FEDERAL COURT OF AUSTRALIA

 

Opal Maritime Agencies Pty Ltd v “Skulptor Konenkov” [2000] FCA 507


ADMIRALTY - General maritime claim - consideration of the requirements to claim on the proceeds of sale fund - whether claims against the proceeds of sale must be “in rem” claims - whether in the circumstances of this case, agency commission or agency fees came within a general maritime claim - specifically consideration of agency commission or agency fees as disbursements or in respect of goods and materials or services - discussion of disbursements made on behalf of a ship or on behalf of a ship’s owner - consideration of the nature of shipping containers - what property constitutes the “ship” - discussion of “equipping” a ship.


TRADE AND COMMERCE - running account - set-off accounts - consideration of the nature of the disbursement and freight account arrangements - the effect, if any, of the appointment of a provisional liquidator.



Admiralty Act 1988 (Cth) ss 4(3), 17, 19, 24

International Convention Relating to the Arrest of Seagoing Ships signed at Brussels on 10 May 1952

Administration of Justice Act 1956 (UK)

Report No 33 Civil Admiralty Jurisdiction (AGPS) Canberra (1986)

Supreme Court of Judicature (Consolidation) Act 1925 (UK)

Supreme Court Act 1981 (UK)

 

 

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

Laemthong International Lines Co Ltd v BPS Shipping Ltd (1997) 190 CLR 181 Cited

Ocean Industries Pty Ltd (receivers and managers appointed) v Owners of the Ship MV “Steven C” [1994] 1 QdR 69 Cited

The Eschersheim [1976] 1 WLR 430 Appl

Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co [1985] 1 AC 255 Foll

Bain Clarkson Ltd v The Owners of the Ship “Sea Friends” [1991] 2 Lloyd’s Rep. 322 Cited

The River Rima [1988] 1 WLR 758 Foll

The Deichland [1989] 2 Lloyd’s Rep. 113 Appl

The Westport (No 3) [1966] 1 Lloyd’s Rep. 342 Appl

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

The Feronia (1868) LR 2 A & E 65 Appl

The Orienta [1895] P 49 Appl

John Carlbom & Co Ltd v Zafiro (Owners). The Zafiro [1960] P 1 Cited

Centro Latino Americano De Commercio Exterior S.A. v Owners of the Ship “Kommunar” [1997] 1 Lloyd’s Rep. 1 Cited

The “Edinburgh Castle” [1999] 2 Lloyd’s Rep. 362 Cited

Morlines Maritime Agency Ltd v The Proceeds of Sale of the Ship “Skulptor Vuchetich” [1997] FCA 432 Appl

 

Patrick Stevedores No 2 Pty Ltd v The Proceeds of Sale of the Vessel MV Skulptor Konenkov (1997) 144 ALR 394 Appl

Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374 Cited

The Fairport (No 5) [1967] 2 Lloyd’s Rep. 162 Cited

William Fleming v “Equator” (1921) 9 Ll. L. Rep. 1 Cited

Webster v Seekamp (1821) 4 Barn & Ald 352 Appl

The Riga (1872) LR 3 A & E 516 Cited

Foong Tai & Co v Buchheister & Company [1908] AC 458 Cited

Christie v The Ship “Karu” (1927) 27 SR (NSW) 443 Cited

Lewmarine Pty Ltd v The Ship “Kaptayanni” [1974] VR 465 Cited

The Heinrich Bjorn (1883) LR 8 PD 151 Cited

Morlines Maritime Agency Ltd v The Ship “Skulptor Vuchetich” and Her Owners (1996) 136 ALR 206 Appl

The Silia [1981] 2 Lloyd’s Rep. 534 Appl

Secony Bunker Oil Co Ld v Owners of the Steamship D’Vora.  The D’Vora  [1953] 1 WLR 34 Appl

In re Harmony and Montague Tin and Copper Mining Company (Spargo’s Case) (1873) LR 8 App Cas 407 Cited

The Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (1929) 43 CLR 247 Cited

Federal Commissioner of Taxation v Steeves Agnew & Co (Vic) Pty Ltd (1951) 82 CLR 408 Cited

Commissioner of Taxation v P Iori & Sons Pty Ltd (1987) 15 FCR 363 Cited

P & C Connell Pty Ltd (provisional liquidator appointed) v The Electricity Trust of South Australia (1990) 8 ACLC 975 Foll

Re Carapark Industries Pty Ltd (In liquidation) [1967] 1 NSWR 337 Cited

Re Codisco Pty Ltd (1974) CLC 40-126 Cited

Airservices Australia v Ferrier (1996) 185 CLR 483 Foll

Re Laycock v Pickles (1863) 4 B&S 497;  122 ER 546 Cited

Siqueira v Noronha [1934] AC 332 Cited

Van Hasselt v Sack, Bremmer & Co;  The Twentje (1859) 13 Moore PC 185;  15 ER 70 Appl

Borneo Company v Mogileff [1921] 6 Ll.L. Rep 528 Cited

Clausen v The Ship O M Alqora [1985] 38 SASR 481 Cited

 

 

 

 

 


OPAL MARITIME AGENCIES PTY LIMITED v THE PROCEEDS OF SALE OF THE VESSEL MV “SKULPTOR KONENKOV”

NG 197 OF 1998

 

BLACK CJ, COOPER AND FINKELSTEIN JJ

MELBOURNE (HEARD IN SYDNEY)

19 APRIL 2000



IN THE FEDERAL COURT OF AUSTRALIA

 

NEW SOUTH WALES DISTRICT REGISTRY

NG 197 OF 1998

 

BETWEEN:

OPAL MARITIME AGENCIES PTY LIMITED

APPLICANT

 

AND:

THE PROCEEDS OF SALE OF THE VESSEL MV “SKULPTOR KONENKOV”

RESPONDENT

 

JUDGES:

BLACK CJ, COOPER AND FINKELSTEIN JJ

DATE OF ORDER:

19 APRIL 2000

WHERE MADE:

MELBOURNE (HEARD IN SYDNEY)

 

THE COURT ORDERS THAT:

 

1.         The appeal be allowed in part. 

2.         The order of Tamberlin J that the claim of Opal Maritime Agencies Pty Limited be dismissed, be set aside and in lieu thereof :

            DECLARE that the claim of Opal Maritime Agencies Pty Limited for the Suez Canal fee in the sum of $303,473.28 is a general maritime claim within the meaning of s 4(3) of the Admiralty Act 1988 (Cth).

3.         The appeal be otherwise dismissed.

4.         The proceedings be remitted to Tamberlin J for the purpose of hearing and determining any application by Opal Maritime Agencies Pty Limited in respect of the proceeds in Court, having regard to the terms of the orders previously made by Tamberlin J in the proceedings.

5.         Pending the hearing and determination  of any application by Opal Maritime Agencies Pty Limited to recover payment of the Suez Canal fee of $303,473.28 from the proceeds of the sale of the ship “Skulptor Konenkov” presently held in Court, or further order of Tamberlin J, the said proceeds not be paid out of Court except to pay any outstanding costs and expenses of the Marshal, including the Marshal’s costs of this appeal.

6.         Any application by Opal Maritime Agencies Pty Limited for payment out of the proceeds in Court be brought by motion on notice given within twenty-eight days, in default of which the Marshal forthwith apply to Tamberlin J or another judge of the Court for such orders and directions as may be appropriate for the final disposition of the proceeds in Court.

7.         Any directions concerning the giving of notice by advertisement or otherwise and the service of parties who may claim an interest in the proceeds in Court be given by Tamberlin J or such other judge of the Court who hears the application of Opal Maritime Agencies Pty Limited.

8.         The Marshal’s costs of the appeal be taxed on an indemnity basis and be paid out of the fund in Court representing the proceeds of sale.


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

NG 197 OF 1998

 

BETWEEN:

OPAL MARITIME AGENCIES PTY LIMITED

APPLICANT

 

AND:

THE PROCEEDS OF SALE OF THE VESSEL MV “SKULPTOR KONENKOV”

RESPONDENT

 

 

JUDGES:

BLACK CJ, COOPER AND FINKELSTEIN JJ

DATE:

19 APRIL 2000

PLACE:

MELBOURNE (HEARD IN SYDNEY)


REASONS FOR JUDGMENT

THE COURT

Background

1                     In 1995, the ship “Skulptor Konenkov”, along with another ship owned by the Baltic Shipping Company (“Baltic”), was arrested and sold by order of this Court.  The proceeds of the sale of the ship (“the fund”) was paid into Court.  On 20 December 1995, Sheppard J ordered that the priorities of all claims against the proceeds of the “Skulptor Konenkov” be determined.  In response to a notice in Form 28 of the Admiralty Rules, Opal Maritime Agencies Pty Limited (“Opal”) on 29 January 1996 filed a caveat against the release of the proceeds of sale and a notice of intention to claim on the fund.  The claim was for “Goods, materials and services provided to the owners of the ship ‘Skulptor Konenkov’”.  At the time of filing the caveat and the notice, a provisional liquidator was in control of Opal.

2                     On 23 April 1996, Opal filed a statement of claim in its proceeding against the fund.  Opal pleaded that it had provided goods, materials and services to Baltic’s ships under a written Agency Agreement for the operation and maintenance of the ships, and that it had incurred disbursements on account of Baltic’s ships.

3                     By paragraph 5 of the statement of claim, Opal pleaded :

“5.       The Plaintiff operated a running ‘Offset’ account with the Baltic Shipping Co.  The offset account operated whereby freight payments received from Baltic Shipping Co’s customers were credited to such account and payments (disbursements) made by the Plaintiff pursuant to the Agency Agreement for a service/material provided to the Baltic vessels were debited to the account.  From time to time that offset account showed that the Plaintiff owed money to the Baltic Shipping Co. and from time to time the balance of account was such that the Baltic Shipping Co, owed money to the Plaintiff.  The deficit position, whereby Baltic owed money to the Plaintiff was funded by the retained earnings of the Plaintiff.  The position of the freight deficit to disbursements paid on one particular vessel was rectified by Baltic from the freight received from a subsequent vessel.”

4                     Opal pleaded that as at 10 July 1995, the balance in the offset account was $2,551,019.13 in its favour.  After giving Baltic the benefit of the sum of $1,912,246.28, being the amount of the proof of debt of Baltic admitted by the provisional liquidator, Opal claimed the balance of $638,772.85.

5                     In support of its claim Opal filed an affidavit of Brian Silva, the provisional liquidator of Opal.  Included in the exhibits to Mr Silva’s affidavit was a summary of the balance struck on the offset account.  The sum of $2,551,019.13 was shown as :

“Disbursement A/cs Conceded by Baltic not Incl in Proof of Debt

- Equipment Operation A/c                             1,059,448.93

- Equipment Operation A/c                                  29,238.79

- General                                                         1,287,621.77

- Container Handling Fees                                174,709.64  (2,551,019.13) dr”

6                     Opal’s claim was heard by Sheppard J on 17 and 18 June 1996.  Mr Silva gave evidence of further debits and credits as between Opal and Baltic which reduced the claim to $538,856.21.

7                     In the final submissions made to Sheppard J, it was agreed by Opal that the Container Handling Fees amount of $174,709.64 were fees and not disbursements, and that Opal’s claim should be reduced to $364,146.57.  That left the remaining items as the two Equipment Operation Accounts and the General Account.

8                     Sheppard J was of the opinion that Opal had failed to prove its case and that the evidence was not sufficient to satisfy him that the remaining heads of claim were general maritime claims under the Admiralty Act 1988 (Cth) (“the Act”).  His Honour published his reasons on 14 May 1997 to allow the parties and their legal advisers to further consider the matter before he made final orders.

9                     On 20 May 1997 Opal, by notice of motion, sought leave to file and serve affidavit material in support of its claim.  Sheppard J made the following orders and directions on 21 May 1997 :

“1.       That Opal Maritime Agencies Pty Limited have leave to reopen its case by leading such evidence as it may be advised in relation to the items constituting the two equipment operation accounts and the general account referred to in the document marked annexure D, annexed to the reasons for judgment published on 14 May 1997 and in relation to the appropriation of amounts credited to that account.

2.         Such evidence is to be by way of affidavit evidence which is to be filed on or before 18 June.

3.         Any evidence in reply is to be filed on or before 2 July.

4.         The matter is to be listed for directions before Tamberlin J on 18 July 1997 at 9:30 am or on such other day as may be notified to the parties by Tamberlin J.

5.         Leave to reopen the case is granted on the following conditions,

(a)       Opal Maritime Agencies Pty Limited recover a judgment in rem in the sum of no more than $364,146.57 together with interest and costs;

(b)       it recover no costs in rem additional to those which it would have recovered if its claim had been fully presented for hearings on 17 and 18 June 1996.

6.         The costs of the further hearing of the matter are to be in the discretion of the judge who hears it.”

10                  On 29 August 1997, Opal sought and obtained from Tamberlin J leave to file and serve an amended statement of claim.  Such leave was granted :

“... on the basis and condition that no party is thereafter precluded from submitting that the claim by Opal Maritime Agencies Pty Ltd in excess of the sum of $364,146.57 together with interest and costs is not able to be raised as not being within the leave granted by Sheppard J and/or that the Court should not in it’s discretion make the declaration.”

11                  The amended statement of claim, so far as presently relevant, pleaded :

“4.       Pursuant to the terms of the Agency Agreement the Plaintiff:

(a)       supplied goods, materials and services to ships owned or chartered by the Baltic Shipping Co for their operation or maintenance;

(b)       equipped ships owned or chartered by the Baltic Shipping Co;

(c)        incurred expenses in respect of general average [sic] and the towage and pilotage of ships owned or chartered by the Baltic Shipping Co;

(d)       incurred expenses in respect of port, harbour, canal or light tolls, charges or dues in relation to ships owned or chartered by the Baltic Shipping Co;

(e)        entered into agreements for and arranged on behalf of the Baltic Shipping Co the carriage of goods by ships owned or chartered by the Baltic Shipping Co;

(f)        entered into agreements for and arranged on behalf of the Baltic Shipping Co the use or hire of ships by way of slot charterparty;

(g)       made or incurred disbursements on account of ships owned or chartered by the Baltic Shipping Co.

PARTICULARS

            Particulars are set out in the affidavit of James Rolfe sworn on 13 August 1997 and in the annexures to that affidavit in the affidavit of Craig James sworn on 22 August 1997.

5.         [Paragraph 5 remained unchanged save for particularising the operation of the account by reference to an affidavit of Craig James sworn on 22 August 1997].

5A.      The Agency Agreement was terminated by the Plaintiff serving upon Baltic Shipping Co a written notice of termination dated 15 May 1995.

PARTICULARS

            The termination is deposed to in the affidavit of Craig James sworn on 22 August 1997.

5B.       As a consequence of the matters referred to at paragraph[s] 5 and 5A above, the offset account came to an end.

6.         The balance of the Offset account as at 10 July 1995 was, according to the provisional liquidator, $2,551, 019.13 in the Plaintiff’s favour.

PARTICULARS

            Particulars are set out in the provisional liquidator’s affidavit and in particular annexure ‘D’.

7.         On 6 February 1996 the Baltic Shipping Co submitted a proof of debt to the provisional liquidator.  The sum of $1,912,246.28 was allowed by the provisional liquidator on or about 13 March 1996 and the provisional liquidator rejected the balance of the proof of debt.

PARTICULARS

            The partial rejection of the proof of debt is set out as annexure ‘C’ to the provisional liquidator’s affidavit.

7A.      In proceeding No 3808 of 1995 in the Supreme Court of New South Wales the Baltic Shipping Co appealed the partial rejection of the proof of debt by the provisional liquidator.

7B.       In March 1996 the proceeding referred to at paragraph 7A above was dismissed.

8.         The Plaintiff had claimed the amount of A$638,772.85 calculated as follows:

(i)        Balance of Offset account

            as at 10 July 1995                               $2,551,019.13

(ii)       Less Baltic’s claim against

            Opal allowed by the provisional

            liquidator                                             $1,912.246.28

                                                                                    $  638,772.85

PARTICULARS

Particulars are set out in the provisional liquidator’s affidavit and in particular annexure ‘D’ to that affidavit.

9.         On 17 and 18 June 1996 Justice Sheppard heard evidence on the claim of the Plaintiff.

10.       On 14 May 1997 Justice Sheppard gave reasons for judgment in the proceeding and found that the Plaintiff had not proved its claim.

11.       On 21 May 1997 Justice Sheppard:

(a)        gave leave to the Plaintiff to reopen its case by leading such evidence as it may be advised in relation to the equipment operation accounts and the general account referred to in annexure ‘D’ to the provisional liquidator’s affidavit and in relation to the appropriation of amounts credited to those accounts;

(b)        ordered that the leave referred to at (a) be subject to the following conditions;

(i)         that the Plaintiff recover a judgment in rem in the sum of no more than $364,146.57 together with interest and costs;

(ii)        the Plaintiff recover no costs in rem additional to those which it would have recovered if its claim had been fully presented for hearing on 17 and 18 June 1996.

12.       At the time the Plaintiff did the matters referred to at paragraph 4 above, the Baltic Shipping Co was the owner of the ship MV Skulptor Konenkov and of the ships set out below in respect of or on account of which the Plaintiff did the matters referred to at paragraph 4 above.

PARTICULARS

            Komsomolosk

            Magnitogorsk

            Skulptor Vuchetich

            Georgiy Pyasetskiy

            Akademik Gorbunov

            Anatoliy Vasiljev

            Skulptor Konenkov

            Further particulars are set out in the affidavit of James Rolfe sworn on 13 August 1997 and in the annexures to that affidavit.

13.       As a consequence of the matters referred to at paragraphs 5, 5A and 5B above, the true and adjusted balances of the offset accounts are :

(a)        as at 30 April 1995, $525,543 in favour of the Plaintiff;

(b)        as at the conclusion or termination of the agency agreement, and offset account $1,244,823 in favour of the Plaintiff.

PARTICULARS

            Particulars as set out in the affidavit of James Rolfe sworn on 13 August 1997 and in annexure JR1 to that affidavit.

14.       In respect of the matters referred to at paragraph[s] 4, 5, 5A, 5B and 13 above, of the amount referred to at paragraph 13(b) above the Plaintiff claims an amount of $1,049,776.00 as a general maritime claim.

PARTICULARS

Particulars of the amount claimed are set out in the affidavit of James Rolfe sworn on 13 August 1997 and in the annexures to that affidavit and in the supplementary of James Rolfe sworn on 26 August 1997.

15.       The claim made by the Plaintiff is a general maritime claim within the meaning of section 4(3)(f), (h), (j), (k), (m), (o), (p), (q), (r) and (t) of the Admiralty Act 1988.

16.       The claim made by the Plaintiff is made pursuant to sections 4, 19 and 24 of the Admiralty Act 1988 against the proceeds of the sale of the ship formerly owned by the Baltic Shipping Co, the MV Skulptor Konenkov.”

12                  Opal claimed the following relief :

“A.      A declaration that the claim made by the Plaintiff in this proceeding is a general maritime claim within the meaning of section 4(3) of the Admiralty Act 1988.

B.         A declaration that the general maritime claim referred to at A is in an amount of $1,049,776.00 or in such other amount as the Court determines.

C.        In accordance with the orders made by Justice Sheppard on 21 May 1997:

(i)        Judgment against the Defendant in the sum of $364,146.57 together with interest;

(ii)       An order that the Defendant pay the costs of the proceedings of the Plaintiff up to and including 18 June 1996.

D.        Interest on the amount referred to at C(i) pursuant to section 4(3)(w) of the Admiralty Act 1988 and in accordance with section 51A of the Federal Court of Australia Act 1976.

E.        Such further or other relief as the Court thinks just and necessary.”

13                  The matter proceeded to a hearing before Tamberlin J on 24 October 1997 on the basis of the orders made by Sheppard J and Tamberlin J and the case pleaded in the amended statement of claim.

14                  At the hearing, Opal handed to the Court a statement which was marked “MFI 2”.  The statement reads as follows :

“Personal liability of Baltic Shipping Company

on running account                                                    $1,244,823       (JRI)

Possible in personam debits pre 30 April 1995

Lease container repairs on Equipment Operation

Account                                                                         $174,847.12  (JR2)

                                                                                        $10,575.61  (JR4)

                                                                                      $197,079.00  (JR5)

Agency Commission on Equipment Operation

Account                                                                         $113,710.68  (JR2)

Agency Commission on General Account                       $58,483.33  (JR8)

Agency Commission on General Account                       $34,730.39  (JR9 and

                                                                                                            JR11)

Container Fees                                                              $151,817.73  (JR10

                                                                                                            para 32)

Slot Charters                                                                   $99,180.00  (JR11

                                                                                                            para 33)

Possible in personam debits post 30 April 1995

Lease container repairs on Equipment Operation

Account                                                                           $56,997.00 (JR12)

Agency Commission on Equipment Operation

Account                                                                           $19,572.95 (JR12)

Agency Commission on General Account                     $162,518.71 (JR 13 and

                                                                                                             JR14)

Container Fees                                                                $22,891.91 (JR 10

                                                                                                            para 32)

Slot Charters                                                                 $156,513.00 (JR11

                                                                                                            para 33)”

15                  The meaning of the statement and its significance was addressed by his Honour in his reasons for judgment given on 12 December 1997.  He said :

“The sum of $1,244,823 which appears at the head of the Statement is the balance at July 1995, said to be due to Opal on a running account over the period from March 1994 to July 1995.  This running account was terminated on and from 15 May 1995.  The consequence of termination is said to be that as from that date the intention of the parties to deal on the basis of a running account ended.  The closest convenient accounting date to 15 May was 30 April 1995.  There is no substantial dispute that this is a convenient and appropriate date for determining the present dispute.

As can be seen on its face the document is to be read in two parts.  The first part consists of the items under the heading ‘Possible in personam debits pre 30 April 1995.’  The second comprises the items under the heading ‘Possible in personam debits post 30 April 1995’.

The expression ‘possible’ is used in the statement to indicate that there may be some disagreement as to whether the amounts referred to are recoverable against the in rem fund because it may be argued that they are of an in personam character. The question of characterisation will be considered later.

Under the running account, Opal has offset payments in respect of both in personam and in rem claims against the total debt, both in rem and in personam, owing by Baltic to Opal.

Opal submits that the starting point in deciding whether the claims are in rem, and therefore recoverable against the fund, should be taken as 30 April 1995. In other words, the submission is that the Court should not go behind the balance struck as at that date on the running account because that represents the agreed sum owing at that date as between Baltic and Opal.  After 30 April 1995 it is conceded that it may be appropriate to disallow some items claimed on the ground that they are not of an in rem character.

Certain consequences follow from an acceptance of 30 April 1995 as a cut-off date.  If all the claims in the Statement both pre and post-April 1995, which are referred to as ‘possible’ in personam debts are disallowed, then Opal will recover $468,835.  If, however, the pre 30 April 1995 in personam claims are not excluded, but all the post 30 April claims are excluded, the resultant debt is $1,049,776 in favour of Opal.  These amounts may, in turn, be further reduced if certain claims relating to the service and handling of containers are disallowed as in rem claims.  This will also be considered later.

The Running Account

 

Opal submits that the Court should accept the running account balance struck as at 30 April 1995 between Opal and the shipowner and that the Court should not go behind that balance amount to investigate, accept or reject claims on the basis that they are not in rem in nature.  While the running account existed, up to 30 April 1995, credits should be applied against debits of any character whether in personam or in rem.  Thereafter, in personam debts might be excluded so that only in rem debts could be recovered.

The consequence of accepting this submission, is that the pre 30 April claims which are in personam would be recovered from the in rem fund arising from sale of the vessel.  This result is contrary to well-settled Admiralty principles that claims against the proceeds of sale, which stand in place of the vessel itself, must be in rem in character.  This is not a case where the nature of the pre 30 April 1995 items is unknown. The general description of the claims are specified.  It seems to me therefore that the Court should consider each claim in the Statement and determine so far as possible its proper characterisation.  If a claim is in personam then it should be disallowed against the fund.

The Statement of Account is between the shipowner, Baltic, and the agent, Opal. It is not an account between Opal and the ship itself, which is a party in its own right, or between Opal and someone on behalf of the ship.  This being so, I cannot see how the ship, as a distinct legal entity, can be bound by a set-off of in personam entries in a set of accounts kept as between Baltic and Opal, which, as Sheppard J pointed out is comprised of ‘all matters of debit and credit which are involved in that account’: TheSkulptor Konenkov’ at 420.

Accordingly, I consider it is neither necessary nor appropriate to approach the claims on the basis that a cut-off point should be drawn as at 30 April 1995 and that the Court should accept that balance as recoverable and not decide whether particular items arising before that date are recoverable against the in rem fund.  The Court is not, in my view, limited to a consideration of the post 30 April 1995 figures in the running account.”

16                  The operation of the Equipment Operation Account and the General Account referred to in the Statement “MFI 2” was described by Mr James Rolfe, the sole director of Opal in paragraphs 45 and 46 of his affidavit :

“45.     The components or categories of the general account are port charges, loading expenses, discharging expenses, agency expenses, vessel expenses and miscellaneous expenses.  Port charges include pilotage, towage and mooring costs.  Loading and discharge expenses include stevedoring, wharfage and cartage costs.  Agency expenses comprises agency commission and fees payable to Opal by Baltic under the agency agreement.  Vessel expenses include the provision of medical care and food to the crews of Baltic ships. Miscellaneous expenses will include items such as postage and the provision of funds to the master of the Baltic ship.

46.       The components or categories of the equipment operation account are repairs to containers owned by Baltic; repairs to containers leased by Baltic; rental for the storage of containers at container depots; the lifting on and off of containers from trucks at container depots; the loading and discharging of containers from ships; container survey fees; the transportation of containers at the port; miscellaneous items; and agency commission payable to Opal by Baltic under the agency agreement.  The item for repairs to containers leased by Baltic relates to slot charters.  The miscellaneous items relate to the missing equipment operation accounts for which it is not possible to provide a breakdown and for which the total amounts payable are taken from the letters comprising annexures ‘JR-3’ and ‘JR-11’.”

17                  This evidence was accepted by Tamberlin J.  His Honour, after setting out paragraphs 45 and 46, stated :

“It is common ground that the claims relating to ‘Lease container repairs’ in respect of both periods are not recoverable against the fund. These claims relate to containers leased by Baltic which were used on ‘slot’ charters rather than on ships owned by Baltic. A ‘slot’ charter is a charter of a ship by a fleet operator such as Baltic for a specific voyage when none of the vessels in the fleet is available.  These accounts cannot be claimed against the fund.

The items described in the Statement as ‘container fees’ are conceded not to be in rem claims.  The amounts separately referred to in items ‘slot charters’ are not recoverable against the fund because these claims do not relate to Baltic vessels.”

18                  His Honour concluded that the claims for agency commission on both the Equipment Operation Account and the General Account both before and after 30 April 1995 were not general maritime claims within s 4(3) of the Act, and were not recoverable by action in rem against the fund constituted by the proceeds of sale of the ship.

19                  His Honour accepted the evidence of Mr Craig James concerning disbursements made by Opal in respect of containers and recorded in the Equipment Operation Accounts.  Mr James deposed :

“21.     The equipment operation accounts recorded disbursements incurred by Opal on account of services supplied to containers owned or leased by Baltic that were used by Baltic ships.  The services included the storage of containers, the transport of containers, the carrying out of repairs to containers, the lifting of containers on and off trucks that would collect the containers either from Baltic ships at port or from transport centres (sometimes referred to as container parks), the inspecting and certifying of containers for seaworthiness, survey fees for  the purpose of insurance claims and the packing and repacking of containers.  The suppliers of these services would render invoices to Opal for payment by Opal.  In turn, Opal would render to Baltic equipment operation accounts on a periodic basis for reimbursement of the costs incurred by Opal in respect of the servicing and handling of the containers.

22.       Opal maintained equipment operation account files that were open and closed on a periodic basis.  Each equipment operation account file was given a file number.  Contained within each equipment operation account file were invoices rendered to Opal by the supplier of goods and services, a computer print out generated from computer accounting records maintained by Opal and a carbon copy of an invoice or account rendered by Opal to Baltic recording the total amount of disbursements incurred by Opal in respect of the servicing and handling of containers within the period covered by the equipment operation account file.

23.       The computer print outs referred to in the preceding paragraph were generated from the computer accounting systems maintained by Opal in respect of the equipment operation account.  Staff of Opal would key in to the computer information taken from invoices provided to Opal by suppliers of services in respect of the servicing and handling of the containers.  The information keyed in would include a description of the service provided and the amount invoiced by the supplier of the service.

24.       At any given time it was possible for Opal to identify and track the whereabouts of a container owned or leased by Baltic by reference to the relevant container number through computer records maintained by Opal.  In this respect, on an inward journey it was possible to identify the Baltic ship upon which a container arrived at an Australian port, the date of its unloading at the relevant port and the container park to which the container had been transported for collection and unpacking.  From that time it was then possible to identify the dates upon which the container had been repacked and transported to an Australian port for loading onto a Baltic ship for an outward journey.  The computer records of Opal also supplemented computer records maintained by Transglobe Container Services Singapore which provided to Baltic a computer tracking system of containers owned or leased by Baltic that were used on Baltic ships throughout the world.

25.       If an exporter in Australia wanted to use a container owned or leased by Baltic the exporter would obtain from Opal an authorisation number issued in the name of Baltic.  The authorisation number would identify the container and would be issued to the exporter with the bill of lading.  At the time the authorisation number was issued the Baltic ship upon which the container was to be placed for the outward journey would be identified in the cargo manifest used in preparing the bill of lading.

26.       At the time Opal performed its responsibilities under the agency agreement in respect of the servicing and handling of containers owned or leased by Baltic for an outward journey, the identity of the Baltic ship that was to carry the relevant container out of Australia was known to Opal.  Likewise, at the time Opal performed its responsibilities under the agency agreement in respect of the servicing and handling of containers owned or leased by Baltic for an inward journey, the identity of the Baltic ship which carried the relevant container into Australia was known to Opal.

27.       Because Opal acted exclusively as maritime agent in respect of Baltic ships, it was not possible for containers owned or leased by Baltic to be used by ships other than Baltic ships which, as noted above, included ships both owned and chartered by Baltic.  The containers the subject of the equipment operation accounts for which Opal incurred charges from service providers were therefore used only on ships owned or chartered by Baltic.

28.       From time to time Baltic chartered spaces on ships owned by other fleet operators for specific voyages to and from ports within Australia.  These are known as slot charters. The slot charters were used so as to fulfil obligations assumed by Baltic for the shipment of cargo.  Containers owned and leased by Baltic which were the subject of the equipment operation accounts were not used on slot charters.  Instead, containers for slot charters would be provided by or on behalf of the ship chartered by Baltic for the slot charter.”

20                  His Honour concluded that none of the disbursements claimed in respect of containers was a general maritime claim within s 4(3) of the Act, and that they were not recoverable by action in rem against the fund.

21                  As to the other items in the disbursement accounts, his Honour concluded that in light of the further evidence of Mr James, those items gave rise to general maritime claims and should be accepted for that purpose.

22                  His Honour’s conclusion in respect of the claim was :

“The view which I have reached is none of the items set out in the Statement, MFI 2, in relation to pre and post 30 April 1995, should be accepted as maritime claims.  The agency commission claimed is not an in rem claim.  I am not satisfied that the claims asserted in respect of the Equipment Operation Account in relation to the servicing and handling of containers and other matters referred to therein should be accepted as maritime claims.  I direct the parties to bring in Short Minutes to give effect to these reasons.”

23                  On 18 December 1997 the matter again came before Tamberlin J for the settlement of orders to give effect to his Honour’s reasons of 12 December 1997.  There was an issue between the parties as to how “credits” in favour of Baltic should be taken into account when determining any net amount recoverable by it against the proceeds of sale.

24                  The position taken by Opal is set out in his Honour’s reasons for judgment given on 20 February 1998 :

“At the October hearing Opal argued its case on the basis that if certain items were disallowed and certain assumptions were not justified in relation to the equipment operation and the general account then there would be a nil recovery against the proceeds.  The result was that Opal failed to satisfy me that the disputed claims were of an in rem character or that the assumptions were not justified.  Accordingly, my view was that Opal had not made good its claims against the proceeds.

Opal now contends, however, that in order to arrive at the net amount recoverable by it against the proceeds, it is entitled to appropriate all credits in the accounts in favour of Baltic in such a way as to maximise its in rem claim.  This could be achieved by applying all credits to the in personam items and thereby reducing such claims.  Opal suggests there are four possible, alternative approaches which could be adopted in the calculation of the net amount due as an in rem claim.  These are:

(1)       Opal is entitled to appropriate all credits to any debits on the offset account. In particular, it may apply all credits first in satisfaction of in personam debits.  The result is that the balance of the offset account constitutes an in rem debt recoverable in admiralty; or

(2)       Conversely, Opal is not so entitled to elect to appropriate credits against particular debits but is obliged to do the opposite.  It must appropriate credits first in payment of in rem debits with the result that the balance of the offset account constitutes an in personam debt and is not recoverable in admiralty; or

(3)       The contractual arrangements and the course of dealings between the parties, the nature of the transactions conducted on the offset account and the nature of the admiralty jurisdiction requires that credits be applied to corresponding debits.  The Court should be concerned with ascertaining the extent of the in rem debit by reference only to credits that correlate to in rem debits recoverable in admiralty; or

(4)       The contractual arrangements and the course of dealings between parties are such that credits, or at least freight credits, are to be applied proportionately or rateably to all debits both in personam and in rem.  They are to be applied to satisfy the oldest debits, regardless of the character of the debits or credits.”

25                  His Honour rejected the positions contended for by Opal and made the following findings as to the operation of the account between Opal and Baltic as a running account :

“... The evidence does not indicate that, at any time prior to commencement of this proceeding, any appropriation was made in respect of any credits or debits with the result that Opal now contends for.  The indication is that Opal simply offset each credit and debit against each other regardless of characterisation of the item in rem or in personam.  The evidence does not establish that there has been any election made as to the treatment of in rem and non in rem claims.  This is not a case where, for example, in rem claims and credits have been separated out and are applied against each other.  In  my view, it is too late to do so at this stage, having regard to the way in which the claim has been presented.  Accordingly, I reject the submission that Opal is entitled to appropriate all credits, whether in rem or in personam, to any debits on the offset account and apply them firstly in satisfaction of in personam debts so as to maximise its in rem claim.

.....

The third alternative proposed by Opal is that the extent of the in rem debt is to be determined by reference only to credits that correspond to the ‘in rem’ debits recoverable in Admiralty.

There are two difficulties with this approach.  The first difficulty is that Opal has chosen to base its claim on references to the balance of a running account.  The way the case has been conducted renders it inappropriate to adopt such an approach in this case.

In addition, there is a long standing line of authority to the effect that an ‘in rem’ claim cannot be brought for a general balance of a mercantile account. ...

.....

The final suggestion for Opal was that any credits, or at least any freight credits, should be applied rateably towards satisfaction of all debits regardless of their nature.  There is no indication in the evidence that this was ever intended or that it was done.  For the reasons given above as to the way the claim was pleaded and the case was conducted, I do not think this approach should be followed.

Accordingly, my conclusion is that Opal cannot now elect to appropriate all credits, both in rem and in personam to maximise its in rem claim.  I do not consider that the balance of the running account, conducted between the parties, which forms the basis of the present claim, gives rise to a general maritime claim against the proceeds of sale in circumstances where the balance is arrived at after the parties have indiscriminately offset both in rem and in personam claims and there has been an intermixture of such debits and credits.  None of the alternatives advanced by Opal are available in the present case.  For these reasons I am not satisfied on the evidence that there is any amount presently recoverable by Opal against the proceeds of sale.

Accordingly, I dismiss the claim brought by Opal. ...”

26                  On 12 March 1998, Opal filed a notice of appeal against the judgment of Tamberlin J constituted by the whole of the reasons given on 20 February 1998 and part of the reasons given on 12 December 1997.

The issues raised on appeal

The requirements of the Act to obtain a judgment in rem against the fund

27                  Opal submitted that ss 4(3), 17, 19 and 24 of the Act confer on claimants statutory rights of action in rem and that those rights are procedural in nature.  A general maritime claim, it was submitted, may be commenced as an action in rem against a wrongdoing ship, a surrogate ship, or the proceeds of sale of the wrongdoing ship or a surrogate ship, where a claim could not otherwise be commenced in rem under s 15, s 16 or s 18 of the Act.  So much followed, it was submitted, from the construction of the provisions and the decisions of The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 420;  Laemthong International Lines Co Ltd v BPS Shipping Ltd (1997) 190 CLR 181 at 188 - 189, 194, 202 - 203;  and Ocean Industries Pty Ltd (receivers and managers appointed) v Owners of the Ship MV “Steven C” [1994] 1 QdR 69 at 74 - 75.

28                  Opal submitted that the principal error of the trial judge was to require that a general maritime claim be characterised as a claim which in itself is in rem in character in order to satisfy the requirements of s 4(3)(m), (o) or (r) of the Act.  Such an approach, it was submitted, introduced a limitation not found in the express words of the provision and one which was contrary to the objects of the Act.  One of those objects was to widen the admiralty jurisdiction.  That Tamberlin J adopted such a construction is said to be evident from the statements from the reasons for judgment of 12 December 1997 concerning the running account set out earlier in these reasons, and his reason for refusing the claim for commission because it was “not an in rem claim and accordingly cannot be recovered from the proceeds of sale.”

29                  In our view, the use of the phrase “in rem claim” by his Honour in that context, meant no more than that the maritime claim must be one which could be enforced in rem against the proceeds of sale before the claim could be recovered from those proceeds.  In this, his Honour is echoing the observation of Sheppard J in the earlier judgments, that no claim can lead to a payment out of the proceeds of sale unless the claimant has recovered a judgment in rem against the vessel which has been served and arrested, or the fund which stands in its place:  (1996) 64 FCR 223 at 237;  (1997) 144 ALR 394 at 396, 399.

30                  Any right of Opal to recover a judgment against the fund represented by the proceeds of sale of the ship “Skulptor Konenkov” arises from s 24 of the Act.  Unless Opal could bring itself within the terms of s 24, it was not entitled to the orders which it sought.  Section 24 provides :

“24.     Where, but for the sale of a ship or other property under this Act, a proceeding could have been commenced as an action in rem against the ship or property, the proceeding may be commenced as an action in rem against the proceeds of the sale that have been paid into a court under this Act.”

31                  For the purposes of the present proceedings, the relevant ship was the “Skulptor Konenkov”.  Opal was required to prove that, but for the sale of the ship, it could have commenced proceedings as an action  in rem against the “Skulptor Konenkov”.

32                  By virtue of s 14 of the Act, Opal’s right to commence an action  in rem against the “Skulptor Konenkov” was limited to the statutory rights given by the Act.  The right to commence a proceeding in rem is provided for in ss 15, 16, 17, 18 and 19 of the Act.

33                  Opal pleaded, by its amended statement of claim, that its right to proceed to commence proceedings in rem lay in ss 4(3) and 19 of the Act.  On the appeal, and before Tamberlin J, Opal also argued that it had a right to proceed in rem against the “Skulptor Konenkov” under s 17 of the Act.

34                  Section 19 of the Act provides :

“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.”

For the purpose of s 19, the “Skulptor Konenkov” is the “other” and “second mentioned” ship.

35                  To succeed in its claim, Opal was required to show that it had a general maritime claim concerning a ship which it is sought to enforce by an action in rem against the “Skulptor Konenkov” and that the conditions in paragraphs (a) and (b) of s 19 were made out.  It is not a requirement of s 19 that there be in existence a general maritime claim on which proceedings could have been commenced in rem against the first named ship as a precondition to proceeding against the “Skulptor Konenkov”:  Laemthong International at 188 - 189, 194, 202 - 203.  However, Opal must prove that it had “a general maritime claim concerning a ship” and that the “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 vessel, and that that person, when the proceeding is commenced, was the owner of the second mentioned ship.

36                  The term “relevant person” is a defined term in s 3 of the Act :

“ ‘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;”

37                  In the context of the present proceedings, Opal was required firstly to prove that it had a general maritime claim concerning a ship other than the “Skulptor Konenkov” in respect of which Baltic, at the time the cause of action arose, was either owner, charterer of, or the person in possession or control of that ship and would be liable on that claim in a proceeding commenced as an in personam action against Baltic.  Opal was then required to prove that at the time the proceeding in rem was commenced against the “Skulptor Konenkov” under s 19 of the Act, Baltic was then the owner of the “Skulptor Konenkov”.

38                  Section 19 of the Act does not give a right to commence an action in rem against the “Skulptor Konenkov” on a general maritime claim concerning the “Skulptor Konenkov”.  The right to commence such a proceeding must be made out under s 17 of the Act.

39                  Section 17 of the Act, on which Opal relied to satisfy the requirement that it could have brought an action in rem against the “Skulptor Konenkov” but for its sale, provides :

“17.     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.”

40                  Section 17 is not concerned with the enforcement of a general maritime claim concerning one ship against another ship in the same ownership;  that is the function of s 19 of the Act.  Section 17 is concerned with giving a right to proceed by an action in rem against a particular ship on a general maritime claim concerning that ship, where there is a person who would be liable on that claim in a proceeding commenced as an action in personam against that person and the conditions in paragraphs 17(a) and (b) are satisfied.  The cause of action referred to in s 17(a) is the cause of action in respect of the claim on which the relevant person would be liable in any in personam proceedings.

41                  For an action in rem to be commenced against a ship, it is not sufficient that the ship is the property of a person who would be liable on an action in personam on a general maritime claim concerning a ship.  The ship against which it is sought to commence in rem proceedings must also be the ship in respect of which the general maritime claim is made.  The policy recommendation of the Australian Law Reform Commission (“the ALRC”) in its Report on Civil Admiralty Jurisdiction and draft Admiralty Bill accompanying the report, which included clause 17 in the form of the present s 17 of the Act, was that the nexus between the ship in respect of which the claim arose, and the ship which may be proceeded against in rem, remain:  see Report No 33 Civil Admiralty Jurisdiction (AGPS) Canberra (1986) paras 124 - 125, 136.

42                  In coming to the view which it did, the ALRC accepted the approach taken by the House of Lords in The Eschersheim [1976] 1 WLR 430.  The leading opinion of the House was given by Lord Diplock with whom the other Law Lords who heard the appeal agreed.  At issue was the proper construction of s 1(1) of the Administration of Justice Act 1956 (UK) (“the 1956 UK Act”) which Act implemented as part of the domestic law the treaty obligations of the United Kingdom under the International Convention Relating to the Arrest of Seagoing Ships signed at Brussels on 10 May 1952 (“the Arrest Convention”).

43                  The 1956 UK Act replaced s 22 of the Supreme Court of Judicature (Consolidation) Act 1925 (UK) (“the 1925 UK Act”) and redefined the admiralty jurisdiction of the High Court in the light of, and to give effect to, the United Kingdom’s treaty obligation under the Arrest Convention;  Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co [1985] AC 255 (HL) at 263 - 264, 266;  Bain Clarkson Ltd v The Owners of the Ship “Sea Friends” [1991] 2 Lloyd’s Rep. 322 (CA) at 323;  “Shin Kobe Maru” v Empire Shipping Co Inc at 417. 

44                  The Arrest Convention itself contained in Article 1 a closed list of maritime claims.  The list in the Arrest Convention was based on the list of types of claims then assigned under English law to the admiralty jurisdiction of the High Court by s 22 of the 1925 UK Act:  Gatoil Inc at 264;  The River Rima [1988] 1 WLR 758 at 764.

45                  The Arrest Convention was a compromise between the existing English law and the law of many other European countries as to the circumstances in which a ship might be arrested:  Berlingieri Arrest of Ships 2nd ed 1996 at 7 - 8, 39 - 40;  The Deichland [1989] 2 Lloyd’s Rep. 113 (CA) at 117.  The effect of the compromise on the operation of the Arrest Convention was summarised by Neil LJ in The Deichland at 117 :

“... English law had hitherto restricted the right to arrest a ship to cases where a ‘maritime’ claim was made.  Moreover the power of arrest did not extend to other ships in the same ownership as the ship concerned with the claim:  see The Beldis, (1935) 53 Ll L Rep 255;  [1936] P 51.

In some Continental countries, however, the power of arrest could be exercised in respect of any claim whether maritime or non-maritime and against any ship in the same ownership.

The 1952 Convention reached a solution which restricted the power to arrest to ‘maritime claims’ as defined in the Convention.  In substance the Convention adopted the approach of English law.”

46                  Lord Diplock outlined the purpose and effect of the Arrest Convention in The Eschersheim.  He said (at 434 - 435) :

“The purpose of that Convention was to provide uniform rules as to the right to arrest seagoing ships by judicial process to secure a maritime claim against the owner of the ship.  Article 1 defined by reference to their subject matter various classes of maritime claim in respect of which alone a right of arrest was to be exercisable;  while articles 2 and 3 granted and confined the right of arrest to either (a) the particular ship in respect of which a maritime claim falling within one or more of those classes arose or (b) any other ship owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship.

The provisions of article 3 represented a compromise between the wide powers of arrest available in some of the civil law countries (including for this purpose Scotland) in which jurisdiction to entertain claims against a defendant could be based on the presence within the territorial jurisdiction of any property belonging to him, and the limited powers of arrest available in England and other common law jurisdictions, where the power to arrest was exercisable only in respect of claims falling within the Admiralty jurisdiction of the court and based upon a supposed maritime lien over the particular ship in respect of which the claim arose.”

47                  As to its implementation by the 1956 UK Act, his Lordship said (at 435) :

“The way in which the draftsman of Part I of the Administration of Justice Act 1956 set about his task of bringing the right of arrest of a ship in an action in rem in English courts into conformity with article 3 of the Convention was (a) by section 1 of the Act, to substitute a fresh list of claims falling within the Admiralty jurisdiction of the High Court, and (b) by section 3, to regulate the right to bring an action in rem against a ship by reference to the claims so listed.  Sections 22 and 33 of the Supreme Court of Judicature (Consolidation) Act was repealed.

Apart from the addition of claims in respect of salvage, towage and pilotage of aircraft (which in any event are not subject to the Convention) there is again no significant difference between what is contained in the new list and what was contained in the 1925 list, except that the language is rather more succinct and a little closer to the language of article 1 of the Convention. ...”


48                  As to the operation of s 1(1) and s 3(4) of the 1956 UK Act, his Lordship said (at 436 - 437) :

“It is clear that to be liable to arrest a ship must not only be the property of the defendant to the action but must also be identifiable as the ship in connection with which the claim made in the action arose (or a sister ship of that ship).  The nature of the ‘connection’ between the ship and the claim must have been intended to be the same as is expressed in the corresponding phrase in the Convention ‘the particular ship in respect of which the maritime claim arose’.  One must therefore look at the description of each of the maritime claims included in the list in order to identify the particular ship in respect of which a claim of that description could arise.”

49                  Professor Berlingieri in his commentary on the Arrest Convention, expressed the view that the decision of the House of Lords in The Eschersheim reiterated the fundamental rule for the arrest of a ship under the provisions of the Arrest Convention.  That was that the right to arrest existed only if the claim arose in respect of a “particular ship” and the owner was liable in respect of a maritime claim relating to that ship:  at p 59.

50                  It was the requirement that there must exist a relationship between the claim and a particular ship which led Professor Berlingieri to conclude :

“Claims against a shipowner that relate to the maintenance and operation of his ships, but which are not related to a particular ship, cannot be secured by means of the arrest of one of the ships owned by him.  If, for example, the owner purchases stores or spare parts for his fleet and uses them for one or more of his ships when the need arises, the claim of the supplier for the payment of such spare parts or stores has not arisen in respect of a particular ship.  The same situation would exist in the case of a contract for the lease by a shipowner of a number of containers to be used on board the container ships he operates and of a contract of affreightment, when the ships to be employed by the owner for the carriage of the agreed tonnage of cargo are not specified and the owner does not perform the contract. ...”

Arrest of Ships (2nd Ed) at 59.

 

51                  The reasoning in The Eschersheim as to the need for the relationship between claims and particular ships is applicable to all  heads of claim under s 4(3) of the Act.

52                  The requirement and its application across all classes of maritime claims was accepted by the ALRC:  see ALRC Report para 151 fn 27, 28;  Chapter 8 paras 125 - 126.

53                  The consequence of the approach adopted by the ALRC in its report and draft legislation and the enactment of that draft as the Act by the Australian Parliament, is that the nature of the connection between the claim and the ship which it is sought to arrest as described in The Eschersheim must exist for the purposes of s 4(3), s 17 and s 19 of the Act.  Section 4(3) neither stands outside of what Professor Berlingieri described as the fundamental rule nor operates independently of s 17 and s 19 to the extent that they give effect to that rule.

54                  Sections 17 and 19 respectively prescribe the conditions to be satisfied before a proceeding on the claim concerning a ship may be commenced as an action in rem against the ship or against another ship.  In respect of each section the claim is limited to a claim concerning the ship identified by the section as being the relevant ship which is the subject of the claim. The type of claim which falls within the description of a general maritime claim is determined by the operation of s 4(3) of the Act.  Section 4(3) defines in paragraphs (a) to (w) inclusive the claims which satisfy the requirement of being, for the purposes of ss 17 and 19, a general maritime claim.

55                  The issues before Tamberlin J arising from the amended statement of claim, the way the proceedings were conducted before his Honour, and the requirements of ss 24, 19 and 17 of the Act, were :

(a)        Whether Opal had established the existence of any general maritime claim concerning the “Skulptor Konenkov” which gave it the right to proceed to enforce the claim by commencing an action in rem against that ship under s 17 of the Act, on the assumption that the other requirements of the section were satisfied.

(b)        Whether Opal had established the existence of any general maritime claim concerning another ship which gave it the right to enforce that claim by commencing an action in rem against the “Skulptor Konenkov” under s 19 of the Act on the assumption that the other requirements of the section were satisfied.

(c)        Whether the preconditions necessary to commence an action in rem against the proceeds in Court from the sale of the “Skulptor Konenkov” under s 24 of the Act were made out.

56                  These were the issues which Tamberlin J addressed.  In our view there is no demonstrable error in the judgment of his Honour as to the proper construction of ss 17, 19 or 24 of the Act and what Opal was required to prove to obtain a judgment in rem against the fund.

57                  The real issue is whether, on the facts as found, the claims advanced by Opal were claims which fell within any of the claims specified in s 4(3) of the Act.

Agency Commissions

58                  Opal, before Tamberlin J and on the appeal, submitted that agency commission payable under the written Agency Agreement dated 24 January 1992 on the Equipment Operation and General Accounts, as identified in the document marked “MFI 2” and described in the evidence of Mr Rolfe, was a general maritime claim.

59                  It was submitted that the claim for commission fell within the category of claims specified in paragraphs (m), (r) and/or (o) of s 4(3).  These provisions relevantly state :

“4(3)(m)a claim in respect of goods, materials or services (including stevedoring and lighterage services) supplied or to be supplied to a ship for its operation or maintenance;

.....

(o)       a claim in respect of the alteration, repair or equipping of a ship;

.....

(r)        a claim by a master, shipper, charterer or agent in respect of disbursements on account of a ship;”

60                  Opal submitted that the object of the Act was to expand the circumstances in which claims could be enforced by proceedings in rem, and that a liberal construction of each of the paragraphs ought to be adopted.  Further, Opal submitted that the words “in respect of” are words of wide import which, in the context of the Act, only require that there be a connection between the subject of the claim and the subject matter described in the respective paragraphs.

61                  That such an approach was warranted, Opal submitted, was demonstrable from the ALRC Report para 164 and the decision in The Westport (No 3) [1966] 1 Lloyd’s Rep. 342.

62                  One of the objects of the ALRC in its report and draft bill, was to strike a balance between following the English legislation and seeking to clarify and simplify the law:  ALRC Report para 95.  In respect of disbursements, the Commission said (para 164) :

“164.   Disbursements.  The rather fragmented statutory underpinning in Australia for the maritime lien for master’s disbursements has already been discussed, as has the proposed provision for its enforcement as a maritime lien (See para 119, 122).  This head of jurisdiction will give a parallel statutory right of action in rem to the master.  The question is whether a similar statutory right should be allowed in respect of claims for disbursements by a person other than the master.  All the overseas Acts allow claims in admiralty jurisdiction for disbursements by shippers, charterers or agents.  The 1952 Arrest Convention art 1(1)(n) and the Admiralty Jurisdiction Regulation Act (SAf) s 1(1)(ii)(o) refer to disbursements on account of a ship or its owner.  The remaining Acts refer more narrowly only to disbursements on account of a ship (Administration of Justice Act 1956 (UK) s 1(1)(p);  Supreme Court Act 1981 (UK) s 20(2)(p);  Admiralty Act 1973 (NZ) s 4(1)(p);  Federal Court Act 1970 (Can) s 22(2)(p)).  The issue is whether any extension beyond disbursements by a master is required or desirable in Australia, and whether disbursements not made on account of a ship should be included.  With respect to the master’s lien for disbursements :

            [g]iven the facility of modern communication, the wide international spread of shipping companies and world proliferation of specialist agents, the circumstances when a master will be required to assume a personal responsibility for the demands and contingencies of a voyage are probably diminishing.

 

            (Thomas (1980) para 341.  This presumably explains the virtual absence of modern reported decisions on master’s disbursements).

To the extent that agents are now making disbursements rather than masters it seems reasonable to allow agents to recover in admiralty.  The argument for widening the class of people whose disbursements claims are within admiralty is simply to improve their chances of recovery against foreign shipowners.  The argument against extension similarly parallels the more general argument for not extending admiralty jurisdiction;  unlike the master, most agents, shippers and charterers are well able to protect themselves by ordinary commercial means (such as letters of credit or bank guarantees) against elusive shipowners.  It follows from the position taken on the more general argument that the recommendation should be for wider jurisdiction.  The categories used in the overseas texts should be followed in the interest of uniformity.  The reference to charterers and shippers is perhaps redundant since any disbursements made by these categories of people would normally be pursuant to a charterparty or contract for the carriage of goods by sea.  As such it could be recovered under other heads of jurisdiction.  But their inclusion will do no harm.  The term ‘agent’ would appear sufficiently elastic to cover not only those trading as ship’s agents but others making payments on behalf of the ship.  To the extent that these payments are for necessaries or other goods and materials supplied on the request of the owner or master to a ship they could be claimed under the head of jurisdiction covering goods or materials supplied to a ship (See eg The Zafiro [1960] P1, 14).  But the overlap may not be complete (eg The Westport (No 3) [1966] 1 Lloyd’s Rep 342) and again the redundancy seems harmless.  It is less clear that disbursements should extend beyond the current definition of payments made ‘on account of the ship’ (Navigation Act 1912 (Cth) s 94(2) referring to master’s disbursements).  As mentioned above, only the 1952 Arrest Convention and the South African legislation allows extension to disbursements on behalf of the ship’s owner.  Such an extension apparently covers disbursements made on behalf of someone who happens to own a ship.  This seems overbroad.  The provision should cover only claims which are made on behalf of a ship.”

63                  The decision in The Westport (No 3) is footnoted as an example where the overlays between a claim “for goods or services supplied to a ship” and a claim for disbursements being payments made on account of the ships may be incomplete.

64                  In The Westport (No 3) the ship’s agent moved for judgment in default of appearance against the proceeds of sale of the ship Westport which had been sold by order of the Court. The claim was for £503 10s 10d of which £423 1s 00d was for disbursements paid on account of the ship, with the balance of £80 9s 10d being for agency fees.  Hewson J identified the issue for decision as “whether the agency fees are properly included in this claim for disbursements”.  The claim was brought under s 1(1)(p) of the 1956 UK Act, which provided :

“1(1)   The Admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following questions or claims -

.....

(p)       any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship.”

65                  Hewson J resolved the issue in the following manner (at 342 - 343) :

“Under Sect 1(1)(p) of the Administration of Justice Act, 1956, this Court has jurisdiction (inter alia) in respect of ‘any claim by’ an ‘agent in respect of disbursements made on account of a ship’.  Obviously an agent does not work for nothing in making disbursements and the usual arrangements that an agent is expected to make.  In my view he is entitled to include in his claim a reasonable figure for his services, and I am satisfied that the £80 9s. 10d. is a reasonable figure in the circumstances.”

66                  The issue which the ALRC regarded as not being covered by a claim for goods and services supplied to a ship was thus the right to remuneration for making the necessary arrangements for the ship which gave rise to the necessity to pay and making the disbursements by payment on account of the ship.  Whether this view was correct is a matter which will be discussed below.  What is important is, that in the context of its report, the ALRC affirmed the policy position that the claims covered be limited to payments in the nature of disbursements and that they be made on account of a particular ship.  To this end it adopted the wording of s 20(2)(p) of the Supreme Court Act 1981 (UK) (“the 1981 UK Act”) which repeats the language of s 1(1)(p) of the1956 UK Act.

67                  The High Court in The Owners of the Motor Vessel “Iran Amanat” v KMP Coastal Oil Pte Ltd (1999) 196 CLR 130, said in a judgment of the Court in the context of the meaning of s 17 and s 19 of the Act (at 136) :

“The legislative provisions set out above originated in a draft Bill attached to a 1986 Report of the Australian Law Reform Commission on Civil Admiralty Jurisdiction (Australian Law Reform Commission, Civil Admiralty Jurisdiction, Report No 33 (1986)).  The language of the draft Bill originated in that of the Administration of Justice Act 1956 (UK) (Subsequently contained in Supreme Court Act 1981 (UK), s 21(4)).  There is no doubt that the Parliament followed the language of the English statute, which, by 1988, had been construed and applied in a number of cases. ...”

and (at 138) :

“The Australian legislation having been enacted against the background of English legislation and authority set out above, the definition of ‘relevant person’ should be understood as having the same meaning as the courts had given to the corresponding words in the English statute.  When the Parliament has enacted legislation, affecting the subject of international shipping, and followed a statutory precedent from overseas which has by then received a settled construction, there is every reason to construe the statutory language in the same way in this country unless such construction is unreasonable or inapplicable to Australian circumstances.  ...”

68                  The approach taken by the High Court to s 17 and s 19 of the Act is in principle to be adopted with respect to the content of the maritime claims specified in s 20(2) of the 1981 UK Act where the provisions of that section have been adopted and applied by the Australian legislature in the form and content of the classes of general maritime claims specified in s 4(3) of the Act.

69                  In our view the recommendation of the ALRC in the terms expressed and the history of the UK legislation indicates that s 4(3)(o) of the Act was not intended by the Australian legislature to have an operation wider than that given to s 20(2) of the 1981 UK Act.

70                  In the United Kingdom masters’ disbursements had, by 1952, acquired a particular meaning which in part was grounded on s 10 of the Admiralty Court Act 1861 (UK), which gave jurisdiction to the Admiralty Court over any claim by a master “... for disbursements made by him on account of the ship.”  Those words were construed by Sir Robert Phillimore in The Feronia (1868) LR 2 A & E 65 at 75 :

“The next question of importance relates to the true construction of the words in the statute, ‘disbursements made by him.’  It certainly appears to me that the legislature intended to include under these words all proper expenditure made by the master upon the ship, whether the particular articles, the subject of this expenditure, were obtained by immediate or by promised payment;  and that in each case two questions would arise:  1.  Had the particular articles actually been applied to the use of the ship?  2.  Whether these articles were such as the necessities of the ship justified and required? ...”

71                  In The Orienta [1895] P 49, Lord Esher MR, in a judgment agreed in by the other members of the English Court of Appeal, said (at 55) :

“The real meaning of the word ‘disbursements’ in Admiralty practice is disbursements by the master, which he makes himself liable for in respect of necessary things for the ship, for the purposes of navigation, which he, as master of the ship, is there to carry out - necessary in the sense that they must be had immediately - and when the owner is not there, able to give the order, and he is not so near to the master that the master can ask for his authority, and the master is therefore obliged, necessarily, to render himself liable in order to carry out his duty as master.”

72                  In Bain Clarkson Ltd v The Owners of the Ship “Sea Friends” in a judgment agreed in by the other members of the Court, Lloyd LJ defined a disbursement within s 20(2)(p) of the 1981 Act as a liability undertaken to acquire something that was “needed to keep the ship going”.  His Lordship gave bunkers as an example.  If the subject matter of the disbursement was not necessary to keep the ship going, it was not a disbursement on account of a ship.  His Lordship also held that s 20(2)(p) required that the disbursement be in the nature of a master’s disbursement even if made by an agent and that the wording of Article 1(n) of the Arrest Convention did not lead to a different result;  rather Article 1(n) contained the same requirement:  at p 324.

73                  Article 1(n) of the Arrest Convention provides :

“Master’s disbursements, including disbursements made by shippers, charterers or agents on behalf of a ship or her owner.”

74                  Professor Berlingieri in his commentary on the Arrest Convention expresses the opinion that the reference to Owner in the article was to differentiate between disbursements which relate to the ship itself and disbursements made for the operation of the ship.  Disbursements falling within the second category are only disbursements under the Article and thus a maritime claim if they were made on behalf of the shipowner in respect of the particular ship:  Arrest of Ships (2nd Ed) at 54 - 55.

75                  The introduction of ss 1(m) and 1(p) of the 1956 UK Act was seen as extending the right given by the legislature to bring in rem proceedings on claims in respect of the supply of necessaries to a ship, and in respect of disbursements made on behalf of a ship:  John Carlbom & Co Ltd v Zafiro (Owners). The Zafiro [1960] P 1 at 14 per Hewson J.

76                  The extension of the right to proceed in rem in respect of disbursements lies in the additional persons, including an agent having the right.  The second aspect lay in the use of the words “any claim ... in respect of disbursements. ...”  Those words, in the context of s 20(2)(p) of the 1981 UK Act and in s 4(3)(r) of the Act, have a wider operation than the word “for”, which is used in the formulation of claims under other paragraphs.  The words should not be given an unduly restrictive operation:  Centro Latino Americano De Commercio Exterior S.A. v Owners of the Ship “Kommunar” [1997] 1 Lloyd’s Rep. 1 at 5;  The “Edinburgh Castle” [1999] 2 Lloyd’s Rep. 362 at 363. 

77                  That said, the words nevertheless require a relationship between the claim and the “disbursements made on account of a ship”.  The question then arises, how close must the circumstances giving rise to the claim be to the disbursements made on account of the ship before there is a sufficient connection to permit the claim to be by an action in rem under s 4(3)(r) of the Act? 

78                  As we have set out earlier in these reasons, the report of the ALRC makes clear that disbursements on behalf of the ship’s owner are not intended to be covered by para 4(3)(r) of the Act.

79                  The decision in The Westport (No 3) does not stand as authority for the proposition that agency fees and commissions are within s 4(3)(r) of the Act as disbursements irrespective of the subject matter giving rise to a claim for agency fees and commissions.  Nor does the decision stand as authority for the proposition that agency fees may be recovered in respect of disbursements for ships other than the ship for which the disbursement was made or recovered otherwise than as part of a claim for disbursements in respect of the ship on whose behalf the disbursements were made.

80                  Tamberlin J rejected the claim to agency commission on two bases.  The first was that, on a proper analysis of the Agency Agreement, the services supplied to Baltic by Opal were supplied to it as a shipowner and that the claims could not be properly characterised as disbursements made on behalf of the ship.  The second basis was that the provision of agency services for which a fee or commission was claimed was not a claim for a disbursement.

81                  In our view, his Honour was entitled to find that the Agency Agreement was made with the owner Baltic to supply agency services in respect of unnamed ships which Baltic may choose to engage in trade to and from Australia where those vessels fell within the general descriptions in clause 1 of the agreement.  The agreement provided “that [Baltic] appoints [Opal] as their General Agent at the ports of the [sic] AUSTRALIA for Owner’s vessels indicated in clause 1 and respective Addenda to this Agreement.”

82                  Clause 1 of the agreement provided :

“1.1     This agreement covers tramp and passenger vessels owned, managed, operated, or chartered by Owner, whenever relevant contract affreightment allows Owner to nominate their own agent.

1.2       This Agreement covers also liner vessels of Owner regular cargo services for which appropriate Addenda are in force.  These Addenda are to be considered an intergal [sic] part of this Agreement.

1.3       The Agreement covers also Owners vessels under repair in the shipyard in the ports covered by this Agreement subject to special instructions of Owner.”

83                  The agreement provided for agent’s obligations in clause 2.  The obligations were divided into two categories :

(a)        “Generals”;

(b)        “Agency services to Owners vessels”.

84                  The twenty obligations in part (a) relate to the conduct of and advancement of Baltic’s business interests in providing shipping services to and from Australian ports.  The nature of the relationship is apparent from the nature of the obligations, of which the following is a representative sample :

“2.1     Protecting and promoting Owners interests in all respects.  Representing Owner before official harbour and other authorities, institutions, and commercial enterprises concerned, and maintaining due contact with them.  Providing Owner with full information on all matters relevant to subject of this Agreement and on special request of Owner and their Representatives.

.....

2.4       Reporting to Owner regularly about Owners vessels arrived, their position and prospects, as well as about any important or special occurrences connected with the vessels, their cargo, passengers and crew.

2.5       Promoting, co-ordinating and controlling all cargo operations on Owners vessels, including arranging for stuffing, unstuffing and transhipment of containers, always endeavouring to minimise time and cost of the operations. 

            Undertaking any arrangements in this respect, always taking into account the provisions of the respective Charter-Party and Owners instructions. 

            Overtime operations involving - extra expenses for Owners account, if the operations are not compulsory under local regulations, are to be arranged only with previous approval of Owner or the Master of the particular vessels.

2.6       Attending to freight and chartering contracts and conference matter always securing Owners interests in this respect.

2.7       Announcing Liner schedules and advising customers of Owners vessels position. 

            Canvassing for and booking cargo. 

            Reporting to Owner regularly about cargo booked and about customers offers on the matter, booking and space allotments regarding each particular vessel.

2.8       Announcing Owners freight rates and amendments thereto, and giving information on same as required.  Quoting rates of freight according to liner tariffs in force and Owners instructions. 

            Pricing of through rates.  Quoting sea-borne and inland transport freight for containers.

2.9       Calling forward outward cargo and receiving same for shipment, delivering inward cargo.  Attending to transhipment cargo.  All these functions are effected on behalf of and for Owners account in case it applies to the vessels of Owners regular services in accordance with relevant Addenda to this Agreement, or in the cases when and where it is provided for by the particular Charter-Party or other particular document confirmed by Owner or under particular Owners instruction.

.....

2.13     Assisting Owner and Masters of Owners vessels in solving any disputes regarding the quantity and quality of the cargo loaded on or discharged from Owners vessels.  Organising receiving the cargo by consignees or their agents alongside Owners vessels.  Arranging for tallying and checking the cargo loaded or discharged in accordance with local practice and Masters requests.  Taking all necessary steps to prevent Owners losses during further movement of inward cargo to receivers if under local rules cargo is received and cargo documents signed after vessels sailing.  Furnishing Owner and his Representative with necessary documents to prevent the losses.

.....

2.19     Not accepting without the consent of Owner the agency of any other competitive cargo lines of other owner.  Not divulging to any third parties any knowledge, information or experience in respect of business matters and practices of Owner, acquired in result of activity as Agent under this Agreement.

2.20     At Owners request, providing Owners Representative free of charge with proper office accomodation [sic] and facilities and introducing them into all matter of Agents activity covered by this Agreement.  All other expenses of the Representative and their wages are to be borne by the Owner. 

            Promoting in getting visas for Owners Representatives.

2.21     Keeping all records, accounts and other documents concerning Owners vessels and their cargo handled under this Agreement as well as any important or special occurrences connected with the vessels, their cargo, crew and passengers, for at least three years and producing copies of the documents at any time during this period on reasonable request and notice of Owner.”

85                  The eleven agent’s obligations under part (b) may be categorised as ship and cargo management obligations.  The following are a representative sample of those obligations :

“2.22   Communicating with the vessel and assisting the Master with any useful information and advice.  Come into personal contact with the Master on the vessels arrival soonest possible.

.....

2.24     Receiving from Master on arrival of the vessel and handing over Notice of Readiness, according to local custom and practice, to shippers and receivers of the cargo, and all other parties concerned, for their signature. 

            Supplying the Master with signed copy of the Notice of Readiness.

.....

2.26     Organising, co-ordinating and controlling cargo operation and tallying the cargo according to local custom and practice.  Advising the Master and all parties concerned on all matters regarding the particulars of the cargo as well as those of the vessel and her facilities to be taken into account during the cargo operation to prevent any misunderstanding and delays of the vessel or other losses.  Controlling progress of the operation, preparing daily Statement of Facts or checking same if prepared by stevedores.

.....

2.31     Providing the Master before departure of the vessel with pro-forma of disbursement account giving closes [sic] possible estimate of all port charges and dues.  Stevedorage, tally and other expenses appertaining to the cargo handled are to be included in the pro-forma if they are for Owners account.

2.32     During week after vessels departure from the port of Loading/ discharging the agent will send the following data by telex:

a)         port charges

b)         stevedoring expenses

c)         other stevedoring expenses

d)         vessels expenses

e)         total amount

            Difference between total amount expenses per proforma and actual expenses would be not more than 5%.”

86                  Two of the clauses specifically provided for Opal arranging the supply of goods and materials or services to Baltic’s vessels by third parties.  Clauses 2.23 and 2.29 provided :

“2.23   Arranging for berth, the vessels approaching the port as well as leaving the port, including pilotage, towage, mooring/unmooring, customs, sanitary and immigration formalities, etc. in accordance with local rules and customs.

.....

2.29     Arranging for fuel, lubricants, fresh water, provisions and technical supply, repair, medical attendance to crew members and passengers as required by Master and/or his Owner.  In each particular case with his preliminary approval of the cost and other conditions of the services. 

            Co-ordinating and controlling these services always endeavouring to minimise their cost and to prevent delay of the vessel.”

87                  The obligations of Opal as to disbursements was contained in clause 5, headed “FINANCIAL OBLIGATIONS”.  So far as is presently relevant, those obligations were :

“5.5     Agent undertake to check and settle local accounts appertaining to the services rendered to Owner vessels at the ports covered by this Agreement under request of the Masters of Owner vessels or compulsory under local rules and customs or in accordance with Owner or their Representatives instructions.

5.6       Agent undertake to control that all local accounts including those presented for payment by Sub-Agents and Sub-Contractors are prepared in strict conformity with effective tariffs and local rules.  Any mistakes are to be corrected and unfair amounts or wrong vouchers are to be refused.  Stevedoring accounts are to be supported by Statements of Facts and Time Sheets.

5.7       Agent undertake to settle the accounts in due time in an endeavour to prevent any claims to Owner on the part of Sub-Contractors and possible delay of Owner vessels.  Special attention in this respect is to be given to the local rules regarding the payment due to local official authorities and their enterprises performing custom, sanitary, immigration and other official services as well as pilotage, port and light dues, etc. in order to allow free pratigue [sic] at the port or sailing to Owner vessels without any delay.

5.8       Agent undertake to ensure that all accounts are properly checked and apportioned between Owner and charterers, shippers or consignees, in accordance with the respective Charter-Party or Trade Contract. 

            In case of Owner vessels on Time-Charter or a vessel time-chartered by Owner, accounts are to be properly apportioned by Agent between Owner and charterer.  Agent [sic] are to insure that respective accounts are presented to the appropriate party for settlement.”

88                  The entitlements of Opal to remuneration under the Agency Agreement were for agency fees and agency commissions.

89                  Agency fees and other remuneration were dealt with by clause 5.10 together with Addendums 1 and 2 to the agreement.  Clause 5.10 provided :

“5.10   Agency Fee appertaning [sic] to Owner tramp vessels are to be included in final disbursement account.  The amount and basis of the remuneration is to be in conformity with current scale of agency fee issued by the Institute of Chartered Shipbrokers.  For regular cargo liner services the Agent is to be remunerated as per Addendum N2 attached.”

90                  Addendum No 1 dealt with an agency fee for services rendered to Baltic’s tramp cargo vessels and non-cargo vessels. So far as is presently relevant, it provided :

“1.       For agency services rendered by Agents to Owners tramp cargo vessels and non-cargo vessels calling at the ports covered by the agreement, Owners are to pay to Agents an Agency Fee on ship call basis at the level of 75 per cent of the effective official recommended tariffs, being issued by the Australian Chamber of Shipping (ACOS).

2.         Agents are to provide Owners with all tariffs and scales of charges, properly adopted as mentioned above and keep them supplied with any official amendments thereto.”

91                  Addendum No 2 provided for the earning of agency commission “for liner agency services rendered by agents to Owners liner vessels”.

92                  Addendum No 2, so far as is presently relevant, provided :

“Agency Commission

Agency Commission is to be calculated on the net freight.

Agency Commission is not to be calculated on any temporary freight surcharges.

In case the vessel carries the cargoes both on liner, or FIO terms the tramp cargoes on C/P terms, only Agency Commission or Agency Fee is to be paid by Owners to Agents, whichever is higher.

Calculation of the Agency Commission

Outward cargo                                                           per cent of net freight

Cargo booked and handled by Agents                                   5%

Cargo handled by Agents, but booked by

another Agents or Owners                                                      2.5%

Inward cargo:

Cargo booked and handle [sic] by Agents                             4.5%

Cargo handled by Agents, but booked by

another Agent or Owners                                                       2.0%

Cargo booked by Agents and carried between

the ports of other countries not covered by

this Agency Agreement                                                           2.5%

Remark:          Cargo of which original shippers or final consignees are domiciled in the Commonwhelth [sic] of Independent States or for which the freight is settled directly between Owners and the freight organisation of the respective C.I.S. member country is to be considered as cargoes by Owners.

Fixed Recovery of Expenses

A fixed recovery fee is to be charged, in the Sydney Disbursement Account only, to cover the Agent’s telex, telephone, car hire, postage and photocopying expenses.  No other charges may be levied by the Agent against the Owner for these expenses for the vessel.  The Fixed Recovery Fee is to be charged at the following rates :

Liner Vessels - per inward and outward voyage -                  A$1215

General Account - per month - to be discussed later upon telex exchanges.”

93                  Agency commission was to be calculated on the net freight which was to be ascertained in accordance with clause 5.11 of the Agency Agreement.  Opal was obliged by clause 5.15 of the Agency Agreement to prepare full disbursement accounts for each vessels’ call “at the ports covered by the agreement” and to send the same to Baltic within sixty days of sailing or arrival of the vessel from or to those ports.

94                  The final addendum to the Agency Agreement was Addendum No 3.  It provided :

“The following procedure for the settlement of freights and disbursement is agreed:

1.         Upon completion of Disbursement Accounts the Agent may deduct the balance due from freight collections owed to Owners.  The Agent will notify the Owner each week as to the balance of freight due to the Owner.

            Where the balance of the Owner’s account with the Agent is in credit the Owner may direct the Agent to disburse the funds in any way the Owner sees fit.  If the funds are retained by the Agent, interest will be paid on those funds at agreed interest rates.

            Where the balance of the Owner’s account with the Agent is in debit the Owner will remit appropriate amounts to the Agent’s bank.  For the time that the Owner’s account remains in debit, the Agent may reduce any interest due to the Owner by applying the same interest rates as above.

2.         Amounts in dispute if discovered after Owners receive and check the final Disbursement Accounts are to be agreed upon between Owners and Agents in the shortest possible period.  Overpaid amounts are to be credited by the Agent by means of special Credit-Note with proper reference.

3.         All payments between Owners and Agents are to be effected in accordance with the terms of Payment Agreement existing between the [sic] Russia and Australia.

4.         This Addendum comes into force from 24 january [sic] 1992.”

95                  Although the remuneration of Opal in respect of the management of the vessels, cargo and freight was brought to account in the disbursement accounts in order to enable that amount to be deducted from the freight collections due to owners for the purposes of Addendum No 3, it did not give to the claims for remuneration or the provision of agency services by inclusion in the accounts alone the character of disbursements made on behalf of a ship as that term is used in s 4(3)(r) of the Act.  Further, the Agency Agreement drew a distinction between agency commission and agency fees and each was payable in the circumstances specified in the Agency Agreement and not otherwise.

96                  Agency fees were payable for agency services rendered to Baltic’s tramp cargo vessels and non-cargo vessels calling at ports covered by the agreement:  clause 5.10 and Addendum No 1.  Agency fees were to be paid at the level of seventy-five percent of the current recommended tariffs and scales issued by the Australian Chamber of Shipping.

97                  Remuneration for regular cargo liner services was to be by way of agency commission in accordance with the provisions of Addendum No 2:  clause 5.10.  The agency commission was to be calculated on net freight as defined in Addendum No 2.

98                  Where a vessel carried cargo on both liner and tramp cargo terms, Opal was to be paid for agency services rendered to that ship, the higher of agency commission or agency fee, but not both:  Addendum No 2.

99                  The agency commission was calculated at a variable rate depending upon Opal’s involvement with the cargo and whether it was outward or inward cargo.  The rate of commission earned depended upon whether Opal booked and handled the cargo, or merely handled the cargo, or whether it forwarded cargo for carrying between ports of other countries not covered by the agreement.  The different basis of entitlements is reflected in the accounting records tendered in evidence to support the figures contained in the General Agency Account maintained by Opal.  The Disbursement Reconciliation Forms raised in respect of the General Agency Account were computer generated and divided into sections under various heads of expenditure.  One of those sections was headed “AGENCY EXPENSES” and included entries under the following codes :

“403                FORWARDING COMMISSION

404                  BOOKING COMMISSION

405                  HANDLING COMMISSION”

100               The agency expenses, including the agency commission, were carried over with other expenses charged under the heads “Port Charges”, “Loading Expenses”, “Discharging Expenses”, “Vessel’s Expenses” and “Miscellaneous Expenses” into the disbursement account balance.  Examples of these accounts are to be found in Exhibits “JR17” and “JR18” to the affidavit of Mr Rolfe sworn on 13 August 1997.

101               The agency commission was not a fee for service calculated by reference to any particular service provided to or on behalf of the ship.  The quantum of the Commission depended upon the involvement of Opal in the cargo carried by the ship and the ultimate profitability of the voyage after the ascertainment of the net freight.

102               None of the accounting records tendered in respect of the General Agency Account disclose remuneration earned and claimed as an agency fee calculated in accordance with the current recommended scales of tariffs and charges issued by the Australian Chamber of Shipping.

103               The other financial records tendered related to Equipment Operations Accounts.  On the evidence of Mr James, which his Honour accepted, these accounts related solely to the costs incurred in handling containers owned or leased by Baltic and used on ships owned or chartered by Baltic.  So far as the tendered records reveal, the Equipment Operations Accounts were divided into sections with headings “EOA”, “EQUIPMENT REPAIR”, “EQUIPMENT PORT OPERATIONS”.  The last section included entries under codes for container storage, container transport to stock area, lifting containers on and off for storage, inland transport, vessel loading/discharging and container miscellaneous expenses.  The port operations section also included under an entry code 912 “AGENTS REMUNERATION”.  The entries under code 912 are lump sum figures.  There is no attempt to break the figure into specific components or to identify how the figure is calculated.  There is no suggestion in the accounts, or in the evidence of Mr Rolfe or Mr James, that these entries relate to containers used on Baltic’s tramp cargo services alone and that the remuneration was agency fees payable under clause 5.10 and Addendum No 1.  Nor is there any material to suggest that the remuneration claimed is agency commission in respect of cargo liner services calculated in accordance with Addendum No 2.

104               There is a further difficulty with respect to the calculation of remuneration claimed by Opal as agency fees on the Equipment Operations Account.  Those accounts also relate to money expended and work done relating to “Lease container repairs”.  As to the treatment of those claims at trial, his Honour said :

“It is common ground that the claims relating to “Lease container repairs” in respect of both periods are not recoverable against the fund. These claims relate to containers leased by Baltic which were used on “slot” charters rather than on ships owned by Baltic. A “slot” charter is a charter of a ship by a fleet operator such as Baltic for a specific voyage when none of the vessels in the fleet is available.  These accounts cannot be claimed against the fund.

The items described in the Statement as “container fees” are conceded not to be in rem claims.  The amounts separately referred to in items “slot charters” are not recoverable against the fund because these claims do not relate to Baltic vessels.”

105               The claim for remuneration for agency fees in the Equipment Operations Account does not identify what part of the agency fees claimed relates to work costs and expenses, which by common agreement were treated as items which were not enforceable by proceedings in rem.  Nor was any attempt made to isolate the amount.

106               Although the evidence was that it was possible to follow the movement of a container, because each had an identifying number, and to thereby identify the Baltic ship on which the container was carried into and out of Australia, the clear purport of that evidence was that the containers were treated as part of a common pool of containers which would be packed or unpacked at a container park and stored there until required to be used to receive cargo for shipment or to be transhipped for use at another location.  The containers were used to unitize cargo for shipment on the scheduled or tramp Baltic cargo service on which it had been booked by the shipper.  The container, once the cargo had been stowed by the shipper, would be delivered to and loaded aboard the particular Baltic ship which was to provide the contracted Baltic cargo service. 

107               It was open to find on the evidence that what Opal did under the Agency Agreement was :

(a)        to render services generally to Baltic as shipowner in the conduct of its business of sea carrier of cargo into and out of Australia;

(b)        to manage Baltic’s stock of containers in Australia whether those containers were owned or leased by Baltic for use in its cargo shipping operation.

108               His Honour made each of those findings.  He found :

“In my view the agent’s remuneration in the present case is payable in respect of services provided to the shipowner.  The commission is paid in consideration for the agent arranging the supply of goods and services to the vessel.  It cannot properly be said that the commission itself constitutes the supply of goods or services to the vessel.  Nor, in my view, can it be said that the agent’s reward is in respect of the supply of goods or services to the vessel.  Properly analysed the remuneration payable to the agent by Baltic, on account of work done, for or on account of Baltic, is not for services to the vessel itself.  The nature of the commission is not, in my view, to be characterised by reference to the underlying service as suggested by Mr Glacken.  In no way can the act of arranging or procuring, by an agent, the supply of goods or services by a third party to the ship be described as the supply of those goods or services to the ship within par (m) or as a “disbursement” on account of the ship. ...

.....

... the operations relating to the container are removed in time and space from the operation of the ship.  There is no close or immediate connection between the services and the ship.  The repair or survey of a container, for example, represents services provided in respect of the containers themselves, and not the vessel on which they are to be carried.

.....

... I do not think it can be said that moneys paid in respect of the servicing or handling of containers, as described in the affidavit of Mr James, were incurred on account of a ship, because the connection between services to the container and the ship itself is too remote.”

109               No basis has been made out by Opal which would justify these findings being set aside.  Indeed, having regard to the evidence led, we are of the view that the findings were correct.

110               The findings of Tamberlin J are fatal to the claim of Opal that the agency commission and agency fees were disbursements made on account of a ship within the meaning of s 4(3)(r) of the Act.  The findings mean that the first element of the statutory requirements, namely the necessity for a payment on account of a ship, is not made out.  Having failed in respect of the initial requirement it is unnecessary to determine whether the payment was in respect of disbursements as that term is understood by the authorities.  Opal did not at trial, and does not on appeal, bring itself into the limited category identified in the Westport No 3, where reasonable remuneration of an agent in respect of disbursements made on account of a ship may be included in the claim for those disbursements.

111               We turn now to the question of agency commission and agency fees as a claim in respect of the supply of goods, materials and services within s 4(3)(m) of the Act.

112               Tamberlin J rejected the submission that agency services were themselves services within the meaning of s 4(3)(m) of the Act.  His Honour also rejected the submission that claims relating to services provided by a third party provider which fell within s 4(3)(m) of the Act themselves fell within that paragraph.  His Honour’s rejection of the argument was in the context of his findings as to the nature of the services provided under the Agency Agreement and his finding as to whom the services were provided.  He said :

“... The services are supplied to the shipowner for its purposes and not to the ship for its operation or maintenance.  The actual ‘disbursement’ for the goods or services themselves, on the other hand, can properly be described as a ‘disbursement’ on account of the ship.  It is the super-added element of an agency fee or commission which does not fit the description.

The payment of commission is not the same as payment for goods or services. Nor can it be said to be either for the operation or maintenance of a ship, or in respect of an out-of-pocket expense for the ship itself.  Any analogy between the agent’s commission and the profit component in the price charged for the actual supply of the goods or services, eg the stevedoring company, cannot be sustained.  In the latter case the ‘profit’ is part of the disbursement itself, whereas the agent’s commission is a charge different and discrete from the payment made to the supplier. For example, the agent’s commission for arranging supply of services by a stevedoring company is over and above, and different from, stevedoring charges made by the stevedoring company.

For the above reasons, in my view, the agent’s commission claimed was payable for services to the shipowner and not for or on account of the ship.  The claim for agent’s commission is not an in rem claim and accordingly cannot be recovered from the proceeds of sale.”

113               In coming to this conclusion, his Honour relied upon observations of Sheppard J in Morlines Maritime Agency Ltd v The Proceeds of Sale of the Ship “Skulptor Vuchetich” [1997] FCA 432 and in Patrick Stevedores No 2 Pty Ltd v The Proceeds of Sale of the Vessel MV Skulptor Konenkov (1997) 144 ALR 394 at 414 - 417. 

114               In Morlines Maritime Agency, Sheppard J rejected (at p 11) the claim of Morlines Maritime Agency for agent’s commission claimed under an Agency Agreement in substantially the same terms as the one into which Opal entered.

115               In Patrick Stevedores No 2, Sheppard J adopted observations of Lord Brandon in The River Rima [1988] 1 WLR 758 as giving practical guidance to the operation of legislation which speaks of the supply of goods or services to a ship for its operation or maintenance.  Lord Brandon gave the leading opinion in The River Rima, which was agreed in by Lords Bridge of Harwich, Brightman, Ackner and Goff of Chieveley.  It concerned the operation of s 20(2)(m) of the 1981 UK Act.

116               Section 20(2)(m) of the 1981 UK Act referred to :

“... any claim in respect of goods or materials supplied to a ship for her operation or maintenance; ...”

Of these words, Lord Brandon said (at 763) :

“... It is clear that paragraph (m) contemplates a contract of supply, whether by way of sale or hire, between the claimant and a shipowner.  But the expression used in paragraph (m) is ‘supplied to a ship’ and not ‘supplied to a shipowner’.  The question is what meaning should be given to the former expression.  There are two main kinds of contract pursuant to which goods or materials required for the operation of a ship may reach her.  The first kind of contract is one which expressly provides that the goods or materials are required for the use of a particular ship, the identity of which is specified in the contract or will be specified by the time when the contract comes to be performed.  The second kind of contract is one which contains no reference to a particular ship for the use of which the goods or materials are required, leaving the shipowner to make his own decision about that later.  The first kind of contract is, in my opinion, a contract under which goods or materials are ‘supplied to a ship’ within the meaning of paragraph (m).  The second kind of contract, however, is, in my opinion, not a contract for goods or materials to be ‘supplied to a ship’ within the meaning of paragraph (m).  It is no more than a contract for the supply of goods or materials to a shipowner, and as such does not come within paragraph (m).”

117               Sheppard J adopted the distinction between the two situations subject to a qualification.  His Honour said (at 418) :

“One of the submissions made in opposition to the claim was that the claim arose out of an agency agreement and was not one contemplated by any paragraph of s 4(3) of the Act.  It is to be observed that the provisions of para (r) of s 4(3) include the word ‘agent’.  It refers to a claim by a master, shipper, charterer or agent in respect of disbursements on account of a ship.  The claim here is by an agent to recover disbursements said to have been incurred on account of a number of vessels.  That is sufficient to dispose of the argument but it ought not to be thought that I would take a narrow view of the relevant words of para (m) of s 4(3).  It includes as a general maritime claim a claim in respect of goods, materials or services supplied or to be supplied to a ship for its operation or maintenance.  Notwithstanding the absence from those words of a reference to an agent, I would take the same view in relation to that paragraph as I have taken in relation to para (r).  It was submitted by counsel for the two original plaintiffs that a claim for reimbursement of expenses was not itself a claim in respect of goods, materials or services supplied within para (m).  My answer to that submission is simply to say that the claim is in respect of goods, materials or services supplied to the ships by third parties at the request of the ship’s agent, Opal Maritime.

Counsel stressed that a distinction must be drawn between supply to a ship and supply to a shipowner for the ship.  It was only the former that was recoverable.  I, of course, agree with that distinction.  Counsel submitted that the fact that goods, materials and services were supplied to a shipowner of itself was not enough to make a claim for their outlay recoverable in rem under para (m) or para (r).  The distinction which is drawn is a fine one.  It is a distinction which is drawn in the cases but it seems difficult to accept the general proposition that no disbursement made by an agent for the ship for which he has responsibility will not fall within one or other of the paragraphs.”

118               The agency commissions and fees presently under consideration do not come within the qualification stated by Sheppard J.  They are not claims to be reimbursed for expenses incurred in paying third parties for the supply to the ships of Baltic of goods, materials or services which were for the maintenance or operation of those ships.

119               Whether or not services are supplied to a ship is to be determined at the time when the services are supplied as a question of fact:  Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374 at 385;  Patrick Stevedores No 2 Pty Ltd at 417.

120               Opal submitted that the Act was intended to be extended to cover activities of persons other than those who directly supply goods or services to the ship:  eg s 4(3)(r) and (o) dealing with agents and subcontractors respectively.  Section 4(3)(m) was extended to cover services supplied or to be supplied.  The extension was made, Opal submitted, in recognition of the modern commercial practice whereby agents rather than masters of ships incur disbursements on account of ships.  The decision in The River Rima was, Opal submitted, distinguishable because of textual differences and because s 20(2)(m) of the 1981 UK Act was based upon Art 1(1)(k) of the Arrest Convention to which Australia was not a party.  In those circumstances the distinction between goods and services supplied to a ship and goods and services supplied to a shipowner ought not to be drawn and supply to either ought, Opal submitted, come within s 4(3)(m) of the Act.

121               The contention advanced by Opal ignores the fact that the ALRC rejected a submission that the distinction ought to be abandoned in respect of disbursements made on behalf of a ship in the context of s 4(3)(r) to allow a claim to cover disbursements made on behalf of someone who happens to own a ship:  see ALRC Report para 164.  There is nothing in para 171 of the report dealing with “Goods, Materials or Services Supplied to a Ship” which indicates that any different approach was intended by the ALRC in relation to a claim under this heading.  On the contrary, the ALRC affirms that the claim was to cover goods, materials or services supplied or to be supplied to a ship and the language used confirms the existence of a relevant distinction between supply to the ship and supply to the shipowner.

122               The 1956 UK Act and the 1981 UK Act, which respectively dealt with the supply of goods to a ship, were not intended to have a narrower operation than that which previously existed in respect of claims for necessaries under the 1925 UK Act:  The Fairport (No 5) [1967] 2 Lloyd’s Rep. 162 at 163;  The “Kommunar” at 7;  The Edinburgh Castle at 363.  This was recognised by the ALRC in its report and it was clearly intended that the present s 4(3)(m) of the Act have no narrower operation than that which applied to claims for necessaries under s 2(3) proviso (a) of the Colonial Courts of Admiralty Act 1890 (UK):  ALRC Report paras 171, note 148.

123               Under the previous law, claims for advances of money made to enable necessaries to be purchased were covered by the term “necessaries”:  see Williams & Bruce Admiralty Jurisdiction and Practice 3rd ed 1902 at 194 and the cases cited at footnote (e);  The Fairport (No 5) at 163;  The Kommunar at 7;  The Edinburgh Castle at 363.  Accordingly, claims to be indemnified for monies advanced to enable goods, materials or services to be supplied to a ship, or money paid to third parties for the supply of goods, materials or services to a ship, come within s 4(3)(m) of the Act.  Where the payments are made to third parties, the claims for indemnity for the payments also come within the disbursements section, s 4(3)(r), of the Act.  Further, there is some authority that, under the previous law, services came within the description of “necessaries” provided the provision of the services satisfied the legal definition of what constituted “a necessary”:  see for example a claim for stevedoring services or for trimming coal in William Fleming v “Equator” (1921) 9 Ll. L. Rep. 1 at 3;  the provision of funds to pay crew wages in The Fairport No 5 and the provision of officers and crew of suitable calibre for the operation and manning of the vessel in The Edinburgh Castle at 363.  However, the ALRC regarded the position as being unclear:  Report para 171, note 149.

124               The test of what was constituted “necessaries” was stated by Abbott CJ in Webster v Seekamp (1821) 4 Barn & Ald 352 (at 354) :

“... I am of opinion, that whatever is fit and proper for the service on which a vessel is engaged, whatever the owner of that vessel, as a prudent man, would have ordered, if present at the time, comes within the meaning of the term ‘necessary’, as applied to those repairs done or things provided for the ship by order of the master, for which the owners are liable.”

125               This definition has been consistently applied:  The Riga (1872) LR 3 A & E 516 at 522;  Foong Tai & Co v Buchheister & Company [1908] AC 458 at 466 (PC);  Christie v The Ship ‘Karu’ (1927) 27 SR (NSW) 443 at 445 and Lewmarine Pty Ltd v The Ship “Kaptayanni” [1974] VR 465 at 472.  No distinction was to be drawn between necessaries for the ship or necessaries for the voyage and all things which were reasonably requisite for the particular venture on which the ship was engaged were comprised in this category of claim:  The Riga at 522;  The Kaptayanni at 472 - 473.

126               Brokerage fees claimed for obtaining future charterparties for a vessel, however, were rejected as coming within the concept of “necessaries” on two grounds in The Marianne [1891] P 180 at 183 - 184.  The first was that expenditure not expended for the voyage in progress or about to be immediately undertaken does not come within the meaning of “necessaries”.  Secondly, a claim for brokerage for the obtaining of work for the vessel was itself outside the meaning of “necessaries”.

127               In the context of the present appeal, to the extent that the agency commission is payable for Opal obtaining work for Baltic by booking and handling cargo, remuneration for that work would not have been regarded as a claim for necessaries under the 1956 UK Act.

128               Further, even if the provision of services came within the category of “necessaries” under the Australian law prior to the commencement of the Act, those services were required to be supplied to a ship as distinct from being supplied to the shipowner:  see for example The Heinrich Bjorn (1883) LR 8 PD 151 at 153 - 154.

129               Before Tamberlin J, Opal did not seek to categorise the claim as one which would have been categorised as a claim for necessaries prior to the commencement of the Act.

130               If, as we find, Tamberlin J was correct in his views that s 4(3)(m) of the Act required that a distinction be drawn between services supplied to a ship and services supplied to a shipowner, then his Honour’s findings of fact preclude the claim for agency commission and agency fees claimed with respect to both the General Agency Account and the Equipment Operating Accounts coming within s 4(3)(m) of the Act.

Services other than agency services as claimed in the Equipment Operating Accounts

131               In respect of the services provided and charged for in the two Equipment Operating Accounts, Opal submitted the services it provided were supply to a ship because the containers themselves were part of the ship.  To sustain this submission, Opal sought to rely on the decision of Sheppard J in Morlines Maritime Agency Ltd v The Ship “Skulptor Vuchetich” and Her Owners (1996) 136 ALR 206.

132               The word “ship” is defined in s 3 of the Act.  It means :

“ ‘ship’ means a vessel of any kind used or constructed for use in navigation by water, however it is propelled or moved, and includes:

(a)       a barge, lighter or other floating vessel

(b)       a hovercraft;

(c)        an off-shore industry mobile unit within the meaning of the Navigation Act 1912;  and

(d)       a vessel that has sunk or is stranded and the remains of such a vessel;”

133               The definition does not deal with the question whether equipment on board a vessel is part of the vessel for the purposes of the Act.  Sheppard J was concerned with the question whether forklift trucks, fork hoists and other equipment on board the “Skulptor Vuchetich” at the time of its arrest and sale, were part of the ship for the purposes of the arrest and sale.  His Honour, with the benefit of the ALRC report, applied the decision of Sheen J in The Silia [1981] 2 Lloyd’s Rep. 534 as a correct statement of the law which applies in Australia.  Sheen J expressed his opinion in the following way (at 537) :

“I have no doubt that in the context of an action in rem the word ‘ship’ includes all property aboard the ship other than that which is owned by someone other than the owner of the ship.  I will set out the reasons which have led me to this conclusion.

If one goes back to the days before ships were driven by power derived from coal or oil a warrant served on a ship covered everything that belonged to it as part of its equipment, even to sails and rigging which are detached from it.  (See The Alexander, (1811) 1 Dods. 282.)  The personal property of the captain and crew were exempt.  For many years before the 1956 Act was enacted it was the practice of the Admiralty Court to treat bunkers as part of the ship, unless they were shown to be the property of charterers.  If Parliament intended that an action in rem should be brought against the hull and machinery, and not against oil in the tanks, Parliament would have used language which made that clear.  The language of the 1956 Act suggests that for this purpose no definition of ‘ship’ was needed and that the practice prevailing immediately before the 1956 Act should continue.  .....  One asks why in those circumstances any property of the shipowner which is on board for the prosecution of the maritime adventure should be exempt from arrest, and not made available to pay the creditors. .....”

134               In Morlines Maritime Agency, Sheppard J said (at 209) :

“In all the circumstances I think that Sheen J’s statements should be adopted and applied.  The equipment in question was equipment which was used by the vessel in the course of its operations.  It may be, as Mr Wood said, that it was not essential for the ship to have the equipment on board although I would have thought that a vessel such as this might well have benefited from the presence of such equipment from the point of view of its safety because of the need perhaps to move cargo in an emergency in order to retrim the vessel or to carry out some other operation when it would not have been possible to engage stevedores.

Accordingly, I am satisfied that the equipment in question is part of the ship for the purposes of the arrest and the sale ...”

135               The decisions relied upon by Opal go no further than holding that property on board a vessel, other than that which is owned by someone other than the shipowner and which is used by the vessel in the course of its operations, is part of the ship for the purpose of arrest and sale under the Act.  The decisions do not support a construction which defines “ship” for the purposes of the Act as including any property of the shipowner on board a ship on some indefinite occasion, irrespective of whether the property was used by the ship in the course of its operations.  There must be some sufficient connection between the property and the ship to justify the former being treated as an integral part of the latter.

136               In the present case there is no question of whether containers on board the “Skulptor Konenkov” at the time of its arrest, which were owned by Baltic, were liable to be arrested as part of the ship or be sold as part of the ship.  To the extent that Baltic used leased containers, those containers could never satisfy the definition applied by Sheppard J in Morlines Maritime Agency;  the containers were not owned by Baltic.  Further, the authorities relied upon by Opal in terms only apply to equipment owned by the shipowner when it is on board a ship for use by the ship in the course of its operations.  The Equipment Operating Accounts relate to agency services provided in respect of containers which were not on board a vessel during the period after discharge up until any subsequent loading.  The period in question relates to the use of the containers post or anterior to the sea carriage undertaken by any particular Baltic ship.  The reasoning which underlies the inclusion of equipment owned by a shipowner on board a ship at the time of its arrest, which is reflected in the judgment of Sheen J in The Silia and the ALRC Report para 107 against the side note “Equipment Furniture, Stores, Bunkers”, does not justify treating all property of the shipowner within the jurisdiction as part of the res simply because it was carried into Australia on a ship owned by the shipowner.  If Opal was correct in its contention that these decisions required that all containers owned by Baltic in Australia be treated as part of the res and thereby liable to arrest and sale while stored at a container park, the Act would have an operation which would contravene the underlying theory of admiralty jurisdiction which the ALRC was at pains to preserve:  ALRC Report paras 94, 96, 209.

137               The authorities do not support the contention of Opal that a container in the circumstances of the present case is part of the res.  Nor is there any other basis to make out such a contention.

138               A container of itself is not a ship.  If authority for such a conclusion is required, it is to be found in the decision of the House of Lords in Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co [1985] 1 AC 255 at 271.

139               The essential characteristic of a container is that of a secure box, package or receptacle into which cargo may be stowed.  It may be used for the carriage of cargo by road, rail or sea.  It is commonly used by one or more transport modes where through transit or door to door carriage is involved.  A container as the medium by which its contents are unitized has advantages to both shippers and shipowners or operators.  Containers provide readymade packaging for shipper’s goods.  They are designed to protect the contents of the container from pilferage or physical damage at all stages of the carriage.  The use of containers reduces the handling involved in loading and unloading cargo thereby reducing the exposure to loss or damage inherent in such operations and reducing the time taken to complete the carriage.  For the shipowner or operator there are substantial efficiencies to be gained from handling containerised rather than breakbulk cargo.  Moving cargo by containers allows for fast loading and unloading, the use of less shore and ship labour in carrying out these activities, less loss or damage to cargo because of the protection given by containers and the ability to carry containers as deck cargo, thereby generating greater freight income from the use of the ships.

140               Whether the carriage of a container as sea carriage of cargo by a ship involves the container becoming an integral part of that ship or an item of equipment used in the operation of a ship, is a question of fact.

141               Tamberlin J was not asked to find that the containers, the subject of the accounts, were integral parts of the “Skulptor Konenkov” or any other Baltic ship.  Also, such a finding could not be made on the evidence as it stood.  The containers were not acquired for or designated for use on a specific Baltic ship.  The containers were managed as a pool with a container being supplied to a shipper for use by that shipper to stuff the container with cargo and deliver the container and bill of lading to Baltic for carriage on the Baltic ship operating the service on which carriage was booked.  During its life in the pool any container could be carried on any number of Baltic ships, depending upon its location and availability for use at any point of time.  Further there was no evidence as to the use of the container on board any Baltic ship beyond its function as the package within which the cargo was contained.

142               In these circumstances there was no basis to find that the containers were, for the purposes of s 4(3)(m), part of the ship, and that the agency services provided in respect of the containers were thereby services supplied to the ship, and not services supplied to the shipowner in respect of its containers.

143               In any event, even if it were correct to hold that a container is part of a ship when it is placed on board a ship, especially a ship designed for carrying cargo packed in containers, we would not conclude that a container that is stored onshore is a part of a ship, at least when it has not been acquired as equipment for a particular ship.  This is important, for here the evidence shows that the services in respect of which the claim was made were rendered when the containers were onshore.  Further, there is no evidence that the containers ever had any character as equipment acquired for a particular ship and thus no evidence that they retained any such character at the relevant time.  Accordingly, even on this narrow ground, Opal must fail.

144               Finally, Opal submitted that the transactions conducted on the Equipment Operations Accounts constituted “a claim in respect of the ... equipping of a ship” within the meaning of s 4(3)(o) of the Act.  Tamberlin J rejected the submission.  His Honour said :

“It was further submitted that the claims in respect of containers would become within par (o) as being claims in respect of the ‘equipping of a ship’.  In aid of this submission reference was made to Lewmarine Pty Ltd v The Ship ‘Kaptayanni’ [1974] VR 465, a decision of Pape J.  That case concerned an action in rem to recover moneys in respect of the supply of a pump, nuts and bolts, and other equipment to a ship at Geelong and the performance of cleaning operations to the holds of the ship. His Honour held that the above works could be described as ‘equipping of the ship’.  In his reasons for judgment, his Honour said (at 471):

            ‘... I am disposed to think that all of these works may be said to constitute the equipping of the ship - they were operations necessary to be undertaken to make the ship fit to carry out the primary purpose for which she was in the port of Geelong, namely to load a cargo of wheat and carry it to Alexandria, and when they were completed and not before was the ship equipped to undertake the carriage of the cargo.  The “equipping of the ship” relates to work done on the ship as opposed to things supplied to it. (see Roscoe Admiralty Practice 5th ed p. 207)’

In that case the goods were supplied to the ship itself and the cleaning work was done in the ship itself to prepare it to receive cargo.  Those circumstances are quite different from the present case where the services were provided to containers. The repairs and services to the containers in the present case could not be said, in any sense, to be necessary or appropriate to make the ship fit to load and carry the cargo.

The plaintiff referred to pars 170 and 171 of theAustralian Law Reform Commission, Civil Admiralty Jurisdiction, Report No 33 (1986).  However, no further light is thrown on the question because that reference simply refers to Lewmarine and to another decision in which it was held that radar equipment supplied to a ship was held to be a ‘necessary’.

In my view, the furnishing of a container to be placed on a ship would not generally be considered to be ‘equipping’ the ship.  The concept of ‘equipping’ denotes fitting out or providing with what is necessary for action, or, providing with arms or apparatus for performance of a task.  See the New Shorter English Oxford Dictionary (1993), volume 1, p 842; and The Macquarie Dictionary, (1991)2nd edn, p 589.”

145               Opal submit that the reasoning of his Honour was in error, because :

(a)        the containers were used by ships of Baltic for the purpose of carrying cargo;

(b)        the containers found on a ship at the time of its arrest form part of the res;

(c)        the provision of services in respect of containers, to make those containers fit for use and available for use, was necessary for the performance by Baltic Ships of their primary function of carrying cargo, and thus within the reasoning of Pape J in the citation from The Ship Kaptayanni set out above;

(d)        Section 4(3)(o) of the Act extended the jurisdiction to persons other than those who directly equipped the ship.

146               The underlying assumption in the Opal submission is that the containers were used by Baltic ships for the purpose of carrying cargo.  That is a question of fact.  A positive finding that containers form part of the equipment of a ship is not required simply because the container is owned by the shipowner and supplied to a shipper to encourage use of the container by the shipper.  The fact that containers may be more efficiently handled than break bulk cargo, does not mean that containers are necessarily part of the ship’s equipment.

147               In The River Rima, Sheen J at first instance found that containers supplied to a shipowner were supplied for the operation of the ship:  [1987] 2 Lloyd’s Rep. 106 at 109.  On appeal, that finding was set aside.  Donaldson MR said (at 112) :

“Like the learned Judge of the Rotterdam Court, I am not impressed either by the fact that the containers were not sold to NNSL, an objection which would apply to much of the electronic equipment on vessels, or by the fact that the containers were not delivered directly on board.  But it does have to be shown that the containers were leased to NNSL for the operation of the ship or ships.  In a broad ‘loosely woven’ sense this is no doubt true.  As Mr Justice Sheen pointed out, containerization is encouraged by shipowners because it makes cargo handling easier and quicker and in some circumstances increases the cargo-carrying capacity of the ship by making deck storage available for goods which otherwise could not be so carried.  But it can equally, and as I think more cogently, be said that the purpose of supplying containers is to meet the convenience of shippers by providing them with ready made packaging for their goods, something which has nothing to do with the operation of the ship.  ...”

His Lordship concluded (at p 113) :

“... I must hold that this leasing agreement between the plaintiffs and NNSL, whilst no doubt designed to enable NNSL to provide a service for cargo-owners, to encourage the routing of cargo via NNSL and to enable NNSL to handle cargo more easily in cases in which they were themselves the carriers, is not sufficiently directly connected with the operation of ships to enable me to say that the containers were supplied by the plaintiffs to NNSL ‘for the operation of a ship or ships’.”

148               In the House of Lords their Lordships were prepared to assume for the purpose of the argument, without deciding, that the use of a container, after being previously stuffed with cargo on land, on board a ship designed to carry containers, was a use for the operation of such a ship within the meaning of s 20(2)(m) of the 1981 UK Act:  [1988] 1 WLR 758 at 763.

149               The evidence in the present case went no further than that Baltic owned containers which it supplied to shippers to stow cargo into, so that the cargo could be carried by a Baltic ship.  There was no evidence before Tamberlin J as to any particular use made of the container on board the ship beyond it being the outer covering of the packaging of the shipper’s cargo.  Nor was there any evidence that the “Skulptor Konenkov” or any other Baltic ship was a purpose designed container cargo ship.

150               It was open for his Honour to make the findings which he did.  The reasoning of the Court of Appeal in The River Rima demonstrates that the evidence as it stood would have sustained a finding that the containers were not supplied to the ship for its operation.  If the containers cannot constitute equipment of the ship, a claim in respect of services rendered to the containers cannot in our opinion be a claim in respect of equipping a ship within the meaning of s 4(3)(o) of the Act.

151               Nor did his Honour adopt a meaning of the term “equipping a ship” inconsistent with the approach taken by Pape J in Lewmarine Pty Ltd v The Ship Kaptayanni at 471.

152               Pape J was concerned with the jurisdiction of the Court in Admiralty under s 4 of the Admiralty Court Act 1861 (UK).  That section provided :

“The High Court of Admiralty shall have jurisdiction over any claim for the building, equipping, or repairing of any ship, if at the time of the institution of the cause the ship or proceeds thereof are under arrest of the Court.”

153               As appears from the reasons for judgment of Pape J, reproduced by Tamberlin J in the extract set out above, his Honour adopted as a correct statement of the law the passage cited from Roscoe Admiralty Practice 5th Ed at 207.  Equipping of a ship, according to Roscoe, related to work done on the ship as opposed to things supplied to it.  Pape J applied such a test to the case before him.  His Honour did not hold that anything done, other than by way of necessary work to a ship to make the ship fit to carry out its primary function, was equipping the ship for the purpose of s 4 of the Admiralty Court Act 1861 (UK).

154               The distinction between things done and things supplied to a ship as a test for whether an act falls within the term “equipping” has been maintained in respect of claims under s 22(1)(a)(x) of the 1925 UK Act and claims under s 20(2)(n) of the 1981 UK Act, although supply of an item which is incorporated into the vessel or an item of equipment supplied in a way that connotes permanence in its use in respect of the ship, have been treated as possibly being equipping of the ship. 

155               In Secony Bunker Oil Co Ld v Owners of the Steamship D’Vora.  The D’Vora  [1953] 1 WLR 34, a claim for the supply of fuel oil was advanced as a claim for “equipping of the ship” within s 22(1)(a)(x) of the 1925 UK Act.  The argument of counsel is recorded in [1952] 2 Lloyd’s Rep. 404 at 404 - 405.  Counsel submitted that “equipping” meant equipping for service and that that service was service in navigating the seas.  He argued that the supply of fuel was “equipping” the ship, even though with a consumable commodity.

156               Willmer J rejected the submission.  His Lordship said (at WLR 35 - 36; Lloyd’s Rep. 405) :

“The sole question to be determined in this case is whether fuel oil supplied to an oil-burning ship comes within the words 'building, equipping or repairing.’  If it does, I have jurisdiction to give judgment for the plaintiffs for the whole amount claimed in this suit;  if it does not, then it seems to me that I have no jurisdiction in respect of the fuel oil supplied to the ship at Haifa, but that the plaintiffs must be left to such remedy as they are able to exercise in the ship’s own country, namely, Israel.

Clearly, supplying of fuel oil could hardly come within the words ‘building’ or ‘repairing.’  The argument, however, is that it comes within the word ‘equipping.’  To my mind, there is, prima facie at least, a wealth of difference between the meaning of the word ‘equipping’ and the meaning of the word ‘supplying.’  A perusal of the Oxford Dictionary has not thrown any great light on the problem which I have to determine.  It is to be observed, however, that among the synonyms given for ‘supply’ in the Oxford Dictionary, one does not find the word ‘equip.’  In my judgment, there is an important difference between ‘equip’ and ‘supply,’ ‘supply’ being a word which is appropriate for use in connection with consumable stores, such as fuel oil, whereas ‘equip,’ to my mind, connotes something of a more permanent nature than consumable stores.  I can well understand that anchors, cables, hawsers, sails, ropes, and such things, may be said to be part of a ship’s equipment, and that, none the less, though they may have to be renewed from time to time;  but such things as fuel oil, coal, boiler water and food - consumable stores - seem to me to be in quite a different category. 

Mr Knox Cunningham concedes that he can find no authority in support of his proposition that the word ‘equipment’ is wide enough to cover such supplies, or that the word ‘equipping’ is wide enough to cover the supplying of consumable stores such as fuel oil.”

157               More recently Sheen J (at first instance [1987] 2 Lloyd’s Rep. 106), in The River Rima, rejected a submission that containers supplied to a shipowner for use in carrying cargo in its ships came within the term “equipping” of a ship for the purposes of s 20(2)(n) of the 1981 UK Act.  His Honour said (at 107 - 108) :

“As to par (n) Mr Sumption submitted that containers are equipment because of their function, which is similar to the function of fixed bins.  If their object is to assist in the carrying of cargo they are equipment.  I have referred first to par (n) because I have no doubt that in its context in par (n) the word equipment does not include containers.  That paragraph is dealing with the construction of a ship and with the repairing or equipping of a ship.  The context suggests that it covers items which become a part of a ship or are carried permanently.  Containers which are on hire to the shipowners for carriage in the ship are not in this category.  Paragraph (n) does not assist the plaintiffs.”

158               The ALRC did not intend to recommend a different meaning to equipping of a ship from that used by Pape J in Lewmarine Pty Ltd v The Ship “Kaptayanni”:  ALRC Report paras 40,170.

Conclusion on the appeal as to “general maritime claims”

159               Opal has failed to make out any of the grounds of appeal that the claim for agency commission and fees claimed with respect to the General Agency Account and the two Equipment Operating Accounts, or, any of the other items claimed in the Equipment Operating Accounts were properly characterised and maintainable as a general maritime claim or claims under s 4(3) of the Act and enforceable as such by an action in rem.

The right to set off accounts between Opal and Baltic

160               Opal’s right to be paid for services rendered to or on behalf of Baltic was expressly provided for in the Agency Agreement.  Opal was required to prepare full disbursement accounts for each vessel’s call at an Australian port and to forward the disbursement accounts to the owner within sixty days after the sailing from or arrival at the ports covered by the Agency Agreement:  clause 5:15.  Any agency fee relating to tramp vessels operated by Baltic were to be included in the final disbursement account for that vessel:  clause 5:10.

161               Upon completion of the disbursement accounts Opal was entitled to deduct the balance due from freight collections made by Opal and owed to Baltic:  Addendum N3 clause 1.  The contractual arrangement provided for the setting-off against the disbursement accounts, as and when completed, the balance then due by Opal to Baltic for freight collections made by Opal on Baltic’s behalf.  If after the set-off a credit balance remained in Baltic’s account, interest was payable on that amount by Opal if the funds were retained.  If there was a debit balance in Baltic’s account, Baltic was obliged to remit an appropriate amount to Opal’s bank to discharge the disbursement accounts for which payment was sought:  Addendum N3 clause 1.  Any disputes between Baltic and Opal discovered after the accounts had been set-off were to be resolved, and if resolved in Baltic’s favour, were to be adjusted by a credit being raised by Opal by means of a credit note:  Addendum N3 clause 2.  The setting-off of the credit balance in the owner’s account for freight collections against the debits constituted by the disbursement accounts claimed for payment operated as payment of those disbursement accounts and was as effective to discharge the debts, the subject of set-off, as if money had been exchanged by Opal and Baltic in payment of each other’s respective debt:  In re Harmony and Montague Tin and Copper Mining Company (Spargo’s Case) (1873) LR 8 App Cas 407 at 412, 414.  This is because there would be, underlying the set-off, existing cross-liabilities, equality of cross-liabilities and agreement, whether express, tacit or implied, to set-off the liabilities in discharge of each other:  The Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (1929) 43 CLR 247 at 263 - 264, 269 - 270;  Federal Commissioner of Taxation v Steeves Agnew & Co (Vic) Pty Ltd (1951) 82 CLR 408 at 421.  If the liabilities were not equal, payment of the residue must be effected by other means:  Federal Commissioner of Taxation v Steeves Agnew & Co (Vic) Pty Ltd at 421.  Save as to the extent of the residue, the balance of the liability is, to the extent of the set-off, pro tanto paid:  Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd at 271;  Federal Commissioner of Taxation v Steeves Agnew & Co (Vic) Pty Ltd at 421;  Commissioner of Taxation v P Iori & Sons Pty Ltd (1987) 15 FCR 363 at 368.

162               Evidence of how accounts were settled as between Baltic and Opal pursuant to Addendum 3 to the Agency Agreement was given by Craig James, who was from August 1994 to March 1995 employed as a consultant to Opal, and who was from March 1995 to August 1996 the company secretary of Opal.  Mr James said :

“29.     By clause 5.15 of the agency agreement the disbursement accounts were to be settled or finalised within 60 days of the arrival to or departure from an Australian port by Baltic ships.  Furthermore, by clauses 2.31 and 2.32 of the agency agreement Opal provided an estimate of the disbursements to the master of a Baltic ship at the time of its departure and within one week of either the loading or discharge of a Baltic ship Opal telexed to Baltic an estimate of disbursements incurred on account of the relevant Baltic ship.  Although the agency agreement made no specific provision for the time by which equipment operation accounts were to be finalised and rendered to Baltic, the equipment operation accounts were included in off set reports that were sent by Opal to Baltic on a fortnightly basis.

30.       The off set reports were in the first instance forwarded to Baltic by telex.  The telexes would record or summarise, on the one hand, amounts incurred by Opal in respect of the disbursement accounts and the equipment operation accounts (and where appropriate amounts in respect of the supplementary accounts), and on the other hand, amounts received by Opal for freight collections which had been applied towards payment of the disbursement, equipment operation and supplementary accounts.  The off set reports would then record whether, after payment of the disbursement, equipment operation and supplementary accounts from the freight collections, there was a deficit or a surplus in the dealings on the accounts.  Ordinarily, the deficit or surplus would be carried forward to the next off set reporting period.  The telexes were then followed up by correspondence from Opal to Baltic which enclosed the original disbursement, equipment operation and supplementary accounts and records of freight collections received for that period.

Dealings on the Running Account - Opening Position

31.       I refer to the statement of position being annexure ‘D’ to Silvia’s affidavit.  The first entry in the statement of position records that in April 1995 the state of accounts for dealings between Opal and Baltic resulted in a surplus of $1,007,699.74 to the credit of Baltic.  April 1995 was the last time when Baltic acknowledged the correctness of an off set report provided to it by Opal.”

163               On 15 May 1995 Opal gave written notice to Baltic terminating the Agency Agreement.  If that notice was given pursuant to clause 8.1 of the Agency Agreement, and there is no suggestion in the evidence or the conduct of the case by Opal to the contrary, the notice was notice of termination at the expiration of three months from the giving of notice.  In this case the notice expired on 15 August 1995.  Subject to any effect consequent upon the appointment of a provisional liquidator to Opal on 10 July 1995, the Agency Agreement continued to regulate the rights and obligations of the parties under the Agency Agreement in respect of the matters covered by the Agency Agreement.  Specifically, the Agency Agreement remained operative in respect to services provided by Opal under the Agency Agreement which involved Baltic ships sailing from or arriving at ports covered by the Agency Agreement in the months of May, June and July 1995.

164               The appointment of the provisional liquidator under the Corporations Law (“the Law”) suspended the powers of and functions of the officers of Opal:  s 471A(2) of the Law.  It also had the effect of staying proceedings and suspending enforcement of process against Opal:  s 471B of the Law.  It did not affect the existence or character of Opal:  P & C Connell Pty Ltd (provisional liquidator appointed) v The Electricity Trust of South Australia (1990) 8 ACLC 975 (FC) at 979;  McPherson Law of Company Liquidation 4th Ed (1999) LBC at 207.

165               The powers of the provisional liquidator were those conferred on him by the Law, by the rules of the Court that appointed him, and by the terms of the order appointing him:  s 472(3) of the Law.  Those powers included a power to carry the business of the company in order to preserve the assets of the company and the status quo pending the making of a winding up order:  s 472(4)(a) of the Law.

166               The primary function of a provisional liquidator is to take control of the company and to preserve the status quo, including the getting in and protection of its assets with the least harm possible to all concerned so as to enable the Court to decide after a proper and final hearing whether or not the company should be wound up:  Re Carapark Industries Pty Ltd (In liquidation) [1967] 1 NSWR 337 at 341;  Re Codisco Pty Ltd (1974) CLC 40-126 at 27,906;  P & C Connell Pty Ltd (provisional liquidator appointed) v The Electricity Trust of South Australia at 979.

167               The appointment of the provisional liquidator did not prevent him from continuing to conduct the agency business of Opal under the Agency Agreement until its termination in consequence of the giving of the notice on 15 May 1995.  Nor did the appointment prevent the provisional liquidator from attempting to obtain payment for agency services rendered both before and after his appointment by preparing and sending to Baltic full disbursement accounts and setting those accounts off against freight collections standing to Baltic’s credit in the owner’s account maintained by Opal.  The evidence shows that this was in fact the course followed by the provisional liquidator.

168               On 25 August 1995, Opal wrote to Baltic a letter which began :

“Dear Sirs,

DISBURSEMENT ACCOUNTS

We enclose original disbursement accounts totalling A$2,099,744.07.

The related disbursements have been offset against freight collections for the week ending 25th August, 19095 [sic].

Disbursement accounts included as follows :

KOMSOMOLSK

97

BRIS

08/06/95

13,390.49

KOMSOMOLSK

97

BRIS

08/06/95

452.28

KOMSOMOLSK

97

ADEL

24/06/95

55,858.95

KOMSOMOLSK

97

MELB

11/06/95

352,773.11

KOMSOMOLSK

97

SYD

08/06/95

225,851.89

KOMSOMOLSK

97

FREM

02/06/95

80,503.21

OP9502

FEB95

ALL PORTS

7,505.25

OP9501

JAN95

ALL PORTS

4,870.82

DISCOVERY BAY

412

FREM

25/06/95

1,684.13

DISCOVERY BAY

405

FREM

29/03/95

411.00

NELSON BAY

409

ADEL

18/05/95

1,713.00

BRANDENBURG

406

FREM

05/04/95

2,129.00

NELSON BAY

409

SYD

27/05/95

7,675.15

NELSON BAY

409

FREM

18/05/95

1,318.00

NELSON BAY

409

MELB

27/05/95

4,190.00

CONTSHIP JORK

020

ADEL

28/06/95

119.43

PALLISER BAY

007

FREM

03/07/95

260.00

CONTSHIP FRANCE

018

SYDNEY

07/06/95

102.00

CONTSHIP SYDNEY

022

SYDNEY

04/07/95

1,500.00

CONTSHIP JORK

020

SYDNEY

27/06/95

8,485.53

CONTSHIP SYDNEY

022

SYDNEY

05/07/95

1,532.57

MORETON BAY

414

SYDNEY

17/07/95

3,501.21

SKULPTOR VUCHETICH

94

MELB

06/03/95

4,678.96

DISCOVERY BAY

412

SYDNEY

25/06/95

8,054.23

SKULPTOR KONENKOV

93

ADEL

09/03/95

108.00

... [There followed seventy-eight similar entries] ...

TOTAL                                                                                    $2,099,744.07

Yours faithfully

OPAL MARITIME AGENCIES PTY LIMITED

A Stimpson

PP Craig James

Company Secretary

Encl”

169               The disbursement accounts related to arrivals or departures between 5 March 1994 and 20 July 1995 inclusive.  Opal had not paid in fact all of the disbursements on the accounts and after taking into account non-payments, the adjusted amount was $1,287,621.77.

170               The letter was exhibit “JR11” to the affidavit of Mr Rolfe sworn 13 August 1997, relied on by Opal.

171               On 15 September 1995 Opal sent a further letter enclosing original disbursement accounts totalling A$1,282,912.48.  The letter also stated that “The related disbursements have been offset against freight collections for the week ending 15 September, 1995.”  This letter was Exhibit “JR3” to the affidavit of Mr Rolfe.

172               In February 1996 Baltic lodged a proof of debt which included, amongst others, the following claims :

Amount of disbursements and supplementary accounts

debited by Opal through statements 21.04.95 - 14.7.95                                 $335,297.44

but not paid


Agency commission erroneously debited in

disbursements Account for M/V Magnitogorsk                                                 $69,586.36


Trans-shipment charges:

Baltic Intermodal Centre                                                                                  $67,659.00

Remitted by Kirby Engineering Co for purchase

of 105 x 20 containers:  20.5.95                                                                       $62,179.17


173               On 1 May 1996 the provisional liquidator admitted the first claim to the extent of $328,579.01 and all the other claims.  The provisional liquidator also admitted Baltic’s outstanding freight claim as at 10 July 1995 to the extent of $376,543.00.  By exhibit “D” to his affidavit of 16 May 1996, Mr Silva admits that as at 10 July 1995 Baltic was entitled to have credits raised in favour of Baltic in the sum of $904,546.74.  As at 10 July 1995 the total credit available to Baltic in the period 30 April 1995 to 10 July 1995 was $1,912,246.28.

174               In his notice of rejection, dated 21 March 1996 of part of Baltic’s proof of debt, the provisional liquidator made the following statements :

“11.     As to the amount of $1,912,246.28, the Company says that Baltic is indebted to it in the sum of $2,551,019.13 and that accordingly the amount of $1,912,246.28 is eliminated by virtue of the offset of $2,551,019.13 and that Baltic is in effect a debtor of the Company in the sum of $638,772.85 subject always to that figure being revised as additional amounts become known (‘the debt’).

12.       The Company maintains its claim in respect of the debt.  However, for the purpose of dealing with this Proof of debt only seeks to offset the amount as aforesaid sufficiently to discharge the balance of the claim admitted as owed by the Company to Baltic, save always that in the event that it be found that any other amount be owed by the Company to Baltic in respect of amounts presently rejected and subject to any adjustment to be made to the amount of the debt, the Company maintains its right to offset such part of the debt (as varied) as may be required to satisfy and discharge any further claim that Baltic may be entitled to make as against the Company.

13.       The Company maintains that any right to offset may be exercised against any funds in the hands of the Provisional Liquidator received after the commencement of the winding up.

14.       This Partial Rejection of Proof of Debt is intended to deal with all claims made by Baltic up to the date hereof.”

175               The provisional liquidator between 10 July 1995 and 30 April 1996 collected $408,238.39 in freight due to Baltic.  He charged against that freight what he called the costs of generating such freight income which he claimed was $328,321.75.  The balance of $79,916.64 he credited against the balance outstanding in the set-off account.  The net effect of the set-offs made by the provisional liquidator between 10 July 1995 and 30 April 1996 was that he claimed a debit balance was due in favour of Opal in the sum of $558,856.21.  The accounting involved in arriving at the debit balance is contained in exhibit “D” to Mr Silva’s affidavit.

176               Opal came out of provisional liquidation in August 1996.  Mr Rolfe deposes that the provisional liquidation ended with the payment of Opal’s creditors.  So far as Baltic was concerned, the admitted debts owed to it by Opal were paid by setting off the debt for collected freight against the debts arising under the Agency Agreement as set out above.

177               In July and August 1997, Mr Rolfe reviewed the files and financial records of Opal relating to the provision of agency services to Baltic under the Agency Agreement.  As a consequence of that examination, Opal pleaded in its amended statement of claim that “the true and adjusted balances of the offset accounts” were $525,543 in Opal’s favour as at 30 April 1995 and $1,244,823 as at the conclusion or termination of the Agency Agreement:  paragraph 13.  Of that sum, Opal claimed $1,049,776 as a general maritime claim:  paragraph 14.

178               As appears from paragraphs 5, 5A, 5B, 13 and 14 of the amended statement of claim, the claim pleaded and particularised by reference to the annexures to the affidavits of Mr Rolfe was that Opal operated a running offset account with Baltic in respect of the totality of their dealings under the Agency Agreement for so long as it remained operative.  Further, that on the taking of an account of the entire dealings between them and by offsetting debits and credits to the account, there was at the conclusion or termination of the agency account a debit balance in the offset account in the sum of $1,244,823 in favour of Opal which it contended $1,049,776 was a general maritime claim and claimed as such.  It was no part of the pleaded or particularised case that the running off-set account pleaded came to an end on 30 April 1995 or 15 May 1995.  The balance pleaded as owing at the termination or conclusion of the agency and the offset account of $1,244,823 includes all of the services provided under the Agency Agreement in the months of May, June and July and shown in exhibit “JR1” as dealings on the account between 30 April 1995 and 31 July 1995.  The document exhibit “JR1” was described by Mr Rolfe as a summary of dealings on the running account in respect of transactions that took place before and after 30 April 1995.

179               Tamberlin J found that the account operated by Opal and Baltic was a “running account” within the meaning of that term as described by Dawson, Gaudron and McHugh JJ in Airservices Australia v Ferrier (1996) 185 CLR 483 at 504 - 505.  Their Honours said (at 504 - 505) :

“... the significance of a running account lies in the inferences that can be drawn from the facts that answer the description of a ‘running account’ rather than the label itself.  A running account between traders is merely another name for an active account running from day to day, as opposed to an account where further debits are not contemplated (The term ‘running account’ seems to come from the world of banking where it is synonymous with a current account ‘on which cheques are drawn and to which credits are paid, as opposed to a deposit account on which normally cheques are not drawn’:  Hanson, Dictionary of Banking and Finance (1985), p183 and see the definition of ‘current account’ in Woelfel, The Fitzroy Dearborn Encyclopedia of Banking & Finance, 10th ed (1994), p278, as an ‘open, continuing, and running account’.)  The essential feature of a running account is that it predicates a continuing relationship of debtor and creditor with an expectation that further debits and credits will be recorded.  Ordinarily, a payment, although often matching an earlier debit, is credited against the balance owing in the account.  Thus, a running account is contrasted with an account where the expectation is that the next entry will be a credit entry that will close the account by recording the payment of the debt or by transferring the debt to the Bad or Doubtful Debt A/c.”

180               After delivery of his Honour’s reasons for judgment in December 1997, Opal sought to appropriate particular payments received by way of set-off over the period that the set-off account operated against items which formed part of the general agency account and the equipment operating accounts which were of a character that could not be enforced as a general maritime claim by action in rem.  His Honour rejected the entitlement of Opal to do so, in terms set out earlier in these reasons, at para 25.

181               The submissions of Opal before his Honour and on appeal were based on the contention that :

(a)        it remained open to Opal to now appropriate all payments because there has been no appropriation by it or Baltic of the credit balance for collected freight to any particular debt due to Opal;

(b)        the services provided after 15 May 1995 were not provided on a running set-off account having the characteristics identified in Airservices Australia, but were provided on the basis that each gave rise to a separate and identifiable debt in respect of which it was free to appropriate to a payment by way of set-off.

182               Although we agree with his Honour that the settlement of accounts between Opal and Baltic was done without differentiation as to whether the items in the account were in the nature of claims enforceable by action in rem or in personam alone, we do not agree that the account which Opal maintained was, or was operated as, a running account against the balance of which credits for collected freight account were set-off.  By the terms of the Agency Agreement and from the evidence which Tamberlin J accepted, the credit balance in the owner’s account for collected freight was set-off against specific disbursement accounts which were delivered to Baltic.  Each disbursement account was paid by way of set-off with the intention that the debt represented by the disbursement account would be fully satisfied and discharged by the set-off.  The balance, if any, standing to the credit of Baltic in the owner’s account, remained to be disposed of or dealt with in accordance with the instructions of Baltic.  Where the entire disbursement account was paid by set-off, the set-off operated as an appropriation.  The debt having been paid, it no longer exists.

183               In the context of the present case, when Baltic and Opal agreed the balance in favour of Baltic at $1,007,699.74, they agreed the state of accounts between them as at 30 April 1995.  Each of the disbursement accounts which had been set-off against the previous agreed balance in the owner’s account for collected freight as at 30 April 1995 was at the time of the set-off thereby paid.  The mutual set-offs which produced the agreed balance discharged the disbursements accounts on the one side and collected freight credit on the other and operated as an appropriation:  Re Laycock v Pickles (1863) 4 B&S 497 at 506;  122 ER 546 at 549;  Siqueira v Noronha [1934] AC 332 at 337 - 338;  see generally Prof R M Goode Payment Obligations in Commercial and Financial Transactions (1983) Sweet & Maxwell.  All of the previous disbursement accounts and credits for collected freight which had been set-off in accordance with the provisions of the Agency Agreement from the time of its inception up to 30 April 1995 had been paid by mutual set-off and the debts used to bring about payment by set-off had been appropriated and discharged.

184               It is not open to Opal to re-open a settled account which has been discharged by payment.  Nor can it seek to treat the conduct of the parties as constituting a running account where an alleged debt is brought to account at the time the service is performed even though the debt was not then due for payment in terms of the Agency Agreement.  Opal cannot now seek to bring into the account as at 30 April 1995 other items which it says were debts which could or should have been taken into account in agreeing a balance at that date so as to take out of the account claims which, if enforceable, would separately be maritime claims within s 4(3) of the Act enforceable by action in rem.  The course which Opal now seeks to take was attempted and rejected as incompetent by the Privy Council in Van Hasselt v Sack, Bremer & Co;  The Twentje (1859) 13 Moore PC 185 at 193 - 194;  15 ER 70 at 73 - 74.

185               Disbursement accounts which had not been the subject set-off against collected freight credits under the procedure agreed in the Agency Agreement were not discharged as at 30 April 1995.  Those accounts fell into two categories.  The first were disbursement accounts which were raised after 30 April 1995 for services rendered pursuant to the Agency Agreement prior to 30 April 1995.  The second category were disbursements made prior to 30 April 1995 which were for whatever reason not included in disbursement accounts.

186               The disbursement accounts falling into the first category are those contained in the summary of account of the provisional liquidator, being exhibit “D” to his affidavit.  They are described as :

“Disbursement A/cs Conceded by Baltic not Incl in Proof of Debt

- Equipment Operation A/c                       1,059,448.93

- Equipment Operation A/c                            29,238.79

- General                                                   1,287,621.77

- Container Handline Fees                           174,709.64       (2,551,019.13) dr”

187               The provisional liquidator set-off the general disbursement account in the sum of $1,287,621.77 (after making allowance for claims not in fact paid by Opal) in the letter of 25 August 1995 (exhibit “JR11”) against the balance outstanding for collected freight due to Baltic.  It is at this point that the problems of proof found by Sheppard J and by Tamberlin J to prevent the identification of the items of mutual set-off become clear.  If at 25 August 1995 the proper balance in the collected freight account amounted to $1,336,278.75, then the set-off, which was in accordance with Addendum N3 of the Agency Agreement, operated to discharge Baltic from the disbursement claims particularised in the letter insofar as those claims had in fact been paid by Opal and left a credit balance in favour of Baltic in the sum of $45,657.98.  This credit balance would then have been available to be set-off in accordance with the purported set-off by letter of 15 September 1995 from Opal to Baltic.

188               The problem is that the evidence is silent as to whether the credit in favour of Baltic as at 30 April 1995 remained available for set-off in August and September 1995 or whether it had earlier been set-off against the other or some of the other accounts identified thereby discharging those accounts by payment and leaving the general disbursement account either wholly or partly unpaid.

189               To the extent that there is any evidence as to the setting off of the credit for collected freight against the accounts other than the general disbursement account, it is equivocal.  It lies in the rejection by the provisional liquidator of a claim for the balance of the collected freight credit made up of the agreed credit of $1,007,699.74 and the credit of $328,579.01 for payment previously made by set-off where Opal had not in fact paid the claim.  The provisional liquidator contended that the balance had been set-off against all four accounts leaving a debit balance in favour of Opal.  The order and identity of the debts mutually set-off is not revealed.

190               In the state of the evidence before Tamberlin J, it was impossible to determine which of the disbursement accounts rendered after 30 April 1995 remained unpaid.  However, that does not entitle the purported set-offs by the letters of 25 August and 15 September 1995 to be ignored as if they did not occur.

191               The disbursement accounts which fall within the second category have never been the subject of set-off.  However, on the findings of fact made by his Honour, some were services provided under the Agency Agreement to Baltic in its own capacity and not on the credit of any ship.  The claims in terms of the Agency Agreement were to become due and payable, and to be paid, in accordance with the provisions of the Agency Agreement.  In the first instance, they were to be paid out of collected freight and if that was insufficient by payment from Baltic to Opal in accordance with Addendum N3 to the Agency Agreement. 

192               The items falling within the second category are :

(a)        Equipment operating disbursement accounts;

(b)        Vessel disbursements pre-30 April 1995 not included in balance of $1,007,699.74 struck in Baltic’s favour;

(c)        Vessel disbursements pre-April 1995 not included in provisional liquidators statement of accounts;

(d)        Container fees and slot charters pre-April 1995;

(e)        Suez Canal fee.

193               The items in (a) and (d) above were not items which were enforceable by an action in rem.  They therefore do not give rise to a claim against the fund.

194               The claim in (b) above is particularised as being sourced in the documents “JR17” to Mr Rolfe’s affidavit.  Those documents on casual observation include substantial claims for agency commission and container related charges and expenses.  Some items would prima facie appear by their nature to be services rendered to the ship.

195               The claim in (c) above is particularised as being sourced in the documents “JR18” to Mr Rolfe’s affidavit.  A perusal of these documents likewise reveals that a not insubstantial part of the items fall within categories of claim which were not recoverable against the fund, notwithstanding that others prima facie appear to be claims relating to goods and services provided to a ship.

196               The difficulty facing Opal in respect of these claims is that although it may be said that they can be characterised as being goods and services supplied to a particular ship by third parties and therefore claims prima facie within s 4(3)(m) and s 4(3)(o) if Opal has paid the third party account, that prima facie entitlement may by agreement or a course of conduct be contracted away:  Borneo Company v “Mogileff” [1921] 6 Ll.L. Rep 528 at 533;  Clausen v The Ship OM Alqora [1985] 38 SASR 481 at 485 ff;  The Kommunar at 7.  Tamberlin J has found that the effect of the Agency Agreement was that all agency services under the Agency Agreement were supplied to Baltic as the owner or operator of the ship it used in its business and that the services were supplied to Baltic in that capacity without the intention that Opal would look to the ships individually for the satisfaction of claims in addition to the personal liability of Baltic secured by the right to access the freight collections it held.  For reasons outlined earlier, we see no reason to disturb that finding.

197               There is also substance in the observation of Tamberlin J that the case was never conducted on the basis that these items were to be regarded as themselves giving right to a judgment in rem against the fund.  They were at all times brought into account to produce a balance of account and it was the balance of account due, it was said, under the Agency Agreement for which judgment in rem was sought.

198               The claim in respect of the Suez Canal fee stands in a different category.  In our view it was not provided under the Agency Agreement.  The documents disclose that Baltic, on 21 March 1995 by telex, requested Opal to forward to Asswan Shipping Agency in Egypt US$220,000 to pay the Suez Canal fee in respect of the “MV Anatoliy Vasiljev” which was then at the Canal.  The money was drawn from Opal’s account with the ANZ Bank and paid as per the telex request.  The amount debited to Opal was $303,473.28.

199               The Suez Canal fee has not been paid and was not brought  to account in any set off. The claim for the fee has the character of a general maritime claim under s 4(3).  However, Opal is not entitled to judgment for this sum as part of the sum of $364,146.57 because of the conditions imposed by Shepherd J when he granted leave to re-open the case.  One of those conditions was that Opal could not recover more than $364,146.57 in respect of the two equipment operation accounts and the general account referred to in the document marked D annexed to his reasons.  This item was never included in those accounts.  Tamberlin J anticipated that, when he granted Opal leave to file and serve its amended statement of claim, it was possible that an amount in excess of this sum might be found to be owing.  Accordingly, his Honour said that his grant of leave would not deprive any party from contending that judgment should not be entered for a sum in excess of $364,146.57 or that the Court should not grant a declaration that any further sum was due.

200               In these circumstances it would be wrong to make an order on this appeal to allow Opal to enter judgment for $303,473.28.  We would regard it as proper, however, to declare that Opal has a general maritime claim for this amount but the question whether it should be entitled to enforce that claim against the money in Court cannot be determined until those who might wish to oppose enforcement have been heard.  In these circumstances we consider that it is appropriate to make the following declaration and orders :

1.         The appeal be allowed in part. 

2.         The order of Tamberlin J that the claim of Opal Maritime Agencies Pty Limited be dismissed, be set aside and in lieu thereof :

            DECLARE that the claim of Opal Maritime Agencies Pty Limited for the Suez Canal fee in the sum of $303,473.28 is a general maritime claim within the meaning of s 4(3) of the Admiralty Act 1988 (Cth).

3.         The appeal be otherwise dismissed.

4.         The proceedings be remitted to Tamberlin J for the purpose of hearing and determining any application by Opal Maritime Agencies Pty Limited in respect of the proceeds in Court, having regard to the terms of the orders previously made by Tamberlin J in the proceedings.

5.         Pending the hearing and determination  of any application by Opal Maritime Agencies Pty Limited to recover payment of the Suez Canal fee of $303,473.28 from the proceeds of the sale of the ship “Skulptor Konenkov” presently held in Court, or further order of Tamberlin J, the said proceeds not be paid out of Court except to pay any outstanding costs and expenses of the Marshal, including the Marshal’s costs of this appeal.

6.         Any application by Opal Maritime Agencies Pty Limited for payment out of the proceeds in Court be brought by motion on notice given within twenty-eight days, in default of which the Marshal forthwith apply to Tamberlin J or another judge of the Court for such orders and directions as may be appropriate for the final disposition of the proceeds in Court.

7.         Any directions concerning the giving of notice by advertisement or otherwise and the service of parties who may claim an interest in the proceeds in Court be given by Tamberlin J or such other judge of the Court who hears the application of Opal Maritime Agencies Pty Limited.

8.         The Marshal’s costs of the appeal be taxed on an indemnity basis and be paid out of the fund in Court representing the proceeds of sale.

201               The Suez Canal fee claim was not advanced before Sheppard J at all.  It was raised as an item in an account the balance of which was claimed before Tamberlin J.  The first time that the claim was advanced as a separate and discrete claim in its own right was before this Court on appeal.  Opal failed before Sheppard J and before Tamberlin J.  It has substantially failed on the grounds argued on the appeal.  Having regard to the way the Suez Canal fee claim was raised and Opal’s lack of success otherwise, it should bear its own costs of the appeal and below.

202               The Marshall’s appearance on the appeal was in defence of the fund and to assist the Court in the proper determination of the issues arising below and on the appeal.  The Marshal’s costs on the appeal shall be taxed on an indemnity basis and paid out of the funds in Court.

203               To the extent indicated above, the appeal is allowed and the judgment of Tamberlin J set aside and in lieu thereof there is to be a declaration in the terms indicated above.  Otherwise the appeal is dismissed.


I certify that the preceding two hundred and three (203) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Black and Justices Cooper and Finkelstein


Associate:

Dated:              19 April 2000


Counsel for the Appellant:

Dr G Griffith QC with Mr S Glacken

Solicitor for the Appellant:

Goldsmiths



Counsel for the Admiralty Marshal:

Mr P King

Solicitor for the Admiralty Marshal:

Law Office of Douglas Coleman



Counsel for the Receivers and Managers:

Mr G Nell

Solicitors for the Receivers and Managers:

Zaparas & Dandanis Lawyers & Consultants



Date of Hearing:

5 November 1998

Date of Judgment:

19 April 2000