FEDERAL COURT OF AUSTRALIA

Broken Bay Slipway Pty Ltd v Yacht Velsheda II [2012] FCA 1120

THE COURT ORDERS THAT:

1.    Judgment be entered by the plaintiff against the defendant in the sum of $20,163.81.

2.    The defendant pay the plaintiff’s costs assessed on an indemnity basis at $30,000.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDER FOR VALUATION AND SALE OF SHIP

THE COURT ORDERS BY CONSENT PURSUANT TO RULE 69(5) OF THE ADMIRALTY RULES 1988 (CTH) THAT:

1.    The Marshal have the ship “Velsheda II” valued in writing.

2.    The Marshal sell the ship “Velsheda II” under the Admiralty Rules 1988 (Cth).

3.    The sale need not be by public auction.

4.    The method of sale be determined by the Court.

5.    The Marshal engage ship brokers to value the ship in writing and advise as to the method of sale.

6.    The Marshal retain a solicitor experienced in the judicial sale of ships to act on the sale of the ship.

7.    Prior to the close of business on 12 October 2012 the Marshal give notice of the ship broker’s recommendations as to the method of selling the ship to the solicitors for the plaintiff and the defendant and to the Commissioner of the Australian Federal Police.

8.    Pending further order, the Marshal and the ship broker not disclose the valuation referred to in Order 5 to the parties or anyone else apart from the Marshal’s delegates.

9.    The plaintiff pay, on demand, to the Marshal an amount equal to the amount of the fees and expenses of the Marshal in complying with these orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    This is an application by the plaintiff, Broken Bay Slipway Pty Ltd, for an order that costs be made payable on an indemnity basis against Sven Halac, who has appeared as the relevant person in respect of the ownership of the yacht Velsheda II. Today, by consent, I made orders for judgment in favour of Broken Bay in the sum of $20,163.81, including interest up to today, and for the valuation and sale of the yacht by the Marshal. Those orders were inevitable from the time the proceedings were commenced.

Background

2    The proceedings have been before the Court on six occasions since they were commenced by a writ filed on 11 May 2012. Broken Bay operates a marina at Broken Bay. On 1 May 2010, an agent of Mr Halac, Mr Fetzer, contracted with Broken Bay to moor Mr Halac’s yacht at its marina. Mr Fetzer paid a year’s mooring fees in advance. Subsequently, on 18 April 2011, Mr Halac caused further monthly mooring fees to be paid to 31 August 2011. No further payments of any kind have been made to Broken Bay in respect of the yacht.

3    On 4 October 2011, the Commonwealth Director of Public Prosecutions obtained a restraining order in the Supreme Court of New South Wales under the Proceeds of Crime Act 2002 (Cth) in respect of Mr Halac’s assets that extended to the yacht. By the time these proceedings were commenced, Broken Bay had incurred further costs in maintaining the yacht. Those costs are detailed in the affidavit of 16 July 2012 of Sean McDonagh, Broken Bay’s accounts manager.

4    The proceedings have been complicated by the incarceration of Mr Halac and the existence of the proceeds of crime order. Ultimately, to remove doubt as to the ability of Broken Bay to seek the sale of the yacht on 26 June 2012, the Director obtained an order from the Supreme Court varying the restraining order so as to permit the net proceeds of sale to be substituted for the yacht, and for this Court to determine how that sum should be arrived at.

Mr Halac’s submissions

5    Mr Halac argued that I should not make a lump sum order for indemnity costs, but rather should make an order for party/party costs and, if I were to make any lump sum order, then discount that sum. He contended that the ordinary principles for the award of indemnity costs have not been engaged in the circumstances of this case, and that there is nothing out of the ordinary course of litigation that would warrant the Court departing from the usual rule of assessing costs on a party/party basis. He called in aid the reasons given by Cooper and Merkel JJ in Re Wilcox; Ex parte Venture Industries Pty Ltd [No. 2] (1996) 72 FCR 151 at 156F-157B, and of Kirby P in Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 at 248D-249A as demonstrating that commercial considerations should not be taken into account for the purposes of exercising the discretion.

Consideration

6    The circumstances of the present case involve factors that, in my opinion, justify a departure from the usual rule for assessing costs on a party/party basis. The jurisdiction to make orders in rem is conferred only on this Court and the Supreme Courts of the States and Territories by s 10 of the Admiralty Act 1988 (Cth). Broken Bay was an involuntary bailee of the yacht. A person in the position of Broken Bay must be able to seek to relieve itself of that burden without having to be substantively out of pocket in doing so.

7    Broken Bay was entitled to seek to proceed against the yacht in rem pursuant to the Admiralty Act. That was a prudent and reasonable course for it to take. The mere fact that the relevant person and the Director, who has now been substituted by the Commissioner for the Australian Federal Police, had interests in the yacht that required a number of directions hearings and adjournments so that they could flesh out what their position was, should not be a burden that should fall on Broken Bay’s pockets having regard to the relatively small debt and its heavy obligations as an involuntary bailee of Velsheda II.

8    In a case that was similar, but relevantly distinguishable, Allsop J held that a plaintiff ought not have its legitimate commercial debt eaten away by the legitimate costs of enforcing it where that debt was, as this one is too, in a small sum: Broken Bay Slipway Pty Ltd v The Yacht “Flying Cloud” [2006] FCA 309 at [19]. As in that case, here the legal costs claimed by Broken Bay’s solicitor, Drew James, up to the last directions hearing, including disbursements, but exclusive of goods and services tax, exceeded $32,000. I suggested that if I were to make an assessment on a lump sum basis I should fix the costs on an indemnity basis at $30,000. Mr James has accepted that that is a reasonable sum to fix for his client’s costs on that basis up to and including the costs of today.

9    I am of opinion that in this case, through no fault of its own, the only practicable remedy which was open to Broken Bay was that which it has pursued by the filing of the writ and the prosecution of its claim for the yacht to be valued and sold. Broken Bay ought not be put in a position where it is left substantially out of pocket in pursuing a relatively small claim and its entitlement to relieve itself of the burden of being an involuntary bailee. Broken Bay was entitled to apply in proceedings in rem when it did to avoid having to remain a bailee of the yacht until some indefinite time in the future, pending the resolution of Proceeds of Crime Act litigation between the Commissioner and Mr Halac and any consequent determination of the ownership and future fate of the yacht.

10    Broken Bay was entitled to come to Court to seek remedies under the Admiralty Act and to have them administered effectively without being required to be or remain substantially out of pocket for doing so. For these reasons, I will order that the defendant pay the plaintiff’s costs assessed up to and including today on an indemnity basis at $30,000.

Associate:

Dated:    16 October 2012