FEDERAL COURT OF AUSTRALIA

 

Kent v The Vessel “Maria Luisa” as Surrogate for the Vessels “Monika” and “Boston Bay” [2003] FCAFC 93


ADMIRALTY – appeal from single Judge setting aside application for want of jurisdiction – appellant sustained injury while employed as a diver on vessel owned by Australian Fishing Enterprises Pty Ltd (“AFE”) – in rem proceedings against surrogate vessel (“Maria Luisa”) – registered owner of surrogate vessel (“Everdene”) sought dismissal of application – Everdene is trustee of Maria Luisa Unit Trust – “Maria Luisa” an asset of Unit Trust – AFE held all shares in Everdene and all units in Unit Trust – terms of Trust Deed – nature of Unit-holders interest – interest to beneficiary defeasible – whether AFE is owner of “Maria Luisa” – nature of ownership – title – par 19(b) of Admiralty Act 1988 (Cth) concerned with proprietorship – whether primary Judge erred in dismissing the application for lack of jurisdiction


WORDS and PHRASES“owner”, “ownership”, “beneficial ownership”


Admiralty Act 1988 (Cth) s 4(3)(c), 4(3)(d), 4(3)(d)(i), 19(a), 19(b)

International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships 1952 Brussels Article 3

Supreme Court Act 1981 (UK), s 21

Administration of Justice Act 1956 (UK), subs 3(4)

Admiralty Rules r 15(1)

Shipping Registration Act 1981 (Cth)

Corporations Law 2000 (Cth) s 249B



Laemthong International Lines Co Ltd as Owners of the Ship Laemthong Pride v BPS Shipping Limited (1997) 190 CLR 181 referred to

The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 followed

The Owners of the Motor Vessel “Iran Amanat” v KMP Coastal Oil Pte Ltd (1999) 196 CLR 130 discussed

Medway Drydock & Engineering Company Ltd v The “Andrea Ursula” (Owners) [1973] QB 265 discussed

I Congreso del Partido [1978] QB 500 discussed

Yulianto v The Ship “Glory Cape” (1995) 134 ALR 92 cited

The “Nazym Khikmet” [1996] 2 Lloyd’s Rep 362 cited

The “Aventicum” [1978] 1 Lloyd’s Rep 184 discussed

Malaysia Shipyard and Engineering Sdn Bhd v The “Iron Shortland” as the surrogate for the ship “Newcastle Pride” (1995) 59 FCR 535 followed

Commissioner of Taxation v Linter Textiles Australia Ltd (in liquidation) [2003] FCAFC 63 cited

McIlwraith McEacharn Ltd v Shell Co of Australia Ltd (1945) 70 CLR 175 referred to

Bellinz Pty Ltd v Commissioner of Taxation (1998) 84 FCR 154 discussed

Yanner v Eaton (1999) 201 CLR 351 referred to

Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 cited

Macaura v Northern Assurance Co Ltd [1925] AC 619 followed

Re Webster (1975) 132 CLR 270 followed

Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 applied

Read v The Commonwealth of Australia (1988) 167 CLR 57 referred to

MSP Nominees Pty Ltd v Commissioner of Stamps (SA) (1999) 198 CLR 494 applied

Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 referred to

Official Receiver in Bankruptcy v Schultz & Anor (1990) 170 CLR 306 cited

Costa and Duppe Properties Pty Ltd v Duppe [1986] VR 90 cited

Suncorp Insurance & Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285 cited

Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 45 NSWLR 639 cited

Karingal 2 Holdings Pty Ltd v Commissioner of State Revenue [2002] VSC 431 discussed

Lock v Commissioner of Taxation [2003] FCA 309 referred to

Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd & Anor (1994) 94 ATC 4774 applied

Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 referred to

Jeffries v Great Western Railway Co (1856)5 E.&B. 802 referred to

Gatward v Alley (1940) 40 SR (NSW) 174

The “Ohm Mariana”, ex “Peony”; Pacific Navigation Co Pty Ltd v Owners “Ohm Mariana” ex “Peony” [1993] 2 SLR 698 referred to

“The Permina 3001” [1979] 2 Lloyd’s Rep 327 cited

The Trustees Executors & Agency Co Ltd v The Acting Federal Commissioner of Taxation (1917) 23 CLR 576 cited

KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 cited

Stern v McArthur (1988) 165 CLR 489 cited

Chan v Cresdon Pty Ltd (1989) 168 CLR 242 cited

Saunders v Vautier [1841] Cr & Ph 240 cited

Trustees of Estate Mortgage Fighting Fund Trust v Federal Commissioner of Taxation [2000] 175 ALR 482 cited

Coulton v Holcombe (1986) 162 CLR 1 referred to

Smith v Layh (1953) 90 CLR 102 cited

“The Winkfield” [1902] P 42 cited

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 cited

Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 cited

Collie v Merlaw Nominees Pty Ltd (in liq) (2001) 37 ACSR 361 cited

 


Australian Law Reform Commission Civil Admiralty Jurisdiction – Report No 33, Canberra, 1986

Davies & Dickey Shipping Law 2nd ed. 1995

Ford & Lee Principles of the Law of Trusts

Lawson & Rudden, The Law of Property 2nd ed. 1982

O W Holmes The Common Law 1882

Blackstone’s Commentaries, 18th ed.  1829, Vol 12

Holdsworth, A History of English Law, Vol VII

Meagher, Heydon and Leeming Meagher Gummow & Lehane’s Equity Doctrines & Remedies  4th ed. 2002 [4-120]

Berlingieri Berlingieri On Arrest of Ships 2nd ed. 1996


GREGORY DAVID KENT v THE VESSEL “MARIA LUISA” AS SURROGATE FOR THE VESSELS “MONIKA” AND “BOSTON BAY”


N 960 of 2002


MOORE, TAMBERLIN & HELY JJ

SYDNEY

16 MAY 2003



IN THE FEDERAL COURT OF AUSTRALIA

 

NEW SOUTH WALES DISTRICT REGISTRY

IN ADMIRALTY

N 960 OF 2002

 

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

BETWEEN:

GREGORY DAVID KENT

APPELLANT

 

AND:

"MARIA LUISA" AS SURROGATE FOR THE VESSELS "MONIKA" AND "BOSTON BAY"

RESPONDENT

 

JUDGES:

MOORE, TAMBERLIN & HELY JJ

DATE OF ORDER:

16 MAY 2003

WHERE MADE:

SYDNEY

 

THE COURT ORDERS THAT:

 

1.         The appeal is dismissed with costs.


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



IN THE FEDERAL COURT OF AUSTRALIA

 

NEW SOUTH WALES DISTRICT REGISTRY

IN ADMIRALTY

N 960 OF 2002

 

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

BETWEEN:

GREGORY DAVID KENT

APPELLANT

 

AND:

“MARIA LUISA” AS SURROGATE FOR THE VESSELS “MONIKA” AND “BOSTON BAY”

RESPONDENT

 

JUDGES:

MOORE, TAMBERLIN & HELY JJ

DATE:

16 MAY 2003

PLACE:

SYDNEY


REASONS FOR JUDGMENT

moore j:

1                     The appellant was a diver and claims to have been badly injured when diving from two ships, the “Monika” and the “Boston Bay” which were involved in tuna farming in South Australia.  Australian Fishing Enterprises Pty Ltd (“AFE”) was then the demise charterer of both ships.  The appellant believes he had a general maritime claim to obtain compensation for these injuries maintainable against both ships which could be brought, as it has been, against the “Maria Luisa”.  That course had been followed because the appellant says the “Maria Luisa” was owned by AFE when the proceedings were commenced.  The respondent contended, by notice of motion, that the Court has no jurisdiction to hear the claim against the “Maria Luisa” because it was not owned by AFE and the learned primary judge accepted this was so.  The respondent, Everdene Pty Ltd (“Everdene”), is the registered owner of the “Maria Luisa”, and a trustee of a unit trust.

2                     I have had the benefit of reading the judgment of Tamberlin and Hely JJ in a draft form.  I gratefully adopt their Honours’ account of the facts.  As I will explain shortly, I agree with aspects of their Honours’ legal analysis though not with their ultimate conclusion.

3                     The central issue raised in the appeal is what is meant by the expression “the owner” in par 19(b) of the Admiralty Act 1988 (Cth) (“the Act”) and whether, on the facts revealed in this matter, AFE was the owner of the “Maria Luisa” for the purposes of that provision.  That is, was the “Maria Luisa” a surrogate or associated ship for the purposes of actions in rem otherwise maintainable against the “Monika” and the “Boston Bay”?  The other possibility is that Everdene was the owner.  The expression “the owner” is not defined.  Section 19 provides:

A proceeding on a general maritime claim concerning a ship may be commenced as an action in rem against some other ship if:

(a)      a relevant person in relation to the claim was, when the cause of action arose, the owner or charterer of, or in possession or control of, the first-mentioned ship; and

(b)      that person is, when the proceeding is commenced, the owner of the second-mentioned ship.

 

I generally use the expression “surrogate ship” to describe the “second-mentioned ship” referred to in par 19(b) which accords with the definition in subs (1) and subs (6) of s 3 (as to the effect of the definition more generally see Laemthong International Lines Co Ltd as Owners of the Ship Laemthong Pride v BPS Shipping Limited (1997) 190 CLR 181), but also, where appropriate, I use the expression “associated ship” to describe that ship.

4                     A convenient starting point in ascertaining what is comprehended by the expression “the owner” in par 19(b) is to identify how provisions in the Act might, more generally, be construed.  In The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404,the High Court noted that the purpose of the Act was to bring Australian legislation into line with the English law, and also to move it more in line with International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships, Brussels, 1952 (“the 1952 Arrest Convention”).  This is so notwithstanding that Australia is not a party to that Convention.  The Court (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron, McHugh JJ) said (at 420):

Nor is it possible to construe s. 4(2)(a) and (b) by reference to the practice and principles applied in Admiralty matters before the Act was passed.  As earlier indicated, the Act was intended to reform the law with respect to the Admiralty jurisdiction.  And it was intended to strike a balance which would bring the jurisdiction more closely into line with that conferred by the U.K. Act and, thus, more closely into line with the practice and principles adopted in the Arrest Convention.

5                     In a later judgment, The Owners of the Motor Vessel “Iran Amanat” v KMP Coastal Oil Pte Ltd (1999) 196 CLR 130 at 138, the Court said that provisions in the Act should be understood as having the same meaning as corresponding provisions (similarly expressed) in the English legislation (unless the construction was unreasonable or inapplicable to Australian circumstances).  The reference to the reform of the law was to the 1986 Australian Law Reform Commission (“ALRC”) report Civil Admiralty Jurisdiction – Report No 33, Canberra, 1986, and the subsequent enactment of the Act.  The UK legislation referred to wasthe Supreme Court Act 1981 (UK) (“the UK Act”).  Section 21 of that Act provides:

 

Mode of exercise of the Admiralty jurisdiction

 (1) Subject to section 22, an action in personam may be brought in the High Court in all cases within the Admiralty jurisdiction of that court.

(4) In the case of any such claim as is mentioned in section 20(2) (e) to (r), where –

            (a) a claim arises in connection with a ship; and

(b) the person who would be liable on the claim in an action in personam (“the relevant person”) was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship,

an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against –

(i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise;

            or

(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it

 

[Emphasis added]

6                     It can be seen that subpara 21(4)(b)(ii) of the UK Act enables an action in rem to be brought against a surrogate ship if the relevant person is the beneficial owner of the ship (because they are the beneficial owner of all the shares in it).  Generally, the English Courts have tended to interpret “beneficial owner” broadly, at least in the sense that the section is treated as enabling the Court to inquire into the true ownership of a ship.  The legislative antecedent of subs 21(4) of the UK Act, was subs 3(4) of the Administration of Justice Act 1956 (UK) (“the 1956 Act”) which provided:

In the case of any such claim as is mentioned in paragraphs (d) to (r) of subsection (1) of section one of this Act, being a claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the Admiralty jurisdiction of the High Court…may…be invoked by an action in rem against-

(a)                 that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or

(b)                 any other ship which, at the time when the action is brought, is beneficially owned as aforesaid.”

In neither par (a) nor par (b) of subs 3(4) is there express reference to charterers generally or demise charterers specifically (in contrast to subpara 21(4)(b)(i) of the UK Act and par 19(a) of the Act).

7                     In Medway Drydock & Engineering Company Ltd v The “Andrea Ursula” (Owners) [1973] QB 265, Brandon J had to consider the meaning of the expression “beneficially owned as respects all the shares therein by that person” in par 3(4)(a).  His Lordship was not considering whether a surrogate ship was “beneficially owned” but rather whether the wrongdoing or guilty ship was “beneficially owned” by a demise charterer.  That this is what his Lordship decided was noted in the ALRC report at p 158 when discussing whether a sufficient nexus would exist between a surrogate ship and the wrongdoing ship if the connection with the former was only as a demise charter.  Nothing is said by the ALRC to suggest it disapproved of his Lordship’s approach in construing the UK Act when determining ownership of the wrongdoing ship.  The issue arose because a ship repairer commenced proceedings against a ship,the “Andrea Ursula”, which was chartered under a demise charter to a company which had commissioned the repairs.  On the assumption that the demise charterer was liable in personam, was the ship beneficially owned by the charterer?  His Lordship noted (at 270) that that the expression “beneficially owned” (not defined in the 1956 Act (as amended)), was capable of more than one meaning.  Brandon J observed that “beneficially owned” could mean owned by someone who, whether the legal owner or not, was in any case the equitable owner.  However his Lordship considered that the words were capable of a more practical meaning and said (at 269):

…the words [beneficially owned] seem to me to be capable also of a different and more practical meaning related not to title, legal or equitable, but to lawful possession and control with the use and benefit which are derived from them.  If that meaning were right, a ship would be beneficially owned by a person who, whether he was the legal or equitable owner or not, lawfully had full possession and control of her, and, by virtue of such possession and control, had all the benefit and use of her which a legal or equitable owner would ordinarily have.

8                     His Lordship concluded that the demise charterer “beneficially owned” the ship.  In reaching this conclusion his Lordship noted that the 1956 Act was, amongst other things, intended to give effect to the 1952 Arrest Convention.  Accordingly recourse could be had to the terms of the Convention in construing the 1956 Act, and Parliament could be presumed to have intended to fulfil, rather than break, its international obligations. 

9                     The relevant parts of the 1952 Arrest Convention are found in art 3 which provides:

“(1) Subject to the provisions of paragraph 4 of this Article and of Article 10, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship, even though the ship arrested be ready to sail but no ship, other than the particular ship in respect of which the claim arose, may be arrested in respect of any of the maritime claims enumerated in Article 1(1)(o), (p) or (q).

(2) Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons.

(4) When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claims.

[Emphasis added]

 

Brandon J’s conclusion that a demise charterer could be a beneficial owner for the purposes of subs 3(4) of the 1956 Act was criticised by Goff J in I Congreso del Partido [1978] QB 500.  The facts were comparatively complex.  One aspect of the litigation concerned an allegation that a Cuban state enterprise, Mambisa, “beneficially owned” a ship,the “Congreso”, which had been arrested by the owners of cargo (sugar) which had not been delivered (as contractually required) by two other ships. Mambisa did not own “Congreso” (it had just been built) in law or in equity (it was legally owned by the Republic of Cuba) but it was to operate and manage the ship.  At the time of its arrest, “Congreso” was in the possession of Mambisa.  The issue of beneficial ownership arose in relation to the scope of par 3(4)(b) of the 1956 Act, namely, beneficial ownership of the associated ship.  Mambisa was the demise charterer of one of the ships (which had carried the sugar) and was in possession of the other ship, which it operated.

10                  Goff J considered that beneficial ownership (arising from the expression “beneficially owned”) included both legal and equitable ownership, but a demise charterer had beneficial use, not beneficial ownership.  Goff J’s starting point was the natural and ordinary meaning of the words “beneficially owned as respects all the shares therein”.  His Lordship rejected the suggestion that the words were ambiguous and, accordingly, it was unnecessary to have recourse to the 1952 Arrest Convention.  Nonetheless his Lordship did and expressed the view that the word “owner” in art 3(4) bore its ordinary meaning, namely the person with title to the ship.  His Lordship’s reconciliation of the 1956 Act with the 1952 Arrest Convention was as follows, at 540-541:

As I read the Convention, article 3(1), which is expressed to be subject to article 3(4), provides for the arrest of either the particular ship in respect of which the maritime claim arose, or (except in certain specified cases) any other ship which is owned by the person who was, at the time when the maritime claim arose, owner of the particular ship.  Furthermore, despite the argument of Mr Alexander for the plaintiffs to the contrary, in this context I read the word “owner” as bearing its ordinary meaning, that is, the person with title to the ship; and I am confirmed in this view by the provision relating to ownership in article 3(2) and by the fact that article 3(4), to which article 3(1) is expressed to be subject, makes special provision for the case of the demise charterer and others.  It is to be observed that, if one puts article 3(4) on one side, the draftsman of the Act of 1956 appears to have been seeking to give effect to article 3(1) and (2) of the Convention, subject to the fact that he appears to have been concerned to extend the word “ownership” by the addition of the adjective “beneficial”, very possibly to take account of the special English institution of the trust which may form no part of the domestic laws of other signatories to the Convention.

For these reasons, when I place article 3 of the Convention alongside section 3 of the Act, I discern a clear intention on the part of Parliament not to give effect to article 3(4) of the Convention; and I do not think it would be right to impose some special construction on the words of section 3(4) of the Act in an attempt to give effect to one part (though not to others) of article 3(4) of the Convention.

[Emphasis added]

In subsequent appeals to both the Court of Appeal [1980] 1 Lloyd’s Rep 23 and the House of Lords [1983] 1 AC 244 the case was maintained on behalf of the cargo owners only on the footing that the owner of Congreso was the Republic of Cuba.  Issues of sovereign immunity became central to the proceedings.  Unlike Brandon J, Goff J was considering the meaning of the expression “beneficially owned” as it might apply to a surrogate or associated ship.  His Lordship considered the adjective “beneficially” may have been used to accommodate the construct known to the English law, the trust.  One would imagine that his Lordship had in mind that if “beneficial ownership” was, on the facts of the particular case involving a trust, to provide the touchstone of ownership for the purposes of the section, there would be one owner which would not be the legal owner, the trustee.

11                  I refer to these two authorities in some detail, notwithstanding that in England they have been overtaken by later decisions and legislative changes.  I do so because they serve to illustrate two approaches which might be followed in construing legislation giving effect to the 1952 Arrest Convention.  The approach of Brandon J is not a narrow one and involves a fairly practical view of the reach of the Convention and legislation intended to give effect to it, bearing in mind the potential application of such legislation to foreign registered ships operated (in the most general sense) by companies or individuals located in countries where the laws which would determine ownership will differ.  The Act has been characterised as remedial legislation which should be construed expansively rather than strictly: Yulianto v The Ship “Glory Cape” (1995) 134 ALR 92 at 99.  I think it can fairly be said that the thrust of the ALRC report is that rights of arrest and the capacity to bring proceedings in rem should be approached expansively and not narrowly (see particularly the section concerning Australia’s national interest at pp 63-64), though on the basis that it should not be at odds with the 1952 Arrest Convention and international practices more generally.

12                  I should note that the difference of approach between Brandon J and Goff J in relation to whether a demise charterer “beneficially owned” the shares in a ship was resolved by the 1981 UK Act, which expressly brought demise charterers of the wrongdoing ship within the purview of the provisions enabling surrogate ship arrest when the demise charterer was also the owner of the surrogate ship.  It has been said that by making this amendment, Parliament preferred the view of Goff J: see The “Nazym Khikmet” [1996] 2 Lloyd’s Rep 362 at 371.

13                  Following these decisions there were a series of cases concerning the reach of the UK legislation (before the enactment of the Act in 1988) when ownership was arguably obscured by the involvement of a number of companies: including The “Aventicum” [1978] 1 Lloyd’s Rep 184, The Maritime Trader [1981] 2 Lloyd’s Rep 153, The “Saudi Prince” [1982] 2 Lloyd’s Rep 255 and The “Evpo Agnic” [1988] 3 All ER 810.  However, with one qualification, it is unnecessary to detail what was said in these later cases.  This is because the issue was addressed by the ALRC, and later considered by Sheppard J in Malaysia Shipyard and Engineering Sdn Bhd v The “Iron Shortland” as the surrogate for the ship “Newcastle Pride” (1995) 59 FCR 535, which is the leading Australian authority on this issue as it concerns surrogate ships, and which is referred to shortly.

14                  In The “Aventicum” (supra), a dispute arose over the ownership of a ship,the registered ownership of which changedafter the alleged wrongdoing.  The plaintiffs submitted that there were links between the companies involved and that the beneficial ownership was in the same person.  In response to the suggestion by the defendants that it was not open to the Court “to pierce the corporate veil”, Slynn J said (at 187):

The argument on behalf of the defendants was really that one should take the matters at their face value.  Here there had been a change from Armadora to Longan, from Longan to Loquat and that apparently was said to be that.  I think that is wrong and that where damages are claimed by cargo-owners and there is a dispute as to the beneficial ownership of the ship, the Court in all cases can and in some cases should look behind the registered owner to determine the true beneficial ownership.

I have no doubt that on a motion of this kind it is right to investigate the true beneficial ownership.  I reject any suggestion that it is “impossible to pierce the corporate veil”.  I of course remember, as Mr Howard urges, the case of Saloman v Saloman & Co. [1897] A.C. 22, but of course it is plain that s. 3(4) of the Act intends that the Court shall not be limited to a consideration of who is the registered owner or who is the person having legal ownership of the shares in the ship; the directions are to look at the beneficial ownership.  Certainly in a case where there is a suggestion of a trusteeship or a nominee holding, there is no doubt that the Court can investigate it. I think it may well be, without having to resolve the difference of opinion expressed by Mr. Justice Brandon and Mr. Justice Goff in the two cases to which I have referred that the Court has the power and should in some cases look even further. 

[Emphasis added]

Slynn J found for the defendants on the evidence.  His Lordship did not undertake an analysis of the 1952 Arrest Convention.  However his Lordship did point to a legislative intention that because the expression “beneficial ownership” was used, ownership for relevant purposes might arise in the context of a trust.  It appears his Lordship thought that a beneficiary under a trust might be viewed as a “beneficial owner”.  Again, one would imagine that his Lordship had in mind that there would be one owner and the trustee would not be the owner for the purposes of surrogate ship arrest, even if the trustee was the registered owner.

15                  It is against this background that the ALRC considered how Australian law might be reformed.  The ALRC addressed whether Australian law should be framed so that ownership could be attributed to a person or body who was not the registered owner.  Typically, that arose when a holding company “owned” a number of ships through subsidiaries, and each subsidiary was the registered owner of one ship.  The ALRC was not prepared to recommend the inclusion of express provisions dealing with related companies which, in terms, would have facilitated the piercing of the corporate veil.  It said (at pp 108-109) of its report:

But the fundamental consideration, in the Commission’s view, is the undesirability of making special provision with respect to the corporate veil in legislation dealing with admiralty jurisdiction.  If the questions of the liability or indebtedness of corporate groups are to be addressed this is properly done through company or insolvency law rather than in specific legislative contexts such as admiralty jurisdiction.  Accordingly there should be no special provision dealing with the corporate veil, or defining ‘related’ or ‘associated’ companies, in the proposed legislation.

On the specific question of trusts, the ALRC said (at p 106) of the section concerning the possible inclusion of special provisions for piercing the corporate veil:

The other situation concerns the arrest of a ship owned by a subsidiary of the company which was the relevant person.  Both questions have had to be resolved by interpreting the relevant provisions of the legislation then in force, the Administration of Justice Act 1956 (UK).  This Act used the expression ‘beneficially owned’ and similar language is used by its successor, the Supreme Court Act 1981 (UK).  It has caused some judicial puzzlement.  As Justice Brandon observed, ‘trusts of ships, express or implied are…rare’.  It is unnecessary to cater for them in the proposed legislation.  In the event the English courts declined to interpret the expression as a mandate for any general lifting of the corporate veil beyond situations of trusteeship or nominee holdings.  Justice Sheen said that he ‘would not hesitate to lift that veil if the evidence suggested that it obscured from view a mask of fraud
rather than the true face of the corporation’.  But merely because a shipping group chose to operate through a number of one ship companies was, in his view, sufficient reason.

 

[Emphasis added]

 

16                  It is comparatively clear that the ALRC did not specifically consider whether ownership could arise by virtue of an interest under a trust.  It appears to have viewed that question as part of the more general issue of whether special provisions should be enacted to enable the corporate veil to be pierced.  That approach is understandable given that the notion of “piercing the corporate veil” is, in this context, a way of describing an approach involving some licence in identifying the owner (in the sense of looking beyond the registered owner) though it is a description of no particular precision: see Re: The “Tjaskemolen” (now named Visvliet) [1997] 2 Lloyd’s Rep 465 at 471 and Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (No 2) [1998] 4 All ER 82 at 93.  It concerns issues “enveloped in the mists of metaphor”: per Cardozo J in Berkey v Third Avenue Railway Co (1926) 244 N.Y. 84.

17                  What was intended by the use of the word “owner” in s 19 having regard to the approach of the ALRC, was considered by Sheppard J in Malaysia Shipyard and Engineering Sdn Bhd v “Iron Shortland” as the surrogate for the ship “Newcastle Pride” (supra).  Sheppard J reviewed in some detail many of the comparatively recent English authorities including those I have referred to earlier.  His Honour concluded that the expression “the owner” in par 19(b) comprehended the beneficial, true or real owner.  Sheppard J took into account the ALRC recommendation that there should be no special provision dealing with the corporate veil.  His Honour said at 546-7:

It should be said at this point, that there is significant difference between attributing to the legislature on the one hand an intention to embrace within the word “owner” the concept of beneficial ownership, and, on the other, a much more general provision which would have the effect of lifting the corporate veil, making companies who were holding companies responsible for the liabilities of their subsidiaries.  The question here is whether a particular company, Capeco Maritime, is the beneficial (ie the real) owner of the vessel.  That is the only way in which the plaintiff’s case is put.  It should be emphasised that counsel for the plaintiff does not seek to advance any proposition based on the fact that Capeco Maritime owns 100 per cent of the shares in each of Newcastle Pride Co and Everbird.  Counsel’s submission is based on evidence to which I have yet to come that Capeco Maritime was the beneficial owner, not of shares in subsidiary companies, but of the whole 64 shares in each of the ships.

18                  In determining whether the expression “the owner” in s 19 comprehended a beneficial owner, his Honour said at 547:

I think there are difficulties in taking the simple view that “owner” in the section means only “registered owner”.  After all, the section does not use those words.  Obviously the registered owner will, in the absence of other evidence, be taken to be the beneficial owner. But there seems to me to be no reason of policy why the section should not be construed to mean or to include a beneficial owner.  Because the judges who decided “Shin Kobe Maru” were dealing with a case directly concerned with the ownership of a vessel and thus with a proprietary, rather than a general, maritime claim, there is a danger in taking too much from the dicta about the meaning of ownership in s 4(2) and applying them to cases under s (3), particularly bearing in mind the terms of both ss 17 and 19.  But at least the judgments show that the concept of “owner” and “ownership” in the Act may have a meaning which involves or includes beneficial ownership.  There is thus nothing which runs counter to ordinary concepts of admiralty law or jurisdiction which should lead me to reject the plaintiff’s submission.

 

Why should the ability of a plaintiff to take advantage of the remedies provided for in the Act depend on the chance of registration?  It is true that most ships will be registered, but some may not be.  And if such a plaintiff were able to identify the real or beneficial owner, what in principle should stand in the way of such a plaintiff proceeding against it, even if there is a nominee or trustee between the vessel and the true owner?

[Emphasis added]

19                  I respectfully agree. What Shepherd J meant by these observations is apparent from their application to the facts.  What is revealed, in my opinion, is that his Honour was not using expressions such as “real owner”, “true owner” or “beneficial owner” as terms of art to signify a relationship with a precise and fixed legal content (“beneficial ownership” need not always be a concept with fixed legal content: see Commissioner of Taxation v Linter Textiles Australia Ltd (in liquidation) [2003] FCAFC 63 at [28] and following).  In addition, it is comparatively clear from the final sentence in the paragraph set out above that his Honour had in mind that in circumstances involving a trust, the trustee might not be the owner for the purposes of s 19 even if the trustee was the registered owner.  Moreover, if the expression “the owner” is not to be taken to be a reference to the registered owner, then the fact that a person or body is the registered owner of a ship, could, in a particular factual setting, be no more than an indicia of ownership of that ship.

20                  In outline, the facts in Malaysia Shipyard and Engineering Sdn Bhd v “Iron Shortland” as the surrogate for the ship “Newcastle Pride” (supra) were as follows.  Proceedings were commenced (on 24 July 1995) against the “Iron Shortland” by a company which had repaired and equipped another ship, the “Newcastle Pride” (in the period December 1994 to January 1995).  The “Iron Shortland” was arrested as a surrogate ship.  BHP Transport Pty Ltd (“BHPT”) applied to have the ship released from arrest and the warrant set aside.  To determine the application, his Honour addressed three questions (identified at 548).  The first was whether the company alleged to be the relevant person in the writ, Capeco Maritime NV (“Capeco”) was the relevant person in relation to the claim.  The second was whether Capeco was the owner or charterer of, or in possession or control of, the “Newcastle Pride” when the cause of action arose.  This question arises because of par 19(a) of the Act.  The third was whether, when the proceedings were commenced, Capeco was the owner of the “Iron Shortland”.  This question arises because of par 19(b).

21                  As to the first question, Sheppard J concluded (at 551) that Capeco was a relevant person.  As to the second question, his Honour concluded (at 554) that Capeco had been the owner of the “Newcastle Pride” when the cause of action arose.  As to the third question, his Honour was not satisfied (at 556) that Capeco was the owner of the “Iron Shortland” when the proceedings commenced.  The approach his Honour took to answering the second and third question serves to illustrate that what is comprehended by true, real or beneficial ownership (as these notions arise under s 19, and particularly par 19(b)) should not be approached narrowly.

22                  In reaching a conclusion about the ownership of the “Newcastle Pride”, his Honour had recourse to several documents.  One was a management agreement between Capeco and another company (“the management company”), which agreed, inter alia, to maintain the ship on behalf of Capeco, which was described, in the agreement, as the owner.  Another was an agreement reached between the plaintiff ship repairer and the management company (after, it appears, the repairs had been effected and the ship equipped) concerning the costs of the repairs.  It recorded that the management company were the agents for the owners.  Other correspondence (both before and after the repairs were effected) similarly described the management company as the agent for the owner or the owner as Capeco.  The secretary of the management company gave evidence to the effect that Capeco had acquired three ships including the “Newcastle Pride” and the “Iron Shortland” through wholly-owned subsidiaries.  He also said that generally the management company received its instructions from two individuals who were managing directors of Capeco.  One of those individuals gave instructions to enter into the agreement concerning the costs of the repairs.  Shepherd J also relied on an insurance certificate which described “Capeco Group of Companies” as the owners of the “Newcastle Pride”.  His Honour referred to other evidence in some detail though it was not viewed as significant.

23                  In reaching the conclusion (at 554) that Capeco was the beneficial or true owner of the ship, Sheppard J indicated that the agreement with the management company and the insurance certificate provided the strongest evidence.  This conclusion was reached notwithstanding that Newcastle Pride Co Inc, a wholly-owned subsidiary of Capeco, was the registered owner of the “Newcastle Pride”.  The approach his Honour took involved looking for indicia of ownership, that is the actual assertion of ownership and control, rather than ascertaining, within the framework of the law of property or equitable principles, the nature of the rights Capeco had in relation to the ship as against the world at large, or the legal relationship, as it concerned the ship, between Capeco and Newcastle Pride Co Inc.  In my opinion, it was, with respect, a practical approach not dissimilar to the approach advocated by Brandon J in the passage quoted above (at [7]).

24                  In relation to the “Iron Shortland”, Sheppard J concluded that the evidence pointed to Everbird Corporation NV (“Everbird”) (a wholly-owned subsidiary of Capeco) being the owner and did not establish that Capeco was.  His Honour referred to the absence of insurance or a management agreement naming Capeco as the owner (and the absence of a document of the type which had identified the cost of the repairs to the “Newcastle Pride” and indirectly described Capeco as the owner of that ship).  There was evidence consistent with Everbird being the owner (evidence of a corporate structure designed to enable Capeco to acquire and operate ships through subsidiaries).  I apprehend that his Honour did not view any of the evidence as indicating that Capeco asserted ownership over the “Iron Shortland”.  Again, it appears to have involved a fairly practical assessment of the issue of ownership and did not involve an analysis, within the framework of the law of property or equitable principles, of the legal relationship between Everbird and Capeco concerning the ship and any interest either might have in it.

25                  In the passage quoted earlier from The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (supra), the High Court cautioned against construing the Act by reference to prior practices and principles.  Moreover the express reference in par 19(a) to “charterer”, in contradistinction to “owner”, would indicate that the latter does not comprehend the former.  However in McIlwraith McEacharn Ltd v Shell Co of Australia Ltd (1945) 70 CLR 175, the various members of the High Court concluded that the word “owner” in s 503 of the Merchant Shipping Act1894 (Imp) could be taken to be include the charterer of the ship in question.  In so doing, various references were made in the judgments to taking a broad rather than a narrow and technical approach to what constituted ownership: see Latham CJ at 194, Starke J at 199, Dixon J at 213 and Williams J at 218. Without seeking to overstate its relevance, this authority illustrates that in the realm of Admiralty law, the notion of ownership does not have a fixed content.

26                  The word “ownership” has neither an historical nor a contemporary universal meaning: see Bellinz Pty Ltd v Commissioner of Taxation (1998) 84 FCR 154 at 161 (and, implicitly, the same would be so of a person who commands that relationship over property, an “owner”) and that the correlative concept of “property” may be elusive: Yanner v Eaton (1999) 201 CLR 351 at 366.  As to what might constitute ownership, the Full Court said in Bellinz Pty Ltd v Commissioner of Taxation (at 161):

…the prima facie meaning of the word [“ownership”], but again subject to context, is the entire dominion of the thing said to be owned: Union Trustee Company of Australia Ltd v Commissioner of Land Tax (1915) 20 CLR 526 at 530.  Halsbury’s Laws of England, 4th ed, 1994) Vol 35, pars 1227 and 1228, cited by the learned primary judge as “a helpful starting point”,says:

“1227.  Meaning of ‘ownership’.  Ownership consists of innumerable rights over property, for example the rights of exclusive enjoyment, of destruction, alteration and alienation, and of maintaining and recovering possession of the property from all other persons.  Those rights are conceived not as separately existing, but as merged in one general right of ownership.

The ownership of goods differs from the ownership of land in that the common law did not treat land as the subject of absolute ownership but only of tenure.  The common law also did not recognise the possibility of the ownership of goods being split up into lesser successive interests or estates, nor did it contemplate remainders or reversions in chattels.

1228.       Division of owner’s rights.  Ownership is nevertheless divisible to some extent.  For example one or more of the collection of rights constituting ownership may be detached.  Thus prima facie an owner is entitled to possession or to recover possession of his goods against all the world, a right which a dispossessed owner may exercise by peaceable retaking.  He may, however, voluntarily or involuntarily part with possession, for example by the pledging, lending, hiring out, bailment, theft or loss of his goods, in any of which cases he is left with a right of ownership without possession, accompanied or not accompanied, as the case may be, by the right to possess.” 

 

[Emphasis in original]

See also the discussion by Finkelstein J in Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 at 430-434 and more generally, see J E Penner, “The “Bundle of Rights” Picture of Property” UCLA Law Review vol 43, 1996, pp 711-820.

27                  Also, as Gleeson CJ, Gaudron, Kirby and Hayne JJ observed in Yanner v Eaton (at 366), there is a measure of circularity about reasoning from the availability of specific performance in protection of property rights in a chattel to the conclusion that the rights protected are property.  The same might also be said of reasoning that the availability of a remedy in equity to securing possession is determinative of whether the interest claimed constituted beneficial ownership in possession: see Trustee, Executors and Agency Co Ltd v Acting Federal Commissioner of Taxation (1917) 23 CLR 576 at 583 per Isaacs J.

28                  Against this general background, I now turn to consider the question of whether AFE was the owner of the “Maria Luisa” for the purposes of par 19(b) of the Act.  I will not repeat, and gratefully adopt, the analysis of the authorities by Tamberlin and Hely JJ in [58] and [59] which point to the conclusion that AFE has an equitable proprietary interest in the “Maria Luisa”.  I would agree with such a conclusion.  For reasons which their Honours then set out, they consider whatever interest AFE has in the “Maria Luisa”, it does not constitute equitable ownership or ownership for the purposes of par 19(b).  Whether that latter link can be forged (that an equitable proprietary interest constitutes ownership) was not really addressed by the parties.  For reasons which I will now endeavour to explain, I do not agree with their Honours’ ultimate conclusion.

29                  It may be accepted that cl 2(c) of the trust deed says that no unit holder shall be entitled to have transferred to him any property “comprised in the Trust Fund” though the operation of that clause has to be considered in the context where AFE is the only unit holder.  AFE’s position as sole unit holder is significant because cl 12(a) enables the transfer of trust property (described as “assets of the Trust Fund”) at any time AFE might decide.  That flows from the definition of “the Vesting Day” in the trust deed and the fact that AFE is the sole shareholder in the trustee, Everdene.  As the sole shareholder, AFE controls Everdene.  The vesting day is defined as including a day specified by Everdene and consented to by unit holders, that is AFE.  Through its control of Everdene, AFE can determine a vesting day of its choosing and bring to an end the trust.  Also through its control of Everdene, AFE can exercise the discretionary power conferred by cl 12(a) on Everdene to transfer property to itself (rather than selling the trust property and distributing the net proceeds) as a unit holder (having, as unit holder, requested the transfer) subject to the prior satisfaction of any liabilities of the trust.  From the only accounts of the trust in evidence, the only liability of the trust which might defeat such a transfer is a debt owing to AFE.  If AFE wished to bring an end to the trust for the purpose of assuming unqualified ownership of the “Maria Luisa”, it could forgive the debt.  It should also be noted that AFE was, at relevant times, also the demise charterer of the “Maria Luisa” and, as such, entitled to immediate possession and control of the ship.  AFE is able, because of those various rights and interests, to maintain possession and control of the “Maria Luisa” against the rest of the world and alienate the ship.

30                  Does the aggregation of these rights and interests of AFE render it the “owner” of the “Maria Luisa” for the purposes of par 19(a), rather than Everdene?  In my opinion there is a rational and practical basis for treating AFE, and not Everdene, as the owner of the “Maria Luisa” even accepting that AFE would not have an immediate right in equity to relief commensurate with beneficial ownership because of the terms of the trust.  It is not based on an approach involving “piercing of the corporate veil” or an assumption that the trust was a sham.  Rather, having regard to the circumstances just referred to, AFE presently enjoys a bundle of rights which enables it to exercise control over and enjoy possession of the ship, and it is able to resist any alteration to that position.  It can take steps to, and ultimately can, alienate the ship.  Everdene does not enjoy the same comprehensive a range of rights and is constrained by the trust deed and its obligations to AFE under the deed (as well as being denied possession and control by the charter party).  I would conclude that AFE (and not Everdene) was the owner of the ship for the purposes of par 19(b) of the Act and that the Court has jurisdiction to determine this proceeding.

31                  I would allow the appeal and dismiss the respondent’s notice of motion challenging jurisdiction.  The other issue raised by the respondent (described by Tamberlin and Hely JJ as the respondent’s alternative case) concerning the formulation of the claim would not, in my opinion, warrant the summary dismissal of the proceedings.  Senior counsel for the appellant indicated the case might be repleaded and it is not apparent to me that the case is so manifestly defective as to justify summary dismissal.  However as the appeal will be dismissed, it is probably unnecessary to address that question in detail.



I certify that the preceding thirty one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.



Associate:


Dated:              16 May 2003



IN THE FEDERAL COURT OF AUSTRALIA

 

NEW SOUTH WALES DISTRICT REGISTRY

IN ADMIRALTY

N 960 OF 2002

 

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

BETWEEN:

GREGORY DAVID KENT

APPELLANT

 

AND:

“MARIA LUISA” AS SURROGATE FOR THE VESSELS “MONIKA” AND “BOSTON BAY

RESPONDENT

 

JUDGES:

MOORE, TAMBERLIN & HELY JJ

DATE:

16 MAY 2003

PLACE:

SYDNEY


REASONS FOR JUDGMENT

TAMBERLIN & HELY JJ:

32                  The appellant was employed by South Australian Marine Farm Pty Ltd as a diver and deckhand in the tuna farming industry.  During the course of his employment, the appellant claims to have sustained personal injury by the progressive onset of decompression illness in consequence of which he is irreparably disabled.

33                  Whilst so employed, the appellant worked off the “Monika” and the “Boston Bay” (the alleged wrongdoing vessels) and off other vessels.  The “Monika” was owned by Simone Fisheries Pty Ltd as trustee of the Simone Fisheries Unit Trust.  The “Boston Bay” was owned by Blazar Fisheries Pty Ltd as trustee of the Blazar Unit Trust.  The sole beneficiary of each of these trusts was Australian Fishing Enterprises Pty Ltd (“AFE”).

34                  AFE was the charterer of each of the alleged wrongdoing vessels.  The appellant contends that his injury and consequent disabilities were caused by negligent acts or omissions on the part of AFE, in relation to which he asserts a general maritime claim within the meaning of s 4(3)(c) and s 4(3)(d)(i) of the Admiralty Act 1988 (Cth) (“the Act”).

35                  By a Writ in rem filed on 24 April 2001 the appellant commenced in rem proceedings against the fishing vessel “Maria Luisa”, and arrested her at Port Lincoln.  The appellant claimed damages against the “Maria Luisa” as surrogate for the alleged wrongdoing vessels under s 19 of the Act.  AFE was specified in the Writ as the “relevant person” in relation to the maritime claim: cf Admiralty Rules, r 15(1).

36                  By Notice of Motion filed on 25 May 2001 Everdene Pty Ltd, the registered owner of the “Maria Luisa”, sought orders setting aside the arrest of the vessel and dismissing the proceedings for want of jurisdiction.  It did so principally on the ground that the person named as the “relevant person” in the Writ (namely AFE) was not the “owner” of the “Maria Luisa” at the time the proceedings were commenced so as to satisfy the requirements of s 19(b) of the Act and thereby permit the prosecution of the proceedings as surrogate proceedings.  It was (and is) common ground that AFE was the charterer of the “Monika” and the “Boston Bay” at the time when the alleged cause of action arose, hence s 19(a) of the Act was satisfied.

37                  Section 19 of the Act confers a right to proceed in rem against a surrogate ship.  It provides:

Right to proceed in rem against surrogate ship

19.       A proceeding on a general maritime claim concerning a ship may be commenced as an action in rem against some other ship if:

            (a)        a relevant person in relation to the claim was, when the cause of action arose, the owner or charterer of, or in possession or control of, the first-mentioned ship; and

            (b)        that person is, when the proceeding is commenced, the owner of the second-mentioned ship.”

38                  The Act is of course a law enacted by the Australian Parliament and s 19(b) must be construed in accordance with the law of Australia.  Australia has not implemented the 1952 International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships (“the Arrest Convention”).  However, it is helpful by way of background to appreciate the circumstances in which provision was made for the arrest of surrogate vessels in the Convention.

39                  The 1952 Arrest Convention provided for the arrest of ships in Article 3 in these terms:

“Article 3

(1)       Subject to the  provisions of paragraph 4 of this Article …, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship with is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship.

(2)       Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons.

(4)       When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claims.  The provisions of this paragraph shall apply in any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship.” (emphasis added)


40                  In his work on the Brussels Convention entitled Berlingieri On Arrest of Ships 2nd ed. 1996, Professor Berlingieri referring to the arrest of surrogate vessels points out (at 72) that:

“… this was one of the questions in respect of which civil and common law differed.  While in civil law all assets of the debtor and thus all ships owned by him could be arrested as security for any debt, whether maritime or not, in common law a ship could be arrested only in respect of a maritime claim and only the ship in respect of which the maritime claim arose could be arrested, but no other ship.  It is this difference which laid behind the different purposes of arrest: a means to obtain security in civil law; a means to found the admiralty jurisdiction in common law.  The ‘compromise’ consisted of reducing the unlimited right of arrest of ships only to specified claims and at the same time extending the right of arrest to other ships in the same ownership.”

41                  It can be seen that the provision in the Convention arose from a compromise between the civil law position and that of the common law with respect to arrest of vessels in the same ownership as that of the ship in respect of which the liability was incurred.

42                  The Act does not contain any definition of the “owner” of a ship.  Ownership of a ship does not depend upon registration under the Shipping Registration Act 1981 (Cth).  Under Australian law, equitable interests can arise in relation to a ship, whether registered or unregistered, in the same way that they may arise in relation to other chattels: Davies & Dickey Shipping Law 2nd ed. 1995 pp 72-75.  It was common ground at first instance (and on appeal) that the word “owner” when used in s 19(b) of the Act, refers not only to the registered owner of a ship, but also includes the beneficial owner of the ship, or the owner in equity: The “Shin Kobe Maru”, Owners of Ship v Empire Shipping Co Inc (1994) 181 CLR 404, 423; Malaysia Shipyard and Engineering SDN BHD v The “Iron Shortland” as the surrogate for the ship “Newcastle Pride” (1995) 59 FCR 535, 547-548.  In the “Iron Shortland” (supra) Sheppard J held that in s 19, “owner” means or includes a beneficial (ie the real or the true) owner, who may not be the registered owner. 

43                  The facts as to ownership of the “Maria Luisa” are not in dispute.  At all relevant times:

-                     the registered owner of the “Maria Luisa” in the Australian Register of Shipping was Everdene Pty Ltd;

-                     Everdene Pty Ltd was the trustee of the “Maria Luisa” Unit Trust constituted by a trust deed dated 5 March 1982 (“the trust”);

-                     the “Maria Luisa” was an asset of the trust;

-                     all the sixty four shares in Everdene Pty Ltd were held by AFE; and

-                     AFE held all of the units in the trust.

44                  At first instance the appellant contended that:

-                     AFE’s interest under the Trust Deed was such that it was the owner of the “Maria Luisa” at material times;

-                     AFE was the demise charterer of the vessel at material times and thus the owner of it; and

-                     an inference should be drawn from the surrounding circumstances as to the method of operation of the vessel and the like, that AFE was the owner of it.

45                  Each of these contentions failed, and the primary judge dismissed the proceedings for want of jurisdiction.  The appellant appeals from that decision.  On appeal the appellant confined his submissions to the first of the contentions referred to above.  There was no attack on the primary judge’s conclusion in relation to the second and third contentions.

46                  During the course of argument on the appeal Counsel for the appellant accepted, contrary to his written submissions, that the issue is not whether the appellant has raised a triable issue as to whether AFE was the owner of the “Maria Luisa” at the relevant time.  Rather, the issue is whether the appellant has established ownership on the balance of probabilities and on the totality of the evidence, and whether the primary judge erred when he concluded that the appellant had not done so.

47                  It is a fundamental principle of company law that a shareholder in a company, even a sole shareholder, has no property, legal or equitable in the assets of the company by reason of that share holding: Macaura v Northern Assurance Co Ltd [1925] AC 619; Re Webster (1975) 132 CLR 270.  If AFE held all of the shares in Everdene Pty Ltd, and there were no interposed trust, then AFE would not be the “owner” of the “Maria Luisa” by virtue of its position as the sole shareholder of Everdene Pty Ltd, and the requirements of s 19(b) of the Act would not be satisfied.  That result is not the consequence of some oversight in the drafting of the Act.  The report of the Australian Law Reform Commission on which the Act is based (Report No 33 – Civil Admiralty Jurisdiction 1986) considered the case where a group of “one-ship” companies is effectively under the control of a holding company (pars  138-141), and recommended against including a special provision in the Act to lift the corporate veil in such cases, either for the purpose of identifying surrogate ships, or for more general purposes.

48                  Whilst units in a trust, from a commercial viewpoint may resemble shares in a company, the two are legally distinct.  Depending on the terms of the trust deed, a beneficiary under a trust may acquire an equitable interest in property the subject of the trust.  In Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 at 609 the High Court adverted to the difference between shares in a company and units in a trust in that respect.  Under the terms of the Trust Deed there under consideration it was held that the Unit-holders under a public investment trust had a proprietary interest in all of the property which, for the time being, was subject to the trusts of the deed by which the trust was constituted.  In Read v The Commonwealth of Australia (1988) 167 CLR 57 at 61 Mason CJ, Deane and Gaudron JJ said of the unit trust there under consideration:

“A unit holder thus has a beneficial interest in the assets of the Trust, a right to have the trusts executed in accordance with the Deed, and a right to proportionate distribution of the proceeds representing the assets of the trust fund on termination of the Trust.  The extent of a unit holder’s beneficial interest at any given time is that proportion which his or her units bear to the total number of units issued.”

One of the terms of the trust was that a Unit-holder had no entitlement to require the transfer to him of any investments comprised in the Fund.

49                  In the present case, the trust deed includes provisions to the following effect:

-                     the trustee holds the trust fund and the income thereof in trust for the Unit-holders (cl 1);

-                     the beneficial interest in the trust fund is held by the Unit-holders in proportion to their unit holding (cl 2(a));

-                     each unit entitles the holder equally with the holders of all other units to the beneficial interest in the trust fund as an entirety, but does not entitle the Unit-holders to any particular security or investment comprised in the trust fund or any part thereof.  Except as provided in cl 10 (this appears to be an error, as cl 10 relates to a different subject matter – a reference to cl 12 was probably intended) no Unit-holder is entitled to the transfer to him of any property comprised in the trust fund (cl 2(c));

-                     the trust continues until the vesting day (cl 12(a)).  The “vesting day” is defined as various dates in the distant future, or such earlier date as the trustee may appoint in writing with the consent of the Unit-holders;

-                     as soon as practicable after the vesting date the trustee is to convert the property constituting the trust fund into money, and to divide the proceeds of such conversion amongst the Unit-holders, provided that the trustee may in its discretion, at the request of any Unit-holder, transfer to such Unit-holder any asset of the trust fund on account of the Unit-holders entitlement on the termination of the trust (cl 12(a));

-                     the trustee may, with the consent of the Unit-holders, vary the terms of the trust by supplemental deed subject to qualifications and provisos which have no present relevance (cl 15); and

-                     the trustee has the powers set forth in its memorandum and articles of association subject to the alterations contained in the third schedule (cl 13).

The copy of the deed included in the appeal papers does not contain a third schedule.

50                  AFE as the sole shareholder in Everdene Pty Ltd and the holder of all the units in the trust may have been in a position to require the trustee to accelerate the “vesting day” to a date prior to the date of institution of the proceedings, but there is no evidence that it had taken any steps to do so.

51                  Financial statements were prepared for the Maria Luisa Unit Trust for the year ended 30 June 2001.  Those statements record that the trust had total assets of $11,784,332, total current liabilities of $2,771,543 with net assets of $9,012,789.  The liability is described as a borrowing from AFE.

The decision of the primary judge

52                  The greater part of the primary judge’s decision was devoted to the second and third contentions referred to above which were not pursued on the hearing of this appeal.  The primary judge’s reasons for decision in relation to the first of these contentions were confined to the following:

“38.     AFE’s rights under the trust deed constituting the trust do not confer upon it equitable ownership in the Trust’s individual assets (see e.g. Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 313-314; MSP Nominees Pty Ltd v Commissioner of Stamps (SA) (1999) 198 CLR 494 at 509).”

The submissions on appeal

53                  In the appellant’s submission     the “remedial provision” in s 19 should be construed expansively.  On 24 April 2001:

                    AFE was the holder of all the units comprising the Maria Luisa Unit Trust;

                    AFE had a proprietary interest in all the trust property;

                    AFE held all the shares in Everdene;

                    AFE had power to cause Everdene to specify the vesting day;

                    Everdene engaged in no activity and held no assets other than as trustee of the fund;

                    Everdene, while the owner of the “Maria Luisa” at law, was not her beneficial owner (or, put another way, her owner in equity); and

                    there was no person other than AFE who had or could have had the equitable title to the vessel on that day,

hence AFE was the beneficial owner or the owner in equity of the ship.  Counsel for the appellant, Mr Grieve QC, submitted in his oral argument that it cannot be doubted, for so long as the trust subsists as such, that the sole Unit-holder continues to be the sole owner in equity of the totality of the trust fund.  Clause 2(c) of the trust deed is irrelevant either because the ship is not an investment or a security, or because cl 2(c) only applies if there is more than one Unit-holder.  In such a case “the Unit-holders do not obtain severally any discrete interest in any specific asset that may form part of the Trust Fund”.

54                  In the respondent’s submission, the terms of the trust deed are such that AFE’s interest as a Unit-holder in the trust was in the trust fund as an entirety, subject to the obligations that have to be met from the fund, and to the discretion vested in the trustee.  As such, it is not an interest in the particular assets of the trust, including the “Maria Luisa” (MSP Nominees Pty Ltd v Commissioner of Stamps (SA) (1999) 198 CLR 494 at 509 par [34] (“MSP Nominees”) and by analogy Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12, Official Receiver in Bankruptcy v Schultz & Anor (1990) 170 CLR 306 at 313-314).  Clause 2 of the trust deed is submitted to be to the same effect as cl 4 of the deed that was the subject of the decision in MSP Nominees (see p 500 par [3]) which was found at par [34] to deny any specific interest in any item of property held in the trust fund.  The submission accords with the primary judge’s finding that AFE’s rights under the trust deed do not confer upon it equitable ownership in the individual assets of the trust.

55                  This submission was elaborated upon in the course of argument.  It was submitted that even if AFE had a beneficial interest in the ship, it was not the beneficial owner of it as the terms of the trust deed denied to AFE any entitlement to call for the ship except in the circumstances referred to in cl 12(a).  Further, in response to a question from a member of the bench as to whether AFE was entitled to terminate the trust at the relevant date, Counsel for the respondent, Mr Nell, submitted that there was no such entitlement because the trustee may have a beneficial interest in the trust property by reason of its entitlement to be indemnified from the trust property for expenses incurred.  If the trustee has an equitable interest in the trust property, then the sole Unit-holder is not the beneficial owner of that property.

56                  In response, Mr Grieve QC submitted that the issue of whether the trustee had a beneficial interest in the vessel had not been argued at first instance, hence the respondent is precluded from raising the issue on appeal: Coulton v Holcombe (1986) 162 CLR 1.

Consideration

57                  Clause 2(c) operates in accordance with its terms.  The ship is an “investment” comprised in the Trust Fund.  The meaning or operation of cl 2(c) does not vary depending on whether there is only one Unit-holder, or more than one Unit-holder.

58                  There is a body of authority which establishes in the case of unit trusts whose trust deeds contain provisions broadly corresponding with the relevant provisions in the present trust deed referred to above, that a Unit-holder has an equitable proprietary interest in all of the property the subject of the trust, and in each of the assets which comprise the entirety of the trust fund.  Provisions such as cl 2(c) of the present trust deed are not construed as denying that a Unit-holder has a beneficial interest in each asset of the trust.  Rather, such clauses recognise that no Unit-holder can claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed: see Costa and Duppe Properties Pty Ltd v Duppe [1986] VR 90; Suncorp Insurance & Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285; Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 45 NSWLR 639; Karingal 2 Holdings Pty Ltd v Commissioner of State Revenue [2002] VSC 431; Ford & Lee Principles of the Law of Trusts [1800].

59                  In Karingal (supra), it was submitted that the decision of the High Court in MSP Nominees was inconsistent with these decisions and should be taken as having overruled them, even though none of the decisions are referred to in the judgment of the High Court.  Nettle J rejected this submission.  In his Honour’s view, the decision in MSP Nominees simply reflects the distinction between a unit trust, which of its nature has been held to confer on a Unit-holder an interest in the trust fund, and a discretionary trust strictly so called, which of its nature has been held to confer on objects no more than a right of due administration.  We agree.  We note that Goldberg J followed Karingal in Lock v Commissioner of Taxation [2003] FCA 309.  It should be noted that Karingal, as Nettle J emphasised, was concerned with a definition of “owner” as every person entitled to any land for any estate of freehold in possession.

60                  In Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd & Anor (1994) 94 ATC 4774 Kennedy J pointed out that it can be a little misleading simply to accept that for all purposes the Unit-holders in a particular trust have a proprietary interest in each of the assets comprised in the trust.  In that context his Honour recalled the passage in the judgment of Fullagar J in Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 at 438.  That case raised a question as to the interest of a Mrs Coulson as one of the residuary beneficiaries in the residue of a deceased estate which had not been fully administered.  Fullagar J said:

“Probably no one would deny that Mrs. Coulson here had an ‘equitable interest’ in the entire mass of the testator’s estate, and some may think it follows that she had an equitable interest in every part of that mass.  We may call it a proprietary interest, if we wish, or equity may call it ‘property’ (Smith v Layh (1953) 90 CLR 102; at pp. 108, 109), but whether it should have this dignity conferred upon it seems to me to be little more than a matter of ‘words and names’, capable to leading to the kind of strife which moved Gallio to say that he ‘cared for none of these things’.  To say that Mrs. Coulson had an equitable interest in the estate is to say something that requires explanation and analysis …”

See also, on the appeal to the Privy Council, Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 22-23.  Hence it may be unsafe to proceed from the premise that because each Unit-holder has an equitable interest in each asset of the Fund to a conclusion that the sole Unit-holder must be the equitable owner of each asset.  It all depends upon the terms of the trust.  The ultimate question is whether AFE was the owner of the “Maria Luisa” at the relevant date.  That is not the same question as whether AFE had an equitable interest in the ship as at that date, although there may be some inter-relationship between the two questions: see Karingal.  Section 19(b) of the Act has as its focus ownership of the ship, rather than ownership of some interest in the ship: cf Lawson & Rudden, The Law of Property 2nd ed. 1982, at 116.

61                  The word “owner” cannot be given any general description.  But ordinarily the incidents of ownership of a chattel include the right to make physical use of the chattel, the right to the income from it, the power of management, and the right of alienation: Lawson & Rudden (supra) at p 8.  In the “Iron Shortland” (at 544) Sheppard J quoted from the decision of the Singapore Court of Appeal in The “Ohm Mariana” The ex “Peony”; Pacific Navigation Co Pty Ltd v Owners “Ohm Mariana” ex “Peony” [1993] 2 SLR 698 that the term “owner” means any person who is vested with such ownership as to have the right to sell, dispose of or alienate the ship, and that a beneficial owner of the ship comes within that term.  See also to similar effect “The Permina 3001” [1979] 2 Lloyd’s Rep 327, 329.

62                  The notion of “ownership” carries a connotation of dominance, ultimate control and of ultimate title against the whole world: cf O W Holmes The Common Law 1882 at 242-246; Blackstone’s Commentaries, 18th ed. 1829, Vol 2, at 389; and Holdsworth, A History of English Law, 1925 vol VII at 449.

63                  In Jeffries v Great Western Railway Co (1856)5 E.& B. 802, at 805, Lord Campbell CJ said:

“I am of opinion that the law is that a person possessed of goods as his property has a good title as against every stranger, and that one who takes them from him, having no title in himself, is a wrongdoer, and cannot defend himself by shewing that there was title in some third person; for against a wrongdoer possession is a title.”

64                  That approach was applied by the Court of Appeal in “The Winkfield” [1902] P 42 at 55 by Collins MR.  These statements accord with the primary definition of “owner” in The Oxford English Dictionary as:

“(a) … One who owns or holds something as his own; a proprietor; one who has the rightful claim or title to a thing (although he may not be in possession) …”

65                  A helpful description of “ownership” is formulated by Jordan CJ in Gatward v Alley (1940) 40 SR (NSW) 174 at 178, where his Honour said in relation to a question as to ownership of a car:

“A good title to property, in the sense of such ownership as the law allows, consists in having the legal right to exercise with respect to it all such rights, as against all such persons, as by law are capable of being exercised with respect to property of the class in question.  A person who has possession of property but not ownership has, as a general rule, the same legal rights as the owner, save to the extent to which those rights are qualified as against the owner …”

66                  Ownership, whether legal or equitable, therefore involves something greater than beneficial interest.  Equitable ownership of property is commensurate with the right to relief in a Court of Equity: The Trustees Executors & Agency Co Ltd v The Acting Federal Commissioner of Taxation (1917) 23 CLR 576 at 583; Meagher, Heydon and Leeming, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies 4th ed. 2002 at [4-120].  If a person has contractual rights in relation to a ship which, if performed will result in the person becoming the owner of the ship, then the person will be regarded as the equitable owner of the ship provided that specific performance of the contract would be decreed: KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288, 296-297.  Thus entitlement to a vesting order or equivalent relief would be necessary before AFE could be regarded as the equitable owner of the ship as at the relevant date: Stern v McArthur (1988) 165 CLR 489, 523-524; Chan v Cresdon Pty Ltd (1989) 168 CLR 242, 252-253.  But that does not mean that AFE does not have an interest in the trust property, including the ship, which equity would protect regardless of whether AFE could be called the equitable owner.

67                  Although clauses 2(a) and (c) of the Trust Deed are summarised above, it is convenient to set out their terms:

“2(a)   The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be held by the Unit-holders for the time being in proportion to the units registered in their respective names and all units shall at any given time be of equal value.

(c)        Each unit shall entitle the registered holder thereof equally with the registered holders of all other units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle the Unit-holders to any particular security or investment comprised in the Trust Fund or any part thereof and (save as provided in Clause 10 hereof) no Unit-holder shall be entitled to the transfer to him of any property comprised in the Trust Fund.” (emphasis added)


68                  The effect of cl 2(c) is that neither “the Unit-holders”, nor any individual Unit-holder is entitled to any property comprised in the Trust Fund prior to the vesting day, and then only in the circumstances referred to in cl 12(a).  As cl 2(c) of the Trust deed negatives any entitlement in AFE to ownership of the ship as at the relevant date, AFE cannot be considered as the equitable owner of the ship as at that date.  Thus, even if it be right to say that AFE had an equitable interest in the ship on the relevant day it was not the equitable owner of the ship because the terms of the trust deed precluded recognition of AFE as equitable owner.

69                  On the hearing of the appeal, Mr Grieve QC did not contend that the trust had been extinguished as at the relevant date in accordance with the rule in Saunders v Vautier [1841] Cr & Ph 240, at 247-249.  The primary judge did not make any factual findings to that effect, and there is nothing in the appeal papers which suggests that if AFE was entitled to extinguish the trust or call for transfer of the legal title to it that it had attempted to do so: cf (in a different context) Trustees of Estate Mortgage Fighting Fund Trust v Federal Commissioner of Taxation [2000] 175 ALR 482, 498-499.  Whether AFE was entitled to extinguish the trust at the relevant date may depend upon whether the trustee had a beneficial interest in the trust property in aid of any rights of indemnity or exoneration which the trustee may have had in connection with the borrowing from AFE, and any rights of subrogation which AFE possessed in that respect: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360, 369; Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226, 246-247; Collie v Merlaw Nominees Pty Ltd (in liq) (2001) 37 ACSR 361.  These questions do not appear to have been raised at the trial.  It was for the appellant, as the party asserting jurisdiction, to establish that AFE, and only AFE, had a beneficial interest in the ship.

70                  Under the terms of the Trust Deed, AFE as sole shareholder in Everdene had the power as at the relevant date to cause Everdene to terminate the trust, and to cause the assets of the trust, including the ship, to be transferred to it.  If AFE wished to exercise that power, it could have convened a general meeting of Everdene and passed the necessary resolutions.  Alternatively, AFE could have procured the same result by utilising the procedures referred to in s 249B of the Corporations Law 2000 (Cth).  AFE’s power in that respect was subject to the qualification that if Everdene had a beneficial interest in the ship at the relevant date, that interest would take priority over any entitlement of AFE, unless AFE was in a position to procure the release of Everdene’s interest.

71                  On the relevant date, AFE had a contingent defeasible interest in the specific assets of the trust, including the ship.  The interest was contingent on AFE being a beneficiary of the trust as at the vesting date, and was defeasible in relation to particular assets of the trust if they were disposed of by the trustee in the course of administration of the trust prior to the vesting day.  However, from a practical and commercial point of view, AFE was in a position to take steps, which if taken prior to the relevant date, would have resulted in AFE becoming the owner of the ship at the relevant date, subject to the qualification referred to above. But the steps necessary to achieve that result were never taken.  The issue, then, is whether AFE was the owner of the ship at the relevant date, because it had the ability to become the owner of the ship by taking particular steps which lay within its power to take, although those steps were never taken.

72                  A sole shareholder in a company has the ability to become the owner of the company’s assets (subject to the position of creditors) by liquidating the company, and distributing its assets in specie.  But the company’s property has never been regarded as the property of its members, or even of its sole member, by reason only of the existence of the practical power which the member has in that respect.  AFE had the practical ability to collapse the trust as at the relevant date, and had it done so, AFE and not Everdene would have been the owner of the ship at the relevant date (subject to the qualification previously referred to).  But “owner” in s 19(b) of the Act is concerned with title to, or proprietorship of the ship at a particular point in time.  Such capabilities as AFE had in relation to the ship at the relevant date lack the directness and immediacy necessary to confer on AFE title to or ownership of the ship as at that date.  The existence of a power in AFE to cause Everdene to terminate the trust does not have any impact prior to the exercise of the power upon Everdene’s ownership of the ship.  It simply means that ownership existing at a point in time could be displaced thereafter by unilateral action.

73                  Once it is accepted that the trust deed is not a sham and that if AFE is to be held to be the owner of the ship it can only acquire that status by virtue of the provisions of the trust deed then the question whether AFE was the owner of the ship at the relevant date depends on the proper construction of the Act, and the legal effect of the deed.  In this case it does not depend upon any inference which might be drawn from surrounding circumstances as to “indicia” of ownership: cf “The Iron Shortland” at 554.  The proposition that it could be inferred from surrounding circumstances that AFE was the owner of the ship was a submission on which the appellant relied at first instance but which was rejected by the primary judge and no appeal is taken from that part of his Honour’s decision.

74                  The circumstance that AFE may be said in general terms to enjoy “a bundle of rights” which may enable it by a series of discrete actions to obtain ultimately possession of the ship, control its activities, and entitle it to alienate the ship, does not equate to present ownership at a particular point in time. Rather, it indicates the potential to become the owner.  The bundling of a series of discrete entitlements which if exercised could lead to ownership does not satisfy the requirement of s 19.

The alternative case

75                  The respondent put an alternative case which only arises if it is found that AFE was the owner of the “Maria Luisa” for the purposes of s 19(b) of the Act.  Shortly stated, that case is that the appellant’s complaints are not within s 4(3)(c) of the Act, as they do not relate to the apparel as equipment of the ship.  It is also submitted that they are not complaints within s 4(3)(d) as they do not relate to the navigation of the ship or to its operation or management.

76                  The primary judge did not make any findings in relation to this alternative case, and in view of his Honour’s finding in relation to ownership it was not necessary for him to do so.  As the appeal from his Honour’s decision dismissing the proceedings fails on the issue of ownership, it is not necessary to deal with the alternative case.

Conclusion

77                  The appeal is dismissed with costs.


I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Tamberlin and Hely.


Associate:


Dated:              16 May 2003


Counsel for the Appellant:

Mr D Grieve QC with Mr S Benson



Solicitor for the Appellant:

Conway Leather Shaw



Counsel for the Respondent:

Mr G Nell with Ms F Rogers



Solicitor for the Respondent:

Ian Maitland & Associates



Date of Hearing:

17 February 2003



Date of Judgment:

16 May 2003