CATCHWORDS
ADMIRALTY - application for release of vessel from arrest - whether Black Sea Shipping Co (“BLASCO”) beneficial owner of vessel - “hand-over” of vessel by Ukrainian government to Ukrainian Shipping Co - whether ownership transferred - vessel lawfully transferred - BLASCO no longer beneficial owner of vessel - whether adverse inferences should be drawn - no appearance by Ukrainian Shipping Co - no evidence of consideration for transfer - no documents evidencing transfer - relevant considerations - not persuasive given countervailing documentary evidence - whether transfer voidable - whether transfer for the purpose of defeating creditors of BLASCO - evidence fails to establish that purpose of Ukrainian government false or colourable - whether failure to make full and frank disclosure on application for arrest sufficient grounds for release - reliance on out-dated information - evidence fails to establish non-disclosure by plaintiff - importance of thorough and careful investigation prior to arrest proceedings
PRIVATE INTERNATIONAL LAW - proof of foreign law - presumption that foreign law the same as the law of the forum unless proven otherwise - whether transfer of vessel avoided by Conveyancing Act 1919 (NSW) - evidence of Ukrainian law - transfer lawful under Ukrainian law - act of State doctrine - whether transfer of vessel an act of State - consideration of nature and intention of act - transfer an act of State - transfer non-justiciable
Admiralty Act 1988 (Cth) ss 3(1), 19
Conveyancing Act 1919 (NSW) s 37A
The Owners of the Ship Shin Kobe Maru v Empire Shipping Company Inc (1994) 181 CLR 404, cited
The Aventicum [1978] 1 Lloyd’s Rep 184, cited
The Saudi Prince [1982] 2 Lloyd’s Rep 255, cited
Malaysia Shipyard and Engineering SDN BHD v Iron Shortland (1995) 59 FCR 535, cited
Dalgety & Co Ltd v Aitchison; “The Rose Pearl” (1957) 2 FLR 219, cited
Electrical Enterprises Retail Pty Limited v Rodgers (1988) 15 NSWLR 473, cited
BP Exploration Co (Libya) Ltd v Hunt [1980] 1 NSWLR 496, cited
Oesterreichische Laenderbank v S’Elite Ltd [1981] QB 565, cited
Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30, cited
Underhill v Hernandez 91987) 168 US 250, applied
Potter v Broken Hill Proprietary Co (1906) 3 CLR 479, cited
Briginshaw v Briginshaw (1938) 60 CLR 336, applied
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, cited
Nominal Defendant v Owens (1978) 22 ALR 128, cited
The Vasso [1984] 1 Lloyd’s Rep 235, cited
The Kherson [1992] 2 Lloyd’s Rep 261, cited
The Varno [1993] 2 Lloyd’s Rep 253, cited
The Nordglimt [1988] QB 183, cited
Byrne and Heydon, Cross on Evidence, 1991 4th Aust. edn.
Nygh, Conflict of Laws in Australia, 1995 6th edn.
Dicey and Morris, The Conflict of Laws, 1993 12th edn.
Shearer, Starke’s International Law, 1994 11th edn.
LLOYD WERFT BREMERHAVEN GmbH - v -
THE OWNERS OF THE SHIP "ZOYA KOSMODEMYANSKAYA" AS SURROGATE FOR THE SHIPS "TARAS SHEVCHENKO", "DELPHIN" (PREVIOUSLY "KAZAKHSTAN II" PREVIOUSLY "BYELORUSSIYA") AND "KAZAKHSTAN"
No NG 311 0f 1997
Tamberlin J
Sydney
15 May 1997
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 311 of 1997 GENERAL DIVISION )
IN ADMIRALTY )
BETWEEN: LLOYD WERFT BREMERHAVEN
GmbH
Plaintiff
AND: THE OWNERS OF THE SHIP "ZOYA KOSMODEMYANSKAYA"
AS SURROGATE FOR THE SHIPS
"TARAS SHEVCHENKO",
"DELPHIN" (PREVIOUSLY
"KAZAKHSTAN II" PREVIOUSLY
"BYELORUSSIYA") AND
"KAZAKHSTAN"
Defendant
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 15 MAY 1997
REASONS FOR JUDGMENT
TAMBERLIN J:
The primary question in this matter is whether as at 24 April 1997 the defendant Black Sea Shipping Co ("BLASCO") of Odessa in the Ukraine was the beneficial owner of the vessel "Zoya Kosmodemyanskaya" ("the Zoya").
The vessel was arrested by the Court on 24 April 1997 at the instance of the plaintiff. She is the sister-ship to the other three vessels nominated in the title to this proceeding.
The importance of the question is that it goes to the jurisdiction of the Court to arrest. That jurisdiction, in this case, arises under s 19 of the Admiralty Act (1989) (Cth) ("the Act") which 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."
(Emphasis added)
The expression "relevant person" is defined in s 3(1) of the Act to being in relation to a maritime claim to mean:
"... a person who would be liable on the claim in a proceeding commenced as an action in personam; "
The writ pursuant to which the arrest of the vessel was made sought the following orders:
1. Arrest of the ship "Zoya Kosmodemyanskaya".
2. Judgment in the sum of DM18,673,177.00.
3. Security for the claim in the sum of A$16,798,474.99
4. Damages for breach of contract.
5. Interest pursuant to Section 51A of the Federal Court Act 1976.
6. Costs.
The particulars of claim assert that:
1. The Plaintiff, pursuant to an agreement dated 12 December 1991 between itself and the Owners (Black Sea Shipping Co of 1 Lanzheronovskaya str Odessa 270026 Ukraine ("Blasco")) of the vessels "Zoya Kosmodemyanskaya", "Delphin" (previously "Kazakhstan II", previously "Byelorussiya"), "Kazakhstan" and "Taras Shevchenko", performed work and provided services for the alteration, repair or equipping of the vessel "Taras Shevchenko".
2. The Plaintiff, pursuant to an agreement dated 6 February 1993 between itself and Blasco, performed work and provided services for the alteration, repair or equipping of the vessel "Delphin" (previously "Kazakhstan II", previously "Byelorussiya").
3. The Plaintiff, pursuant to an agreement dated 25 September 1992 between itself and Blasco, performed work and provided services for the alteration, repair or equipping of the vessel "Kazakhstan".
4. The agreements dated 12 December 1991, 6 February 1993 and 25 September 1992 ("the Agreements") provided that the Plaintiff's charges for the work performed and services provided by the Plaintiff under the Agreements ("the Plaintiff's Charges") would be paid by Blasco to the Plaintiff.
5. In breach of the Agreements Blasco has failed to pay to the Plaintiff all of the Plaintiff's Charges.
6. By Minutes of a Meeting held on 1 February 1995 between representatives of Blasco and representatives of the Plaintiff and signed by those representatives on behalf of Blasco and the Plaintiff respectively, Blasco acknowledged that it is indebted to the Plaintiff for the outstanding amount of the Plaintiff's Charges, then exceeding the sum of DM17,013,753,00.
7. The outstanding amount of the Plaintiff's Charges is DM17,013,753.00.
8. The Plaintiff claims interest on the outstanding amount of the Plaintiff's Charges at the rate of 5% p.a. from May 12 1995, totalling DM1,659,424.00."
For the purposes of this interlocutory proceeding as to jurisdiction there is no issue as to the in personam liability of BLASCOon the claim. The merits of that claim arise at a later stage.
The writ for arrest is addressed to BLASCO as owner.
The evidence in support of the writ comprised an affidavit dated 24 April 1997 by the solicitor acting for the plaintiff. This asserted, without qualification, that BLASCO was the owner of the Zoya and the three vessels in respect of which the debt was incurred.
BLASCO has not entered an appearance. However, on 30 April 1997 an appearance was filed by Tor Shipping Limited ("Tor"). Its relationship with the Zoya was particularised in the Notice of Appearance as "demise charterer".
Also, on 30 April, an application for release was made by Tor to the Court on two grounds. First, that there was no jurisdiction at the time proceedings were commenced. Second, that there was a failure on the part of the plaintiff to make full and frank disclosure on the ex parte application for arrest.
There are no caveats in force against release of the ship.
It is common ground that:
• the plaintiff bears the onus of proving jurisdiction.
• this must be established on the balance of probabilities.
• the primary issue is as to the beneficial ownership of the vessel on 24 April 1997.
This is in accordance with the principles discussed in The Owners of the Ship Shin Kobe Maru v Empire Shipping Company Inc (1994) 181 CLR 404 at 426; The Aventicum [1978] 1 Lloyd's Rep. 184 at 186
The question as to the identity of the owner of the Zoya as at 24 April is not simple. The complexity arises as a consequence of the demise of the USSR and the steps subsequently taken by the Republic of the Ukraine to reorganise the shipping fleet of that State. Of particular relevance are certain measures taken in July 1996 and thereafter which will be referred to later.
The matter first came before me on 1 May 1997 when an application was made by the plaintiff for an adjournment to enable further evidence to be collated as to ownership of the Zoya. This was strenuously resisted by Tor. Four reasons were advanced for the adjournment. These were to:
• Arrange for translation into English of documents in German upon which the plaintiff relies.
• Obtain instructions and further material from Europe regarding the plaintiff's allegations of an intention on the part of the Black Sea Shipping Company to defeat its creditors and on an issue of estoppel.
• Obtain evidence under a Notice to Produce to Tor Shipping Limited.
• Obtain evidence as to Ukraine law.
Essentially, the plaintiff claimed that it needed time to respond to the evidence adduced or foreshadowed by Tor.
I granted a brief adjournment to 7 May to enable further evidence to be adduced by both parties. An application for leave to appeal this judgment was made to Whitlam J. His Honour refused leave.
At the outset it must be borne in mind that frequently vessels are
arrested as a matter of urgency in circumstances where all the relevant
information is not available to the
plaintiff. This means that it will often be necessary to gather further
evidence where an objection to jurisdiction is raised based on a challenge as
to ownership of the vessel. These applications need to be dealt with urgently
in order to mitigate the drastic hardship and financial consequences which can
flow from an arrest to numerous parties interested in the vessel and its cargo.
Often, the vessel will have commitments to passengers; buyers and sellers; and
crew. Therefore, often a
decision as to jurisdiction will need to be taken where the evidence is in a relatively
imperfect state.
Affidavit evidence
Mr Haake
The plaintiff's evidence included an affidavit by Mr D Haake, dated 2 May 1997. He is the General Manager of the plaintiff and is resident in Bremerhaven, Germany. His affidavit states that the plaintiff had entered into repair contracts for the three sister vessels of the Zoya. At that time he was aware of the vessels listed in Lloyd's Register as owned by BLASCO, and therefore had an "impression" that BLASCO had a large fleet and could pay for the costs of repairs. He then expresses his belief that BLASCO own the vessels which were repaired. He says BLASCO referred to itself as owner of the vessels in the repair contract and that at that time it was referred to as the owner in the Lloyd's Shipping List and documents supplied by the Port authorities of Odessa. He did not doubt that all the vessels were owned by BLASCO.
Mr Haake asserts that had he known that ownership would be contested the plaintiff would not have entered into the repair contract the way it did, unless substantial security had been provided. After default by BLASCO an agreement to pay was entered into on 29 February 1996. Once again he claims that had he known that ownership of the ships would be contested at a later date, the plaintiff would not have entered the agreement. He then expresses a strong "belief" that transfers of vessels previously owned by BLASCO were made with an intention of preventing, hindering or delaying its creditors. He said that he was not aware of the transfer of the vessels before they occurred or when they occurred. He says the first date on which BLASCO breached its obligations under the agreement of 29 February, was 16 March when it failed to meet a payment schedule. This first payment was one month late. He then refers to two German judgments.
In my view, this affidavit based as it is on conjecture and surmise does not significantly advance the plaintiff's case. It is a collection of largely unsupported assertions.
Plaintiff's solicitor
A second affidavit relied on is that of the solicitor for the plaintiff dated 5 May 1997. The deponent annexed a number of documents. The deponent refers to a Captain Savitskiy, who is described as the President of the Ukrainian Shipping Co. She states that she was informed by a partner of the German lawyers of the plaintiff that Capt Savitskiy "appears" to have been a former employee and vice-president of BLASCO and that he "may" still hold those positions. Again, this is remote hearsay and is cast in tentative terms.
There is in evidence a document which expedites the fact that Captain Savitskiy is now the President of the Ukrainian Shipping Company.
The affidavit further asserts that another entity, Marine Trade Consulting GmbH, is also a creditor of BLASCO, and a copy of a writ filed in this Court in proceedings in relation to the vessel "Kareliya" is annexed. She states that no evidence has been produced to the plaintiffs solicitors as to any consideration passing between the Ukrainian Shipping Company and BLASCO for any transfer of property, despite a request for such material.
At this stage it is appropriate to note that, as at 24 April 1997, when the Zoya was arrested and the solicitor's affidavit as to ownership was sworn, the solicitor had assumed that an extract provided by her Melbourne office as to entries on the Lloyd's Register, was up-to-date. It was not. The evidence was that this was the sole evidence relied on by her as to the ownership of the vessel when the writ was taken out.
It is clear from the evidence that monthly amendments are made to the Lloyd's Register and supplements issued. The 1997 supplements disclose that during April 1997 the owner of the vessel was listed in the Lloyd's Register as the Ukrainian Shipping Company. It is clear that the material relied on as to ownership at the time when the writ was issued was out of date and did not record the position at the relevant time. BLASCO had not been listed as owner at all in 1997.
Tor's solicitor
The solicitor for Tor, in an affidavit of 6 May 1997, states that he has been informed by Captain Stavitskiy that the Ukrainian Shipping Company is the sole beneficial owner of the Zoya; that this company was established by the Ministry of Transport of the Ukraine on 8 April 1996; that in accordance with a government order, 11 vessels previously owned by BLASCO were transferred to Ukrainian Shipping Company and that Ukrainian Shipping Company is an independent company which has nothing to do with BLASCO.
Captain Stavitskiy also states that he has examined the Lloyd's Register of Shipping for 1996-1997. He states that the Register is updated by a monthly publication, in the form of a supplement, which can be inspected at Lloyd's Register of Shipping in Sydney. In his experience it is common practice for practitioners in the field of maritime law to examine the Register and supplements. He states that the notation in respect of ownership of the Zoya for the months January, February and March refer to Victory Maritime Inc. For April 1997 the Ukrainian Shipping Company is shown as owner. The records do not disclose any reference to BLASCO in that period in relation to the Zoya. He states that he is informed by Captain Litvinchuk that he is employed by and his wages are paid by Tor.
Documentary evidence
The Government of Australia officially recognised, and entered into diplomatic relations with the Republic of the Ukraine as an independent sovereign state on 26 December 1991.
Cabinet order - 3 July 1996
There was evidence, originally furnished in the Ukrainian language, in the form of a Cabinet Order of the Presidium of the Supreme Council of the Ukraine, dated 3 July 1996. This was translated by Ms Tania Ryvchin who gave evidence. The English translation of which reads:
"Presidium of the Supreme Council of Ukraine
[Coat of Arms]
CABINET OF MINISTERS OF UKRAINE
ORDER
3 July 1996 No 420-r
Kyiv
In order to increase the effectiveness of the use of a fleet and to further improve the management structure of the state merchant fleet, to establish market basis and necessary prerequisites for de-monopolisation of the industry, and to prevent significant losses to the economy of Ukraine, Mintrans [Ministry for Transport] should ensure, in the prescribed manner, the hand-over of vessels (according to the Addendum) which belong to the "Chornomorske morske paroplavstvo "[Black Sea Steamship-line] State Shipping Company, to the "Ukrainske morske paroplavstvo" [Ukrainian Steamship-line] State Shipping Company.
Prime Minister of Ukraine P.LAZARENKO
[Round Seal]
[Handwritten:]
Com.Krup, [Illegible] - to consider
11.07.96 signature"
The addendum to the above order is simply a list of eleven vessels to be handed over. It includes the Zoya, but does not include the three sister ships.
There is another translation of this Cabinet order in evidence but I prefer the verified translation of Ms Ryvchin where there is a conflict. She impressed me as a most careful and capable translator.
Ministerial Order - 15 July 1996
Also translated by Ms Ryvchin is an order under the heading of the Ministry for Transport of the Ukraine dated 15 July 1996 (Exhibit C) which reads:
"Ministry for Transport of Ukraine
ORDER
15.07.96 city of Kyiv No 233
RE: Handover of vessels
Following the Order No 420r of the Cabinet of Ministers of Ukraine, dated 03.07.96, in order to increase the effectiveness of use of the fleet, and in accordance with the "About Management of the All-State Assets" Decree of the Cabinet of Ministers of Ukraine, dated 15.12.92,
I hereby order:
1. O.M. STOGNIYENKO, the President of the "Chornomorske paroplavstvo" State Shipping Company in the prescribed manner, to take the vessels (as per Addendum) off the shipping company account.
2. O.L. SANITSKIY, the President of the "Ukrainske morske paroplavstvo" State Shipping Company:
2.1 To accept the abovementioned vessels on the account of the "Chernomorske morske paroplavstvo" State Shipping company.
2.2 To ensure an effective use of the vessels.
3. Handover to be completed within one month.
To make O.M. ZOLOTOVERKH, Deputy Minister, responsible for supervision of carrying out of the Order.
Round seal
Minister I.P. Dankevich"
Ministerial Document
There is then Exhibit D, a document which is undated. It bears the title "Ministry of Transport of Ukraine State Department of Merchant Marine and River Transport". An Odessa address appears. The document reads:
"WE, MINISTRY OF TRANSPORT OF UKRAINE, CONFIRM HEREWITH THAT MV "ZOYA KOSMODEMJANSKAJA" IS THE PROPERTY OF STATE OF UKRAINE AND ABOVEMENTIONED VESSEL IS IN SIIPERE (SIC) OF MAMAGEMENT (SIC) OF STATE UKRAINIAN SHIPPING COMPANY HAVING LEGAL ADDRESS 30, KOVALEVSKOGO STR, ODESSA, 270029, UKRAINE.
DIRECTOR OF DEPARTMENT OF THE MERCHANT MARINE AND RIVER TRANSPORT OF THE MINISTRY OF TRANSPORT OF UKRAINE
(Common seal)
(indecipherable) RUCHENKO
(Emphasis added)
This document is executed under what appears to be the Seal of the Ministry for Transport.
Deletion Certificate - 14 August 1996
Also in evidence is a "Deletion Certificate" dated 14 August 1996 under the heading "Ukraine Port of Odessa Harbour Master" which reads:
"to whom it may concern
Deletion Certificate
That is to certify that on request of the State Black Sea Shipping Co., 1 Lastochkina Str., Odessa, Ukraine, mv "Zoja Kosmodemjanskaja" has been deleted from the Registry of Shipping of Odessa port to register the up mentioned vessel to another shipowner.
Harbour Master
of Odessa port capt. Kharitoshin
(seal)
Ministerial Order - 31 October 1996
There is then an Order under the heading of Ministry of Transport of Ukraine, dated 31 October 1996, which as translated by Ms Ryvchin in oral testimony reads:
"ORDER
31.10.96 City of Kiev. No 344
Re: Appointment of Mr O.L. Savitskiy as President of state shipping enterprise "Ukrainian Shipping Co."
Having examined the documents and the decision of the commission for concluding contracts with general managers of state enterprises,
I hereby order:
- to appoint Savitskiy O.L. as President of state shipping enterprise "Ukrainian Shipping Co." (SSC Ukrship) on contract basis from 30.10.96 till 30.10.2001.
Grounds: Contract No 53 of 30.10.96;
Confirmation of Odessa regional State
Administration of 3.10.96
Application No 3481 dated 11.10.96
of State Department of Sea and River
Transport.
Minister I.P. Dankevich"
Other documents
Also in evidence is a Bare Boat Charter issued at Odessa on 10 February 1995 which shows BLASCO as the executed owner. There is an "Addendum" to that Bare Boat Charter dated 6 August 1996, not signed by the parties to that Charter, which in par 3 records a change in the owner's name to State Ukrainian Shipping Company, Odessa, Ukraine.
There is then a Classification Certificate issued under the heading "Russian Maritime Register of Shipping". It is dated 15 March 1997 and records that the ship owner of the Zoya is the Ukrainian Shipping Company.
In a letter dated 1 May 1997, Lloyd's Maritime Information Services Limited states that as at 1 April, 24 April and 30 April 1997 Ukrainian Shipping Company was stated as being the registered owner of the Zoya. However, it is to be noted that the Lloyd's Information Administrator states that the information published in the Register has been obtained from sources "believed to be reliable" but that the Register is unable to guarantee the accuracy of all details, and that the records of merchant ships registered in some countries are incomplete due to lack of official information. This appears to be a standard disclaimer.
There is also before me a Ship's Certificate dated 12 September 1996 signed by the Harbour Master at Odessa which certifies that according to data inserted in the State Shipping Register of that Port, the owner of the Zoya is Ukrainian Shipping Company.
There is further material in the form of a letter to Messrs Phillips Fox dated 24 April 1997 from a Captain Litvinchuk under seal which asserts that his vessel, the Zoya, sails under the Ukrainian flag and is now owned by the Ukrainian Shipping Company. This entity was established on 8 April 1996.
Also, there is a fax from Captain Savitskiy, President of the Ukrainian Shipping Company, dated 5 May 1997, which "confirms" that his company, Ukrainian Shipping Company is the "sole beneficial" owner of the Zoya.
Also in evidence are the articles of incorporation of the State Shipping Company "Ukrainian Shipping Co", dated 29 April 1996. This document states that the charter has the approval of the Deputy Minister of Transport of the Ukraine.
The Agreement of 29 February 1996 between the plaintiff and BLASCO is in evidence. In the recital to this agreement BLASCO acknowledges that as at 23 February 1996 it owed to the plaintiff the sum of DM26,106,458, plus interest from that date plus costs. This is said to be the basis of the underlying debt on which the writ was requested.
Legal Opinions
Tor has filed two legal opinions by lawyers who practise in Kiev. Both are dated 6 May 1997.
Frishberg and Partners
The first is by Frishberg and Partners. The substance of this advice is
that they have acted as advisers of the Ukrainian Shipping Company on Ukrainian
law in connection with the question whether the rights to the Zoya were
properly transferred to the Ukrainian Shipping Company. The opinion details the
documents examined, which include the Ship's Certificate, the Deletion
Certificate, the letter from the Department of Merchant Marine and River
Transport of the Ukraine, the Order of the Cabinet of Ministers of the Ukraine
of 3 July 1996, the resolution of the Ministry of Transport of the Ukraine
dated 15 July 1996 and an Order of BLASCO
confirming that registration of the Zoya with the balance sheets of BLASCO has
been deleted.
The Frishberg letter also notes that Ukrainian legislation differentiates between the "ship owner" and the "owner of the title" under the Ukraine Maritime Code, Article 20. The ship owner is any legal or natural entity that operates the vessel on its own behalf regardless as to whether the title belongs to that operator, or whether the operator is operating the vessel on any other legal grant from the owner of the title for the vessel.
The letter states that the Certificate of 12 September 1996 complies with the form and substance required by the Maritime Code of Ukraine and is considered as "the final and complete evidence of the right of ownership (title) of the State of Ukraine to the vessel." (Emphasis added). The Deletion Certificate was prepared at the request of BLASCO and according to the letter proves as sufficient evidence that all ship owner rights to the vessel Zoya have been transferred to another company. The letter states that the Cabinet Order of 3 July 1996 signed by the Prime Minister of the Ukraine authorised the Ministry of Transport to transfer the vessels from BLASCO to the state owned Ukrainian Shipping Company. The Ukrainian Shipping Company and BLASCO are two different legal entities and there is no direct liability existing between the two companies.
The conclusion stated in the Frishberg letter, after an examination of relevant documents, is that the Zoya has been lawfully transferred to the balance sheets of the Ukrainian Shipping Company. The documents referred to are said to evidence that title to the Zoya vests with the State of Ukraine. They confirm that the Zoya has been lawfully transferred with subsequent registration in the balance sheets of Ukrainian Shipping Company and with deletion of the registration from BLASCO's balance sheet. There then follow a series of disclaimers.
Vasil Kisil and Partners
The second opinion of 6 May 1997 is from Vasil Kisil and Partners, Attorneys of Kiev. Mr Alyoshin of that firm was requested to express an opinion on the status of the ship's certificate and on the legal status of the Ukrainian Shipping Company and BLASCO. It states that under Article 35 of the Merchant Shipping Code of Ukraine, which commenced operation on 12 July 1995, the Certificate of Ownership of the vessel is a valid document which demonstrates that the Ukrainian Shipping Company is the owner.
He also states that there is no doubt that Ukrainian Shipping Company and BLASCO are entirely separate legal entities under Ukrainian law.
Beneficial ownership - discussion
A convenient starting point to begin consideration of this question is the Lloyd's Register. The evidence shows that in the 1996-1997 year, prior to January 1997, the recorded owner of the Zoya was BLASCO. Entries in monthly supplements for January, February March and April indicate that in those months this was no longer the case. Indeed, the Lloyd's Register listings indicate that throughout April the recorded owner was Ukrainian Shipping Company.
In a case such as the present where beneficial ownership is contested the LLoyd's Register is a convenient reference point, affording some indication of ownership. See The Saudi Prince [1982] 2 Lloyd's Rep. 255 at 257-258 per Sheen J. It has no official or binding status. This is evidenced by the express disclaimer made by Lloyds.
The Register, nonetheless, indicates that prior to January 1997, BLASCO was the owner of the vessel.
The next relevant document is the Ukrainian Cabinet Order of 3 July 1996, signed by the Prime Minister which refers to:
"... the hand-over of vessels (according to the Addendum) which belong to ... the Black Sea Steamship-line State Shipping Company to the ... Ukrainian Steamship- line State Shipping Company."
(Emphasis added)
This document on its face provides support for the conclusion that the Zoya was one of the listed vessels which belonged to, in the sense of "was owned by", BLASCO prior to 3 July 1996. While there is some debate on the matter I consider for present purposes that the expression "belong", used in relation to BLASCO's past relationship with the vessel, is sufficient to comprehend both legal and beneficial ownership.
However, the parties differ as to the meaning and consequences which attach as a result of the reference to ensuring "in the prescribed manner the hand-over of vessels". On the one hand the plaintiff contends that there is simply a delivery of the vessels without change in ownership so that the beneficial ownership remains in BLASCO. Reliance is placed on the expression "hand-over" which does not necessarily convey a transfer of ownership in normal English parlance. It is said to be a different concept to transfer of beneficial ownership. The interpreter, Ms Ryvich, agreed that the expression "transfer" was a distinct term in the Ukrainian language. Tor, on the other hand, contends that the reference to "hand-over in the prescribed manner" denotes a transfer of beneficial ownership in the vessels. Some support for this view was gained from the evidence of the interpreter to the effect that the "prescribed manner" was a reference to prescription according to law or regulations.
The plaintiff also submits that the absence of any consideration in relation to the hand-over either in this document or the subsequent order of the Minister for Transport of 15 July 1996 tends to support the conclusion that no transfer of beneficial ownership was intended. The plaintiff also relies on the absence of any transfer documents such as a Bill of Sale.
In my opinion, it is clearly not appropriate to construe this document in isolation. Some initial indication may be gleaned from the language but reference must be made to other evidentiary material and to legal opinion where it is available.
The Order of the Minister for Transport of 15 July 1996 refers to the Cabinet Order of 3 July and appears to be part of the process involved in the implementation of that Order. It requires the President of BLASCO to take the Zoya off the shipping company account. It then orders the President of Ukrainian Shipping Company to accept the Zoya on the account of the Ukrainian Shipping Company.
This language in the Minister's Order, because of the reference to the company account, is consistent with a view that the intention and effect was to procure a transfer of an asset, namely ownership of the Zoya.
Next in sequence there is the Deletion Certificate which records that the Odessa Harbour Master on the request of BLASCO should delete the Zoya from the Odessa Port Shipping Register and register it to another ship owner. Again, although somewhat vague this is consistent with a transfer of ownership as opposed to a transfer of mere possession or management. It is also inconsistent with BLASCO remaining as owner.
There is, in addition, the undated document apparently issued by the Director of the Department of the Merchant Marine and River Transport of the Ukraine, which confirms that the Zoya is the property of the State of Ukraine and is in the management of the State Ukrainian Shipping Company of Odessa. This, of course does not sit comfortably with the contention that the Ukrainian Shipping Company is the sole owner of the Zoya.
This document suggests that ultimate ownership of the vessel is in the Ukraine State and that the vessel is to be managed by the Ukrainian Shipping Company. On its face it appears to indicate that the Ukrainian Shipping Company does not itself have ownership but that ultimately ownership resides in the State.
In none of the foregoing documents is there any statement to the effect that ownership of the Zoya, in any sense, remains with BLASCO.
The documents, of course, must be considered together with the material provided by the two Kiev law firms. These letters indicate that Ukrainian Shipping Company is the ship owner and that it is a separate legal entity under Ukrainian law from BLASCO. In addition, the Frishberg letter indicates that the documents confirm that the vessel has been lawfully transferred to the balance sheets of the Ukrainian Shipping Company.
While some criticisms can be levelled at several apparent inconsistencies in the language of the documents as to where property or ownership, in a legal or beneficial sense, resides, the preponderance of the documentary evidence persuades me that the vessel is no longer owned, in any sense, by BLASCO. The beneficial ownership, on the evidence, appears to reside in either the Ukrainian State or in Ukrainian Shipping Company. Probably the former. I am satisfied on the balance of probabilities that as at 24 April 1997 the plaintiff has not proven that the beneficial or legal ownership resided in BLASCO.
The plaintiff relied heavily on inferences. It submitted that inferences should be drawn adversely to the case propounded by Tor because there has been no appearance by the Ukrainian Shipping Company which, if it is really the owner, might properly have been expected to appear before the Court to assert that ownership. In my view this inference does not necessarily follow. It is, of course, a factor to be taken into account, and I have done so, but there may be other relevant circumstances or considerations apart from the inferences sought to be drawn which could explain the non-appearance.
In addition, reliance is placed on the non-attendance of Captain Savitskiy, President of the Ukrainian Shipping Company. However, he has furnished material which has been placed before the Court. While I have taken it into account I have substantially discounted it by reference to the fact that he is a senior employee of an interested party.
Reliance is also placed on the fact that there is no evidence of consideration. However, the legal opinions of the Kiev lawyers do not suggest that valuable consideration as known to Australian contract law is required. They both treat the change in ownership as valid. This matter, whilst relevant, must again be weighed against the Cabinet and Ministerial documents and the legal opinions.
A suggestion was made that the Ukrainian Shipping Company was merely a management company because of its Charter. However, a perusal of the Charter of that entity indicates quite clearly that it is given powers and functions with respect to the ownership and leasing of property. No assistance is gained by the plaintiff from the company Charter.
While I respectfully agree with the observations of Sheppard J in Malaysia Shipyard and Engineering SDN BHD v "Iron Shortland" (1995) 59 FCR 535 at 554-555, and 558, to the effect that the absence of the alleged owner would incline the Court to more readily infer ownership, that consideration is outweighed, in this case, by the documentary evidence and legal opinions which strongly point away from ownership by BLASCO.
The plaintiff also seeks further inferential support from the fact no documents evidencing the transfer of the vessel to the alleged owner were produced in circumstances where it might be expected that such documents might be in the possession of Tor or at least accessible to them. Again, this is a consideration to take into account but, when read in the light of all the other countervailing evidence, particularly the evidence of the Ukrainian lawyers who treat the transfer as valid, it is not persuasive.
In my view, the plaintiff has failed to establish that BLASCO was the beneficial owner of the Zoya on 24 April 1997.
Voidable disposition
As an alternative ground the plaintiff submits that even if there has
been an order for transfer of beneficial ownership in the Zoya by the Ukrainian
Cabinet then that Order and the Order made by the Ukrainian Minister for
Transport of 15 July 1996 were not bona
fide and were made in order to defeat creditors. Accordingly, the plaintiff
asserts that it would be
open to it to invalidate the transfer under s 37A of the Conveyancing Act 1919 (NSW).
That section provides:
"37A Voluntary alienation to defraud creditors voidable
(1) Save as provided in this section every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment Act) 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.
(2) .....
(3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors."
The plaintiff submits that, in the absence of proof to the contrary, the law of the Ukraine must be presumed to be the same as that of New South Wales. Reliance is placed on the decision of Kriewalat J of the Supreme Court of the Northern Territory, in Dalgety & Co Ltd v Aitchison; "The Rose Pearl" (1957) 2 FLR 219 at 232-3. In that case his Honour was careful to note that the presumption only applied until the contrary is proved.
In further support of this proposition the plaintiff referred to Electrical Enterprises Retail Pty Limited v Rodgers (1988) 15 NSWLR 473. That was a decision of Kearney J. His Honour expressed the view that for an agreement to attract the operation of s 37A where the disposition is without valuable consideration it is easier to infer the relevant intention. At 497, his Honour observed that it was common ground that "intent to defraud" encompasses intention to defeat, delay or hinder creditors.
In the present case there was no evidence of consideration for the transfer of the Zoya. Nor was any document such as a Bill of Sale provided to evidence transfer of ownership. Cf The "Rose Pearl".
As of 3 July 1996, the date of the Cabinet Order, the plaintiff asserts that there were substantial creditors of BLASCO; and that both Court judgments and subsequent agreements to pay BLASCO's debts had been broken. BLASCO must therefore be treated as having been insolvent at the time of the transfer. The intended transfer was not disclosed to creditors, nor approved by them. The necessary effect of the transfer was to defeat creditors so as to amount to an intention to defraud creditors. Accordingly, the Court ought to "draw the inference" that the purported disposition of property by the Cabinet or Ministry of Transport of the Ukrainian Republic would be defeated by s 37A.
In substance, this submission asks this Court to decide that the Cabinet decision of the Republic of the Ukraine and the consequential Order by the Ukrainian State Transport Minister giving effect to the Cabinet order are avoided by s 37A of the New South Wales Conveyancing Act.
There are in my view several insurmountable obstacles in the path of this submission.
Rebuttable Presumption
The plaintiff seeks to rely on the presumption that foreign law is the same as the law of the forum, unless proven otherwise. The relavent principle as to the content and effect of foreign law is that the burden of proof is on the party asserting that foreign law is different from domestic law. See Byrne & Heydon, Cross on Evidence, 1991 4th Aust. edn 1991 at par 41005. In the present case that presumption has effectively been rebutted. The principle cannot apply. There is evidence here from Ukrainian law firms that under the law of the Ukraine ownership of the vessel resides in either the Ukraine state or the Ukrainian Shipping Co. These statements of legal opinion are on the clear basis that under Ukrainian law the transfers are lawful and effective.
It should be noted that the presumption is not one of universal application: see BP Exploration Co (Libya) Ltd v Hunt [1980] 1 NSWLR 496 per Hunt J at 503 and the cases cited therein. More specifically, as Roskill LJ (with whom Sir David Cairns and Brightman LJ agreed) observed in Osterreichische Landerbank v S'Elite Ltd [1981] QB 565 at 569:
"There seems to me to be a number of difficulties in the way of the defendants. In the first place as Lloyd J. pointed out, there is no evidence whatever of the relevant Austrian law. The whole argument has proceeded upon the assumption that the relevant Austrian law is the same as the relevant English law. Pressed with this omission by the Court, Mr Thomas relied upon the so-called presumption, if that be the right word, that in the absence of evidence to the contrary, foreign law is presumed to be the same as English law. In proper cases, of course, that presumption can be applied but I question whether it has any place in a matter of this kind where an assertion is made of fraud, based upon a provision of an English statute which does not have any direct application, at any rate at first sight, to the law of the country of the incorporation of the company whose conduct is complained of - or indeed of the bank, whose conduct is complained of." (Emphasis added)
Act of State
The second objection raised to the application of s 37A is that the act of State doctrine applies. The doctrine is that "in general, courts will not adjudicate upon the validity of acts and transactions of a foreign sovereign State within that sovereign's own territory": Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 at 40. Not every governmental act will be an act of State. Whether an act can be characterised as an act of State will depend on the particular circumstances, namely the nature of the act and the intention with which it is done. See P E Nygh, Conflict of Laws in Australia, 1995 6th edn at 128-129.
The transfer in terms was in accordance with a Cabinet Decree of 15 December 1992 concerning the management of state assets. It was made pursuant to the Cabinet Order and was effected by Ministerial Order. These orders having their genesis in the 1992 Decree support the view that reorganisation of State assets had been contemplated by the Ukrainian government for more than four years before July 1996. These Orders and the Decree represent governmental acts and reflect governmental decisions taken at the highest level of the Ukrainian government. They were made in the Ukraine expressly for the purpose of increasing the "effectiveness of the use" of the shipping fleet and for establishing a "market basis and necessary prerequisites for de-monopolisation of the industry".
The fact that the Zoya and other vessels engage in international commerce, does not in my view affect the characterisation of the action taken as an act of State. Engagement by a state or state-owned enterprise in international trade and commerce may be a consideration relevant to a determination whether sovereign immunity of the state is attracted to a commercial transaction but that is quite a different principle to that of the act of State doctrine. The act of State doctrine depends on the character of the act in question, not the character of the party to litigation. See Nygh at 128.
The evidence in this case establishes that the Republic of the Ukraine was recognised as an independent state by the Australian Government on 26 December 1991. Diplomatic relations have been entered into with the Republic. It is a friendly foreign state. Accordingly, the transfer transaction being an act of State is not justiciable by Australian courts: see Underhill Hernandez (1987) 168 US 250 at 252, applied by the High Court in Potter v Broken Hill Proprietary Co (1906) 3 CLR 479 at 495, 507, 511 and Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 at 40-41. See also: Dicey & Morris, The Conflict of Laws, 1993 12th edn Vol 1 at 108-110; Starke's International Law, 1994 11th edn at 100-101.
Voidable not void
As at 24 April 1997 no action under s37A had been taken. Even if contrary to my opinion, the transaction were considered voidable, the transfer was not avoided as at that date and therefore the transfer as at that date was valid and BLASCO was effectively divested of its ownership and title.
Insufficient evidence
The charge of fraud is a serious one. In substance the allegation is of an intention on behalf of the Ukrainian Government to bring about a situation whereby BLASCO avoids, hinders, or delays its creditors. Accordingly, the allegation attracts the level of satisfaction called for by Briginshaw v Briginshaw (1938) 60 CLR 336 at 343-4, 362-3; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 573. I am not satisfied that the evidence before me begins to approach the requisite degree of satisfaction. True it is that there is some evidence that BLASCO incurred substantial debts which have not been paid and that it apparently has not honoured at least one agreement to pay its debts.
The "evidence" relied on in the present case, said to justify the suggestion of fraud, is no more than conjective and speculation: Nominal Defendant v Owens (1978) 22 ALR 128 at 132-133. This material when taken with the other evidence before me, does not satisfy me that there is any intent demonstrated in any particular person or entity to avoid or delay creditors. The July 1996 Cabinet Order and the Ministerial actions in evidence when taken with the Cabinet Decree of 1992, which recite the purpose underlying the rearrangement, negate the conclusion contended for. The evidence falls far below the level necessary to establish that the assertions of purpose on the part of the Ukrainian Government are false or colourable in any respect.
Ultra-Vires
The plaintiff also submits that the actions of the Cabinet and Minister in "purporting" to transfer property in that vessel are void as ultra-vires insofar as they have the effect of hindering or delaying creditors of BLASCO. This submission must also fail for the reasons given above. It seems to impugn an act of a sovereign state within its own territory. It, too, is non-justiciable.
Non-Disclosure
Tor submits that the Zoya should be released because the arrest was procured as the result of non-disclosure to the Court by the plaintiff on the application for arrest.
The evidence establishes that when applying for the arrest warrant the solicitor handling the matter for the plaintiff relied solely on what has since been shown to have been out-of-date listings in the Lloyd's Register.
Tor relies on the decisions and observations in The Vasso [1984] 1 Lloyd's Rep. 235 at 243 and The Kherson [1992] 2 Lloyd's Rep. 261, but also refers to the observations made in The Varna [1993] 2 Lloyd's Rep. 253. See also the case note "Disclosure and Arrest of Ships" (1994) 110 LQR 382.
In The Vasso, Goff LJ delivering the judgment of the Court of Appeal, held that the affidavit in support of the arrest failed to disclose material facts. An unconditional order was therefore made for the discharge of the security obtained by reason of the arrest.
The non-disclosure in that case consisted of a failure to alert the Court to the fact that the parties were in the process of arbitration, at the time of the arrest, and that the arrest was made with the purpose of obtaining security for an arbitration award. There was no suggestion of bad faith by the deponent of the affidavit.
In The Kherson, Sheen J applied The Vasso and made an unconditional order for the discharge of the security obtained by reason of the arrest because of the failure by the plaintiff to exhibit a letter from the defendants setting out the reasons why the vessel should not be arrested. His Honour following the observations of Goff LJ in The Vasso said at 268:
"I fully appreciate the pressure under which Mr Holt was working. Nevertheless he was about to embark on the very drastic step of arresting a ship which was engaged in trade. It was clear from the affidavit that there were unusual circumstances. Indeed the Admiralty Marshal, who always deals with the straight forward cases, wanted to refer the affidavit to the Admiralty Registrar ... the matter was dealt with by Master Prebble. I feel sure that [he] ... would not have authorised the arrest of the ship if he had been fully appraised of the defendants' contention. The importance of full and frank disclosure being made on an ex parte application was emphasised .. in The Vasso...." (Emphasis added)
The Court of Appeal in The Varna
took a narrower view of the duty of disclosure on an arrest application. This
was because it considered the warrant of arrest was available virtually as of
right and did not involve a broad discretion such as exists in the case of an ex parte injunction application.
However,
the decision in that case largely turned on amendments made to the United
Kingdom Rules of the Supreme Court O 75 r 5(9) which set out specifically the
necessary contents of an application for arrest.
In the present case, the supporting affidavit specifically and without qualification, stated that BLASCO was the owner at the relevant date. If it had been shown that there was credible relevant evidence known to the deponent but withheld from the Court, on the application, there may have been a ground for release in the present case.
However, I have considered the testimony of the solicitor handling the matter both in chief and under cross-examination together with the material placed before me. Whilst the Lloyd's Register entry relied on for the arrest was outdated, the evidence does not go so far as to satisfy me that either the solicitor or other persons acting on behalf of the plaintiff, or the plaintiff itself, was aware that the Lloyd's Register relied on had been updated. Nor am I satisfied that the plaintiff or the solicitors withheld any relevant information from the Court in initiating the arrest proceedings. Should it subsequently become apparent that evidence placed before the Court on an arrest was incorrect then it is incumbent on the solicitors to correct it forthwith. In The Nordglimt [1988] QB 183 at 188 Hobhouse J observed:
"It is of the greatest importance to the administration of justice that courts should be able to rely upon the truthfulness and accuracy of affidavits sworn by solicitors or their employees. It is accordingly essential that such affidavits should be prepared with proper care and that mistakes of the kind which I have described should not occur. It is also essential that lawyers acting for parties and in particular the deponents of such affidavits, should attach the greatest importance to their oath and that when they find that they have made a false statement on oath they should be at pains to correct it. Happily what has occurred in the present case is in my experience most unusual but, having occurred, it must be made the subject of comment by the court."
I completely agree with the above remarks. The caution sounded in the above decisions must be carefully borne in mind by parties who institute proceedings for the arrest of a vessel, namely that the arrest of a ship in trade is a drastic measure and there should therefore be a thorough and careful investigation as to ownership before arrest proceedings begin.
For the above reasons I do not consider that any ground has been made out to justify release of the vessel on the ground of non-disclosure.
Accordingly this submission must fail.
Conclusion
I propose to make an order for release. I will hear the parties on costs or as to any further or other orders which may be considered appropriate having regard to the above reasons.
However, before making any order I wish to hear from the Marshal as to the position, under r 53 of the Admiralty Rules, with respect to the sufficiency of arrangements for payment of the Marshal's costs and expenses.
I certify that this and the
the preceding thirty-seven (37)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 15 May 1997
Counsel for Applicant: A W Street SC
B W Larkin
Solicitor for Applicant: Phillips Fox
Counsel for Respondent: Dr A S Bell,
Mr T Reilly
Solicitor for Respondent: Norton Smith & Co
Date of Hearing: 7 May 1997
Date Judgment Delivered: 15 May 1997
