FEDERAL COURT OF AUSTRALIA
Safezone Pty Ltd v The Ship “Island Sun” [2004] FCA 1797
ADMIRALTY AND MARITIME –application for arrest of a surrogate vessel pursuant to section 19 of the Admiralty Act 1988 (Cth) – whether it has been established that the “relevant person” is the “owner” of the surrogate vessel under section 19(b) of the Admiralty Act 1988 (Cth).
Admiralty Act 1988 (Cth) ss 3, 4, 19
Kent v The Vessel “Maria Luisa” as Surrogate for the Vessels “Monika” and “Boston Bay” (2003) 130 FCR 12, applied
Malaysia Shipyard v "Iron Shortland" as surrogate for the ship "Newcastle Pride" (1955) 131 ALR 738, applied
SAFEZONE PTY LTD (ACN 107 634 588) v THE SHIP “ISLAND SUN”
W 283 of 2004
LEE J
12 DECEMBER 2004
PERTH
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
W283 OF 2004 |
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IN ADMIRALTY |
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BETWEEN: |
SAFEZONE PTY LTD (ACN 107 634 588) Plaintiff
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AND: |
THE SHIP "ISLAND SUN" Defendant
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LEE J |
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DATE OF ORDER: |
12 DECEMBER 2004 |
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WHERE MADE: |
PERTH |
THE COURT ORDERS THAT:
1. The District Registrar be directed not to issue the arrest warrant.
2. There be liberty to apply.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
W283 OF 2004 |
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BETWEEN: |
SAFEZONE PTY LTD (ACN 107 634 588) APPLICANT
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AND: |
RESPONDENT
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JUDGE: |
LEE J |
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DATE: |
12 DECEMBER 2004 |
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PLACE: |
PERTH |
REASONS FOR JUDGMENT
LEE J:
1 The plaintiff applies for the issue of a warrant for the arrest of the passenger ship MV “Island Sun” (“the vessel”). The vessel is berthed at D Shed, Victoria Quay, in the inner harbour of the port of Fremantle, Western Australia. It is to take on bunkers at 6:00 am on 13 December 2004 and thereafter depart from Australian waters.
2 The plaintiff filed a writ in rem together with an application for an arrest warrant. The “relevant person” described in the writ is “Mauritius Island Cruise Ltd, of Quatre Bornes, Mauritius, being the owner of the Defendant Ship”. Section 3 of the Admiralty Act 1988 (Cth) (‘the Act’) defines a “relevant person”, in relation to a maritime claim, as a person who would be liable on the claim in a proceeding commenced as an action in personam.
3 The particulars of the plaintiff’s claim endorsed on the writ are as follows:
‘(a) Breach of Charterparty between Mauritius Island Cruise Ltd as Owner and the Plaintiff as charterer in respect of the ship MV “World Adventurer” dated 16 October 2004;
(b) the issue of a Warrant for the arrest of property;
(c) interest pursuant to section 51A Federal Court of Australia Act 1956; and
(d) costs.’
4 An affidavit sworn by Mr Jackson, the managing director and a shareholder of the plaintiff, is filed in support of the arrest application. Mr Jackson deposes that he believes that Mauritius Island Cruise Ltd (‘MIC’) is the beneficial owner of the vessel and, therefore, that the plaintiff is entitled to arrest the vessel as a “surrogate ship”. Section 3(6) of the Act defines a surrogate ship, inter alia, as a ship against which a proceeding on a maritime claim may be commenced under s 19 of the Act.
5 Section 19 of the Act confers a right to proceed in rem against a surrogate ship as follows:
‘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.’
6 The plaintiff’s endorsed claim against the relevant person for a breach of charterparty is a “general maritime claim” as defined in s 4(3) of the Act.
7 The plaintiff conducts business as a pleasure cruise and tour operator. The plaintiff sought to charter a cruise ship to carry passengers on a voyage from Singapore to Fremantle via Darwin commencing on 26 October 2004. The plaintiff intended to conduct return-trip cruises between Fremantle and Albany between November 2004 and March 2005.
8 Mr Jackson, on behalf of the plaintiff and a Mr Grüner-Hegge, on behalf of MIC, negotiated a Cruise Vessel Time Charter on 16 October 2004 (‘the World Adventurer Charterparty’) under which the plaintiff, (under its trading name), agreed to charter the cruise vessel MV “World Adventurer” from MIC, described therein as the owner.
9 The World Adventurer Charterparty provided, inter alia, as follows:
1. Clause 1 - the period of hire was from the time of delivery (about 22 October 2004) until about 31 March 2005 with an option to extend the charter period by fifteen days by the plaintiff declaring the option and MIC agreeing to it on or before 31 December 2004;
2. Clause 3.1 - the MV “World Adventurer” be delivered to the plaintiff at Singapore following a notice of readiness being given by MIC 72 hours prior to the arrival of the World Adventurer at Singapore Harbour Front Passenger Terminal;
3. Clause 3.2 - if no notice of readiness had been given by MIC to the plaintiff by 23 October 2004 then MIC would provide a new date of readiness by 26 October 2004;
4. Clause 5(a) & (e) – MIC provide and pay for all crew needed for the intended trade to operate inter alia a hotel service on the MV “World Adventurer” and maintain the vessel in an efficient state for ordinary use;
5. Clause 13.2 – the MV “World Adventurer” be employed solely for the carriage of passengers and their luggage; and
6. Clause 7(a) – as a pre-condition to the entry into force of the charterparty the plaintiff pre-pay into the account of the owner an amount of no less than US$250,000.00 by no later than three days after signing the charter.
10 The plaintiff duly paid the sum of US$250,000.00 to MIC. In anticipation of the charter of the MV “World Adventurer” the plaintiff obtained passengers for the proposed voyages and received from them the payment of fares.
11 On 18 October 2004 MIC advised the plaintiff that MIC would be unable to deliver the MV “World Adventurer” under the World Adventurer Charterparty. The plaintiff, therefore, had to cancel bookings made for the voyage from Singapore.
12 On 22 October 2004 the plaintiff advised MIC of the bookings that the plaintiff had accepted in anticipation of the delivery of the MV “World Adventurer” and of the costs it would incur. MIC responded by advising the plaintiff that MIC shared the plaintiff’s concerns and was confident that the charter would “materialize soon”.
13 On 29 October 2004 the plaintiff contacted the actual owner of the MV “World Adventurer” in Singapore and was advised that MIC had taken a bareboat charter of the ship from September 2004 but payments of hire charges due under the charterparty were in arrears and until the arrears were paid (a sum of approximately US$500,000) the MV “World Adventurer” would not be delivered to MIC by the owner.
14 On 10 November 2004 Mr Grüner-Hegge offered the vessel to the plaintiff as a substitute for the MV “World Adventurer”. On 15 November 2004 the plaintiff, as charterer, entered into a Cruise Vessel Time Charter with Sun Shipholding Ltd, as owner, (‘the Island Sun Charterparty’) under which the plaintiff agreed to charter the vessel from 15 November 2004 until about 31 March 2005. Mr Grüner-Hegge executed the charterparty on behalf of Sun Shipholding Ltd.
15 Clause 7.1 of the Island Sun Charterparty acknowledged that the plaintiff “as a condition to the entry into force” of the Charterparty had “executed a cleared deposit” of US$250,000 into the account of Sun Shipholding Ltd as “advanced payment for the daily charter hire of the vessel”. The deposit was to be refunded to the plaintiff “in daily instalments equal to the deposit divided by the number of days in the charter period”.
16 As a result of the cancellation of bookings; refunds of fares; and negative publicity directed at the plaintiff, the plaintiff claims to have suffered severe financial detriment as a result of the non-delivery of the MV “World Adventurer”. As at the time of hearing of the application for the arrest warrant the plaintiff estimates that it has refunded AU$2,769,144.00 for cancelled bookings and that its net losses to 30 April 2005 will be approximately AU$6,948,391.00.
17 On about 10 December 2004 the vessel berthed at Fremantle. It is not stated in the material presented in support of the application for arrest when the Notice of Readiness was given to the plaintiff under the Island Sun Charterparty. The ‘place of readiness’ under the charterparty was Port Louis, Mauritius and the time of delivery of the vessel was to be 15 November 2004. Whilst berthed at Fremantle the Master of the vessel distributed a letter addressed to “Passengers” stating that he had been instructed by the owner of the vessel to advise passengers that the vessel was ready to perform the cruise for which the passengers had booked but was unable to embark passengers because the owner had not been paid by the plaintiff “to operate this cruise”. The entity employed by the owner to manage the vessel had advised the plaintiff that a crew would not be provided for the vessel unless US$50,000.00 was paid by the plaintiff to the manager. The plaintiff was unable to pay that sum. To this point the plaintiff has not claimed that Sun Shipholding Ltd is in breach of the Island Sun Charterparty.
18 The issue now before the Court is whether it has been established by the plaintiff that MIC, as the “relevant person”, is the “owner” of the vessel for the purposes of s 19(b) of the Act. The Act does not define the term “owner of the … ship” as used in s 19(b).
19 In the Lloyd’s Register of Ships for 2004 Sun Shipholding Ltd is the registered owner of the vessel. According to an “Information Memorandum” forwarded to the plaintiff by Mr Grüner-Hegge, Sun Shipholding Ltd is a wholly owned subsidiary of MIC.
20 The plaintiff relies on the following circumstances for its contention that MIC is the beneficial owner of the vessel:
· Mr Grüner-Hegge offered the vessel as a substitute for the MV “World Adventurer” and executed the Island Sun Charterparty on behalf of Sun Shipholding Ltd and apparently transferred the US$250,000.00 deposit paid under the World Adventure Charterparty to the benefit of Sun Shipholding Ltd for the purpose of Clause 7.1 of the Island Sun Charterparty; and
· Sun Shipholding Ltd is a wholly owned subsidiary of MIC.
21 Counsel for the plaintiff relied on the case of Malaysia Shipyard v “Iron Shortland” as surrogate for the ship “Newcastle Pride” (1995) 131 ALR 738 (‘Iron Shortland’) in support of its submission that MIC is the beneficial owner of the vessel for the purposes of s 19(b) of the Act.
22 In Iron Shortland (supra) Sheppard J concluded that for the purposes of s 19(b) of the Act “owner” includes a beneficial (i.e. a real or true) owner. At 749 his Honour said:
‘I think there are difficulties in taking the simple view that “owner” in the section means only “registered owner”. After all, the section does not use those words. Obviously the registered owner will, in the absence of other evidence, be taken to be the beneficial owner. But there seems to me to be no reason of policy why the section should not be construed to mean or to include a beneficial owner. Because the judges who decided Shin Kobe Maru were dealing with a case directly concerned with the ownership of a vessel and thus with a proprietary, rather than a general, maritime claim, there is a danger in taking too much from the dicta about the meaning of ownership in s 4(2) and applying them to cases under s 4(3), particularly bearing in mind the terms of both ss 17 and 19. But at least the judgments show that the concept of “owner” and “ownership” in the Act may have a meaning which involves or includes beneficial ownership. There is thus nothing which runs counter to ordinary concepts of admiralty law or jurisdiction which should lead me to reject the plaintiff’s submission.’
23 The expression “owner” in s 19(b) of the Act has been more recently considered by a Full Court of this Court in Kent v The Vessel “Maria Luisa” as Surrogate for the Vessels “Monika” and “Boston Bay” (2003) 130 FCR 12 (‘Maria Luisa’).
24 In Maria Luisa, the appellant, Mr Kent, was a diver who claimed to have been badly injured when diving from two ships, the MV “Monika” and the MV “Boston Bay” which were involved in tuna farming in South Australia. The MV “Monika was owned by Simone Fisheries Pty Ltd as trustee of the Simone Fisheries Unit Trust. The MV “Boston Bay” was owned by Blazar Fisheries Pty Ltd as trustee of the Blazar Unit Trust. The sole beneficiary of each of these trusts was Australian Fishing Enterprises Pty Ltd (“AFE”). AFE was the demise charterer of both ships. The appellant was of the opinion that he had a general maritime claim to obtain compensation for his injuries and that the claim could be brought against the “Maria Luisa” as it was contended that the vessel was owned by AFE when the proceedings were commenced.
25 Everdene Pty Ltd (‘Everdene’) the registered owner of the “Maria Luisa”, sought orders setting aside the warrant for the arrest of the vessel and dismissing the proceedings for want of jurisdiction. The main ground for this contention was that AFE as the person named as the “relevant person” in the writ was not the “owner” of the “Maria Luisa” at the time when the proceedings were commenced so as to satisfy the requirements of s 19 (b) of the Act. At the relevant time Everdene was the trustee of the MV “Maria Luisa” Unit Trust and the vessel was an asset of the trust. All 64 shares in Everdene were held by AFE and AFE held all the units in the trust.
26 In Maria Luisa the learned primary judge accepted Everdene’s argument that AFE was not the “owner” of the “Maria Luisa” for the purposes of s 19(b) of the Act.
27 On appeal the Full Court dismissed the appeal by a majority (Tamberlin and Hely JJ, Moore J dissenting) holding that:
‘The circumstance that AFE may be said in general terms to enjoy “a bundle of rights” which may enable it by a series of discrete actions to obtain ultimately possession of the ship, control its activities, and entitle it to alienate the ship, does not equate to present ownership at a particular point in time. Rather, it indicates the potential to become the owner. The bundling of a series of discrete entitlements which if exercised could lead to ownership does not satisfy the requirements of s 19.’
28 Prior to reaching this conclusion Tamberlin and Hely JJ accepted (at [42]) the view expressed by Sheppard J in Iron Shortland that in s 19 of the Act “owner” means or includes a beneficial owner, who may not be the registered owner.
29 Of relevance to the current application before the Court, Tamberlin and Hely JJ said the following (at [47]) in relation to the concept of a “beneficial”, “real” or “true" owner:
‘It is a fundamental principle of company law that a shareholder in a company, even a sole shareholder, has no property, legal or equitable in the assets of the company by reason of that share holding: Macaura v Northern Assurance Co Ltd [1925] AC 619; Re Webster (1975) 132 CLR 270. If AFE held all of the shares in Everdene Pty Ltd, and there were no interposed trust, then AFE would not be the “owner” of the “Maria Luisa” by virtue of its position as the sole shareholder of Everdene Pty Ltd, and the requirements of s 19(b) of the Act would not be satisfied. That result is not the consequence of some oversight in the drafting of the Act. The report of the Australian Law Reform Commission on which the Act is based (Report No 33 – Civil Admiralty Jurisdiction 1986) considered the case where a group of “one-ship” companies is effectively under the control of a holding company (pars 138 -141), and recommended against including a special provision in the Act to lift the corporate veil in such cases, either for the purpose of identifying surrogate ships, or for more general purposes.’
30 Accordingly, the circumstances relied on by the plaintiff are not sufficient to give rise to an inference that MIC is the beneficial owner of the vessel for the purposes of s 19(b) of the Act. Even if it is assumed that there is single management for the corporate chain that constitutes MIC and Sun Shipholding Ltd the fact that Sun Shipholding Ltd is a wholly owned subsidiary of MIC does not assist the plaintiff. It may be taken that Maria Luisa (in particular at [47]) has established that the concept of beneficial ownership in relation to proceedings against a surrogate vessel is to be construed narrowly and does not extend to wholly-owned subsidiary “one ship” companies. On the evidence so far adduced the plaintiff has not demonstrated entitlement to effect an arrest of the vessel under s 19(b) of the Act.
31 It follows that an arrest warrant should not issue in relation to the vessel. I will, however, make an order that the plaintiff have liberty to apply on short notice in the event that it obtains any further evidence relevant to the application.
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I certify that the preceding thirty-one (31) paragraphs are a true copy of the Reasons for Judgment herein of The Honourable Justice Lee. |
Associate:
Dated: 10 March 2005
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Counsel for the Plaintiff: |
D C Leask |
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Solicitors for Plaintiff: |
Leask and Co |
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Date of Hearing: |
12 December 2004 |
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Date Judgment Delivered: |
12 December 2004 |
