FEDERAL COURT OF AUSTRALIA

 

 

CMC (Australia) v “Socofl Stream” [1999] FCA 1419



ADMIRALTY - application to strike out proceedings for want of jurisdiction - whether a person nominated as a "relevant person" in relation to a maritime claim was such a person so as to found a right to proceed in the Court in rem under s 18 Admiralty Act 1988 (Cth) - issue of whether a nominated person was a demise charterer at the date proceedings were commenced in the Court - question of whether relevant demise charterparty agreement had been terminated prior to that date - meaning of "person who would be liable" in the definition of "relevant person" under the Act - effect of filing an unconditional appearance in the proceedings and whether it amounts to submitting to the Court's jurisdiction.


WORDS & PHRASES - "relevant person" - "demise charterer".


Admiralty Act 1988 (Cth) ss 3, 4, 18

Admiralty Rules r 23(2)

Federal Court Rules O 9 r 7



Owners of the "Iran Amanat" v KMP Coastal Oil Pte Ltd (1999) 161 ALR 434, considered

Owners of the Ship "Shin Kobe Maru" v Empire Shipping Company Inc (1994) 181 CLR 404, considered

Patrick Stevedores No 2 Pty Ltd v MV "Turakina" (1998) 154 ALR 666, considered

The "Guiseppe di Vittorio [1998] 1 Lloyd's Rep 136, considered

Baumvoll Manufactur von Scheibler v Gilchrest [1892] 1 QB 253, considered

Baumvoll Manufactur von Scheibler v Gilchrest [1893] AC 8, considered

Kaleej International Pty Ltd v Gulf Shipping Lines Ltd (1986) 6 NSWLR 569, considered

The "St Elefterio" [1957] P 179, considered

Ocean Industries Pty Ltd v Owners of the Ship MV "Steven C" [1994] 1 Qd R 69, considered

Robinson v Kuwait Liaison Office (1997) 145 ALR 68, considered


CMC (AUSTRALIA) PTY LTD v THE SHIP “SOCOFL STREAM”

N 80 of 1999

 

MOORE J

18 OCTOBER 1999

SYDNEY

 


IN THE FEDERAL COURT OF AUSTRALIA

 

NEW SOUTH WALES DISTRICT REGISTRY

 N 80 of 1999

 

BETWEEN:

CMC (AUSTRALIA) PTY LTD 

ACN 002 007 427

Plaintiff

 

AND:

THE SHIP "SOCOFL STREAM"

Defendant

 

JUDGE:

MOORE J

DATE OF ORDER:

18 OCTOBER 1999

WHERE MADE:

SYDNEY

 

THE COURT ORDERS THAT:

 

1.         The strike out application 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

 N 80 OF 1999

 

BETWEEN:

CMC (AUSTRALIA) PTY LTD 

ACN 002 007 427

Plaintiff

 

AND:

THE SHIP "SOCOFL STREAM"

Defendant

 

 

JUDGE:

MOORE J

DATE:

18 OCTOBER 1999

PLACE:

SYDNEY


REASONS FOR JUDGMENT

 

Introduction

1                     On 5 February 1999 proceedings were commenced by CMC (Australia) Pty Ltd (“CMC”) as proceedings in rem under the Admiralty Act 1988 (Cth)(“the Act”) against the ship “Socofl Stream” (“the Vessel”).  The relevant persons named in the writ were Kamchatka Shipping Company (“Kamchatka”), Sovremenniy Kommercheskiy Flot (“Sovcomflot”) and Aurora Navigation S.A. (“Aurora”).

2                     An amended writ was filed by CMC on 9 February 1999.  On 18 February 1999 an application was made for a warrant for the arrest of the Vessel which issued that day and was executed the following day.  On 24 February 1999 a notice of motion was filed by Sovcomflot seeking several orders including an order that the proceedings be struck out.  This judgment concerns the strike out application.  It was made clear by counsel for Sovcomflot during the hearing that the only basis upon which the order striking out the proceedings was sought was that this Court lacked jurisdiction to hear the application made by CMC on 5 February 1999.  On 2 March 1999 an order was made releasing the Vessel from arrest.  On 3 March 1999 a notice of appearance was filed by solicitors acting for Sovcomflot.  The appearance was not, in terms, conditional and identified the relationship between Sovcomflot and the Vessel as demise charterer.  

Background

3                     The following is the background against which these proceedings were commenced and continued.  On 24 April 1990 Sovcomflot entered an agreement (“the 1990 demise charterparty ”) to demise charter the Vessel from Aurora though the agreement also provided for the ultimate purchase of the Vessel by Sovcomflot.  On 31 August 1993 Kamchatka entered an agreement (“the 1993 sub-demise charterparty ”) to sub-demise charter the Vessel from Sovcomflot and this agreement provided for the transfer of the title of the Vessel to Kamchatka at the conclusion of the agreement after all payments under the agreement had been made. 

A further agreement was entered into on 14 October 1997 (“the 1997 agreement”) by Aurora, Sovcomflot and Kamchatka which modified the 1993 sub-demise charterparty.  This agreement concerned a number of vessels including the Vessel.  During 1998, the commercial arrangements between these parties started to unravel.  In December 1998, at a time when Kamchatka had failed to make two quarterly payments under the 1993 sub-demise charterparty, Sovcomflot purported to terminate that agreement.  Kamchatka remained in physical possession of the Vessel.  On 6 January 1999 bills of lading issued in Singapore in relation to certain steel products.  They were issued on behalf of the master of the Vessel.  On 9 January 1999 further bills of lading issued in Port Kelang.  Again they were issued on behalf of the master of the Vessel.  On 22 January 1999 Sovcomflot commenced proceedings in the Queensland Registry of this Court.  The Vessel was arrested on 25 January 1999.  On 29 January 1999 Kiefel J refused to make orders permitting the vessel to sail to Newcastle to discharge cargo.  On 3 February 1999 three faxes, to basically similar effect, were sent to Kamchatka  by Thynne & Macartney, solicitors acting for Sovcomflot.  Each fax purported to accept the repudiation by Kamchatka of the 1993 sub-demise charterparty.  The first two faxes erroneously described the vessel as the “Socofl Wind”.  The last fax correctly identified the Vessel.  On 5 February 1999 at least one meeting took place between interested parties in Moscow concerning the future arrangements about the Vessel and other vessels in the same fleet.  On 18 February 1999 Spender J ordered that Sovcomflot be entitled to possession of the Vessel and that it be released from arrest upon payment of a satisfactory amount to the Marshal.  On 1 March 1999 a club letter of undertaking was provided to various cargo owners including CMC. 



Admitted facts

4                     Prior to the hearing, Sovcomflot was asked to make certain admissions.  In the result the following formal admissions were made:

1.         That as at 6-9 January 1999 the [Vessel] was owned by [Aurora];

2.         That as at 5 February 1999 the [Vessel] was owned by [Aurora];

3.         That as at 6-9 January 1999 the Master and crew of the [Vessel] were employed by [Kamchatka];

4.         That as at 5 February 1999 the said persons employed by [Kamchatka] remained on board the [Vessel], but Sovcomflot did not otherwise admit the facts alleged in paragraph 4 of the notice to admit which was in the following terms:

...at the date of the commencement of the proceedings [5 February 1999] the master and crew of the [Vessel] were employed by [Kamchatka]. 

The Evidence in detail

5                     I turn to consider the evidence in more detail though in view of the conclusions I have reached on a number of legal issues, it is unnecessary to descend into great detail about some events occurring in January and February 1999.  Unless I indicate otherwise, the following are findings of fact on that evidence.  The 1993 sub-demise charterparty together with the 1997 agreement required Kamchatka to pay Sovcomflot periodic payments twice a year during the currency of the agreement.  The 11th and 12th instalments were to be paid to Sovcomflot in April 1998 and October 1998 respectively.  They were not paid.  It was common ground that a sum of $960,250.44 US had not been paid by Kamchatka up to and including 8 December 1998.  On 2 December 1998 a telex was sent by the General Director of Sovcomflot, Mr V. Kornilov, to the President of Kamchatka, Mr Yakov D. Potylitsyn (at the telex address of Kamchatka – 244112 which was one of the addresses for service in the 1993 sub-demise charterparty ) demanding payment of the 11th and 12th instalment totalling $960,250.44 US and interest.  Notice was also given that if payment was not made within seven business days, Sovcomflot might teminate the charterparty  pursuant to article 11(2)(a) of the 1993 sub-demise charterparty .  Another telex was sent to similar effect on 8 December 1998.  I infer from documents in evidence, which were tendered by CMC without objection, that the 11th and 12th instalments remained unpaid after 8 December 1998.  On 15 December 1998 a further telex was sent by Mr. Komilov on behalf of Sovcomflot to Kamchatka.  It read in part: 

“… and (sic) “event of default” under Article 11(1)(A) of the bareboat charter has occurred by reason of the charterers’ non-payment.  You, the charterer, have failed to remedy that “event of default” within 7 (seven) business days from the date of our telex notice of default dated 2nd December 1998.  Therefore, we hereby declare and give notice that the bareboat charter is forthwith terminated under Article 11(2)(A) of the bareboat charter.

As a result, we hereby call upon you pursuant to Article 11(2)(A) of the bareboat charter, to forthwith pay to us a sum equal to the outstanding charter hire principal amounting to USD 5.956.015.57 together with interest overdue with regard to 11th charter hire amounted to USD (amount unclear in exhibit) and the default interest calculated at the default rate (libor + 1.5% as per item 3 of the Schedule A to the bareboat charter) which we calculate as USD 24,713.00 up to the date of this notice and an additional USD 100.97 per day for each day hereafter together with interest overdue with regard to 12th charter hire amounting to USD 194,466.67 and the default interest calculated at the default rate (libor + 1.5% as per item 3 of the Schedule 4 to the bareboat charter) which we calculate as USD 6.118.00 up to the day of this notice and an additional USD 97.11 per day for each day hereaftertogether with interest accrued with regard to 13th charter hire which we calculate as USD 61,886.72 up to the date of this notice and an additional USD 982.33 per day for each day hereafter.  We are prepared to allow you 7 (seven) business days from today’s date for you to pay such sums.” (Emphasis added)

6                     No demand was made for the redelivery of the Vessel and therefore no direction given nominating a port at which redelivery was to be effected.  However a demand to that effect was made by telex dated 25 December 1998 in the following terms:

“… You, the charterer, failed to remedy that “event of default” within 7 (seven) business days from the date of our telex notice of default dated 2nd December 1998.  Therefore, we declared and gave notice that the bareboat charter was forthwith terminated under Article 11(2)(A) of the bareboat charter by the above mentioned telex notice dated 15th December 1998.

As a result, we, the disponent owner, hereby call upon you pursuant to Article 11(2)(D) of the bareboat charter, to forthwith re-deliver the above vessel to the disponent owner as soon as possible at a safe port to be nominated by us, failing which re-delivery the disponent owner (or their agent) may itself enter upon and repossess the vessel.  In addition we, the disponent owner, hereby reserve all of our rights in relation to the above vessel under the bareboat charter or otherwise.”

7                     While redelivery was demanded, no port was nominated.  On 30 December 1998 the acting President of Kamchatka sent a telex to Sovcomflot in the following terms:

“We have already made clear to you that we are not indebted to you as claimed by you or at all and deny that any contractual right exists on your part to terminate our possession of the above vessel.  We have furthermore reserved all our rights in relation to the above vessel and continue so to do.  Our review of your recent conduct has led to a review of the overall position and we have been advised that your conduct in purporting to take the above vessel on hire-purchase with a similar contract on to us is unlawful.  We anticipate that similar arguments as have been put to us may well apply as regards the respective obligations of yourselves and of the Ministry of Transport towards Mitsubishi Corporation and its nominee, Aurora Navigation S.A.

We therefore propose to apply to a competent court of jurisdiction for directions in the matter and do not propose to return possession of the above vessel to you or to whoever may be entitled thereto until a final determination has been made.  We confirm that pending the same we will use our best endeavours to maintain the above vessel in a thoroughly efficient state in hull machinery and equipment and will account for any profits made in accordance with the court’s direction.

The High Court of Justice in London is a competent court to determine the dispute regarding our respective rights and obligations to whose jurisdiction we are willing to submit.  Please confirm that you in turn are willing (to) have the matter decided accordingly and let us have the name of the person on whom proceedings may served.

We also note that we are awaiting to hear from you as to your undertaking to refrain from arresting seizing or otherwise detaining the above vessel pending an amicable solution a final court decision.  Please let us have your response on this issue within the next five (5) business days.”

8                     It is at least implicit in this telex that Kamchatka intended to continue to use the Vessel for trading as it had done, to that point, as a demise charterer, pending a resolution of the issues identified in the telex.  I infer Sovcomflot was, by the telex, made aware that Kamchatka would do so. 

9                     It is convenient to set out now the provisions of the 1993 sub-demise charterparty  between Sovcomflot and Kamchatka on which the operation of these telexes from Sovkomflot depended.  The character of the agreement is described, correctly, in the recitals as a “Bareboat Charter with Purchase Agreement”.  The terms upon which Kamchatka  was in possession of the Vessel after delivery of the Vessel are found in articles 2(1) and (2), 4(3), 5(1) and 6(1) of the agreement which provide: 

“ARTICLE 2 (Demise of Vessel and Charter Period)

(1)       Subject to the terms and conditions of this Agreement, the Disponent Owner hereby agrees to let and sub-demise the Vessel to the Charterer, and the Charterer hereby agrees to hire the Vessel from the Disponent Owner for the Charter Period.

(2)       The Disponent Owner and the Charterer mutually agree that upon the Charterer’s fulfilment of the terms and conditions set forth herein the title to the Vessel shall pass to the Charterer and that the role of the Disponent Owner contemplated hereunder shall be, in effect, that of a lessor.

ARTICLE 4 (Delivery of Vessel)

(3)       The Charterer shall have the right to the use and operation of the Vessel in accordance with the provisions of Article 5 hereof from the date the Vessel is delivered to the Charterer hereunder.


ARTICLE 5  (Custody and Use of Vessel)

(1)       The Vessel shall at all times be the sole and exclusive property of the Owner or Disponent Owner as the case may be.  The Charterer shall have no right, title or interest in or to the Vessel except that the Charterer shall, subject always to the terms and conditions of this Agreement, have full use and exclusive possession and control and jurisdiction over the Vessel and shall use and operate the Vessel under Russian flag and shall man, maintain, repair, bunker, supply and victual the Vessel, all at the charterer’s own expense and by its own procurement from the date the Vessel is delivered to the Charterer hereunder.

ARTICLE 6 (Maintenance of Vessel)

(1)       Throughout the Charter Period, the Charterer, always at its own expense, procurement and risk, shall have exclusive control of the Vessel and shall be charged with full responsibility for its possession, maintenance and repair, surveys and special surveys, manning, use, navigation and operation.  The Charterer shall at all times maintain and preserve the Vessel in good running order and repair so that the Vessel shall be tight, staunch, strong and well and sufficiently tackled, apparelled, furnished, equipped and in every respect seaworthy.”

In the recitals to the Agreement, Aurora is identified as “the Owner”, Sovcomflot as “the Disponent Owner” and Kamchatka as “the Charterer”.  Article 11 of the agreement deals with default and Aurora’s and Sovcomflot’s remedies in the event of default.  Article 11(2)(a) provides:

“(2) (a)  If any Event of Default occurs and is not remedied within seven (7) business days from the date of telex notice by the Owner or Disponent Owner as the case may be to the Charterer, then the Owner or Disponent Owner may, by telex notice to the Charterer, forthwith terminate this Agreement and upon such termination the Charterer shall forthwith pay to the Owner or Disponent Owner as the case may be a sum equal to the then outstanding Charter Hire Principal together with all other sums then due and unpaid under this Agreement and any other indebtedness of the Charterer under other agreements with the Owner and Disponent Owner and interest on the Charter Hire Principal calculated at the Default Rate for such period of time as the Charter Hire Principal remains overdue, whereupon the Charterer’s obligation to pay the Charter Hire shall cease and the Owner or Disponent Owner as the case may be shall thereupon transfer title to the Vessel to the Charterer in the manner mutatis mutandis provided in Articles 17 and 18 below.”

It is to be recalled that the agreement is characterised, correctly, in the recitals as a “Bareboat Charter with Purchase Agreement”.  It is this agreement that may be terminated pursuant to a notice given under article 11(2)(a).  The obligation of Kamchatka to pay amounts due to Sovcomflot is dealt with in article 3 which includes:

“ARTICLE 3 (Charter Hire and Other Payments)

(1)…

(4) After the acceptance of the delivery of the Vessel by the Charterer, the obligation of the Charterer to pay the Charter Hire and other sums required to be paid under this Agreement is absolute and unconditional and shall not be subject to any right of setoff, counterclaim, defense, suspension, deferment or reduction.  Except as specifically provided in this Agreement, the Charterer shall not have any right to terminate this Agreement or to be released, relieved, or discharged from any obligation or lability under this Agreement by any circumstance whatsoever …” 

Article 11(2)(b)(i) deals with the sale of the Vessel:

“(b) (i)  If the Charterer fails to pay the sum equal to the then outstanding Charter Hire Principal and such other sums as aforesaid the Owner or Disponent Owner as the case may be may, after such termination, sell the Vessel free of any charter, lease or other engagement concerning her within the reasonable range of the market price prevailing at the time of sale of the Vessel on cash terms.” 


The use of the Vessel pending its sale under these provisions is dealt with by article 11(2)(c):


“(c)  Pending any sale of the Vessel by the Owner or Disponent Owner as the case may be as aforesaid the Owner or Disponent Owner may hold, use, operate, charter, lease or keep the Vessel idle, as the Owner or Disponent Owner in its sole discretion may determine, all free and clear of any rights of the Charterer and without any duty to account to the Charterer with respect to such action or inaction, provided that such acts of the Owner or Disponent Owner shall be performed in order to minimize the indebtness of the Charterer.  Any net income derived from the use of the Vessel as aforesaid shall be deemed to form part of the Gross Sale Proceeds, provided always that if such use of the Vessel results in the Owner or Disponent Owner suffering a loss, then such loss shall be account of the Owner or Disponent Owner.”   


The redelivery of the Vessel after termination of the agreement is dealt with by article 11(2)(d):


“(d)  Upon the receiving of any notice of termination under the provisions of this Article the Charterer shall, if required by the Owner or Disponent Owner as the case may be restore the Vessel to the condition in which she was at the time she was delivered to the Charterer hereunder except for ordinary wear and tear and subject to changes allowed under Article 7 hereof and re-deliver the Vessel to the Owner or Disponent Owner as soon as possible thereafter at such safe port as the Owner or Disponent Owner may nominate, failing which re-delivery the Owner or Disponent Owner (of their agent) may itself enter upon and repossess the Vessel.”

10                  After the exchange of telexes in late December 1998, Kamchatka continued to deploy the Vessel for the carriage of goods.  It appears it loaded the goods the subject of these proceedings in early January 1999 in Singapore and Port Kelang, Malaysia for carriage to Sydney or Newcastle.  It is not clear when the Vessel entered the Port of Brisbane but on 22 January 1999 solicitors acting for Sovcomflot commenced proceedings in the Queensland Registry of this Court seeking possession and delivery of the Vessel and damages.  It also sought an arrest warrant which issued that day and was executed on 25 January 1999.  On 26 January 1999, Kamchatka telexed Sovcomflot asking that Sovcomflot instruct its solicitors “to transfer the arrest procedure for [the Vessel] from Brisbane to Newcastle where she could be discharged in order to avoid additional claims on the part of the consignees”.  This did not happen and on 3 February 1999, solicitors acting for Sovcomflot telexed Kamchatka.  There was an issue about whether these telexes were received though I am satisfied they were.  They purported to accept Kamchatka’s repudiation of the 1993 sub-demise charterparty .  For reasons which will become apparent shortly, it is unnecessary to dwell on these telexes in so far as they are relied on by Sovcomflot to evidence the termination of the 1993 sub-demise charterparty .

11                  On 5 February 1999 a meeting took place in Moscow attended by representatives of Kamchatka, Sovcomflot and Aurora.  I am satisfied there was only one meeting and not two as suggested by counsel for CMC.  There are in evidence two written records of the same meeting which diverge in several material respects as to what was discussed and resolved.  The two records identify the same individuals as having attended.  The divergence probably reflects the perceptions of the person who created the record about what was discussed and agreed.  One record is signed by Mr Lugovets, the First Deputy Minister for Transport of the Russian Federation and Head of the Marine Fleet Service.  He appears to have chaired the meeting.  However as the evidence does not disclose there has been an adoption of the signed version of the minutes by a later meeting, I treat the two records as both providing some evidence of what occurred.  It is probable that it was agreed that Kamchatka would give up possession of seven timber carriers to Sovcomflot and some financial adjustments made between the parties. 

12                  During February 1999, correspondence passed between Kamchatka and Sovcomflot about the fate of various vessels and on 17 February 1999 Sovcomflot telexed Kamchatka requesting that immediate steps be taken to transfer possession of three vessels including the Vessel and to confirm its agreement to redeliver the vessels.  In my opinion these are to be taken to be references to the physical possession and redelivery of the vessels in question.  It should be noted that it appears that throughout this period, and subject to the legal effect of the telexes of late December 1998, the Vessel was time chartered by Jebsens Orient Shipping Services A/S as the result of the extension of a charterparty executed on 23 January 1998 for an initial time charter of three months.   

 

Particulars of the challenge to jurisdiction

13                  In order to understand the issues in the present proceedings it is convenient to set out Sovcomflot’s particulars of the challenge to the Court’s jurisdiction.  They read:

“1.       The Amended Writ names as the “Relevant Person” “Kamchatka Shipping Company and/or Sovremenniy Kommercheskiy Flot and/or Aurora Navigation SA as owner or demise charterer”.

2.         “Relevant person” is defined in section 3 of the Admiralty Act as “in relation to a maritime claim, a person who would be liable on the claim in a proceeding commenced as an action in personam”.

3.         The only party which could be a “relevant person” for the purposes of establishing jurisdiction under Part III of the Admiralty Act was Kamchatka Shipping Company as it was the only one of the 3 persons described as a relevant person who could be liable to the plaintiff in an action commenced as an action in personam.  Kamchatka through its servant or agent Captain Sergey issued the Bills of Lading SY2-SY9 referred to in the Amended Writ.

4.         Sovremenniy Kommercheskiy Flot and/or Aurora Navigation SA, not being liable under the Bills of Lading, could not be relevant persons for the purposes of Part III of the Admiralty Act

5.         As at the date of commencement of proceedings, Kamchatka was not an owner or a demise charterer of the vessel.

6.         In the premises, the Federal Court of Australia does not have jurisdiction under the Admiralty Act 1988 (C’wth) to entertain the in rem proceedings.”


Relevant Legislative Provisions

It is convenient to set out various provisions of the Act.  Section 3 of the Act contains the following definitions:


"maritime claim", "general maritime claim " and "proprietary

maritime claim " have the meanings given by section 4;

"relevant person", in relation to a maritime claim , means a

person who would be liable on the claim in a proceeding

commenced as an action in personam;

The expanded definition of maritime claims in s 4 is:

“4.    Maritime claims

  (1)   A reference in this Act to a maritime claim is a reference to

        a proprietary maritime claim or a general maritime claim.

  (3)   A reference in this Act to a general maritime claim is a

        reference to:

            (a) …

            (d)        a claim (including a claim for loss of life or personal injury) arising out of an act or omission of:

              (i)   the owner or charterer of a ship ;

              (ii)  a person in possession or control of a ship ; or

              (iii) a person for whose wrongful acts or omissions the

                    owner, charterer or person in possession or

                    control of a ship is liable;

.

                    being an act or omission in the navigation or

                    management of the ship , including an act or

                    omission in connection with:

              (iv)  the loading of goods on to, or the unloading of

                    goods from, the ship;

              (v)   the embarkation of persons on to, or the

                    disembarkation of persons from, the ship; and

              (vi)  the carriage of goods or persons on the ship;

        (e)   a claim for loss of, or damage to, goods carried by a

              ship;

        (f)   a claim arising out of an agreement that relates to the

              carriage of goods or persons by a ship or to the use or

              hire of a ship , whether by charterparty  or otherwise;

        (g) …”


Part II of the Act deals with the jurisdiction inAdmiralty of this and other courts.  Sections 9 and 10 provide:

“9.    Admiralty jurisdiction in personam

  (1)   Jurisdiction is conferred on the Federal Court and on the

        courts of the Territories, and the courts of the States are

        invested with federal jurisdiction, in respect of proceedings

        commenced as actions in personam:

        (a)   on a maritime claim; or

        (b)   on a claim for damage done to a ship.

  (2)   Subsection (1) does not confer on a court other than the

        Federal Court or a Supreme Court of a Territory, or invest a

        court of a State other than the Supreme Court of a State with,

        jurisdiction in respect of limitation proceedings.

  10.   Jurisdiction of superior courts in respect of Admiralty

        actions in rem

  Jurisdiction is conferred on the Federal Court and on the Supreme

  Courts of the Territories, and the Supreme Courts of the States are

  invested with federal jurisdiction, in respect of proceedings that

  may, under this Act , be commenced as actions in rem.”

14                  Part III of the Act is entitled “Rights to Proceed in Admiralty”.  It is desirable to set out the several sections of this part.  They provide:

“14.   Admiralty actions in rem to be commenced under this Act

In a matter of Admiralty or maritime jurisdiction, a proceeding

shall not be commenced as an action in rem against a ship or other

property except as provided by this Act.

17.   Right to proceed in rem on owner's liabilities

Where, in relation to a general maritime claim concerning a ship or

other property, a relevant person:

        (a)   was, when the cause of action arose, the owner or

              charterer of, or in possession or control of, the ship

              or property; and

        (b)   is, when the proceeding is commenced, the owner of the

              ship or property;

              a proceeding on the claim may be commenced as an action

              in rem against the ship or property.

 

  18.   Right to proceed in rem on demise charterer's liabilities

  Where, in relation to a maritime claim concerning a ship, a

  relevant person:

        (a)   was, when the cause of action arose, the owner or

              charterer, or in possession or control, of the ship; and

        (b)   is, when the proceeding is commenced, a demise charterer

              of the ship;

              a proceeding on the claim may be commenced as an action

              in rem against the ship.”

 

The General Legislative Scheme

15                  Jurisdiction is conferred on this Court by s 10 of the Act in respect of proceedings that may be commenced as actions in rem.  Section 14 declares that proceedings shall not be commenced as an action in rem against a ship except as provided by this Act.  Thus the jurisdiction conferred by s 10 is dependent upon the proceedings having the character of being a proceeding provided by the Act.  The relevant sections relied on by CMC that might, for present purposes, provide for a proceeding are ss 17 and 18.  Nothing of substance was put that would make s 17 relevant. 

16                  Section 18 contains several elements, the existence of which give a proceeding the character of a proceeding provided by the Act.  First there must be a maritime claim concerning the ship.  What is a maritime claim is answered by s 4 and, for present purposes, by s 4(3)(d)(e) or (f).  In addition to there being a maritime claim concerning a ship there must be a person who is both a relevant person and a person who satisfies both paras (a) and (b) of s 18.  Those paragraphs are satisfied if the person was, when cause of action arose, the owner or charterer or in possession or control of the ship and was, on 5 February 1999, (which is the time at which the proceedings commenced) a demise charterer of the ship.  That person must also be a relevant person.  The definition of relevant person directs attention to whether the person would be liable on the claim in proceedings commenced in personam.  This means a person who, if the case necessary to establish liability were made out, would be liable: see Owners of theIran Amanat” v KMP Coastal Oil Pte Ltd (1999) 161 ALR 434.  Thus, if it cannot be shown that the person could be liable then that person is not a relevant person.

The Contentions of the parties

            The submissions of Sovcomflot were comparatively straightforward.  First, if a challenge to jurisdiction is made, generally the party asserting jurisdiction is bound to follow the course identified by the High Court in The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 426:

“Where jurisdiction depends on particular facts or a particular state of affairs, a challenge to jurisdiction can only be resisted by establishing the facts on which it depends.  And, of course, they must be established on the balance of probabilities in the light of all the evidence advanced in the proceedings held to determine whether there is jurisdiction.”

17                  CMC did not put in issue that it was required to approach the matter this way.  The gravaman of Sovcomflot’s case was that none of Aurora, Sovcomflot or Kamchatka were both a relevant person and a person satisfying the characteristics identified in s 18.  While Aurora and Sovcomflot were the owner and charterer of the Vessel when the cause of action on the bills of lading arose in January 1999, and Sovcomflot was the demise charterer on 5 February 1999 when CMC commenced these proceedings, Kamchatka was not.  Yet, Sovcomflot contended, Kamchatka was the only person named as a relevant person who could satisfy the definition of relevant person.  Counsel for Sovcomflot undertook, perhaps unnecessarily, the burden of demonstrating Aurora and Sovcomflot were each not a relevant person as neither could be liable on the claim based on the bills of lading if a proceeding was brought against either in personam

18                  The first submission of CMC was that by merely asserting a claim in documents regularly filed and identifying Aurora, Sovcomflot and Kamchatka as relevant persons the jurisdiction of the Court was invoked so as to authorise, notwithstanding the challenge to jurisdiction, the Court embarking upon a hearing of the claim on its merits.  It was also submitted by CMC that Kamchatka was a relevant person (a matter not in issue) and that Kamchatka was either a charterer or in possession or control of the Vessel in January 1999 and was a demise charterer on 5 February 1999.  That latter matter raises the issue of whether the 1993 sub-demise charterparty was terminated before 5 February 1999 and the nature of Kamchatka’s possession of the Vessel.  CMC puts in issue that the charterparty had been terminated though bears the burden of establishing it was not: see Lloyd Werft Bremerhaven GmbH v Owners of Ship Zoya Kosmodemyanskaya (1997) 79 FCR 71.  A further submission of CMC was that on Sovcomflot’s contentions, Sovcomflot was a demise charterer in both January 1999 and on 5 February 1999.  The claims made by CMC are not restricted to actions on the bills of lading themselves.  The failure to deliver the goods in question in accordance with the terms of the bills arose from the conduct of Sovcomflot in arresting the Vessel in Brisbane.  That constituted conduct actionable as a general maritime claim of the type identified in s 4(3)(d) or (e).  Moreover, Sovcomflot and Aurora may be liable on the bills if entered into on their behalf by the master.  Jurisdiction arises from the making of the claim and not the strength of the claim: The “Iran Amanat” especially at paras 17 to 21.    


Consideration of the principal issues

(a)        The status of Kamchatka for the purposes of s 18.

19                  A central issue in these proceedings was whether, for the purposes of s 18, Kamchatka was the charterer or in possession or control of the Vessel when CMC’s cause of action arose and a demise charterer when the proceedings commenced.  Counsel for CMC contended the cause of action arose on or shortly after 22 January 1999 when Sovcomflot commenced the proceedings in the Queensland registry leading to the arrest of the Vessel which prevented delivery of CMC’s goods in accordance with the bills of lading.  What was the relevant time for the purposes of s 18(a) and Kamchatka’s status at that time was not the focus of the submissions of the parties.  Rather the focus was on whether, on 5 February 1999 when CMC commenced these proceedings, Kamchatka was a demise charterer of the Vessel: see s 18(b).  It is to this issue that I now turn. 

20                  To resolve that question it is first necessary to consider the effect of the notices given by Sovcomflot in December 1998.  In my opinion, the 1993 sub-demise charterparty was intended to operate in this way.  First Kamchatka was by operation of articles 4(3), 5(1) and 6(1) to have possession and exclusive control of the Vessel throughout the charter period (defined in article 2) which is the period commencing from the delivery of the Vessel to the date of the last payment in accordance with the payment schedule.  If Kamchatka defaulted, Sovcomflot could terminate the agreement (article 11(2)(a)) with at least four possible consequences. The first was that payment was immediately made by Kamchatka of all outstanding amounts and title to the Vessel would be transferred to Kamchatka (article 11(2)(a)).  That obligation to pay was a continuing one (article 3(4)(i)).  Second Sovcomflot could exercise its power to sell free of any charter (article 11(2)(b)(i)) and pending such sale, hold, use, operate, charter, lease or keep idle the Vessel (article 11(2)(c)).  Third Sovcomflot could demand redelivery at a nominated port though if the demand was not complied with, exercise a right to enter upon and reposses the Vessel (article 11(2)(d)).  A fourth consequence was that none of these events occured as happened in the present case.  That is, Kamchatka did not pay all outstanding amounts, Sovcomflot did not purport to exercise a power of sale and Sovcomflot did not demand redelivery at a nominated port.  The question that then arises is the nature of the relationship between Sovcomflot and Kamchatka and whether Kamchatka remained a demise charterer when Kamchatka remained in at least physical possession and control of the Vessel. 

21                  A broadly similar situation was considered by Tamberlin J in Patrick Stevedores No 2 Pty Ltd v MV “Turakina” (1998) 154 ALR 666.  The Turakina was sub-demise chartered by South Pacific Shipping Ltd (“SPS”) from Deil Shipowners BV (“Deil”).  The vessel was arrested on 19 February 1998.  On 18 February 1998 Deil wrote to SPS stating the charterparty was terminated with immediate effect.  There was no express power to terminate, at least of the type involved.  Redelivery was directed.  In issue was whether at the time of arrest, SPS was a demise charterer for the purposes of s 18.  The charterparty provided that the vessel was to be in the full possession and complete control of SPS during the charter period.  It also provided that Deil had, after default in payment of hire, a right to withdraw the vessel but that the hire of the vessel was to continue until redelivery. 

22                  After setting out the facts and the relevant provisions of the charterparty , Tamberlin J discussed the nature of a demise charter and the effect of withdrawal of a vessel from the charter.  As to what were the characteristics of a demise charter, his Honour said at 671:

“A charter by demise is one by which the owner parts the whole possession and control of the ship and gives the charterer a power and right independent of him and without reference to him to do what he pleases with the regard to the appointment and employment of crew: Sandeman v Scurr [1866] LR 2 QB 86 at 96; Baumvoll Manufactur von Scheibler v Gilchrist [1892] 1 QB 253 at 259; Australasian United Steam Navigation Co Ltd v Shipping Control Board (1945) 71 CLR 508 at 521-2, 525, 526-7, 528; see also Scrutton on Charterparties, 20th edn at 59-60.  As Scrutton points out, a charter by demise operates as a lease of the ship itself to which the services of the master and crew may or may not be super-added.”

23                  His Honour then considered the effect of withdrawal of the vessel.   That is, the effect of an intimation by Deil that SPS had to redeliver the vessel and the charterparty  was terminated.  Reference was made to the Agios Giorgis [1976] 2 Lloyd’s Rep 192, The Aegnoussiotis [1977] 1 Lloyd’s Rep 268, Scrutton on Charterparties (20th ed. 1996), A/S Tankexpress v Campagnie Financiere Belge des Petroles SA (1948) Ll L Rep 43, Sea and Land Securities Ltd v William Dickinson and Co Ltd [1942] 2 KB 65 and Italian State Railways v Mavnrogordatos [1919] 2 KB 305.  His Honour concluded by first discussing what might constitute withdrawal and redelivery at 675: 

“Although the above authorities do not expressly decide that redelivery of possession is necessary in order to terminate a charter by demise, they proceed on the basis that there is a significant distinction between a time or voyage charter and a demise charter.  This distinction resides in the fact that in a non-demise charter there is no requirement for delivery or transfer of possession to the charterer at the commencement of the charter.  Accordingly, redelivery cannot require a transfer back of possession. In such a case, the services provided to the charterer are terminated upon notice of withdrawal.  However, in the case of a demise charter the vessel itself is let and possession is taken by the charterer.  Therefore, once the vessel is withdrawn from the service of the charterer, an obligation to redeliver possession arises because possession has been delivered at the commencement of the charter.  Redelivery, in its natural and ordinary meaning, denotes a delivery back of that which was originally delivered.  Upon withdrawal, if the charterer refuses to redeliver possession, there will be a repudiation by the charterer, which could then be accepted by SPS.  It is clear that if an owner is entitled to treat the breach as a repudiation or on behalf accepts the repudiation the charter is thereafter at an end: “The Munster” [1983] 1 Lloyd’s Rep 20, on appeal, [1983] 1 Lloyd’s Rep 70, “The Gregos” [1995] 1 Lloyd’s Rep 1 at 9.”

Tamberlin J then dealt with a submission that the possession of the vessel by SPS was, in some respects, qualified (at 675-76):

“The appellant submits that once notice of withdrawal of the ship from service of the charterer is given, the charterer has lost that complete possession and control which is the distinguishing hallmark of a demise charter. The charterer is then under an obligation to give back possession of the vessel at the direction of the owner and its status as a demise charterer is, from the time when withdrawal is notified, reduced to that of an involuntary bailee.

One answer to this submission, in my view, is that 10(a) of the charter contemplates the continued payment of hire under the charter until the day and hour of redelivery of the possession of the vessel.  That redelivery had not taken place before the arrest proceedings were commenced.  The letter of 18 February 1998 itself contemplates “redelivery” to the possession of the beneficial owner and to the taking of possession after termination.  The language used indicates that possession is to be taken by subsequent redelivery to Deil.  In the case of a true demise charter, such as the present, there is no difficulty in construing the requirement of “redelivery” in its ordinary and natural sense; meaning the giving back that which was originally given.

The language of the charter, in the present case, supports this conclusion.  It provides in detail for delivery of possession of the ship to the charterer and also for redelivery of that possession by the charterer: see cll 1, 2, 3, 4, 5, 8, 10 and 13, and also Boxes (b) 13, 14, 16 and 30.  The ship is, during the charter period, in the possession and absolute control of the charterer: see cl 9.  The wording of cl 10 does not refer in terms to “termination” of the charterparty.  In this respect it is noteworthy that cl 23, which relates to compulsory acquisition, makes particular reference to the charter being “terminated” and to hire being paid only up to the date and time of the compulsory acquisition: cl 23(b).  This contrasts with the provision of the present demise charter to the effect that hire continues to be payable under it until redelivery, which indicates that the charterparty obligations continued to operate after notice of withdrawal.”

The next issue addressed by Tamberlin J was whether there had been redelivery of the vessel (at 676):

“As at the time of commencement of the arrest proceedings there had been no redelivery of the vessel of possession.  There has been no act of actual or symbolic delivery of possession.  Nor was there any attornment or statement of intent by the charterer to the effect that possession was surrendered or redelivered.  The evidence does not indicate that any or that any steps had been taken by or on behalf of SPS to redeliver possession of the vessel to Deil prior to commencement of the arrest proceeding.  As mentioned earlier in these reasons a mere notification by the owner that redelivery is required does not itself amount to redelivery.  Having regard both to the language of the demise charter, and the indications in the authorities as to the different character of a demise charter which confers an interest in the vessel and possession, my conclusion is that the notice of withdrawal in the present case did not operate to terminate the charter at the time arrest proceedings were instituted.”

24                  Tamberlin J went on to reject a submission that there had been constructive redelivery of the vessel by Deil’s notice of withdrawal.  His Honour’s conclusion that SPS was the demise charterer on 19 February 1998 was based both on the fact that Deil retained physical possession of the Vessel and also that, as a matter of construction, the charterparty  provided that SPS remained both in possession and absolute control of the vessel and liable for hire until there had been redelivery of possession to Deil.   

25                  The parties in these proceedings did not rely on a recent judgment of Clarke J and, on appeal, the Court of Appeal in The Guiseppe di Vittorio [1998] 1 Lloyd’s Rep 136 which appears to me to be relevant.  The facts in those proceedings were that the plaintiffs supplied bunker fuel to the vessel and commenced proceedings in rem to recover the cost of the fuel.  It was common ground that when the bunkers were supplied, the Black Sea and Shipping Co (“Blasco”) was in possession of the vessel.  The jurisdiction of the court was challenged on several grounds including that Blasco was not the charterer of the vessel under a charter by demise: see s 21(4) of the Supreme Court Act 1981 (UK).  The vessel was beneficially owned by the Republic of Ukraine.  Clarke J rejected an argument that beneficial ownership had vested in Blasco.  However Clarke J accepted that Blasco could be treated as a charterer by demise because it had all or almost all of the attributes, rights and duties of a charterer by demise even though there was no contract creating the charter by demise.  It is unnecessary to recount in detail the facts leading to that conclusion but Blasco was described by Clarke J as a statutory contractor.  In his reasons, Clarke J made the following observations about what constitutes a demise charter at 143:

“I accept Mr. Macdonald’s submission that in ordinary commercial parlance the expression “demise charter” contemplates an agreement between owner and demise charterer.  However, if regard is had to the purpose of art. 3(4) of the Arrest Convention and thus of s.21(4) of the 1981 Act it would, in my judgment, be too narrow a view to hold that the expression used in the Convention and the Act should be restricted to relationships created by private agreement.  The purpose of the Convention and the statute was to enable a person with a maritime claim of the kind set out in s.20(2)(e) to (r) of the Act, such as the plaintiffs’ claim here, to arrest a ship owned by or demise chartered to the person liable in personam.   A demise charterer is essentially a person who has possession of the vessel with the consent of the owner and who both manages it and employs the crew on his own account.  In the course of operating the vessel such a person is likely to incur debts of which liability for the cost of bunkers is a typical example.  The purpose of both the Convention and the statute was, as it seems to me, to enable the claimant in such a case to look to the vessel and not just to the demise charterer for the satisfaction of his claim.  In these circumstances I see no reason to give the words “charterer of it under a charter by demise” a narrow meaning, provided that the words are capable of the meaning suggested.

In my judgment if the person concerned has the rights and obligations equivalent to those of a demise charterer by contract the above expression in both the Convention and the statute should be construed so as to include him.  To take that course would be to construe them consistently with their purpose whereas not to do so would leave a claimant in such a case without the right to arrest for no sensible reason, which would be contrary to the purpose of both the Convention and the statute.”

  

The Court of Appeal agreed with the conclusion of Clarke J on this issue.  The leading judgment was given by Evans LJ.  At one point in his judgment, his Lordship considered the long standing authority of Baumvoll Manufactur von Scheibler v Gilchrest, both in the Court of Appeal; [1892] 1 QB 253, and the House of Lords; [1893] AC 8, and said at 157:

“Generally, the judgments show that the Court was concerned with the issue whether the master of a demise-chartered ship, dealing with third parties who have no knowledge of the charter terms, has power to, as it was put, pledge the owner’s credit.  The House of Lords’ judgment, in my respectful view, can be restated in a contemporary idiom, as follows: when the vessel is demise chartered in fact, then without more the master does not have ostensible authority to bind the registered or “actual” owners of the vessel.”


On the question of what is a demise charter, Evans LJ said at 156:


“What then is the demise charter?  Its hallmarks, as it seems to me, are that the legal owner gives the charterer sufficient of the rights of possession and control which enable the transaction to be regarded as a letting – a lease, or demise, in real property terms – of the ship.  Closely allied to this is the fact that the charterer becomes the employer of the master and crew.  Both aspects are combined in the common description of a “bareboat” lease or hire arrangement.

It is also evident from the authorities that the status of demise charterer depends on the nature of the charterer’s rights rather than the extent to which he has exercised them in fact.  Of course, if he does not use the vessel for trading and does not employ a master and crew, then there will be no claims arising from the ship’s or their activities for which he might by [sic] held personally or vicariously liable, but if there was some other claim for which a demise charterer is liable e.g. salvage then the fact that he was not using the vessel would not be a defence.

On the other hand, in order to discover what the charterers’ rights are and whether they are sufficient to amount to a letting of the ship, it is necessary to consider the terms of the charter agreement, when such an agreement exists.”

26                  The expression “demise charterer” should, in s 18(b) of the Australian legislation, be approached on the same footing as the expression “a charterer of the vessel under a charter by demise” in s 21(4) the UK legislation: see The “Iran Amanat” at para 20.  That is, it should not be narrowly construed and should be construed in a way that enables, in appropriate circumstances, a maritime claim to be pursued by recourse against the vessel and not simply the charterer.  However even if the expression “demise charterer” in s 18(b) is to be treated as referring to the status of the party, as appears to have been the approach adopted in the “Gusseppe di Vittorio” (see also The “Tychy” [1999] 2 Lloyd’s Rep 11 at 23 for a consideration of the status of a charterer), it is a status usually deriving from the contractual relationship between the owner (or a person who is to be treated as the owner) and the charterer.  In my opinion, consistent with the approach of Tamberlin J in The “Turakina” and Evans LJ in The “Guiseppe di Vittorio”, it is necessary to ascertain from the terms of the charterparty whether continuing physical possession of a vessel by the charterer (pending the taking of physical possession by the owner either by redelivery or some other means) is co-extensive with continuing possession and absolute control of the vessel of the type characteristic of a demise charter.   

27                  In the present case the structure and terms of the 1993 sub-demise charterparty are materially different to those of the charterparty considered by Tamberlin J in The “Turakina” and there is a clear contractual right conferred by article 11(2)(a) on Aurora or Sovcomflot to terminate the 1993 sub-demise charterparty by giving a telex notice.  It was exercised by Sovcomflot.  There was no equivalent power to terminate in the charterparty considered by Tamberlin J.  The notice of termination given by Sovcomflot on 15 December 1998 under article 11(2)(a) effectively required the immediate (or at least within seven working days) accelerated payment of the entire amount that was payable originally over seventeen instalments though article 11(2)(c) provided for a situation in which Kamchatka failed to make the accelerated payment immediately.  In those circumstances there had to be payment of “interest on the Charter Hire Principal calculated on the Default Rate for such period of time as the Charter Hire Principal remains overdue.”  It is true that the combined operation of articles 4(3) and 5(1) was to give Kamchatka full use and exclusive possession and control of the Vessel from delivery and article 11(2)(d) provided for either redelivery to Aurora or Sovcomflot at a nominated port after notice of termination had been given or for repossession by Aurora or Kamchatka by entry upon the Vessel.  However the 1993 sub-demise charterparty clearly contemplated, in my opinion, the termination of the demise charter by the notice.  Unlike the charterparty in The “Turakina”, the 1993 sub-demise charterparty did not contain provisions which fairly unambiguously point to the continuation of the demise charter pending redelivery of the vessel.  The possession and control of Kamchatka after a notice of termination had been received was not unconditional.  It was possession subject to the rights of Aurora and Sovcomflot to direct redelivery or charter the Vessel.  It was also possession subject to the right of Aurora and Sovcomflot to sell and, pending sale, deal with the Vessel in the various ways described in article 11(2)(c). 

28                  Even accepting that a broad interpretation should be given to the expression “demise charterer” in s 18(b), is difficult to avoid a conclusion that if a charterparty expressly provided for its termination and the power to terminate was exercised, then the charterer ceased to be a demise charterer from the time of termination at least in the absence of provisions in the charterparty that suggested some other result.  The effect of the telex notice of 18 December 1998 was, in my opinion, that at least at the expiry of the seven days in which payment could be made of the amount demanded by Sovcomflot, Kamchatka no longer had an unqualified right to possession and control and thus was no longer a demise charterer for the purpose of s 18(b) on 5 February 1999.

 

(b)        Whether Sovcomflot is a relevant person

29                  However, a conclusion that Kamchatka was not a demise charterer on 5 February 1999 does not conclude the inquiry concerning the Court’s jurisdiction.  Even if Kamchatka, though a relevant person, did not satisfy the criteria in s 18, it is necessary to consider the alternative basis on which CMC contends the Court has jurisdiction.  It is to be recalled that counsel for CMC relied on paragraphs (d), (e) and (f) of s 4(3) of the definition of maritime claim as identifying the basis upon which CMC’s claim is made.  It is clear from these reasons to this point, that Sovcomflot was from at least 27 December 1998, a charterer of the Vessel and, on 5 February 1989, a demise charterer of the Vessel.   Thus, if Sovcomflot was a relevant person the Court’s jurisdiction would be enlivened.

30                  As noted earlier, the question of whether Sovcomflot is a relevant person depends on whether it could be liable, in the way discussed by the High Court in The “Iran Amanat” if an action was brought against it in personam.   It has been long settled that generally in relation to a vessel under demise charter, the owner is not liable under bills of lading signed by a master engaged by the demise charterer even if the shipper is ignorant of the charter: see Baumvoll Manufactur von Scheibler v Gilchrest.  However counsel for Sovcomflot was not able to point to any authority dealing with a situation analogous to the present one.  That is, a situation where the issue of the liability of the owner arose after the demise charter had been terminated, the person who had been demise charterer was not under a direction to redeliver in conformity with the demise charterparty and that person was able to, and did, enter into arrangements to carry goods on the vessel.  In the present case the bills of lading declare the contracting parties to be the “merchant and the owner” of the vessel.  Generally if a vessel is the subject of a demise charter then the demise charterer is to be treated as the owner for the purpose of liability under a bill of lading.  The question that arises in these proceedings is whether that remains so if the demise charter has been terminated. 

31                  Counsel for CMC submitted, in the alternative to its contention that Kamchatka remained the sub-demise charterer throughout early 1999 until at least 5 February 1999, that the bills of lading were signed on the master’s behalf as agent for Sovcomflot or Aurora.  In my view, that submission is not untenable.  If it is accepted that the decision in Baumvoll Manufactur von Scheibler v Gilchrest was based, in part, on the principle that a demise charterer could be treated as the owner for the purposes of liability under the bill: see the observations of Lord Herschale in [1893] AC at 17, then if the demise charter (in this case the sub-demise charter ofKamchatka) has been terminated, the former demise charterer must be liable (and the owner or a person in the position of the owner not liable) under a bill signed by the master solely because the master was employed by the former demise charterer and acted as its agent and only as its agent.  However in a case such as the present an issue of ostensible authority of the master to bind the owner or a person in the position of the owner may arise.

32                  In many situations, other than where there is a demise charter, the master is to be treated as acting as agent for the owner when signing a bill of lading.  The position was summarised by Samuels JA in Kaleej International Pty Ltd v Gulf Shipping Lines Ltd (1986) 6 NSWLR 569 at 572:

“There is a general, although not invariable, rule that, certainly where the shipper is ignorant of the charter (and there is no evidence here that the appellant was aware of the charter to Gulf), a master who signs, or whose agent signs, the bill of lading, contracts with the shipper on behalf of the ship owner: see Namchow (at 572); Carver’s Carriage by Sea, 13th ed (1982) vol 1, pars 704-707 at 517-522; Scrutton on Charterparties, 19th ed (1984) at 69 and Payne and Ivamy’s Carriage of Goods by Sea, 12th ed (1985) at 72 which expresses in one respect a view which seems to me, with respect, to be rather more positive than the cases justify.  In Tillmanns & Co v SS Knutsford Ltd (1908) 2 KB 385 it was held that where the terms of the time charter authorised the charterers to require the master to sign bills of lading, the charterer’s signature “For the captain and owners” bound the ship owners.” 

33                  Whether, in law, Sovcomflot is liable under the bills which declare the contracting parties to be “the merchant and the owner” need not be finally determined now.  That is because the only issue I am presently dealing with is the Court’s jurisdiction. 

34                  The High Court in The “Iran Amanat” treated the expression “a person who would be liable” in the definition of relevant person in s 4, in the context of a challenge to jurisdiction, as comprehending a person whose liability does not simply depend on the proof of facts founding liability by reference to established legal principle.  In speaking of putative liability and hypothetical liability the High Court was not excluding as a relevant person, a person whose liability on the established law was uncertain.  The High Court referred, with approval, to the remarks of Wilmer J in The “St. Elefterio” [1957] P 179 which included:

“… the natural construction of those quite simple words [“the person who would be liable”] is that they mean the person who would be liable on the assumption that the action succeeds.  This action might or might not succeed if it were brought in personam; that would depend upon the view which the court ultimately took of the various contentions raised by [counsel].  But clearly, if the action did succeed, the person or persons who would be liable would be the owner or owners of the steamship St. Elefterio.  In such circumstances, in the absence of any suggestion that the action is a frivolous or vexatious action, I am satisfied that the plaintiffs are entitled to bring it and to have it tried, and that, whether or not their claim turns out to be a good one, they are entitled to assert that claim by proceeding in rem.”

35                  There is no reason to assume that when Wilmer J spoke of “various contentions” his Lordship was excluding contentions of law.  That is, a person can be a relevant person even if, ultimately, it proved to be the case that a contention of law upon which liability depended was not accepted.  It may be that the later reference to “frivolous or vexatious actions” in the passage of Wilmer J’s judgment quoted by the High Court is to be treated as excluding from jurisdiction claims founded on factual or legal contentions that are untenable.  But even so, as I have already indicated, the contention of CMC concerning liability of Sovcomflot is not untenable. 

36                  The High Court also referred, with approval, to the judgment of McPherson ACJ in Ocean Industries Pty Ltd v Owners of the Ship MV “Steven C” [1994] 1 Qd R 69 and his Honour’s reference to hypothetic liability.  McPherson ACJ’s reference to hypothetical liability was preceded by the following at 74:

“The decisions thus show that the function of the expression ‘person who would be liable’ in a context like this is to identify someone having a sufficient connection with the ship as to render him or her personally, and consequently the ship herself, responsible for goods, materials or supplies for its operation or maintenance.  It is concerned not with the question whether in the particular case the defendant in an action in personam (which is assumed by the definition in s 3(1) as its hypothesis) is liable in fact and in law, but whether it can be predicated that the necessary relation exists between the defendant in rem as owner or otherwise and the ship in question.” 

37                  Thus, in ascertaining whether a person is a “person who would be liable” the court is not concerned with, inter alia, the question of whether the person is liable in law.  This accords with what I understand to be the effect of the judgment of the High Court in The “Iran Amanat”.

38                  I am satisfied Sovcomflot is a relevant person and accordingly the Court has jurisdiction to entertain this application.

(c)        Other Matters

39                  In view of the conclusion I have just expressed about the Court’s jurisdiction, it is unnecessary to deal with a range of subsidiary issues.  I should, however, mention one.  Counsel for CMC submitted that because, on 3 March 1999, Sovcomflot filed an unconditional appearance, it is to be taken to have been accepting or submitting to the Court’s jurisdiction.  Rule 23 of the Admiralty Rules provides that an appearance in proceedings commenced as an action in rem shall be filed within 21 days.  Rule 23(2) directs:

“(2)     an appearance shall be in accordance with Form 9.”

40                  Form 9 of the Admiralty Rules is, in terms, an unconditional appearance and allows, by way of completion of the form, only for the identification of the appearing party, the specification of the relationship of the appearing party with the vessel or property in question and the identification of an address for service. Order 6 of the Admiralty Rules provides that they are not intended to exclude or limit the operation of, relevantly, the Federal Court Rules to the extent that those latter rules are not inconsistent with the Admiralty Rules or indeed the Act.  The Federal Court Rules provide for the entering of a conditional appearance: see O 9 r 7.  Counsel for CMC referred to The Banco [1971] P 137 at 151 and The August 8 [1983] 2 AC 450 at 456.  However these authorities deal with the well settled principle that by entering an appearance a defendant in proceedings in rem is exposed to liability in personam.  Unlike the Admiralty Rules in Australia, O 12 r 7 of the United Kingdom Supreme Court Rules provides for the entry of conditional appearances in Admiralty matters.

41                  I discussed what is comprehended by the notion of unconditional and conditional appearances in Robinson v Kuwait Liaison Office (1997) 145 ALR 68 at 75:

“A person may appear in a court by announcing an appearance or, if the Rules of the Court so provide, by filing a notice of appearance.  The appearance may be unconditional in which case it generally amounts to a submission to the jurisdiction of the court and a waiver of any irregularity such as one concerning the manner of service: see Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 at 539; 11 ALR 227, per Gibbs J.  A conditional appearance constitutes an appearance for the purposes of the litigation, subject to a right to apply to set aside the originating process: see Trade Practices Commission v Gillette Co (No 1) (1993) 45 FCR 366 at 369-70; 118 ALR 280; Westpac Banking Corp v P&O Containers Ltd (1991) 105 ALR 90 at 93-4; for reasons relating to service or other reasons: see Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 58 FCR 365 at 370; 136 ALR 733.

If the court does not have rules regulating the manner of appearing, then issues will arise about the consequences of a party appearing before articulating an objection to jurisdiction.  In Lindgran v Lindgran [1956] VLR 215, Smith J concluded that a party had not waived an objection to jurisdiction arising from defective service of the originating process by consenting to an adjournment and, on a later occasion, by appearing through counsel who announced an appearance before raising an objection to jurisdiction.  His Honour said at 220 that to waive objection to jurisdiction:

            [There] must at least be words or conduct of such a nature that an inference can properly be drawn therefrom that the party alleged to have waived the objection does not intend to rely upon it: cf Ray v Justices of Melbourne (1981) 17 VLR 186; Brokenshire v Bacon (1895) 1 VLR 273; Re Melbourne Democratic Club (1901) 27 VLR 88; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326; see also Hampden v Wallis (1884) 26 Ch D 746; Rein v Stein (1892) 66 LT 469, per Cave J at 471-2.

The prosecution of an application to set aside orders on ground that the court did not have jurisdiction to make them because there had been ineffective service of the originating process, while raising grounds touching the merits, does not constitute a waiver of the right to object to jurisdiction: see Laurie v Carroll (1958) 98 CLR 310 at 335-6; see also National Commercial Bank v Wimborne (1979) 11 NSWLR 156 at 176-83.  A recent example of the application of these principles is found in Williams v Society of Lloyds [1994] 1 VR 274 in which McDonald J concluded that a request for particulars of a claim did not constitute a waiver of the right to object to jurisdiction.” 

             

In the present case the unconditional appearance was filed after the lodgment of the notice of motion to strike out the proceedings.  In filing the appearance in the terms they did, the solicitors for Sovcomflot simply did as r 23(2) of the Admiralty Rules directed.  The direction in r 23(2) to file an appearance in accordance with Form 9 (which is an unconditional appearance) is, on a literal reading, inconsistent with O 9 r 7 of the Federal Court Rules which allows for the filing of a conditional appearance.  Compliance with r 23(2) should not be taken to be an unqualified submission to jurisdiction.  Even if, however, a conditional appearance can be filed in proceedings such as these under the Federal Court Rules, it is plain that Sovcomflot was not submitting to the jurisdiction of the Court given that over a week earlier it had filed a notice of motion seeking to have the proceedings struck out.  


Conclusion

42                  I dismiss the application to strike out these proceedings with costs.

I certify that the preceding forty two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.


Associate:


Dated:              18 October 1999



Counsel for Sovcomflot:

Dr A S  Bell



Solicitor for the Sovcomflot:

Thynne & McCartney



Counsel for the CMC (Australia) Ltd:

Mr P E  King



Solicitor for CMC (Australia) Ltd:

James Neill



Date of Hearing:

5, 6 August and 3 September 1999



Written submissions concluded

14 September 1999



Date of Judgment:

18 October 1999