CATCHWORDS
ADMIRALTY - Action for declaration that plaintiff entitled to a ten per cent interest in ship or to ten per cent of proceeds of sale - bank guarantee provided as security to prevent arrest - recovery sought against bank guarantee as representing the res.
PRACTICE AND PROCEDURE - Application pursuant to O 32 r 2(d) of the Federal Court Rules.
Federal Court Rules O 32 r 2(d)
The "Gay Tucan" [1968] 2 Lloyd's Rep 245 - Discd.
YELLOW WOOD HOLDINGS PTY LTD v THE OWNERS OF THE SHIP MV "CAPE DON"
No QG 89 of 1995
Cooper J
Brisbane
25 June 1996
IN THE FEDERAL COURT OF AUSTRALIA
IN ADMIRALTY
No. QG 89 of 1995
BETWEEN:
YELLOW WOOD HOLDINGS PTY LTD
ACN 009 155 015
Plaintiff
AND:
THE OWNERS OF THE SHIP MV "CAPE DON"
Defendant
JUDGE MAKING ORDER: Cooper J
WHERE MADE: Brisbane
DATE OF ORDER: 25 June 1996
MINUTES OF ORDER
THE COURT DECLARES THAT:
1. Pursuant to an agreement dated 2 September 1993 between Burnside Services Pty Ltd and Martaban Limited, Burnside Services Pty Ltd validly exercised an option to acquire a ten per cent interest in the ship MV "Cape Don" from Martaban Limited.
2. Burnside Services Pty Ltd by the exercise of the option on 5 July 1994 acquired a ten per cent interest in the said ship.
3. Yellow Wood Holdings Pty Ltd acquired the ten per cent interest of Burnside Services Pty Ltd in the said ship on 8 November 1994.
4. The value of a ten per cent interest in the said ship as at 20 June 1995 was $50,000.
THE COURT ORDERS THAT:
1. Judgment be entered for the plaintiff in the sum of $50,000 and that the plaintiff recover against Martaban Limited the sum of $50,000.
2. Martaban Limited and
Transworld Investments Pty Ltd (in liquidation) pay
the plaintiff's costs of and incidental to these proceedings, including
reserved costs, to be taxed if not agreed.
3. Upon the expiration of the appeal period, Mr Grant McKenzie be released from his undertaking by way of security for costs of the within action, such undertaking provided pursuant to the order of the Court on 24 August 1995.
4. The plaintiff recover against the Australia and New Zealand Banking Group Limited as guarantor under the bank guarantee dated 23 June 1995 an amount up to but not exceeding the sum of $70,000 being in total the sum of $50,000 referred to in Order 1 above and the taxed or agreed costs referred to in Order 2 above.
5. Pursuant to Order 27 rule 4A, the plaintiff pay Brian Morris' expenses of attending on the trial, in compliance with the subpoena issued by the court on the application of the plaintiff for his attendance, in the sum of $1,750.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
IN ADMIRALTY
No. QG 89 of 1995
BETWEEN:
YELLOW WOOD HOLDINGS PTY LTD
ACN 009 155 015
Plaintiff
AND:
THE OWNERS OF THE SHIP MV "CAPE DON"
Defendant
CORAM: Cooper J
PLACE: Brisbane
DATE: 25 June 1996
REASONS FOR JUDGMENT
This was an action in rem commenced by writ of summons filed in this court on 20 June 1995. The claims originally made were for a declaration that the plaintiff was entitled to ownership of a 6.4/64th share of the ship MV "Cape Don" and an order restraining a company, Martaban Limited ("Martaban"), from transferring, mortgaging or otherwise dealing with its interest in the ship. The writ was amended on 22 June 1995. Additional claims were made for declarations that an option to acquire a ten per cent interest in the ship had been validly exercised and that the plaintiff was entitled to a ten per cent interest in the ship, or to ten per cent of the proceeds of the sale of the ship. The plaintiff also sought an account of the proceeds derived from the operation of the ship from the time of the exercise of the option. A warrant for the arrest of the ship issued but was never executed as an unconditional bank guarantee was provided in order to avoid the arrest of the ship.
When the matter first came before the court on the evening of 21 June 1995 there was an appearance made by Mr Couper QC on behalf of Transworld Investments Pty Ltd ("Transworld"), a company in respect of which a Mr R C G Marks had some association. Later in the proceedings before me on 21 June 1995, Mr Couper QC stated that he appeared on behalf of both Western Travel Services Limited and Transworld; the former company claiming an interest as purchaser of the ship and the latter claiming an interest as mortgagee of the ship. Undertakings were given to the court on that occasion by Mr Marks on behalf of the companies not to deal with the ship in any way or to remove it from the jurisdiction until further order so that discussions could take place to enable appropriate security to be put in place in lieu of the ship.
On 22 June 1995, by consent, the following orders were made:
"(1) On or before 5 pm on 23 June 1995 Transworld Investments Pty Ltd lodge with the Registrar of the Federal Court of Australia an unconditional and irrevocable bank guarantee in a form satisfactory to the Registrar in favour of the plaintiff in the sum of $70,000, such guarantee securing payment of the said sum as may be ordered by the Federal Court of Australia or as may be agreed between the plaintiff and Transworld Investments Pty Ltd."
and
(4) Upon notification by the solicitor for Transworld Investments Pty Ltd to the solicitors for the plaintiff that the said bank guarantee has been lodged and accepted by the Registrar the Arrest Warrant in respect of the ship MV Cape Don is discharged."
On
23 June 1995 a guarantee was provided and lodged with the court, being an
unconditional bank guarantee drawn on the ANZ Banking Group Limited, securing
payment of the sum of $70,000 as may be ordered by the Federal Court of
Australia in action QG 89 of 1995 or as may be agreed between Yellow Wood
Holdings
Pty Ltd and Transworld.
On 24 July 1995 a notice of appearance was filed by Transworld in the proceedings, but it did not claim any identifiable interest in the ship. On 21 November 1995 an amended appearance was filed which specified the relationship between Transworld and the ship as being an interest in the title of the ship. On 1 April 1996 a further amended appearance was filed which provided as follows in paragraph 2:
"My relationship with the ship against which this proceeding has been commenced is as follows:
an interest in the title of the ship
an interest as a bona fide purchaser for value without notice under a contract dated May 1995."
On 8 March 1996 Martaban entered a conditional appearance which did not specify any particular interest claimed in the ship. Subsequently on that day, Martaban filed a further notice of appearance which was unconditional and specified the interest claimed by Martaban as being the owner of the ship MV "Cape Don".
The bank guarantee of the ANZ Banking Group Limited specifies the clients of the bank which procured the issue of the guarantee as John and Lorraine McQuade. On 26 March 1996 the McQuades sought to have the bank guarantee provided by them discharged. The application was refused on 26 March 1996 on the ground that the ship had not been arrested in reliance upon the provision of the guarantee and that the bank guarantee stood in place of the res.
On 14 June 1996 Drummond J gave the plaintiff leave to proceed against Transworld which had by then been placed in liquidation.
When the matter was called today Mr Woodhead, solicitor, appeared out of courtesy on behalf of Transworld (in liquidation) to advise the court that the liquidator did not wish to participate in these proceedings or take up the litigation on behalf of the company in liquidation. Consequently, Transworld (in liquidation) did not appear to contest the proceedings.
Mr Woodhead next sought to appear and make submissions on behalf of John and Lorraine McQuade, not as a party to the proceedings but as the persons providing the bank guarantee. That application was refused on the basis that any relief sought in relation to the guarantee, either against the bank or against the plaintiff, if the plaintiff obtained an order for payment, was a matter to be taken up by the McQuades on the basis of demonstrating some right or equity to prevent payment out under the guarantee. Otherwise, they had no interest in these proceedings sufficient to entitle them to appear or make any submissions as to the final relief available to the plaintiff against those parties who have appeared or against the res in the form of the bank guarantee.
Martaban did appear by its counsel Mr Webb when the matter was called on for trial.
Before
proceeding to call evidence the plaintiff made application for judgment against
Transworld (in liquidation) or against the guarantee. The application
was made on the basis that Transworld (in liquidation) was an absent party when
the proceeding was called and that the plaintiff was entitled therefore to
proceed to judgment against it under O 32 r (2)(d) of the Federal Court Rules. In the end result, it became unnecessary for
me to rule on the application. However,
I should say that the proceedings are proceedings in rem against the ship, the owners and all those interested in
it. Merely because one party who claims
an interest in the ship does not appear on the trial in my view does not
entitle the plaintiff then to enter judgment in default of appearance against
that party and seek to enforce it against the res or security in lieu when other parties claiming an interest in
the ship do appear when called upon at trial in order to defend that interest
and to deny the plaintiff's right to recourse to the res on the security.
It became unnecessary to rule finally on the matter because Mr Webb on behalf of his client sought leave to withdraw from the proceedings on trial. Leave was not opposed and was granted. Once Martaban withdrew there was no person appearing on the trial of the action interested in resisting the relief sought by the plaintiff. The question then arose as to what relief, if any, the plaintiff was entitled to on the material before the court.
Without
going into great detail, I am satisfied that the agreement entered into between
Burnside Services Pty Ltd ("Burnside") and Martaban on 2 September
1993 in respect of the sale of the ship from Burnside to Martaban, and the
granting of an option to Burnside to acquire a ten per cent interest in the
ship, was one properly made between those parties. In terms, the agreement was one where, upon
the exercise of the option, Burnside would acquire a ten per cent interest in
the ship. I am further satisfied that
the
option was duly exercised by Burnside on 5 July 1994 and that the interest held
by Burnside in the ship was assigned to the plaintiff on 8 November 1994.
The plaintiff was entitled as at the date of the institution of the suit to be registered as a ten per cent owner of the ship or to have assigned to it upon sale of the ship an interest equal to ten per cent of the net proceeds on sale.
The question as to whether and in what circumstances security can stand for a ship where what is sought is a claim to possession of the ship and a declaration of an interest in it is not an easy one. This is because the value of the interest may change from time to time during the proceedings and the principal relief is not to enforce a claim for a money sum against the res. Rather, the claim is to secure possession of or a declaration of an interest in the ship. The practice where an interest is claimed in a ship and that interest is sought to be enforced by an action in rem, in respect of the granting of bail to enable the ship to be released and to trade, appears not to be fixed or settled. (See The "Gay Tucan" [1968] 2 Lloyd's Rep 245).
In
The
"Gay Tucan", Cairns J was prepared to allow the ship to be
released with the posting of bail. The
bail was to be provided in an amount equal to the value of the ship at that
time. The value of the ship was to be
ascertained by proper valuation. As I
read the judgment, the consequence of the bail being provided to the extent of
the value of the interest claimed in an ownership case is that at the end of
the day, if the title is established, the plaintiff at its option is entitled
to a money judgment
equal to the value of the interest proved upon trial. The ship having been released the risk of
loss, damage or deterioration of the ship is borne by those interests which
provided the bail in lieu of the ship.
Such a conclusion is consistent with the law with respect to the
provision of security in lieu of the ship and the rights of a plaintiff
thereafter being exercised and exercisable against the security of the ship.
It becomes important in the present case to understand that, as between the parties, consideration was given to the issue of the value of a ten percent share in the ship at the time when the provision of the guarantee in lieu of the ship to avoid arrest was agreed. The transcript of the proceedings on 21 June 1995 discloses the concession on behalf of Transworld that the ten percent share in the ship then had a value of about $40,000. Further, in an affidavit of Richard Stacy Anthon filed in these proceedings, Mr Anthon deposes that the sum of $70,000 as security under the guarantee was calculated as between the parties on the basis of a ten percent interest being worth, at that time, $50,000. The likely cost of the proceedings was agreed as $20,000.
The material also discloses that the sale price agreed to be paid by Transworld to Martaban for the ship in May 1995 was $500,000. However this sale did not proceed. There is material which indicates that there have been attempts, particularly in the latter part of 1995 and the early part of 1996 to sell the ship for prices ranging from $250,000 to over $500,000. The offers at the lower end of the range do not appear to represent market value and were to be supplemented by other considerations not stated in the contracts of sale: they are a totally unreliable indication of value.
Evidence was also given by Mr G McKenzie as to the value of the ship. Mr McKenzie is a Master Mariner and a ship broker. He also has an interest in a favourable outcome of the proceedings for the plaintiff. Mr McKenzie was last on board the ship in 1992. He valued it at that time at $500,000. Although he did not see the ship in 1995 he expressed the opinion that the ship, provided it was maintained, should have retained a value of not less than $500,000.
Although the evidence as to value is less than satisfactory, I am satisfied that to order now an appraisement by an independent valuer to establish a value as at June 1995 would at the end of the day cost more than it is worth to do so. This is because the parties at the time of fixing security were prepared to accept a figure of $50,000, Transworld conceded a value of $40,000 and such other supporting evidence as is available supports a value of around $50,000 for a ten percent interest. I am satisfied that, on balance, a value of approximately $50,000 is not inappropriate in all of the circumstances.
The plaintiff does not seek to recover in these proceedings anything beyond declarations going to its interest in the ship and an order that it be paid the sum of $50,000, as the value of that interest, together with the costs of the proceedings. Specifically, the plaintiff does not seek an account in respect of the operation of the ship since the exercise of the option, nor interest on the sum of $50,000.
The court is satisfied that on the material presently before the court the plaintiff is entitled to the following declarations and orders :-
THE COURT DECLARES THAT:
1. Pursuant to an agreement dated 2 September 1993 between Burnside Services Pty Ltd and Martaban Limited, Burnside Services Pty Ltd validly exercised an option to acquire a ten per cent interest in the ship MV "Cape Don" from Martaban Limited.
2. Burnside Services Pty Ltd by the exercise of the option on 5 July 1994 acquired a ten per cent interest in the said ship.
3. Yellow Wood Holdings Pty Ltd acquired the ten per cent interest of Burnside Services Pty Ltd in the said ship on 8 November 1994.
4. The value of a ten per cent interest in the said ship as at 20 June 1995 was $50,000.
THE COURT ORDERS THAT:
1. Judgment be entered for the plaintiff in the sum of $50,000 and that the plaintiff recover against Martaban Limited the sum of $50,000.
2. Martaban Limited and Transworld Investments Pty Ltd (in liquidation) pay the plaintiff's costs of and incidental to these proceedings, including reserved costs, to be taxed if not agreed.
3. Upon the expiration of the appeal period, Mr Grant McKenzie be released from his undertaking by way of security for costs of the within action, such undertaking provided pursuant to the order of the Court on 24 August 1995.
4. The plaintiff recover against
the Australia and New Zealand Banking Group Limited as guarantor under the bank
guarantee dated 23 June 1995 an
amount up to but not exceeding the sum of $70,000 being in total the sum of
$50,000 referred to in Order 1 above and the taxed or agreed costs referred to
in Order 2 above.
5. Pursuant to Order 27 rule 4A, the plaintiff pay Brian Morris' expenses of attending on the trial, in compliance with the subpoena issued by the court on the application of the plaintiff for his attendance, in the sum of $1,750.
I certify that this and the preceding nine (9) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.
Date: 25 June 1996
Associate
Counsel for the Plaintiff: A Philippides
Solicitors for the Plaintiff: Hemming and Hart
Counsel for the Martaban Limited: J Webb
Solicitors for the Martaban Limited: Hopgood & Ganim
Solicitor for Transworld Investments
Pty Ltd (in liquidation): G P S Spencer Woodhead
Date of Hearing: 26 June 1996
Place of Hearing: Brisbane
Date of Judgment: 26 June 1996
