’s Class fully up to date with the Classification Society indicated in Box 10 and maintain all other necessary certificates in force at all times.
…
(b) Operation of the Vessel – The Charterers shall at their own expense and by their own procurement man, victual, navigate, operate, supply, fuel and, whenever required, repair the Vessel during the Charter Period and they shall pay all charges and expenses of every kind and nature whatsoever incidental to their use and operation of the Vessel under this Charter, including annual flag State fees and any foreign general municipality and/or state taxes. The Master, officers and crew of the Vessel shall be the servants the Charterers for all purposes whatsoever, even if for any reason appointed by the Owners.” (emphasis added)
13 Clause 11(a) required the charterers to pay hire due to the owners punctually in accordance with the terms of the charterparty, in respect of which time was of the essence. Relevantly, for Hako Fortress, hire was payable “monthly in arrears and 30 days terms” (Box 25) and interest on outstanding hire was payable at 1.5% per month or part thereof (Box 24, cl 11(f)). The grace period for the purposes of cl 28 was 14 banking days (Box 34). Clause 16 prohibited the charterers from suffering, or permitting to be continued, any lien or encumbrance incurred by them that might have priority over the owners’ interest in the vessel. Importantly, cll 28 and 29, relevantly, provided:
“28 Termination
(a) Charterers’ Default
The Owners shall be entitled to withdraw the Vessel from the service of the Charterers and terminate the Charter with immediate effect by written notice to the Charterers if:
(i) the Charterers fail to pay hire in accordance with Clause 11. However, where there is a failure to make punctual payment of hire due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers, the Owners shall give the Charterers written notice of the number of clear banking days stated in Box 34 (as recognised at the agreed place of payment) in which to rectify the failure, and when so rectified within such number of days following the Owners’ notice, the payment shall stand as regular and punctual. Failure by the Charterers to pay hire within the number of days stated in Box 34 of their receiving the Owners’ notice as provided herein, shall entitle the Owners to withdraw the Vessel from the service of the Charterers and terminate the Charter without further notice;
…
29 Repossession
In the event of the termination of this Charter in accordance with the applicable provisions of Clause 28, the Owners shall have the right to repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them without hindrance or interference by the Charterers, courts or local authorities. Pending physical repossession of the Vessel in accordance with this Clause 29, the Charterers shall hold the Vessel as gratuitous bailee only to the owners. The Owners shall arrange for an authorised representative to board the Vessel as soon as reasonably practicable following the termination of the Charter. The Vessel shall be deemed to be repossessed by the Owners from the Charterers upon the boarding of the Vessel by the Owners’ representative. All arrangements and expenses relating to the settling of wages, disembarkation and repatriation of the Charterers’ Master, officers and crew shall be the sole responsibility of the Charterers.” (emphasis added)
14 Notices given under each charterparty had to be in writing and could be sent by fax, registered mail or personal service at the address of the respective party in Boxes 3 and 4 (cl 31). Clause 22(b) permitted the owners to sell the ship, subject to the charterparty, with the prior written consent of the charterers, such consent not to be unreasonably withheld. (There was no suggestion by PTMS that any registered owners who were different to the original owners named in any of the charterparties were not entitled to assert their rights as assignees.)
The relevant terms of the deed
15 The deed recited that at 7 April 2011, when it was made, Hako Excel, Hako Endeavour and Hako Esteem were under arrest and that, in breach of a manning agreement for crewing and catering services between them dated 25 June 2010, Hako Offshore owed PTMS about $6 million.
16 Under the deed, PTMS sold and assigned to Boskalis the existing debt of about $6 million (cl 1.1) owed by Hako Offshore. Hako Offshore appointed PTMS as the sole and exclusive supplier, to or in respect of the four ships, of marine manning services, catering services and other services as defined respectively under cll 5, 6 and 7 (cl 4). The term of the deed continued until completion of the rock transportation work from Henderson to Barrow Island or earlier termination (cl 3).
17 Relevantly, cll 5.1 and 5.5 provided (PTMS’ corporate name was at that time Total Marine Services Pty Ltd and, in the deed, it was called “TMS” and Hako Offshore was called “Hako”):
“5 Marine Manning Services
5.1 Description
Marine Manning Services means the supply of personnel by TMS to Hako in accordance with the terms of this document and during the Term.
...
5.5 Personnel are TMS employees or contractors
Hako acknowledges that all Personnel are and will remain at all times employees or contractors of TMS.”
18 Earlier in letters dated 10 February 2009 and 17 June 2010, PTMS had made proposals to provide full crews, including masters, for each tug at specified rates and conditions. Those letters were incorporated into and annexed to the deed and defined as “Proposal” in cl 1.1. Under cl 5.4, Hako Offshore had the right to make a reasonable request to PTMS to remove from one of the ships personnel supplied who, in the performance of his or her duties, in Hako Offshore’s opinion, had engaged in serious or wilful misconduct, or was incompetent or negligent. However, cl 5.4 also provided that PTMS had an absolute discretion whether or not to remove that crew member from a ship or counsel him or her. Nonetheless, if Hako Offshore then insisted that the crew member be removed, PTMS had to do so provided that Hako Offshore indemnified PTMS for all costs and liabilities that it incurred as a result. In addition, cl 5.4 allowed PTMS to supply substitute crew members, with Hako Offshore’s consent, which could not be unreasonably withheld, provided that they were suitably qualified and experienced.
19 The deed provided that the crew members would work under Hako Offshore’s direction and supervision and that, when they were working on one of the ships, Hako Offshore maintained operational responsibility for that ship at all times (cl 5.7). Hako Offshore had to provide all accommodation, plant, equipment facilities induction and training necessary for the crew members to perform their work (cll 5.8, 5.9). However, PTMS was responsible for maintaining good industrial relations with respect to the crew members (cl 5.11). Importantly, cll 5.12 and 5.13 provided:
“5.12 Rates for Marine Manning Services
Hako is liable to TMS for the Marine Manning Services at the rates set out in the Proposal (Rates) for each person for each day, or part day, that such persons are provided to Hako, taking into account their roster, and calculated as set out in the Proposal in the manner and at the times set out in this clause 5.
5.13 Invoicing
TMS will invoice Hako fortnightly, copied to Boskalis for the Marine Manning Services provided in that past fortnight. For the avoidance of doubt, each of TMS and Hako agrees and acknowledges that Boskalis does not assume any liability to TMS, Hako or any other third party under any invoices for Marine Manning Services.” (emphasis added)
20 Invoices became due and payable 14 days after PTMS rendered them to Hako Offshore under cl 5.17 unless they were disputed in accordance with the procedures in cl 5.16. Next, cl 6 provided for PTMS to supply catering services on the following basis:
“6 Catering Services
6.1 Description
Catering Services means the supply of provisions and related items for consumption and use by TMS to Hako on the Hako Vessels demise chartered by Hako and operating in Australian waters during the Term.
6.2 Time and manner of supply
TMS will supply the Catering Services at the times and in the manner set out in the Proposal.
6.3 Rates for Catering Services
Hako is liable to TMS for the Catering Services as set out in the Proposal.
6.4 Invoicing
TMS will invoice Hako monthly, copied to Boskalis, for the Catering Services provided in that month, unless the Proposal provides otherwise. For the avoidance of doubt, each of TMS and Hako agrees and acknowledges that Boskalis does not assume any liability to TMS, Hako or any other third party under any invoices for Catering services.” (emphasis added)
21 The “other services” were defined in cl 7 as being those incidental or in relation to the manning and catering services, including cleaning, waste collection, vessel management or procurement, maintenance, repair and permanent recruitment services (cl 7.1). TMS would supply the other services at the times and in the manner set out in the proposal letters and would invoice Hako Offshore for them, sending copies to Boskalis in the same way as in cll 5.13 and 6.4 (cll 7.2, 7.4).
22 The next clauses of the deed dealt with the purchase by, and assignment to, Boskalis of the existing debt of about $6 million and then for the future purchase by, and assignment to, Boskalis of the debts that would become due to PTMS by Hako Offshore in subsequent invoices issued under cl 5.13 within 14 days (cl 8(a)). This involved Boskalis paying Hako Offshore’s existing outstanding debt to PTMS progressively until 24 June 2011. Additionally, cl 8(a)(vii) provided that the “Assignment Fees” (being defined in cl 1.1 as the amounts payable by Boskalis to PTMS in accordance with cl 8) would be paid in the following way:
“8 Payment of the Assignment Fees
(a) Boskalis shall pay the Assignment Fees to TMS as follows:
…
(vii) Subject to clause 8(b), from the Commencement Date until the end of the Term unless this document is terminated in accordance with its terms, Boskalis agrees upon the expiry of fourteen (14) days of receipt by it of a copy of an invoice issued by TMS to Hako for the Services after the Commencement Date, to purchase as debt such amount due under that invoice in accordance with clause 5.16 [a typographical error for cl 5.17] above.” (emphasis added)
23 Boskalis could reduce the purchase price for any invoice debt where the relevant ship was not on hire under its Supplytime 89 charter in accordance with a mechanism provided in cl 8(b). Importantly, PTMS expressly acknowledged that Boskalis was not liable for any debts due by Hako Offshore under the deed other than those provided for in cl 8(a) (cl 8(e)). The deed provided in cl 9(a) for a legal and equitable assignment (cl 9(c)) of the moneys referred to in cl 8(a) in the following terms:
“Assignment
(a) In consideration of the receipt by it of each part of the Assignment Fees, TMS as legal and beneficial owner of the Hako Debt shall be deemed by reason of this clause to assign in law and equity to Boskalis all of its legal and beneficial right, title and interest in the Hako Debt limited in each instance to the amount of debt purchased by Boskalis at that time, with the effect that all such rights, title and interest in the entire Hako Debt will have been assigned by TMS to Boskalis upon receipt by TMS of the full amount of the Assignment Fees (the Assignment). Each Assignment takes place when each part of the Assignment Fees is paid to TMS.” (emphasis added)
24 Under cl 9(d), Boskalis had the right, in its absolute discretion, once it had paid PTMS in full for any assignment fee, to enforce the relevant assigned debt against Hako Offshore. However, each of PTMS and Boskalis retained its rights to terminate the deed under cl 22. Hako Offshore also agreed:
that it would be liable under the deed to Boskalis for any debt assigned to it under cl 8(a) and to PTMS for any debt not assigned to Boskalis (cl 10);
any of the four ships could be arrested by PTMS or Boskalis in any jurisdiction to recover any amount due to the arresting party under the deed;
it was, and for the term of the deed it would remain, the demise charterer of each of the ships (cl 21).
25 The deed provided in cl 24:
“24 Relationship
24.1 Independent Contractor
The relationship between Hako and TMS is that of company and independent contractor and nothing in this document shall be taken as deeming TMS or any of TMS’s employees, servants or agents as employees or servants of Hako.”
26 Last, the deed contained an “entire agreement” clause in respect of the subject matter for which the deed provided (cl 26.4).
The circumstances of the parties leading up to the arrests
27 On 25 October 2010, Dolphin 2 was registered under the Singapore Merchant Shipping Act as the owner of Hako Fortress. In late 2010, Hako Offshore requested PTMS, for audit and tax purposes, to address invoices for services rendered under the deed to its Australian subsidiary, Hako Offshore Australia Pty Ltd (Hako Australia) but to send the invoices to it in Singapore as had occurred previously. PTMS accepted this request and subsequently addressed its invoices to Hako Australia. The shipowners did not suggest that this affected the characterisation of the way in which, or the person for whom, PTMS performed its obligations under the deed for Hako Offshore.
28 On 20 October 2011, Dolphin 2 sent by facsimile to Hako Offshore a notice of default referring to the Barecon charterparty between Otto Marine and Hako Offshore dated 27 April 2009. The notice did not state that Dolphin 2 was the nominee of Otto Marine, which was named as owner in the Barecon Charterparty for Hako Fortress. However, the notice made the demand that Hako Offshore pay Otto Marine the amount claimed. On 21 October 2011, Dolphin 2 sent a copy of that notice by registered post to Hako Offshore at an address in Singapore different to that in Box 4 of the charterparty. The notice claimed payment of USD2,095,500 plus USD158,337.75 accrued interest. The charterparty had permitted Otto Marine to nominate another person as owner and it can be inferred that is how Dolphin 2 became registered.
29 On 24 October 2011, Otto Marine’s related company, Otto Ship Management Pte Ltd sent to Hako Offshore letters demanding payment of outstanding hire:
(a) in respect of Hako Endeavour, of USD1,164,667.88 on behalf of Eagle 3;
(b) in respect of Hako Excel, of USD2,259,546.67 on behalf of Eagle 2;
(c) in respect of Hako Esteem, of USD2,171,000.00 on behalf of Eagle 1.
30 As far as the evidence shows, only Dolphin 2 engaged in any subsequent activity to enforce its rights to payment by Hako Offshore of outstanding and subsequently accruing hire. On 1 March 2012, Dolphin 2 sent to Hako Offshore, by facsimile, a notice of termination and withdrawal of vessel in respect of Hako Fortress. The notice of termination was also sent to Hako Offshore by registered post on 2 March 2012. Hako Offshore signed a Singapore Post Registered Articles Receipt for that letter on 5 March 2012. That notice was based on the earlier notice of default of 20 October 2011. It recited that, to the date of the notice, notwithstanding cl 28(a)(i) of the Barecon Charterparty, Hako Offshore had neglected, failed or refused to pay hire totalling USD3,007,500 plus accrued interest. The notice concluded by stating that pursuant to cl 28(a), Dolphin 2 was terminating the charterparty and withdrawing the ship from service of Hako Offshore “with immediate effect due to its failure to pay the full amount of outstanding hire within 14 days of the Notice of Default”.
31 There was no evidence that Hako Offshore ever disputed the amounts of indebtedness claimed by the shipowners or, in particular, Dolphin 2’s exercise of its right to terminate the charterparty for Hako Fortress.
The primary judge’s reasons
32 The primary judge determined that PTMS had established that Hako Offshore was the demise charterer of each of the four ships. He did so on the balance of probabilities for the purposes of deciding whether the Court had jurisdiction on applying the test in Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 426. However, his Honour then considered each of the shipowners’ other arguments on the basis that they had to satisfy the common law test for summary judgment as explained in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125.
33 His Honour reasoned that the terms of the Barecon charterparties expressly provided for the hire of each ship to be by demise. He said that Hako Offshore’s conduct in contracting for the provision of the crews, catering and other services under the deed reinforced the conclusion that it was the demise charterer. The primary judge gave particular weight to cl 5.7 of the deed because it expressly gave Hako Offshore the power to direct and supervise the crew. He also referred to cll 6 and 6.1 as showing that PTMS was supplying the catering services on the ships to Hako Offshore as demise charterer .
34 Next, his Honour held that he would not decide the Hako Fortress termination issue in a summary manner on interlocutory hearing. The primary judge noted that there was no explanation for Dolphin 2’s delay between the notice of default of 20 October 2011 and the notice of termination of 1 March 2012. He observed that there was no evidence of any intervening acts of waiver or acquiescence or of any act giving effect to the withdrawal of Hako Fortress, such as the giving of directions to her master. The primary judge observed that it had been open to Dolphin 2 to repossess the ship but it had not done so prior to her arrest. He noted a difference in views in the authorities as to whether it was possible to terminate a demise charter by notice alone. His Honour did not consider that he should resolve that difference in a summary manner but expressed a preference for the view of Finkelstein J in Re Pan Australia Shipping Pty Ltd (under administration); ASP Holdings Ltd v Pan Australia Shipping Pty Ltd (2006) 235 ALR 554 at 557-558 [12]-[15] that the owner needed physically to repossess a ship to terminate a demise charter. The primary judge distinguished the contrary view of Moore J in CMC (Australia) Pty Ltd v Ship “Socofl Stream” (1999) 95 FCR 403 on the basis of the terms of the charterparty there in question.
35 The primary judge found that Boskalis had not paid PTMS any of the amounts the subject of the four proceedings. Accordingly, he held that PTMS remained entitled to sue Hako Offshore and that no assignment to Boskalis had occurred. Next, the primary judge held that under cll 5.6 and 7 of the deed PTMS supplied the crew, catering and other services to each of the four ships, not to Hako Offshore. He held that there was a clear and close connection between those services and the operation of the ships.
36 His Honour held that PTMS had an arguable case that it had become subrogated to the rights of the masters and crews to a maritime lien for their wages under s 15(2)(c) of the Act. He held that PTMS’ contractual obligation to pay the crews was not relevant to whether it might be subrogated to their maritime liens when it paid them. He refused to follow The “Petone” [1917] P 198 where Hill J had held that a volunteer who discharged the liability of a privileged creditor, such as a seafarer, could not obtain a maritime lien for the payment where the creditor did not need to make it to protect its own property and was under no compulsion to do so.
Consideration – JurisdictionAL Facts
37 Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ decided the standard of proof of jurisdictional facts on a challenge to jurisdiction in “Shin Kobe Maru” 181 CLR at 426. They held that the plaintiff (here PTMS) has the onus of establishing that the Court has jurisdiction where the defendant challenges it. Their Honours held:
“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.”
38 The question of jurisdiction must be answered by reference to the nature of the plaintiff’s claim as put forward, without reference to the further point of whether it is likely to succeed or not: The Owners of the Motor Vessel “Iran Amanat” v KMP Coastal Oil Pte Limited (1999) 196 CLR 130 at 137-138 [18]-[20] per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ. Their Honours observed there that a challenge to jurisdiction may involve the resolution of factual issues relating to ownership for the purposes of pars (a) and (b) of ss 17 and 19 of the Act. That observation must also apply to questions of whether a demise charter existed at each of the times referred to in s 18(a) and (b). For the purposes of a challenge to jurisdiction, the issue of whether someone is a relevant person within the meaning of ss 17, 18 or 19 turns, as their Honours held, “upon the nature of the claim, not its strength”.
39 However, the Court emphasised that this question could involve considering the elements of the definition of “relevant person” in s 3(1) of the Act, namely whether, “in relation to a maritime claim”, the person “would be liable on the claim in a proceeding commenced as an action in personam”. Thus, the jurisdictional fact that must be established is not whether the alleged relevant person is, or is likely to be found, liable. Rather, the question is whether that person has the necessary nexus with the ship against which the proceedings in rem are brought under ss 17, 18 or 19, that the person could be found liable on the plaintiff’s claim as it is put forward against that person: cf The “Eschersheim” [1976] 1 WLR 430 at 436H-437A per Lord Diplock with whom Lords Simon of Glaisdale, Kilbrandon, Salmon and Edmund-Davies agreed.
40 In Iran Amanat 196 CLR at 136-139 [17]-[22], and in the Full Court (KMP Coastal Oil Pty Ltd v The Owners of Motor Vessel “Iran Amanat” (1997) 75 FCR 78 at 83-86) the issue was whether the relevant person was a party to the contract for the supply of bunkers to sister ships of the ship that had been arrested. The Court held that that dispute was concerned with the conditional question that the definition of “relevant person” raised, namely whether the person “would be liable” on the plaintiff’s claim which was an issue for trial. They said (196 CLR at 138 [18]):
“To adopt the language of McPherson A-CJ in Ocean Industries Pty Ltd v Owners of MV “Steven C” [1994] 1 Qd R 69, pars (a) and (b) are concerned with facts that may need to be established, whereas the liability to which the definition of “relevant person” refers is hypothetical. The difference between the conditional nature of the inquiry raised by the definition of “relevant person” and the unconditional nature of the inquiry raised by pars (a) and (b) is important.” (emphasis added)
41 It follows that not every challenge to jurisdiction can, or should, be decided at a preliminary stage. That is because a person, self-evidently, will not be a “relevant person” if after a trial on contested issues of fact as to liability it is established that he, she or it, was not in fact liable on the maritime claim alleged. In a preliminary jurisdictional challenge, the “unconditional nature of the inquiry” that the Court is usually concerned to identify is whether the plaintiff’s claim as formulated identifies a relevant person who, in fact, had the nexus or connection with the arrested ship at each of the times specified in pars (a) and (b) of ss 17, 18 or 19. Ordinarily, the next inquiry is the conditional one whether that person falls within the description of a person who because of the identified nexus with the ship, is someone who would be liable in an action in personam.
42 Here, PTMS had to establish, on the balance of probabilities, the jurisdictional facts of Hako Offshore’s or the shipowners’ nexus for its asserted maritime claims and maritime liens. Accordingly, his Honour erred by applying the common law test for summary judgment to determine some of the challenges brought by the shipowners other than whether the original Barecon charterparties were demise charters of each ship. The existence of the demise charters at each relevant time was one jurisdictional fact relevant to the questions under both s 18(a) and (b). However, the resolution of that question did not resolve whether PTMS had also formulated a maritime claim or a maritime lien within the meaning of ss 4(3)(m) or 15(2)(c) that it could assert in a proceeding under s 18 of the Act. The shipowners had raised challenges that also required PTMS to establish on the balance of probabilities the jurisdictional facts that:
the Hako Fortress remained under demise charter at the time the proceedings were commenced against her (s 18(b));
PTMS’ claim was in respect of goods and services supplied to the ships as opposed to Hako Offshore (s 4(3)(m));
PTMS could maintain a claim that Hako Offshore owed to PTMS the debts claimed, i.e. the debts had not been assigned to Boskalis by the terms of the deed (s 4(3)(m); and
PTMS could assert that it was subrogated to maritime liens for the masters’ and crews’ wages that it had paid.
It is necessary to consider each of the five issues in turn.
The Hako Fortress termination issue
(a) PTMS’ submissions
43 PTMS argued that there was no fixed rule that required the Court to determine a jurisdictional challenge immediately, rather than at a trial, especially where the ship had been released from arrest after security had been provided. It contended that there was a limited time for the parties to obtain evidence before the hearing of the shipowners’ challenges to jurisdiction and so it was open to his Honour to defer resolving some of those until a final hearing. PTMS submitted that Dolphin 2 had led only evidence of a formal nature in support of its assertion of default by Hako Offshore, its termination of the Barecon Charterparty for Hako Fortress and had not explained the over four month delay between the two notices. PTMS argued that Dolphin 2 had not done anything to repossess Hako Fortress or to exercise its authority over her, such as giving instructions to her master. PTMS contended that, in those circumstances, Hako Offshore remained in possession and control of the ship as demise charterer at the time of her arrest.
44 During the hearing before us, PTMS developed orally an argument that the notices of default and termination had not been served under cl 31(b) of the Barecon Charterparty on Hako Offshore at its address for service in Box 4. Last, PTMS relied on an undeveloped written submission that there was evidence of substantial payments by Hako Offshore to Otto Marine in the period between the notices of default and termination.
(b) Consideration
45 PTMS’ argument, that in the circumstances the primary judge was correct to defer dealing with Dolphin 2’s challenge to jurisdiction under s 18(b) based on the asserted termination of the demise charter of Hako Fortress, should be rejected. In order to meet that challenge, PTMS had to prove, on the balance of probabilities, that Hako Offshore was the demise charterer at the time the proceedings were commenced against Hako Fortress on 2 April 2012. Both parties led evidence on that issue before his Honour. Significantly, PTMS did not seek an adjournment of the hearing of that issue on the ground that it had not had an adequate opportunity to obtain evidence, such as by discovery.
46 The shipowners led affidavit evidence from Marjorie Wee, the general counsel of their managing agent, Otto Marine. Ms Wee had authority and control over the records of Dolphin 2 and its beneficial owner. She swore affidavits on 8 and 9 May 2012; some time before the hearing fixed for 17 May 2012. PTMS did not seek to cross-examine Ms Wee. PTMS’ witnesses evidence, from the masters of Hako Fortress, was prepared later. PTMS did not suggest to his Honour that the issue of whether Dolphin 2 had terminated the Barecon Charterparty should not be decided at the hearing on 17 May 2012. Rather, PTMS called the evidence of the three masters (who were cross-examined) to show that Dolphin 2 had not done anything to retake possession or exercise control over Hako Fortress, after 1 March 2012, the date of the notice of termination. Senior Counsel for PTMS told the Full Court that the termination of the Barecon Charterparty was “firmly at issue” before the primary judge. He argued that, PTMS did not need to deal with that topic in cross-examination because Dolphin 2’s case on termination was clearly deficient.
47 PTMS made the deliberate forensic decision to analyse that evidence and to avoid the pitfall of making a case for Dolphin 2 in cross-examination. In those circumstances, PTMS should be bound by its conduct of the interlocutory application: Metwally v University of Wollongong [No 2] (1985) 59 ALJR 481 at 483; 60 ALR 68 at 71 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ. Such an application is not in substance interlocutory but is in the nature of a final hearing, albeit on the preliminary question of jurisdiction as Beaumont, Burchett and Lindgren JJ held in Lloyd Werft Bremerhaven GmbH v Owners of Ship “Zoya Kosmodemyanskaya” (1997) 79 FCR 71 at 93C-D. PTMS led its own evidence and chose not to cross-examine on the issue of whether the charterparty for Hako Fortress had been terminated at the time of her arrest. There was no reason why that issue, on which the parties had fully put their cases on the basis of their considered forensic choices, should not have been heard and determined. It went squarely to the jurisdiction of the Court to arrest Hako Fortress.
48 I am of opinion that, for the reasons which follow, the evidence before the primary judge established on the balance of probabilities that Dolphin 2 had terminated the Barecon charterparty in early March 2012 and that Hako Offshore was not a demise charterer of Hako Fortress at the time when the proceeding against her was commenced on 2 April 2012 for the purposes of s 18(b). First, cl 28(a)(i) of the Barecon charterparty gave the owners the right to withdraw the ship and terminate the charter with immediate effect if the charterer failed to pay hire in accordance with cl 11, namely punctually, monthly in arrears on 30 days terms, time being of the essence. The notice of default dated 20 October 2011 demanded payment of 11 months unpaid hire and interest. It specifically stated that it was a notice under cl 28(a)(i). There was no evidence of any payment or other response to that notice by Hako Offshore.
49 Secondly, although PTMS referred in its written submissions to evidence of Hako Offshore making substantial payments “to the owner”, after 20 October 2011 that evidence did not demonstrate that the default on which Dolphin 2 relied had been remedied. The evidence consisted of copies of emails and bank telegraphic transfer applications by Hako Australia to pay Otto Marine moneys. The significance of these documents was not elaborated in oral or written submissions before the primary judge or the Full Court. However, they are not inconsistent with any money paid to Otto Marine being appropriated to pay the substantial arrears owed to the other three shipowners, as evidenced by Otto Marine’s three letters to Hako Offshore of 24 October 2011 demanding payment of over USD5.5 million in outstanding hire for the other three tugs. In this respect, the deed had recorded that at the time it was made on 7 April 2011, the other three tugs had been arrested but it did not suggest that Hako Fortress had been arrested then. Only Dolphin 2 issued a notice of default and a notice of termination. There was no evidence that Otto Marine had received payments in respect of the telegraphic transfer applications or that, if it had, they were made or applied in respect of any debt due to Dolphin 2. Dolphin 2’s notice of termination dated 1 March 2012, contained a statement of account that did not record any receipt by it from Hako Offshore between 31 October 2010 and 29 February 2012. That notice relied on Hako Offshore’s failure to comply with the earlier notice of default of 20 October 2011 within 14 days. On that evidence Dolphin 2 had not received any hire after the notice of default. Accordingly, it was entitled to exercise its right to withdraw Hako Fortress and terminate the Barecon Charterparty for her on 1 March 2012. There is no reason not to treat the notice of termination as valid on its face.
50 Ms Wee, who had authority and control over Dolphin 2’s records, was not cross-examined to suggest that the notices of default and termination were inaccurate or not bona fide statements of the state of affairs between Dolphin 2 and Hako Offshore in respect of unpaid hire for Hako Fortress. If it were part of PTMS’ case that Dolphin 2’s notices of default and termination were not entitled to be taken at face value and that it had received payments, that should have been put to Ms Wee. However, that was not an issue at the interlocutory hearing. Rather, PTMS’ case accepted that the notice of termination had been sent to, and received by Hako Offshore, but that thereafter Dolphin 2 did not act on it and did not pursue it. There was no issue about the earlier default. PTMS did not appear to address any argument to the primary judge about the documents relating to the telegraphic transfer applications. They were contained in a bundle of documents that was tendered without elaborating what, if any thing, was to be attributed to them.
51 As PTMS pointed out before the Full Court, Dolphin 2 did not serve the notices of default or termination at Hako Offshore’s Singapore address given in Box 4 of the Barecon Charterparty. Instead, Dolphin 2 sent those notices to another Singapore address for Hako Offshore. That other address appeared at the foot of the email Hako Offshore sent to Otto Marine on 18 April 2012 notifying it of the arrest of the four ships earlier in April 2012. Both notices were sent to Hako Offshore at that other address by registered mail and it signed a receipt for the notice of termination. The address used by Dolphin 2 was an address at which Hako Offshore actually conducted business concerning the ships and Barecon Charterparties. The address to which both notices were sent was one at which it was highly likely that they would come to the attention of Hako Offshore’s officers responsible for the administration of the Barecon Charterparties. Dolphin 2’s failure to use the address in Box 4 could not have caused Hako Offshore any prejudice. In my opinion, the notices were validly served on Hako Offshore under the Barecon Charterparties.
52 These two arguments should be rejected. That requires consideration of the substantial argument on which the shipowners failed below.
The nature of a demise charterparty
53 In formulating its recommendations for what became s 18 of the Act, the Australian Law Reform Commission intended to make a limited, but principled, extension to a plaintiff’s existing rights to proceed in rem where the relevant person was a demise charterer: Civil Admiralty Jurisdiction: Report No 33 (ALRC 33) at 104 [136]. Ryan and Allsop JJ said in Tisand Pty Ltd v The Owners of the Ship MV “Cape Moreton” (Ex “Freya”) (2005) 143 FCR 43 at 69 [103] that the Commission intended that, for a ship to be liable to arrest in the exercise of in rem jurisdiction, “it must be the property of the presumptively liable relevant person, or be chartered by demise to that person at the commencement of the suit”
54 A charter by demise is often called a “bareboat” charter. That is because the owners will frequently give possession and control of the vessel under a letting or hire contract to the charterer who will take her unmanned and then employ a master and crew: cf The “Guiseppe di Vittorio” [1998] 1 Lloyd’s Rep 136 at 156 per Evans LJ, with whom Aldous and Waller LJJ agreed. The essence of a demise charter is that the owners confer on the charterer, for a term, sufficient of their rights to give the charterer possession and control of the ship, including the right to employ and direct the master and crew, so as to place the charterer in the same position, for the duration of the term, as the owners would have had to possess and control the ship, her master and crew: [1998] 1 Lloyd’s Rep at 156-157.
55 A demise charterer has often been described as “the owner pro hac vice or the temporary owner because of the extent of his possession and control”: The “Andrea Ursula” [1973] QB 265 at 269H per Brandon J, citing The “Lemington” (1874) 2 Asp MLC 475 at 478 per Sir Robert Phillimore, The “Tasmania” (1888) 13 PD 110 at 118 per Sir James Hannen P and The “Hopper No 66” [1908] AC 126 at 136 per Lord Atkinson; see too Laemthong International Lines Co Limited v BPS Shipping Limited (1997) 190 CLR 181 at 192 per Toohey J; ALRC 33 at 96 [126]. In The “Ripon City” [1897] P 226 at 243 Gorell Barnes J explained that the principle that where owners vested control of their ship in a charterer, the charterer would be deemed to have derived his authority from the owners so as to make the ship liable for the charterer’s negligence (citing The Ticonderoga (1857) Swab 215 at 217 (166 ER 1103 at 1104) per Dr Lushington and The “Lemington” 2 Asp MLC 475).
56 The cases have drawn broadbrush analogies with the law of real property as to the nature of a demise of a ship. Lord Herschell LC in The Baumvoll Manufactur Von Carl Scheibler v Christopher Furness [1893] AC 8 at 14 explained that the use of the word “demise” is descriptive of the plenary ambit of those rights. He described the nature of a demise charter as one (at 16):
“… in which by the charterparty the charterer has become, pro hâc vice and during the term of the charter, the owner of the vessel, when one is considering the rights and liabilities which arise from the acts of the master, and the crew of the vessel, who during that time are the servants of the charterer, appointed and paid by him.” (emphasis added)
He continued (at 17 and see too The “Hopper No 66” [1908] AC at 132-133, 136 per Lord Atkinson):
“But there may be two persons at the same time in different senses not improperly spoken of as the owner of a ship. The person who has the absolute right to the ship, who is the registered owner, the owner (to borrow an expression from real property law) in fee simple, may be properly spoken of, no doubt, as the owner; but at the same time he may have so dealt with the vessel as to have given all the rights of ownership for a limited time to some other person, who, during that time, may equally properly be spoken of as the owner. When there is such a person, and that person appoints the master, officers, and crew of the ship, pays them, employs them and gives them the orders, and deals with the vessel in the adventure, during that time all those rights which are spoken of as resting upon the owner of the vessel, rest upon that person who is, for those purposes during that time, in point of law to be regarded as the owner.” (emphasis added)
57 Thus, the common law regarded a demise charterer as having the rights and responsibilities of the owner in respect of his exercise or of the consequences (such as collision or liabilities for necessaries) of possession and control over the ship. Accordingly, where, for example, the demise charterer was liable for a collision, he could limit liability under ss 503 and 504 of the Merchant Shipping Act 1894 (UK) even though that Act in terms only gave that right to “owners”. As Lord Atkinson observed that in The “Hopper No 66” [1908] AC at 132 in those sections:
“… the word “owner” must be held to include a charterer by demise, who for the time being had, under a contract with the registered owner, possession and control of the ship, and hired and employed the master and crew.” (emphasis added)
58 The analogy of a demise charter with real property law is a useful one but it cannot be taken literally, lest it create injustice. A ship is not realty; she is a chattel. Ships are “goods” within the meaning of the Sale of Goods Act 1923 (NSW) (although other legislation may now govern or affect dealings in them): Commonwealth v Mort’s Dock & Engineering Co Ltd (In Liq) [1962] NSWR 1497 at 1498 per Walsh J; Behnke v Bede Shipping Co Ltd [1927] 1 KB 649 at 659 per Wright J; Scrutton on Charterparties (22nd ed) at [4-012(1)].
59 Thus, rules apposite to how a landlord retakes possession of real property demised to a tenant following a breach of their lease cannot be readily transposed to how owners withdraw and retake possession of a ship from a demise charterer following a breach of their charterparty. Legal principles governing possession and dispossession of realty are not necessarily the same or apposite to those governing that subject matter for chattels, including ships. Charterparties are contracts and their construction ought be governed, in general, by the ordinary principles of the law of contract, subject, of course, to statutory provisions and the principles of the law maritime. Lord Wilberforce, with whom Viscount Dilhorne and Lords Simon of Glaisdale and Kilbrandon agreed, said in his seminal speech in Reardon Smith Line Ltd v Hansen-Tangan [1976] 1 WLR 989 at 998D-G:
“Even if a strict and technical view must be taken as regards the description of unascertained future goods (e.g., commodities) as to which each detail of the description must be assumed to be vital, it may be, and in my opinion is, right to treat other contracts of sale of goods in a similar manner to other contracts generally so as to ask whether a particular item in a description constitutes a substantial ingredient of the “identity” of the thing sold, and only if it does to treat it as a condition (see Couchman v. Hill [1947] K.B. 554 , 559, per Scott L.J.). I would respectfully endorse what was recently said by Roskill L.J. in Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. [1976] Q.B. 44 , 71:
“In principle it is not easy to see why the law relating to contracts for the sale of goods should be different from the law relating to the performance of other contractual obligations, whether charterparties or other types of contract. Sale of goods law is but one branch of the general law of contract. It is desirable that the same legal principles should apply to the law of contract as a whole and that different legal principles should not apply to different branches of that law,” (emphasis added)
60 In ASP Holdings 235 ALR at 557-258 [12] Finkelstein J noted that in Patrick Stevedores No 2 Pty Ltd v MV “Turakina” (1998) 154 ALR 666 at 675 Tamberlin J had held that when the vessel was withdrawn from the service of the charterer, under a demise charter in the Barecon 89 form, the charterer had an obligation to redeliver the vessel. Tamberlin J held that a breach by the charterer of its obligation to redeliver could be treated by the owner as a repudiation. As Finkelstein J pointed out, Tamberlin J’s analysis was followed by Giles J in the High Court of New Zealand in The “Rangiora” [2000] 1 Lloyd’s Rep 36 at 55. While Finkelstein J preferred that analysis, he reluctantly followed the decision of Moore J in Socofl Stream 95 FCR 403. The terms of the demise charter before Moore J (a “bareboat charter with purchase agreement”) gave an express right to the owners to terminate the charterparty by telex (95 FCR at 419 [29]). Moreover, Finkelstein J was considering a charter in the Barecon 2001 form.
61 The terms of the Barecon 89 and 2001 forms differed materially on the circumstances in which the owners could withdraw the vessel and its consequences: see M. Davis: Bareboat Charters (2nd ed, LLP London 2005) at [28.13]-[28.14]. More importantly, cl 29 of the Barecon 2001 form was a new provision that Davis observed at [29.01] was designed to clarify and strengthen the owners’ position if the charter was terminated under cl 28 and to address the practical difficulties that may occur in such circumstances. As he pointed out if the owners terminated a demise charter while the ship was on the high seas, they were in a potentially vulnerable position if they were unable, then and there, to retake possession. Clearly, cl 29 was formulated with this in mind.
Did Dolphin 2 withdraw Hako Fortress and terminate the demise?
62 The Commission observed that the common law right to proceed in rem against a ship, where there is no claim based on a maritime lien, was available where the owner was either liable in personam on the claim or “could be treated as if liable by virtue of a form of implied consent (for example, in some cases of liabilities of demise charterers)”. The Commission noted that a suggested explanation for the second basis was that the charterer had possession of the ship with the owner’s authority and consent: ALRC 33 at 96 [126].
63 I am of opinion that as a matter of principle the terms of cll 28 and 29 of the Barecon 2001 form of charterparty can operate as they were intended without requiring the owners, first, to physically retake possession of the ship following her withdrawal and the termination of the charterparty: Reardon-Smith Line [1976] 1 WLR at 998D-G. The charterer becomes entitled to possession of the ship under and by virtue of the contractual rights that the owners confer on it by the terms of the demise. But that right to possession and control can be affected by another of the terms of the Barecon 2001 form. Thus, cl 29 provides that upon withdrawal of the ship and termination of the charter, the nature of the charterer’s possession changes from possession for the charterer’s use and benefit to possession as a gratuitous bailee for the owners. Possession of the latter kind is substantively different in character to the plenary right to possession and use of the ship formerly enjoyed by the charterer while the charter remained on foot.
64 When the charterer is in possession as a gratuitous bailee under cl 29, he holds the ship for the sole use and benefit of the owners. When, however, he is in possession because of the demise of the ship to him, the charterer holds her for his own use and benefit. The effect of withdrawal and termination of the charter under cl 29 is the same as a physical redelivery to the owners because the charterer has lost his contractual authority and right to use and employ the ship as he pleases. The concept of constructive delivery of chattels, without any change of physical possession, is well established in the law of bailment. In the classic text by Pollock and Wright, An Essay on Possession in the Common Law (Oxford 1888) at pp 72-73, the learned authors discussed the position of a seller in possession of goods who could assent to holding what was sold on account of the buyer. They said:
“A seller in possession may assent to hold the thing sold on account of the buyer. When he begins so to hold it, this has the same effect as a physical delivery to the buyer or his servant, and is an actual receipt by the buyer (Elmore v Stone (1808), 1 Taunt. 458); and this whether the vendor’s custody is in the character of a bailee for reward or of a borrower (Marvin v Wallace, (1856), 6 Ex. B. 726, 25 L.J.Q.B. 369). The important thing is his recognition of the purchaser’s right to possess as owner, and his continuing to hold the goods either as the purchaser’s servant or as his bailee with a possession derived from that right.” (emphasis added)
65 Tamberlin J recognised in his analysis in “Turakina” 154 ALR at 676 that the terms of the Barecon 89 charterparty before him contemplated redelivery of the ship at a port or place indicated in the charter. For that reason he rejected an argument that upon withdrawal there was a constructive redelivery to the owners and the charterer became an involuntary bailee. The redraft of that earlier form in cll 28 and 29 of the Barecon 2001 form expressly addressed that difficulty.
66 Hako Offshore contracted in cll 28 and 29 that it would become the owners’ gratuitous bailee of Hako Fortress upon the owner exercising its right of withdrawal and termination. That is, the parties contemplated and provided in their contract that the nature of Hako Offshore’s possession would change, if the ship was withdrawn and the charterparty terminated, from that of a contractual right to the full use and enjoyment of the ship to become that of gratuitous bailee for the owners, Dolphin 2. That change was effected by Dolphin 2’s notice of termination, that Hako Offshore acknowledged receiving on 5 March 2012. Dolphin 2 had been entitled at that time to exercise its right to withdraw the ship and terminate the Barecon Charterparty because Hako Offshore had not paid hire within 14 days of the notice of default that was sent on 21 October 2011. It is safe to infer that that letter would have been received in the ordinary course of post by not later than 28 October 2011.
67 Accordingly, after following Hako Offshore’s receipt of the notice of termination on 5 March 2012, it held Hako Fortress from then on as a gratuitous bailee and not as a demise charterer. It follows that the requirement of s 18 (b) of the Act, that Hako Offshore be a demise charterer of Hako Fortress on 2 April 2012 when the writ against her was filed, was not satisfied. The proceeding below against Hako Fortress must be dismissed and the security provided for her release from arrest must be returned to Dolphin 2.
The demise issue
(a) The shipowners’ arguments
68 The shipowners contended that the charterparties were not demises because PTMS employed, and then supplied, the masters and crews to each of the four ships. They argued that the masters received their instructions from PTMS and Boskalis and so Hako Offshore was not in control or possession of the ships.
(b) Consideration
69 The shipowners’ argument must fail. Under cl 10(a)(i) and (b) of Barecon Charterparties, Hako Offshore was granted full possession and complete control of the ships. It had the obligation, at its own expense and “by [its] own procurement” to man the ships. The terms of the charterparties left Hako Offshore with plenary power to arrange for the ships to be crewed. The character of Hako Offshore’s possession and control of the ships must be ascertained from the terms of the Barecon Charterparties. An owner of a ship could have engaged PTMS to provide manning and other services of the kind it supplied to Hako Offshore for the four vessels under the deed.
70 The Barecon charterparties did not restrict the ability of Hako Offshore, as in effect the owner for the time being of each ship under their terms, from choosing how it would operate and work those ships including how it would man them and the arrangements for engaging their masters and crews. Hako Offshsore assumed the responsibilities and liabilities of the owner of the ship so far as third parties were concerned, including for any damage done or maritime liens created during the terms of the Barecon charterparties: The “Guiseppe de Vittorio” [1998] 1 Lloyd’s Rep at 156-157, see [54]-[56] above.
71 I am of opinion that the primary judge correctly concluded that Hako Offshore was the demise charterer, within the meaning of s 18 of the Act of each of the ships while each of the Barecon charterparties remained on foot.
The supply issue
(a) The shipowners’ arguments
72 The shipowners contended that under cll 5, 6 and 7 of the deed PTMS supplied the manning, catering and other services, not to each of the four ships, but to Hako Offshore. As a result, they argued PTMS did not have a claim that satisfied the requirement of s 4(3)(m) of the Act that the services the subject of its claim be supplied or were to be supplied to a ship.
(b) Consideration
73 The jurisdiction created by s 4(3)(m) is for a claim involving four characteristics, namely that it is:
in respect of;
goods, materials or services (including stevedoring and lighterage services);
supplied or to be supplied to a ship;
for its operation or maintenance.
74 First, the claim must be “in respect of” a supply that falls within some combination of each of the remaining three characteristics. The expression “in respect of” provides for a broad relational connection and should be given its ordinary broad meaning: “Shin Kobe Maru” 181 CLR at 421; Elbe Shipping SA v The Ship “Global Peace” (2006) 154 FCR 439 at 463-464 [92] per Allsop J. Secondly, the concatenation of the last three characteristics was intended to comprehend what was previously called a claim for necessaries, but without the restrictions that formerly applied to such a claim: The “River Rima” [1988] 1 WLR 758 at 764H per Lord Brandon of Oakbrook with whom Lords Bridge of Harwick, Brightman, Ackner and Goff of Chieveley agreed; Opal Maritime Agencies Pty Ltd v The Proceeds of Sale of the Vessel MV “Skulptor Konenkov” (2000) 98 FCR 519 at 554-555 [121]-[130] per Black CJ, Cooper and Finkelstein JJ. Under the modern law, maintenance can now include non-essential maintenance. The Commission intended that by adding the bracketed words in s 4(3)(m), referring to loading and unloading operations, the Australian phraseology would be wider than the equivalent in the 1952 Arrest Convention and the analogous s 1(1)(m) of the Administration of Justice Act 1956 (UK): ALRC 33 at [171].
75 Thirdly, the characteristic that the relevant goods, materials or services are, or are to be, supplied to a ship is critical. There must be a direct connection between the ship and the actual or proposed supply. There is a distinction between a supply to a ship and a supply not directly to a ship but to a shipowner, as explained by Lord Brandon in The “River Rima” [1988] 1 WLR at 763B-E as follows:
“It is clear that paragraph (m) contemplates a contract of supply, whether by way of sale or hire, between the claimant and a shipowner. But the expression used in paragraph (m) is “supplied to a ship” and not “supplied to a shipowner.” The question is what meaning should be given to the former expression. There are two main kinds of contract pursuant to which goods or materials required for the operation of a ship may reach her. The first kind of contract is one which expressly provides that the goods or materials are required for the use of a particular ship, the identity of which is specified in the contract or will be specified by the time when the contract comes to be performed. The second kind of contract is one which contains no reference to a particular ship for the use of which the goods or materials are required, leaving the shipowner to make his own decision about that later. The first kind of contract is, in my opinion, a contract under which goods or materials are “supplied to a ship” within the meaning of paragraph (m). The second kind of contract, however, is, in my opinion, not a contract for goods or materials to be “supplied to a ship” within the meaning of paragraph (m). It is no more than a contract for the supply of goods or materials to a shipowner, and as such does not come within paragraph (m).” (emphasis added)
76 This Court accepted the analysis of Lord Brandon in The “River Rima” [1988] 1 WLR at 763C-E, 765C-D in “Skulptor Konenkov” 98 FCR at 552-553 [115]-[117], 554 [121], 555 [130]; see too Patrick Stevedores No 2 Pty Ltd v The Proceeds of Sale of the Vessel MV “Skulptor Konenkov” (1997) 75 FCR 47 at 71D-F per Sheppard J; Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374 at 383-387 per ML Foster J. Whether goods, materials or services are actually supplied to a ship is a question of fact that must be determined at the time of the supply: “Skulptor Konenkov” 98 FCR at 553 [119].
77 Fourthly, the modern cases on s 4(3)(m) and its inexact United Kingdom analogue, have accepted that the test of what constituted “necessaries” is of assistance. That test was stated by Abbott CJ (later Lord Tenterden) in Webster v Seekamp (1821) 4 B & Ald 352 at 354 [106 ER 966] as encompassing “whatever is fit and proper for the service on which a vessel is engaged, whatever the owner of that vessel, as a prudent man would have ordered, if present at the time”. This concept included necessaries both for the voyage and the particular venture on which the ship was engaged: see: “Skulptor Konenkov” 98 FCR at 554 [123]-[125]; The “River Rima” [1988] 1 WLR at 745G. The expression “necessaries” also includes the provision of officers and crew for the operation and manning of a ship: The “Edinburgh Castle” [1999] 2 Lloyd’s Rep 362 at 363 per Peter Gross QC, sitting as a deputy High Court judge; Lavington International Ltd v Bareboat Charterers of Nore Challenger and Nore Commander [2001] 2 Lloyd’s Rep 103 at 105-106 [16]-[21] per David Steel J; Re Oceaneering International AG (The “Sarah”) [2011] 1 Lloyd’s Rep 546 at 549 [13]-[16] per Lord Emslie (Outer House of the Court of Session).
78 The shipowners’ argument that the services supplied by PTMS under cll 5, 6 and 7 of the deed were not services supplied to a ship should be rejected. A prudent owner (or demise charterer) would have ordered the provision of necessaries such as officers and crew, catering and other services that are covered by cll 5, 6 and 7 of the deed. After all, working ships and tugs need masters and crew. Critically, cl 5.4 contemplated that PTMS would supply the master and crew to a particular vessel and that Hako Offshore could require that PTMS remove crew members from that vessel in certain circumstances. Similarly, cl 6.1 contemplated that the catering services were supplied for “consumption and use by TMS to Hako on the Hako vessels”. The deed was not dealing with a situation where the parties envisaged that the services under cll 5, 6 and 7 would be used in any way other than on each of the four ships as necessary for each of those ships whose names were specified in the deed. The services under cll 5, 6 and 7 of the deed were supplied or to be supplied to each of those ships within the meaning of s 4(3)(m) of the Act.
79 The invoices that PTMS rendered to Hako Offshore in respect of its claims for the supplies of marine manning services had supporting documents that showed that the services were supplied for an identified ship or in respect of a crew member of such a ship.
80 The primary judge was correct to have found that PTMS had made a claim that fell within s 4(3)(m).
The assignment issue
(a) The shipowners’ arguments
81 The shipowners argued that PTMS had assigned to Boskalis its legal and beneficial interest in all past and future debt due by Hako Offshore under the deed in respect of the services provided by PTMS to Hako Offshore. They submitted that cl 8(a)(vii) created an obligation for Boskalis to purchase from PTMS the amount due under each invoice at the time that it became due and payable, being 14 days after it was rendered to Hako Offshore. The shipowners contended that cll 8(a)(vii) and 9 operated to create an immediate assignment to Boskalis of each debt payable to PTMS by Hako Offshore as soon as it became due following its receipt of an invoice. They argued that the last sentence of cl 9(a) created that immediate assignment.
(b) Consideration
82 The shipowners’ construction of cl 9(a) does not accommodate that clause’s requirement that Boskalis must actually purchase each invoice debt by paying it in full to PTMS. As the clause stated, PTMS’ rights, title and interest in each invoice debt “will have been assigned by TMS to Boskalis upon receipt by TMS of the full amount of the Assignment Fees (the Assignment)”. Moreover, cl 9(d) only conferred on Boskalis the right to enforce each debt assigned after Boskalis had paid that debt in full.
83 Critically, the primary judge found that PTMS had not been paid by Boskalis (or Hako Offshore) any of the debts the subject of its claim. Accordingly, Boskalis had not acquired, and more importantly, PTMS had not assigned, any interest in those debts. The primary judge correctly found that on an interlocutory basis the shipowners had failed to prove PTMS was not still owed those debts on which it sued at the time that it commenced the proceedings.
tHE LIEN ISSUE
(a) PTMS’ submissions
84 PTMS argued that it was subrogated to the lien of the masters and crew for wages under s 15(2)(c) of the Act. That was because, PTMS contended:
it employed and paid each of the masters and crew in arrears for the work they performed;
Hako Offshore was liable to pay PTMS for providing marine manning services under cl 5 of the deed;
there was no contractual relationship between the masters and crew members, on the one hand, and either Hako Offshore or the shipowners, on the other;
there was also no contractual relationship between PTMS and the shipowners.
85 PTMS submitted that crewing agencies “in the modern era” have been more frequently used to provide ships with crews than when Hill J decided The “Petone” [1917] P 198. PTMS argued that the maritime lien for wages attached to each ship as and when the masters and crew became entitled to be paid for their services whether or not a contract for those services existed between the owners or charterer of the ship (RWS 44-47). The masters and crew were paid in arrears, and so, the argument ran, their liens attached in an inchoate form as and when they performed their services for each ship. PTMS then contended that since the shipowners and Hako Offshore, as demise charterer, had never paid the masters or crew, neither had discharged their liens for their wages which remained attached to each of the ships. PTMS also asserted that the shipowners had no contractual arrangements to exclude their liabilities for those wages.
86 PTMS contended that if it had not discharged its own liability as employer of the masters and crews, they could have exercised their liens by commencing proceedings in rem against each ship. It argued that Hako Offshore would have had no defence to such a claim simply because PTMS had a contractual liability to pay the masters and crews. It asserted that because it had paid the wages, PTMS was subrogated in equity to the rights of the masters and crew to enforce their liens. It contended that The “Petone” [1917] P 198 was wrongly decided because it had held that no right to subrogation arose where a person voluntarily, and without any necessity compelling it to do so, paid a privileged creditor.
(b) Consideration
87 I am of opinion that no maritime lien on any of the four ships ever arose that was available to PTMS. My reasons are as follows.
88 There was no basis for suggesting that PTMS had any right to equitable subrogation. First, a maritime lien for seafarer’s wages is extinguished once the wages are paid as explained below. Secondly, PTMS created the debts due to the masters and crews by entering into contracts of employment with them for them to perform the services on the ships that were said to create its right to subrogation. When PTMS paid the masters and crew their wages it discharged its own obligation to pay its employees, that it had created, and so extinguished any lien the seamen may have had. PTMS was the principal debtor to the seamen for their wages.
89 The purpose of the maritime lien for seafarer’s wages was to secure the entitlement of a seafarer to his or her wages that were due by his or her employer, ordinarily the master, owner or demise charterer. It would invert the conceptual basis of that lien as a security for the payment of the seafarer’s wages by another, to permit the principal debtor to recover the payment it was obliged to make to discharge the employment liability it had created against the estate of a surety or person who was only secondarily liable (i.e. the ship). Here, the seafarers could look to either PTMS or their lien for payment of their wages. But, a seafarer’s lien was only ever a security interest to enable the seafarer to obtain his or her wages when the person with whom he or she had contracted did not pay.
90 The right of a surety, who had paid a debt, to equitable subrogation to the creditor’s rights against the debtor was explained by Gummow, Hayne, Heydon, Kiefel and Bell JJ said in Bofinger v Kingsway Group Limited (2009) 239 CLR 269 at 280-281 [8] as follows:
“This notion of the ultimate liability of the principal provides a foundation for the application of subrogation in aid of the surety. Thus, where a claim to the benefit of securities held by the creditor is made by a surety, it was said by Turner V-C (Yonge v Reynell (1852) 9 Hare 809 at 818-819 [68 ER 744 at 748-749]) that the equity for subrogation is derived from the obligation of the principal debtor to indemnify the surety (See also O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 223; Friend v Brooker (2009) 239 CLR 129 at 153 [55]). There is “nothing hard” in the act of a court of equity in placing the surety in exactly the situation of the creditor with respect to those securities (Duncan, Fox & Co v North & South Wales Bank (1880) 6 App Cas 1 at 12), because it would be unconscientious for the debtor to recover back the securities from the creditor while the debtor was obliged to indemnify the surety (Andrews and Millett, Law of Guarantees, 5th ed (2008), §11-017).” (emphasis added)
91 It would be unconscientious for PTMS to obtain from its own employees their seafarers’ liens. That is because PTMS, as debtor, had paid them their wages. PTMS had created and always had to discharge itself, as their employer, that very liability for those wages. Here, PTMS contracted to provide Hako Offshore with the marine manning services under cl 5 of the deed. Hako Offshore’s liability to the seafarers was a secondary liability secured by the seafarers’ liens over the ships to pay them if PTMS did not. The purpose of the seafarer’s lien is to protect the interest of the seafarer to receive his or her wages if the person who engaged him or her to serve on the ship does not pay those wages. Hako Offshore never engaged the seafarers. It contracted with PTMS for the ships to be supplied with masters and crews and promised to pay PTMS, not the seafarers, for that service. No doubt if PTMS had failed to pay them their wages, the seafarers could have exercised their liens and caused Hako Offshore and, perhaps (cf: The “Castlegate” [1893] AC 38 at 52 per Lord Watson) ultimately the shipowners to pay or to have the ships sold in order to realise a fund from which they could have been paid: see Visscher v Teekay Shipping (Australia) Pty Ltd (2011) 198 FCR 575 where the rights of seafarers engaged on Australian ships, as here, to payment of wages by the master and their employers under the Navigation Act 1912 (Cth) are discussed; and DR Thomas: Maritime Liens (Stevens & Sons, London, 1980) at 178-179 [314]-[315].
92 The nature of a maritime lien as a privilege must be understood. In The “Two Ellens” LR 4 PC at 169, the Privy Council said:
“A Maritime lien must be something which adheres to the Ship from the time that the facts happened which gave the Maritime lien, and then continues binding on the Ship until it is discharged, either by being satisfied or from the laches of the Owner, or in any other way by which, by law, it may be discharged. It commences and there it continues binding on the Ship until it comes to an end.” (emphasis added)
93 Earlier the Privy Council had explained in its classic opinion in Harmer v Bell (The “Bold Buccleugh”) (1851) 7 Moo PC 267 at 284-285 (13 ER 884 at 890-891) that a maritime lien does not include or require possession. Rather, it is a claim or privilege on the res that is carried into effect by a legal process, being a proceeding in rem. The claim or privilege travels with the res, usually, of course, of ship, but is inchoate until the proceeding in rem commences: see too the discussion by Scott LJ in The “Tolten” [1946] P 135 at 144-145. The claim or privilege then relates back to when it first attached to the res. And, as Allsop J said in Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 at 81 [128] the proceeding in rem, at least prior to the unconditional appearance of a relevant person, is an action against the ship, not the owner or demise charterer.
94 Under the early law maritime and at common law the master had no lien over the ship for wages, but seamen did. The reason was explained by Holt LCJ in Clay v Snelgrave (1700) 1 Ld Raym 576 at 578; also reported 12 Mod 405 and sub. nom Clay v Sudgrave (1700) Holt (KB 595 (90 ER 1229), 1 Salk. 33 (91 ER 34 at 35) saying:
“… the mariners contract upon the credit of the ship, and the master upon the credit of the owners of the ship, of whom generally he is one.”
95 The master’s position was subsequently remedied by statute (see Hanson v Royden (1867) LR 3 CP 47 of 50 per Willes J) and is now specifically protected in s 15(2)(c) and s 94 of the Navigation Act 1912 (Cth). However, the previous inability of the master to exercise a lien over the ship extended to situations where he had paid the crew himself and sought reimbursement from the owners. As Thomas identified (Maritime Liens; op cit at 266 [472]) from an early time the Court of King’s Bench had granted writs of prohibition preventing the Court of Admiralty from entertaining suits brought by a master against the part owners of a ship for seamen’s wages. In Anonymous (1696) Fort. 230 (92 ER 830) the King’s Bench granted a writ of prohibition reasoning that:
“… when the master has paid the seamen and they are discharged, there is an end of the privilege and indulgence to seamen, which is personal, and can’t be transferred.”
96 Thus, the seaman’s lien for his wages was a personal right. The lien was extinguished when he was paid (and had his discharge from the articles of agreement under which he had contracted to sail on the voyage). A century later Sir Thomas Salisbury (a judge of the High Court of Admiralty), in Holland v The Money Arising from the Sale of the “Royale Charlotte” (1768) Burrell 76 applied that principle. So did Lord Mansfield CJ giving the opinion of the Court (Willes, Ashurst and Buller JJ) in Wilkins v Carmichael (1779) 1 Doug 101 at 104-105; see too The “New Eagle” (1846) 2 W. Rob 441 (166 ER 822); Hamilton v Baker (The “Sara”) (1889) 14 App Cas 209 at 215-216 per Lord Halsbury LC; at 222 Lord Macnaghten. Lord Mansfield CJ held that the master could not claim any lien for his wages or his expenditures on stores and repairs provided by a carpenter. He again said that the master had a personal contract with the owner but no lien on the ship for his wages. Lord Mansfield CJ explained that this rule may have been grounded in public policy to prevent disgruntled masters who had been dismissed by the owners from arresting ships to secure payment and so interfering in commerce. He then rejected the other claim for a lien on two bases, first, the master had not paid the carpenter for his work or materials, and, secondly, by saying (1 Doug at 105):
“The captain could not, by paying him, be in a better situation than his, and he had parted with the possession, so that he had given up his lien, if he ever had one. The other creditors had none. If the defendant [captain] is liable to the tradesmen, it is by his own act.” (emphasis added)
97 In The “Louisa” (1848) 3 W. Rob 99 at 100 (166 ER 900 at 900) Dr Lushington held that an agent of the salvors who had made some payment to them did not obtain a lien on the salved property for that expenditure. He found that the agent had contracted to make the payment solely on the security of the salvors themselves, not the ship or its proceeds of sale. In Tenterden’s Law of Merchant Ships (11th ed) Edited by Justice Shee, at 626-627 the learned authors said:
“A maritime lien is not transferable and cannot be revived for the benefit of one by whom it has been discharged.”
98 Now the master can recoup payments he or she makes to the crew as wages as part of the master’s disbursements lien: see ss 15(2)(d) and 94 of the Navigation Act 1912 (Cth); The “Albion” (1872) 3 VLR (A) 1 at 6, 1 Asp MLC 481 at 483 per Stawell J (sitting as a judge of the Court of Vice-Admiralty of the Colony of Victoria) and at 53-54 per Phillimore J.
99 By Dr Lushington’s time a practice had evolved that if, but only if, the Court of Admiralty gave its consent to a third party voluntarily paying seamen’s wages, that person was entitled to the benefit of the seamen’s lien. Dr Lushington was at pains to emphasise that the person making such a payment did not succeed, simply by doing so, to the seamen’s rights and remedies. Rather, his view was that the sanction of the Court gave the payer the right in rem of a quasi-subrogated lien: The “William F Safford” (1860) Lush 69 at 71 (167 ER 37 at 38); The “Cornelia Henrietta” (1866) LR 1 A & E 51 at 52; The “Fair Haven” (1866) LR 1 A & E 67. This line of authority was followed in Canada: The “City of Manitowoc” (1879) 5 Quebec LR 108 per Stuart J; Rankin v The Ship “Eliza Fisher” (1895) 4 Exch CR 461 at 466-469 where the Toronto local judge, McDougall LJ, held that the seamen’s lien was not assignable on grounds of public policy, such as statutes, prohibiting the allotment or assignment of a seafarer’s right to wages.
100 This appears to have been, in a general way, the state of English law at the time Hill J decided The “Petone” [1917] P 198. However, there were cases going the other way. In The “Tagus” [1903] P at 54 Phillimore J said that he was following Stawell J in The “Albion” 1 Asp MLC 401:
“… that if the whole disbursements are, as apparently they are, payment of wages of the crew, who might have seized the ship, then I think that the doctrine, that the man who has paid off the privileged claimant stands in the shoes of the privileged claimant, should be applied, and he has a lien for any disbursements made, although he was not master, in payment of the wages of the crew, …”
101 And that decision was followed by the Inner House of the Court of Session in a case not considered by Hill J: Clark v Bowring & Company 1908 SC 1168. In obiter dicta, their Lordships said that if the third party paid the crew’s wages or master’s disbursements on the credit of the ship, as opposed to the credit of the master or someone else, the payer had the same rights and remedies as the crew or master (see at 1175 per the Lord President (Lord Dunedin), 1176 per Lord M’Laren and 1177 per Lord Kinnear). Lord Dunedin said that ordinarily the Court would infer that the payer was making the payment in reliance on the credit of the ship especially when the master had arrived in port with no money to pay the crew’s wages and that no formal assignment was necessary to enable the payer to stand in the shoes of, and enforce the crew’s rights and remedies against the ship (1908 SC at 1175 and see too at 1176, 1177).
102 In The “Petone” [1917] P 198 a third party, being an agent of the purchaser of the ship paid the master’s and crew’s wages when the ship arrived at port, fearing that if they were not paid they would use their maritime lien to arrest her. The third party sought to proceed in rem against the ship and to recoup itself by claiming to be subrogated to the wages lien. Hill J comprehensively reviewed almost all the authorities, some of which he found, as have I, were not reconcilable, and concluded ([1917] P at 208-209):
“In my view the weight of authority is strongly against the doctrine that the man who has paid off the privileged claimant stands in the shoes of the privileged claimant and has his lien, whether it be regarded as a general doctrine or as applied to wages only.
…
The plaintiffs paid the wages and/or disbursements. The master and crew have been paid and their debts satisfied. They assigned nothing to the plaintiffs. The plaintiffs do not claim as their assignees but in their own right as having paid the men off. Counsel for the plaintiffs contends that the doctrine is an application of the principle of subrogation. But I know of no principle of English law which says that one who, being under no compulsion and under no necessity to protect his own property, but as a volunteer, makes a payment to a privileged creditor, is entitled to the rights and remedies of the person whom he pays. That is the position of the plaintiffs. They chose as volunteers to pay off debts which constituted a marine lien upon the ship. They did not, in my opinion, thereby acquire any maritime lien. They have, therefore, no right in rem based upon a maritime lien. They have no right in rem independent of a maritime lien.” (emphasis added)
103 In The “Leoborg” (No 2) [1964] 1 Lloyd’s Rep 380 at 383, Hewson J followed The “Petone” [1917] P 198. Forty years earlier Adams J in Rhind v The “Zita” [1924] NZLR 369 at 372-373 had, instead, followed The “Tagus” [1903] P 44 and the obiter dicta in Clark v Bowring & Company 1908 SC 1168. Adams J distinguished The “Petone” [1917] P 198 on the ground that in that case there had been no contractual or constructive assignment to the payer of the crew’s or master’s rights ([1924] NZLR at 373). However, in ABC Shipbrokers v The Ship “Offi Gloria” [1993] 3 NZLR 576 at 581 Holland J followed what Hill J had decided without referring to “The Zita” [1924] NZLR 369. Waung J in the High Court of Hong Kong also followed The “Petone” [1917] P 198 in The “Sparti” [2000] 2 Lloyd’s Rep 618. He noted that the non-assignability of the maritime lien for wages was by then well established in Canada and had been left open in Singapore by Chan Sek Leong JC in Soon Aik Marine & Engineering Pte Ltd v Hoesheng [1987] 1 SLR 149 who, however, did not refer to The “Petone” [1917] P 198. Waung J also referred to later Canadian decisions that had followed Hill J’s decision. Waung J observed that there may be good ground for acknowledging the principle of assignability of the maritime lien for wages based on decisions of Circuit Courts of Appeals in the United States of America ([2000] 2 Lloyd’s Rep at 622-623). I am of opinion that the much wider bases for, and categories of, maritime liens in the maritime law of the United States makes that jurisdiction inapposite as a source for developing principles affecting the incidents of the particularly narrow classes of maritime liens that s 15 of the Admiralty Act recognised as applicable here based on the recommendations in ALRC 33.
104 Bottomry bonds are the only exception to the principle that maritime liens are not transferable or assignable. In The “Rebecca” (1804) 5 C. Rob 102 at 104, Sir William Scott recognised that a bottomry bond was a negotiable interest that could be transferred. That is because the law maritime and the law merchant recognised bottomy bonds as hypothecations of the ship. The nature of such a bond was that of a mortgage under which the owner or its representative, often the master in a state of distress and necessity, raises funds that cannot otherwise be had, to pay necessary expenditures for the ship or to obtain credit so as to enable her to continue her voyage: Thomas, Maritime Liens op cit at 207 [373].
105 Leading text writers consider that a maritime lien, other than one arising on a bottomry bond, is automatically extinguished upon payment of the sum it secures: Martin Davies & Anthony Dickey Shipping Law (3rd ed) (Lawbook Co Sydney 2004) at 121 citing The “James W Elwell” [1921] P 351 at 363 per Hill J; Roscoe’s Admiralty Practice (5th ed) (Stevens & Sons Ltd London 1931) at 28-29 citing, inter alia, The “Two Ellens” (1872) LR 4 PC 161 at 169. However, in Sarah C Derrington and James M Turner: The Law and Practice of Admiralty Matters (Oxford University Press, 2007) at 59-61 [4.12]-[4.16] the learned authors, while recognising the effect of the older cases, observed that were the point to arise for decision (which it does not here) it would be necessary to consider whether a maritime lien is capable of assignment: see esp at [4.14]-[4.16]. That would involve examining, among other matters, what effect ss 70-73, 83 and 94 of the Navigation Act 1912 (Cth) or any similar legislation might have on the assignment. A seaman has limited rights under ss 70-73 of the Navigation Act 1912 (Cth) to make stipulations for allotments of his or her wages to family, dependants and banks. And s 83 makes void any agreement by a seaman that deprives him or her of a remedy for recovery of wages or the lien on the ship for wages). The position in the United Kingdom appears to be similar: D C Jackson: Enforcement of Maritime Claims 94th ed: LLP London 2005) at 499 [18.86].
106 The payment of an apportionment of a seaman’s wages to a nominee at his or her direction under provisions such as ss 70-73 does not change their character, or that of the balance due to the seaman, as wages and so does not affect his or her lien for the balance: The “Turiddu” [1999] 2 Lloyd’s Rep 401 at 408 per Brooke LJ with whom Nourse and Schieman LJJ agreed. Nonetheless, the lien attached over the whole amount of wages due until the apportioned part was actually paid to the nominee when it abated to cover only the balance due (at 408-409).
107 In these proceedings PTMS did not assert any assignment of the masters’ and crews’ liens. Rather, it claimed to have an equitable right of subrogation that arose when it paid the masters and crews their wages. It did not pay those wages on the credit of the ships. Far from it, PTMS was bound to pay the masters and crews because of its contracts for their employment by it. PTMS did not take any assignment from the masters and crew of their lien when it paid, as their employer, the wages it was contractually liable to pay them.
108 Accordingly, PTMS had no right of equitable subrogation to any lien the masters and crews had to wages because, first, any such lien was extinguished as soon as they were paid and so was no longer in existence; The “Two Ellens” LR 4 PC at 169, The “Petone” [1917] P at 208, and secondly, even if that be wrong, it would be unconscientious for PTMS as the principal debtor to the masters and crews as its employees to recover their lien so as to enable it to exonerate itself from its own primary liability: Bofinger 239 CLR at 280-281 [8].
109 For these reasons, the primary judge should have rejected PTMS’ claim that it was entitled to a lien.
Conclusion
110 The primary judge erred in holding that first, Hako Offshore was the demise charterer of Hako Fortress at the time the proceedings in rem commenced and, secondly, PTMS could arrest any of the ships under a maritime lien.
111 Leave to appeal should be granted in each application. Ordinarily, the hearing before the primary judge on an application challenging the jurisdiction of the Court in cases such as these, is in the nature of a final hearing. The orders made on such an application are final determinations of the questions: “Zoya Kosmodemganskaya” 79 FCR at 93C-D. In any event, Hako Fortress would suffer serious injustice if leave to appeal were not granted and its appeal must be allowed with costs. Similarly, the issues in the balance of the shipowners’ applications for leave to appeal raised important issues, particularly as to one of the two juridical bases on which the arrests the primary judge found them to have been within the Court’s jurisdiction in rem. The shipowners in the other three matters should be granted leave to appeal: Bienstein v Bienstein (2003) 195 ALR 225 at 231 [29] per McHugh, Kirby and Callinan JJ.
112 Hako Fortress’ appeal must be allowed and the proceedings below be dismissed for want of jurisdiction. The security securing that ship’s release should be returned. PTMS must pay Hako Fortress’ costs of the proceedings and the appeal. The Court should dismiss the remaining three appeals. Despite their partial success on the lien point, the shipowners in those three appeals failed in their overall challenge to the Court’s jurisdiction. In all the circumstances, costs should follow the event.
I certify that the preceding one hundred and nine (109) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. |
Associate:
Dated: 26 February 2013
IN THE FEDERAL COURT OF AUSTRALIA | |
IN ADMIRALTY | |
WESTERN AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | WAD 189 of 2012 WAD 190 of 2012 WAD 191 of 2012 WAD 192 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | THE SHIPS "HAKO ENDEAVOUR", HAKO EXCEL", "HAKO ESTEEM" AND "HAKO FORTRESS" Appellant
|
AND: | PROGRAMMED TOTAL MARINE SERVICES PTY LTD Respondent
|
JUDGES: | SIOPIS, RARES AND BUCHANAN JJ |
DATE: | 26 february 2013 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
BUCHANAN J:
113 These appeals against interlocutory orders, which were heard together, arise out of a judgment given, and orders made, on 1 August 2012. The orders dismissed interlocutory applications which sought to set aside writs issued on 2 April 2012 under the Admiralty Act 1988 (Cth) (“Admiralty Act”). The writs commenced proceedings in rem against four ships. The interlocutory applications also sought that warrants dated 2 April 2012 for arrest of each of the ships be set aside, that any security provided to the plaintiff (the respondent to the present appeal) be returned and consequential orders.
114 The vessels, the subject of the proceedings, were the “Hako Esteem”, the “Hako Excel”, the “Hako Fortress” and the “Hako Endeavour”. They were arrested on 3 April 2012, 6 April 2012, 11 April 2012 and 16 April 2012 respectively. The vessels were each registered in Singapore. The registered owners of each of the Hako vessels were, as at 3 May 2012, as follows:
• Eagle 1 Pte Ltd – for the vessel Hako Esteem
• Eagle 2 Pte Ltd – for the vessel Hako Excel
• Eagle 3 Pte Ltd – for the vessel Hako Endeavour
• Dolphin 2 Pte Ltd – for the vessel Hako Fortress.
115 The interlocutory applications were made by the shipowners, which entered a conditional appearance for that purpose.
116 The respondent had a contract for the provision of services (manning, catering and other services) which it made on 7 April 2011 with Hako Offshore Pte Ltd (“Hako”) and Boskalis Pty Ltd (“Boskalis”). Hako Offshore entered into BIMCO Standard Bare Boat Charters on 27 April 2009 for the charter of the Hako Fortress (from Otto Marine Ltd), the Hako Excel (from Aries Offshore Singapore Pte Ltd) and Hako Esteem (from Aries Offshore Singapore Pte Ltd). As earlier indicated, by the time of the proceedings the owners of those vessels had become Dolphin 2 Pte Ltd, Eagle 2 Pte Ltd and Eagle 1 Pte Ltd respectively. On 14 June 2010, Hako Offshore entered into a BIMCO Standard Bare Boat Charter of Hako Endeavour from Eagle 3 Pte Ltd, which company remained its owner at the time the proceedings were commenced.
117 Clause 10(a)(i) of each of the charterparties provided:
During the Charter Period the Vessel shall be in the full possession and at the absolute disposal for all purposes of the Charterers and under their complete control in every respect.
118 Subject to rights of termination, which are later to be addressed in the case of the Hako Fortress, the terms of the charter in each case sufficed, in my view, to make Hako the demise charterer of each of the four vessels. In the case of each vessel except the Hako Fortress there is no issue that the charters remained in place at the time proceedings were commenced and the vessels were arrested. In the case of the Hako Fortress the appellants contend that the charter had been brought to an end by written notice dated 1 March 2012 effective immediately. Further attention will be given to that contention in due course. Reference will also be made to an argument, which I do not accept, that despite clause 10 of the charterparty Hako was not a demise charterer of any of the vessels because it did not directly employ the crew.
119 The contract made amongst the respondent, Hako and Boskalis recited that Hako was, at the time the contract was made, the demise charterer of each of the four vessels, which were expressly named in the contract. Separately, Hako warranted that it was the sole demise charterer of each of the vessels.
120 By the contract, the respondent agreed to provide “Services” to Hako. “Services” was defined as follows:
Services means the supply of services by [the respondent] to Hako as described at clause 4.
121 Clause 2 of the contract provided:
2. Hako appoints [the respondent] as the sole and exclusive provider of the Services for the Term.
122 Clause 4 of the contract provided:
4. The Services consist of the provision of the following services to or in respect of the Hako Vessels whilst such Hako Vessel(s) are engaged in relation to the Marine Rock Transport:
(a) Marine Manning Services;
(b) Catering Services; and
(c) Other Services.
123 By clause 5 of the contract the respondent was to supply personnel to Hako. Those personnel were identified in the “Proposal” to which the contract responded. The personnel were to occupy the positions of Master, Chief Officer, Second Mate (where appropriate), Chief Engineer, First Engineer, Second Engineer (where appropriate), Integrated Ratings and Cook on the four vessels. The persons whose services were supplied were to be, and remain, employees or contractors of the respondent. Hako was enjoined from soliciting their services as employees. The contract recorded that nothing in it was taken as deeming the respondent or any of its employees, servants or agents to be employees or servants of Hako. The personnel were to work under the direction and supervision of Hako which was to maintain operational responsibility for the vessel on which they worked at all times while they were working on it.
124 Hako was stated to be liable to the respondent to pay for the manning services at specified rates, payment to be invoiced fortnightly with a copy to Boskalis. The parties recorded that “Boskalis does not assume any liability to [the respondent], Hako or any other third party under any invoices for Marine Manning Services”.
125 The respondent was also to supply catering services and invoice monthly with copies to Boskalis. Again, Boskalis assumed no liability under any such invoices.
126 The contract provided for the provision of other services which might include:
(a) cleaning services;
(b) waste collection services;
(c) vessel management/procurement;
(d) maintenance and repair services; and
(e) permanent recruitment services.
These services were to be invoiced monthly, copies to Boskalis, who again expressly did not assume liability under the invoices.
127 The proceedings commenced against the vessels claimed the following amounts:
Hako Endeavour $1,224,427.62
Hako Excel $1,268,473.73
Hako Esteem $1,226,515.68
Hako Fortress $1,182,478.35
128 In each case the claim was stated to be a claim “in relation to the costs of and related to the provision by [the respondent] of goods” to the vessel and “the provision by [the respondent] of services in the form of a master and crew” to the vessel for its operation. The claim was said to be made pursuant to or in accordance with the terms of the contract. The claim was said to be, by reason of ss 4(3)(m) and 18 of the Admiralty Act, a general maritime claim enforceable by an action in rem. Alternatively, so far as it incorporated payments by the respondent to the master and crew of each ship in respect of their wages, the respondent claimed to be entitled to be subrogated to a maritime lien which the master and crew had in respect of their wages which, by reason of s 15 of the Admiralty Act, may be enforced by an action in rem.
129 Section 4(3)(m) of the Admiralty Act has the effect that a general maritime claim includes:
(m) a claim in respect of goods, materials or services (including stevedoring and lighterage services) supplied or to be supplied to a ship for its operation or maintenance; …
130 Section 18 of the Admiralty Act provides:
18 Where, in relation to a maritime claim concerning a ship, a relevant person:
(a) was, when the cause of action arose, the owner or charterer, or in possession or control, of the ship; and
(b) is, when the proceeding is commenced, a demise charterer of the ship;
a proceeding on the claim may be commenced as an action in rem against the ship.
131 For the purpose of the proceedings commenced on 2 April 2012, the relevant person was said to be Hako which was, when the causes of action arose, a charterer of each of the ships and in possession or control of each ship and, when the proceedings were commenced, a demise charterer of each ship. Accordingly, if those characterisations are accepted, a general maritime claim might be brought in a proceeding commenced in rem against each ship.
132 The grounds upon which the appellants sought to set aside the writs and the arrest warrants, and sought the other relief claimed, were, in summary:
Hako was not the demise charterer of any of the ships because it did not employ the master or crew which worked the ship.
In any event, in the case of the Hako Fortress, any demise charter had been terminated effectively on 1 March 2012.
The claim was not a general maritime claim because the services supplied pursuant to the contract between the respondent and Hako were not supplied to any ship but were services supplied to Hako in its own right.
Any liability asserted against Hako had, under the terms of the contract itself, been assigned absolutely to Boskalis in conformity with the provisions of s 20 of the Property Law Act 1969 (WA) so that any claim against Hako was ineffective.
There was no maritime lien with respect to wages in existence because the masters and crew of each vessel had been paid by the respondent as their legal employer.
133 As the interlocutory applications raised questions about the jurisdiction of the Court it was necessary that the primary judge consider whether it had been established by the respondent on the balance of probabilities that the facts upon which the jurisdiction of the Court depended existed. In Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 (“Shin Kobe Maru”) the High Court stated the relevant principle as follows (at 426):
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.
134 The primary judge appreciated that this was the test to be applied to determine whether the challenge to jurisdiction represented by the interlocutory applications should be upheld, and he applied the test to determination of the issue of whether Hako was (at least before 1 March 2012) the demise charterer of each of the vessels. However, with respect to some other arguments, including the question whether the charter of the Hako Fortress came to an end on 1 March 2012, the primary judge applied a different test, namely, whether it had been shown that the proceedings should be dismissed on a summary basis having regard to the test expressed by the High Court in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 (“General Steel”).
135 In my respectful view, each of the challenges to jurisdiction should have been assessed in conformity with the test stated in Shin Kobe Maru. It seems apparent from the way in which some matters were discussed by the primary judge that he felt it inappropriate (and perhaps unnecessary) to apply this test to all the jurisdictional challenges raised by the interlocutory applications. His Honour said, as to those matters (at [40]):
40 I accept that the more appropriate forum would be within a trial of a preliminary issue as to any outstanding jurisdictional point, where proper relevant discovery has been exchanged enabling more comprehensive presentation of the evidence, including cross examination and arguments.
136 Occasions may certainly arise where matters come before the Court in circumstances of urgency which do not readily permit a full (or sometimes even proper) examination of the factual matters necessary to reach a satisfactory conclusion about the jurisdiction of the Court. In such a case there could be no objection to the necessary adjournment(s) to permit issues to be satisfactorily examined, consistent with any real requirement for a speedy decision. I do not understand the contrary to have been seriously suggested on the present appeals. However, it seems to me, with respect, that the primary judge made an error of principle in applying the test in Shin Kobe Maru to some only of the jurisdictional arguments and subjecting the balance of those arguments to the much stricter test in General Steel where the appellants (rather than the respondent) bore the onus of showing why the proceedings should be summarily dismissed, rather than the respondent being required to show on the balance of probabilities that the Court truly did have jurisdiction.
137 That being so, it will be necessary to give consideration to the various arguments advanced by the appellants, having regard to the evidence which was made available to the primary judge.
Demise charter
138 In my view, the terms of the charters made with Hako on 27 April 2009 and 14 June 2010 rendered Hako the demise charterer of each of the vessels. Its status as a demise charterer was not eroded or compromised simply because the arrangements it made to crew the vessels were through labour provided by contract rather than by some form of direct employment. In The “Guiseppe di Vittorio” [1998] 1 Lloyd’s Rep 136, Evans LJ analysed the characteristics of a charter by demise. At 156, his Honour said:
When then is the demise charter? Its hallmarks, as it seems to me, are that the legal owner gives the charterer sufficient of the rights of possession and control which enable the transaction to be regarded as letting – a lease, or demise, in real property terms – of the ship. Closely allied to this is the fact that the charterer becomes the employer of the master and crew. Both aspects are combined in the common description of a “bareboat” lease or hire arrangement.
139 I do not take his Honour to be suggesting, by the second aspect of the statement set out above, that it is necessary for a charterer to be the legal employer of the master and crew in every circumstance. At 157, his Honour quoted from The Baumvoll Manufactur Von Carl Scheibler v Christopher Furness [1893] AC 8 and, when the matter was in the Court of Appeal ([1892] 1 QB 253), from the judgment of Lord Esher MR, who said (at 259):
… through all the cases it has been assumed that this question depends, where other things are not in the way, upon this; whether the owner has by the charter, where there is a charter, parted with the whole possession and control of the ship, and to this extent, that he has given to the charterer a power and right independent of him and without reference to him to do what he pleases with regard to the captain, the crew and the management and employment of the ship. This has been called a letting or a demise of the ship.
(Original emphasis removed. Emphasis added)
140 To similar, but much more recent effect, Tamberlin J said in Patrick Stevedores No 2 Pty Ltd v MV “Turakina” (1998) 154 ALR 666 at 671:
A charter by demise is one by which the owner parts the whole possession and control of the ship and gives the charterer a power and right independent of him and without reference to him to do what he pleases with the regard to the appointment and employment of crew: Sandeman v Scurr [1866] LR 2 QB 86 at 96; Baumvoll Manufactur von Scheibler v Gilchrist [1892] 1 QB 253 at 259; Australasian United Steam Navigation Co Ltd v Shipping Control Board (1945) 71 CLR 508 at 521-2, 525, 526-7, 528; see also Scrutton on Charterparties, 20th ed, pp 59-60. As Scrutton points out, a charter by demise operates as a lease of the ship itself to which the services of the master and crew may or may not be super-added.
141 The effect of these statements is, as it seems to me, that consistently with the passing of possession and full control from an owner to a demise charterer, the latter is responsible for arranging for the manning and operation of the chartered vessel in its various aspects. That does not mean that the demise charterer, any more than an owner, is obliged to become the direct employer of the master and crew. Too many legitimate arrangements for the provision of labour are now in existence to seriously contemplate that that is the case and I doubt that it has ever been a requirement, rather than an assumption. However that may be, this aspect of the arrangement is not the critical one. The critical consideration is whether a demise charterer has possession and full control of the ship. On the facts of the present case there was a sufficient reservation of supervision of masters and crew and of operational control to deny the argument that Hako Offshore was not the demise charterer of the vessels because it was not the direct employer of the crew.
142 This question arose directly for consideration in Lavington International Ltd v Bareboat Charterers of Nore Challenger and Nore Commander [2001] 2 Lloyd’s Rep 103. In that case the claimants, Lavington International Limited, had agreed to supply crew and crew services to the defendant, which was described as “the owners and/or bareboat charterers” of two vessels, the Nore Challenger and the Nore Commander. They had been let to Nore Maritime Shipping Ltd under bareboat charters. The owner of the vessels, Linelevel Limited, moved to strike out the proceedings on the grounds that there was no jurisdiction to entertain the claim under provisions which operate in similar fashion to s 4(3)(m) of the Admiralty Act. Steel J held that the provision of the services of officers and crew to a vessel (and payment of wages in that respect) was the subject of a valid claim, referring to Edinburgh Castle [1999] 2 Lloyd’s Rep 362. That represents, in substance, the position in the present proceedings also.
143 For those reasons, I agree with the primary judge that Hako was the demise charterer of each of the vessels.
144 Before dealing with the question of whether the charter of the Hako Fortress was effectively terminated on 1 March 2012 it is convenient to deal with the question of whether the claims made against Hako are claims which otherwise fall within s 4(3)(m) of the Admiralty Act.
Nature of the claims
145 In my view, the claims made were claims “in respect of” the provision of “goods, materials or services” to each of the ships, as required under s 4(3)(m). I do not accept the proposition that they were services provided to Hako as demise charterer in a way which denied that they were provided to the ships themselves. As the respondent pointed out on the appeal it is “difficult to conceive of any services more closely or directly connected with the vessel than services for manning of the vessel …” The same is true of the catering and other services that were supplied. There can be no doubt, in my view, that under the contract made between the respondent and Hako it was intended that the services would be provided to the vessels in question. They were in fact provided to the vessels in question. When invoices were rendered they were rendered with respect to obligations relating to each of the vessels. The invoices were supported by documentation which also directly identified the vessel to which the services related, or permitted that relationship to be clearly understood.
146 In Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374, Foster J rejected an argument that services were not supplied to a ship if the contract of supply made no reference to a particular vessel. His Honour said (at 385):
In my view, the matter must be looked at as at the time when services were supplied and the question determined as at that time, as a question of fact: was there supply to a ship within the meaning of the subsection? That investigation cannot be foreclosed by the fact that there was a formal contract of supply in existence which made no reference to the particular vessel.
147 It is also, in my view, sufficiently clear from the terms of the contract between the respondent and Hako that their intention was that the respondent would provide services of varying kinds (crew, catering, cleaning, repairs etc) in a context where Hako warranted that it was the demise charterer of each of the vessels and where it would be open, if necessary, for the respondent to look to the security of each of the ships if necessary to secure payment of its entitlements. Clause 11 of the contract provided:
Any of the Hako Vessels may be validly and lawfully arrested by [the respondent] or Boskalis in any jurisdiction to recover any amount due to that party under this document.
148 Subject to the other matters to be considered, in my view it was established on the balance of probabilities that the claims were within the jurisdiction of the Court consistently with s 4(3)(m) of the Admiralty Act.
Termination
149 The appellants claimed that the charter of the Hako Fortress was effectively terminated on 1 March 2012. The primary judge did not deal directly with this contention but dismissed it as not established in conformity with the General Steel test. I have come to the view that, on the evidence before the primary judge, he should not have been satisfied on the balance of probabilities that jurisdiction existed to deal with the claim against Hako Fortress.
150 It may be accepted that the evidence establishing that a termination of the charter of the Hako Fortress had been effected was sparse. The respondent made a strong case that the relatively skimpy matters referred to and relied upon by the appellant before the primary judge did not carry the point sufficiently. However, slim though the margin may be, in my view the preponderance of probabilities is with the appellants.
151 The charter of the Hako Fortress provided that the then owner was:
Otto Marine Limited or Nominee,
9 Temasek Boulevard,
#33-01, Suntec Tower 2,
Singapore 038989
152 The charterer was identified as follows:
Hako Offshore Pte Ltd
13 Kaki Bukit Road 1,
#03-01, Eunos Technolink
Singapore 415928
153 The identity of the parties and their addresses, precisely as set out in the charter, was relied upon by the respondent because clause 31 of the charterparty provided:
31. Notices
(a) Any notice to be given by either party to the other party shall be in writing and may be sent by fax, telex, registered or recorded mail or by personal service.
(b) The address of the Parties for service of such communication shall be as stated in Boxes 3 and 4 respectively.
154 On 20 October 2011, Dolphin 2 Pte Ltd (“Dolphin 2”) sent a notice of default to Hako addressed differently as follows:
Hako Offshore Pte Ltd
No. 1 Kaki Bukit Road 1,
#04-20, Enterprise One
Singapore 415934
155 Dolphin 2 referred to the charter, and to the rights of Otto Marine Ltd (“Otto Marine”) under the charter. The letter did not say that Dolphin 2 was the nominee of Otto Marine. On the contrary, it made a demand in the name of Otto Marine, not in the name of Dolphin 2. The notice of default was sent to the wrong address, although there is other evidence to suggest that it was later the correct address in fact of Hako.
156 On 1 March 2012, Dolphin 2 sent a notice of termination and withdrawal to the same address as the notice of default. There was a certificate of receipt of this document. This letter did inform Hako that Dolphin 2 had been nominated as nominee. By this time, on the evidence, Dolphin 2 was in any event the registered owner of the vessel and had no doubt acquired the rights in the charterparty. It is clear from other material that the address to which the notice of termination was sent was, even though not the one in the charterparty, the address of Hako at the relevant time.
157 Notwithstanding the force of the criticisms by the respondent, in my view it was sufficiently established by the appellants that notice of termination and withdrawal was given, so as to engage the relevant provisions of the charterparty. There was no evidence to the contrary.
158 Clause 28 of the charterparty permitted the owner (by this time Dolphin 2) to withdraw the vessel from the service of Hako and terminate the charter in specified circumstances. It has not been suggested that those conditions were not satisfied in the present case. Clause 29 then provided:
29 Repossession
In the event of the termination of this Charter in accordance with the applicable provisions of Clause 28, the Owners shall have the right to repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them without hindrance or interference by the Charterers, courts or local authorities. Pending physical repossession of the Vessel in accordance with this Clause 29, the Charterers shall hold the Vessel as gratuitous bailee only to the Owners. The Owners shall arrange for an authorised representative to board the Vessel as soon as reasonably practicable following the termination of the Charter. The Vessel shall be deemed to be repossessed by the Owners from the Charterers upon the boarding of the Vessel by the Owners’ representative. All arrangements and expenses relating to the settling of wages, disembarkation and repatriation of the Charterers’ Master, officers and crew shall be the sole responsibility of the Charterers.
159 It is clear from the terms of clauses 28 and 29 of the charterparty that a distinction is made (and made clearly) between termination of the charter and recovering physical possession of the chartered vessel. The right to repossess the vessel depended upon the event of termination. It was not co-terminus with it. The charterparty clearly stated that between those two events the charterer would hold the vessel as “bailee only”. Similar provisions were held by Moore J in CMC (Australia) Pty Ltd v Ship “Socofl Stream” (1999) 95 FCR 403 (“Socofl Stream”) to be effective to bring a demise charter to an end from the time of termination. The consequence, his Honour found in that case, was that a demise charterer had ceased to have that status for the purpose of s 18(b) of the Admiralty Act. His Honour said (at [30]):
30 Even accepting that a broad interpretation should be given to the expression “demise charterer” in s 18(b), is [sic] difficult to avoid a conclusion that if a charterparty expressly provided for its termination and the power to terminate was exercised, then the charterer ceased to be a demise charterer from the time of termination at least in the absence of provisions in the charterparty that suggested some other result. The effect of the telex notice of 18 December 1998 was, in my opinion, that at least at the expiry of the seven days in which payment could be made of the amount demanded by Sovcomflot, Kamchatka no longer had an unqualified right to possession and control and thus was no longer a demise charterer for the purpose of s 18(b) on 5 February 1999.
160 No different view should be taken in the present case. The respondent relied, nevertheless, on a judgment by Finkelstein J in Re Pan Australia Shipping Pty Ltd (under administration); ASP Holdings Ltd v Pan Australia Shipping Pty Ltd (2006) 235 ALR 554 where Finkelstein J expressed doubt about the analysis in Socofl Stream. Finkelstein J said (at [13]-[15]):
13 Comity requires me to apply The Socofl Stream and thus hold that in the case of this charterparty, in particular because of cll 28 and 29, the charter can be terminated on written notice. Clause 28 provides for termination by notice and cl 29 says that when the charter is at an end the charterer is the “gratuitous bailee” of the vessel.
14 If I may say so, this is a troubling conclusion. It is troubling because until the owner actually withdraws the vessel, not only does the charterer retain possession, it still mans and supplies her. The problem becomes acute if the notice of termination is served while the vessel is at sea. Applying The Socofl Stream, she is not under demise while returning to port. If that be true it may surprise the owner to learn that the master now has ostensible authority to bind it. There is also the possibility that the owner may decide to retake possession at the next port of call or at a convenient port or place, as contemplated by cl 29. The result of the application of The Socofl Stream is that the owner has control of the vessel during the voyage. The true position is probably different.
15 I prefer the view that it is not until the vessel has been withdrawn that the demise comes to an end for it is only then that the charterer has lost exclusive possession of the vessel. That the charterparty describes the charterer’s possession before delivery as that of “gratuitous bailment” is not to the point. The real relation between the charterer and the vessel cannot be disguised by the use of an inapposite label or description. I appreciate, however, that others take a different view.
161 Presumably, the terms “withdraws” and “withdrawn” as used in these passages were intended to signify an act of repossession rather than to refer to a right of the kind given by clause 28 of the charterparty in the present case to withdraw a vessel from the service of a charterer in a formal way. In my respectful view the observations of Finkelstein J should not be preferred to the conclusions of Moore J in Socofl Stream. Like Moore J in that case, it seems to me that the charterparty in the present case permits a formal withdrawal of a vessel from the service of charterers and termination of the charter at the same time with immediate effect, followed by a right to reclaim possession in any of the ways identified in clause 29.
162 On the present appeals the respondent drew attention to the fact that there was no evidence that the owner had moved to take repossession in the period between 1 March 2012 and the commencement of the proceedings and the arrest of the vessels in early April 2012. Indeed there was evidence to the contrary. In my view that circumstance cannot override the clear meaning and effect of the charterparty. It follows that, so far as the evidence before the primary judge shows, the charter of the Hako Fortress was effectively terminated on 1 March 2012 and Hako ceased to be a demise charterer of that vessel from that date, holding possession of the vessel thereafter as bailee only and not having the right earlier provided by the charterparty to full possession and complete control (see clause 10(a)(i) quoted earlier).
163 In my view it was not established on the balance of probabilities that the Court had jurisdiction to entertain the proceedings against the Hako Fortress, and those proceedings should have been dismissed.
Assignment
164 Clause 9(a) and (f) of the contract made amongst the respondent, Hako and Boskalis provided as follows:
9(a) In consideration of the receipt by it of each part of the Assignment Fees, [the respondent] as legal and beneficial owner of the Hako Debt shall be deemed by reason of this clause to assign in law and equity to Boskalis all of its legal and beneficial right, title and interest in the Hako Debt limited in each instance to the amount of debt purchased by Boskalis at that time, with the effect that all such rights, title and interest in the entire Hako Debt will have been assigned by [the respondent] to Boskalis upon receipt by [the respondent] of the full amount of the Assignment Fees (the Assignment). Each Assignment takes place when each part of the Assignment Fees is paid to [the respondent].
…
(f) Hako agrees and acknowledges that Boskalis has no liability, responsibility or obligation for any of the debts of Hako and/or Hako Australia and does not by reason of this document assume any such liability, responsibility or obligation.
165 “Assignment fees” were defined to mean amounts payable by Boskalis to the respondent in accordance with clause 8 of the contract. Clause 8 of the contract specified various amounts to be paid between 23 March 2011 and 24 June 2011. It then provided that Boskalis agreed, upon the expiry of 14 days after receipt of a copy of an invoice issued by the respondent to purchase as a debt that amount due under that invoice. This was a promise to the respondent (which was not affected by clause 9(f)) to pay the respondent in discharge of the obligations of Hako, which no doubt the respondent could have enforced against Boskalis if it chose to do so. However, that circumstance does not support the contention of the appellants that all of the respondent’s rights against Hako were assigned by the contract to Boskalis at the time the contract was made, much less that there was an assignment which was absolute within the meaning of s 20 of the Property Law Act 1969 (WA) (which it is not necessary to set out).
166 It is quite clear, in my view, from the terms of clause 9(a) itself that no assignment of any debt owed by Hako was made pursuant to the contract unless and until payment was made to, and was received by, the respondent. No such amounts make up the claim in the present case.
167 The claims against the Hako Esteem, the Hako Excel and the Hako Endeavour are therefore not defeated by reason of the argument that no claim is available against Hako as demise charterer for supply of services to the ships.
Lien for wages
168 The primary judge thought that this contention afforded an independent foundation for the jurisdiction of the Court to entertain each of the four proceedings, although it was only necessary for the respondent to rely upon it insofar as the claims could not be brought within s 4(3)(m) of the Admiralty Act. With respect, I do not agree.
169 Section 15 of the Admiralty Act provides:
15(1) A proceeding on a maritime lien or other charge in respect of a ship or other property subject to the lien or charge may be commenced as an action in rem against the ship or property.
(2) A reference in subsection (1) to a maritime lien includes a reference to a lien for:
(a) salvage;
(b) damage done by a ship;
(c) wages of the master, or of a member of the crew, of a ship; or
(d) master’s disbursements.
170 In an action in rem the res (or proceeds of sale or security deposit) constitutes a source of funds from which judgment on the claim may be met. However it is fundamental that there exist a valid claim based on a legal liability to the claimant of a relevant kind. In the present case there was no outstanding claim for wages. The respondent satisfied its obligation to pay wages to the masters and crew which it engaged to work on the vessels chartered by Hako.
171 The claim made by the respondent upon Hako was not a claim for wages of the crew. Hako had no liability of that kind to the crew. In truth, the respondent simply sought to find a foothold in the Admiralty Act to enforce its contractual rights against Hako by way of recovery of its expenses and profits arising under the contract. Those contractual arrangements are not susceptible to the characterisation sought to be given to them as, in part, an exercise in subrogation to the rights of crew for wages. There were no rights of crew to wages remaining to be exercised. When payment was made by the respondent of those wages it did not do so to discharge anybody else’s obligation or as a volunteer. It did so in discharge of its own obligations owed directly to the crew which it had engaged.
172 As the appellants argued, once those payments were made there could be no maritime lien in existence which would activate any rights under s 15 of the Admiralty Act. A lien, whether a maritime lien or a lien of any other kind, operates as security for an outstanding claim. If a claim is not available the foundation for a lien does not exist. There was no claim for wages available. There was no maritime lien in existence. The proposition that the respondent could exercise rights of subrogation was based on a fiction. The facilities for an action in rem provided by s 15 of the Admiralty Act are not intended to support such a fiction.
173 It follows that there was no alternative basis available to the respondent to sustain part of its claim against the Hako Fortress.
Conclusion
174 To give effect to the conclusions stated above I would dismiss the appeals against the orders made which dismissed the interlocutory applications in the proceedings commenced with respect to the Hako Endeavour, the Hako Excel and the Hako Esteem. I would uphold the appeal in respect of the order dismissing the interlocutory application in the proceedings commenced concerning the Hako Fortress.
175 I agree with the orders proposed by Rares J.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. |
Associate:
Dated: 26 February 2013
