FEDERAL COURT OF AUSTRALIA
ASP Holdings Ltd v Pan Australia Shipping Pty Ltd [2006] FCA 1379
CORPORATIONS – leave to commence action in rem against ship
Admiralty Act 1988 (Cth) s18
Corporations Act 2001 (Cth) ss 440C, 440D, 441J
Addis v Burrows [1948] 1 KB 444 considered
Allam & Co Ltd v Europa Poster Services Ltd [1968] 1 WLR 638 considered
Barclays Mercantile Business Finance Ltd v Sibec Developments Ltd [1992] 1 WLR 1253 cited
Cinema Plus Ltd (Administrators Appointed) v Australia & New Zealand Banking Group Ltd (2000) 49 NSWLR 513 cited
CMC (Australia) Pty Ltd v Ship ‘Socofl Stream’ (1999) 95 FCR 403 followed
Morris v Ship Kiama (Mubum) (1998) 16 ACLC 945 cited
National Australia Bank v King (2003) 45 ACSR 413
P Phipps and Company (Northampton and Towcester Breweries) Ltd v Rogers [1925] 1 KB 14 considered
Re Ansett; Intrepid Aviation Partners VII LLC v Ansett Australia Ltd (2001) 115 FCR 175 cited
Re Java 452 Pty Ltd (Administrators Appointed) (1999) 32 ACSR 507 applied
The Aegnoussiotis [1977] 1 Lloyd’s Rep 268 applied
The Mihalios Xilas [1979] 2 Lloyd’s Rep 303 applied
The Rangiora [2000] 1 Lloyd’s Rep 36 cited
The Turakina (1998) 154 ALR 666 distinguished
IN THE MATTER OF PAN AUSTRALIA SHIPPING PTY LTD (ACN 115 315 985) (UNDER ADMINISTRATION)
ASP HOLDINGS LIMITED v PAN AUSTRALIA SHIPPING PTY LTD
VID 1092 of 2006
ASP HOLDINGS LIMITED v THE SHIP “BOOMERANG 1”
VID 1099 of 2006
FINKELSTEIN J
18 OCTOBER 2006
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY IN ADMIRALTY |
VID 1092of 2006 |
IN THE MATTER OF PAN AUSTRALIA SHIPPING PTY LTD (ACN 115 315 985) (UNDER ADMINISTRATION)
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BETWEEN: |
ASP HOLDINGS LIMITED Plaintiff
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AND: |
PAN AUSTRALIA SHIPPING PTY LTD Defendant
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VID 1099 of 2006 |
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BETWEEN: |
ASP HOLDINGS LIMITED Plaintiff
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AND: |
THE SHIP "BOOMERANG 1" Defendant
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FINKELSTEIN J |
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DATE OF ORDER: |
19 OCTOBER 2006 |
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WHERE MADE: |
MELBOURNE |
THE COURT NOTES THAT:
(a) the Plaintiff applied by Originating Process dated 6 October 2006 in action No VID 1092 of 2006 for leave pursuant to s 440D of the Corporations Act 2001 (Cth) to make application to arrest the ship "Boomerang 1"; and
(b) the Plaintiff has agreed to the discharge of all present cargoes from the ship "Boomerang 1" during the operation of the Undertakings given below.
UPON THE OWNERS OF THE "BOOMERANG 1", JAYMONT SHIPPING COMPANY LIMITED, BY ITS COUNSEL'S UNDERTAKING: -
(a) to keep the ship "Boomerang 1" inside the heads of Sydney Harbour until the later of 12 noon on Friday 20th October 2006 or when security has been provided in accordance with the Order 3 below; and
(b) to notify Gavin James Vallely orally (mobile phone 0416 05 2023) and in writing and failing him Robert Clive Springall (0416 05 2015) both of Holman Fenwick & Willan at least six hours prior to any movement of the ship "Boomerang 1" to anywhere outside the heads of Sydney Harbour until security is paid into Court in accordance with Order 3 below or security satisfactory to the Plaintiff is otherwise provided by or on behalf of Jaymont.
THE COURT ORDERS THAT:
1. Subject to Order 2 below, the Plaintiff have leave to apply in this proceeding for the arrest of the ship "Boomerang 1"(IMO 9309162).
2. The Order granting leave to the Plaintiff to apply to the Court for an arrest warrant is stayed until 12 noon on Friday 20 October 2006.
3. In the event that Jaymont Shipping Company Limited ("Jaymont") pays into Court the sum of A$2,528,143.40 to the credit of this action to answer the Plaintiff's claim in this proceeding andto prevent the arrest of the ship "Boomerang 1" by the Plaintiff (or security satisfactory to the Plaintiff is otherwise provided by or on behalf of Jaymont and the Court is notified accordingly by the Plaintiff) then Order 1 herein granting leave to the Plaintiff to apply for an arrest warrant is rescinded from the date such payment is made (or such security is provided) except where an arrest warrant has already been issued in accordance with these Orders.
4. Any such payment into Court made by Jaymont pursuant to Order 3 be invested by the Court in an interest-bearing account.
5. Within 3 days of the sum being paid into Court, the Registrar shall
notify each party in writing that the sum has been received.
6. The Notice of Motion dated 11 October 2006 filed by Jaymont is dismissed.
7. Jaymont pay the Plaintiff's the costs of the Notice of Motion.
8. Jaymont have leave to appeal under Order 52 Rule 10 of the Rules of Court against Orders 6 and 7.
9. The Application by the Administrators of PAN Australia Shipping Pty Ltd for an order revoking the order made on 6 October 2006 in proceeding No. VID 1092 of 2006 is dismissed with no order as to costs.
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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VICTORIA DISTRICT REGISTRY |
VID 1092 of 2006 |
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BETWEEN: |
ASP HOLDINGS LIMITED Plaintiff
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AND: |
PAN AUSTRALIA SHIPPING PTY LTD Defendant
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VID 1099 of 2006 |
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BETWEEN: |
ASP HOLDINGS LIMITED Plaintiff
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AND: |
THE SHIP "BOOMERANG 1" Defendant
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JUDGE: |
FINKELSTEIN J |
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DATE: |
18 OCTOBER 2006 |
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PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
1 ASP Holdings Ltd claims a statutory lien over the Boomerang 1, a cellular container vessel. The lien is for unpaid management services (the provision of the crew and technical management for the vessel’s operation and maintenance) provided by ASP’s agent to Pan Australia Shipping Pty Ltd, the demise charterer. The amount claimed is $910,872.26, but Pan Australia says much less is due. Pursuant to leave granted on 6 October 2006, ASP filed an action in rem against the vessel to execute the lien. The owner, Jaymont Shipping Company Limited, has entered a conditional appearance and moves to set aside the action for want of jurisdiction. Section 18 of the Admiralty Act 1988 (Cth) imposes two conditions for the right to proceed in rem on liabilities incurred by a demise charterer. The first is that when the cause of action arose, the person personally liable on the claim was the owner or charterer or the person in possession or control of the ship. It is common ground that this condition is satisfied. The second condition is that when the action is commenced that person is the demise charterer. The contest is whether this condition is met.
2 There is also an application by Pan Australia, which is in voluntary administration, that the leave granted to bring the action in rem be revoked. It was said, correctly, that this application need only be considered if I were to find there is jurisdiction to bring the action in rem.
3 The essential facts are these. By a bareboat charter dated 17 February 2006 Jaymont demised the vessel, then named “Sea Beta”, to Pan Australia for thirty-six months with an option for a further twelve months. The charterparty was on the revised Baltic and International Marine Council form – Barcom 2001 – which I am told is in common use. The charter hire was $US15,000 per day pro rata for the initial term and $US16,200 per day pro rata for the option period.
4 Several provisions in the charterparty are important for the purposes of this case. Clause 11(a) provided that: “(a) The charterer shall pay hire due to the Owners punctually in accordance with the terms of this Charter in respect of which time shall be of the essence.” Paragraph (b) went on to state that the hire was payable 30 running days in advance. Provision was made in cl 28 for the owners to “withdraw the Vessel from the service of the Charterers and terminate the Charter with immediate effect by a written notice to the Charterers” upon the occurrence of certain specific events. One such event was where: “(i) the Charterers fail to pay hire in accordance with Clause 11.” If this were all, the owner would have an immediate right to withdraw the vessel on the failure to pay any instalment of hire. But cl 28 contained what is commonly, but misleadingly, referred to as an “anti-technicality” proviso. The proviso was in these terms: “[W]here there is a failure to make punctual payment of hire due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers, the Owners shall give the Charterers written notice [that they have ten days] in which to rectify the failure, and when so rectified within [ten] days following the Owners’ notice, the payment shall stand as regular and punctual. Failure by the Charterers to pay hire within [that period] shall entitle the Owners to withdraw the Vessel from the service of the Charterers and terminate the Charter without further notice.”
5 Clause 29 dealt with repossession in the event of termination. It provided that on termination of the charter: “[T]he Owners shall have the right to repossess the Vessel from the Charterers at the current or next port of call, or at a port or place convenient to them … Pending physical repossession of the Vessel … the Charterers shall hold the Vessel as gratuitous bailee only to the Owners.” The clause also required the owners to arrange for an authorised representative to board the vessel as soon as reasonably practical following the termination and that the vessel would “be deemed to be repossessed by the Owners” upon its boarding by the owners’ representative.
6 An instalment of hire was due on 2 October 2006 but was not paid. The instalment was not paid because Pan Australia was insolvent. Indeed on 2 October 2006 the directors had appointed voluntary administrators to take control of the company’s affairs. The following day one of the directors, Mr McLachlan, telephoned Mr Smith the general manager of Frontline Management (Bermuda) Ltd – Frontline managed the vessel on behalf of Jaymont – and told him of the appointment. Mr McLachlan explained that the hire due on 2 October had not been paid because his company did not have the funds and also because administrators had been appointed. During the conversation Mr McLachlan acknowledged that the failure to pay was not for a reason covered by the “anti-technicality” proviso. This concession could not bind the company in any way as the directors’ powers had been suspended upon the appointment of administrators.
7 By letter dated 4 October 2006, Frontline attempted to terminate the charter on the owner’s behalf. The dispute between the parties is whether the attempt was effective. The outcome of this dispute turns upon the answer to two questions. First, was the owner entitled to terminate the charter while Pan Australia was in administration? The answer to that question depends upon the proper construction to be given to several statutory provisions. Secondly, if the owner was entitled to terminate, did the 4 October letter effect termination?.
8 On the first question I must refer to several sections in Pt 5.3A of the Corporations Act 2001 (Cth), the division dealing with voluntary administrations. The appointment of an administrator establishes a moratorium on actions against the company and its property. Secured creditors cannot take steps to enforce their security: s 440B. Owners or lessors of property in the company’s possession cannot take steps to take or recover possession of their property: s 440C. Unsecured creditors cannot bring or proceed with a claim against the company or its property: s 440D. There are exceptions, but only one need be mentioned. Section 441J provides that: “Nothing in s 437C [it is likely that the reference should have been to s 437D] or s 440C prevents a person from giving a notice to a company under an agreement relating to property that is used or occupied by, or is in the possession of, the company.”
9 With these sections in mind Mr Horgan for ASP argued that the owner was forbidden from giving a notice that would determine the charter as that was prohibited by s 440C. He referred me to Barclays Mercantile Business Finance Ltd v Sibec Developments Ltd [1992] 1 WLR 1253 to support the view that this was a reasonably arguable proposition.
10 I do not feel able to accept Mr Horgan’s argument. The effect of s 440C is to prevent possession (actual or constructive) being taken of property in the hands of the administrators: Cinema Plus Ltd (Administrators Appointed) v Australia & New Zealand Banking Group Ltd (2000) 49 NSWLR 513, 545. The notice determining the charter, even if it were effective, did not remove possession of the vessel from Pan Australia. In any event, it is plain that s 441J permits the giving of a notice of termination. In Re Java 452 Pty Ltd (Administrators Appointed) (1999) 32 ACSR 507, 515 Byrne J said in relation to a notice to determine a tenancy that the result of ss 440C and 441J was that “although the lessor may not recover possession, it may take steps to perfect its right to possession which right might be exercisable, if available, at the end of the administration”. This reasoning applies a fortiori to a charterparty. The English legislation considered in Barclays Mercantile, the Insolvency Act 1986 (UK), is in different terms. There is in any case nothing like s 441J in that statute.
11 The answer to the first question, then, is that the owner was entitled to terminate the charterparty despite Pan being in administration.
12 The second question, whether termination was effected, gives rise to several difficult issues. The first is whether a notice of termination will bring the charter to an end or whether the charter remains on foot until the vessel is repossessed. Unfortunately this is still a controversial topic. In The Turakina (1998) 154 ALR 666, Tamberlin J held that a demise charter, under which possession and control of the ship had been given to the charterer, could not be terminated by notice alone. He said termination would only occur when the owner retook possession of the ship. In The Rangiora [2000] 1 Lloyd’s Rep 36, the New Zealand High Court followed that decision, stating that the principle was a rule of the common law. Nonetheless, there is a view that the rule established in The Turakina may be avoided by careful drafting. In CMC (Australia) Pty Ltd v Ship ‘Socofl Stream’ (1999) 95 FCR 403 it was held that the question whether a demise charter could be terminated without repossession depended upon the terms of the charterparty. The judge, Moore J, said (at 419):
“[I]t is necessary to ascertain from the terms of the charterparty whether the continuing physical possession of a vessel by the charterer (pending the taking of physical possession by the owner either by redelivery or some other means) is co-extensive with continuing possession and absolute control of the vessel of the type characteristic of a demise charter.”
He went on to say (at 520) that it:
“… is difficult to avoid a conclusion that if a charterparty expressly provided for its termination and the power to terminate was exercised, then the charterer ceased to be a demise charterer from the time of termination at least in the absence of provisions in the charterparty that suggested some other result.”
13 Comity requires me to apply The Socofl Stream and thus hold that in the case of this charterparty, in particular because of cll 28 and 29, the charter can be terminated on written notice. Clause 28 provides for termination by notice and cl 29 says that when the charter is at an end the charterer is the “gratuitous bailee” of the vessel.
14 If I may say so, this is a troubling conclusion. It is troubling because until the owner actually withdraws the vessel not only does the charterer retain possession it still mans and supplies her. The problem becomes acute if the notice of termination is served while the vessel is at sea. Applying The Socofl Stream, she is not under demise while returning to port. If that be true it may surprise the owner to learn that the master now has ostensible authority to bind it. There is also the possibility that the owner may decide to retake possession at the next port of call or at a convenient port or place as contemplated by cl 29. The result of the application of The Socofl Stream is that the owner has control of the vessel during the voyage. The true position is probably different.
15 I prefer the view that it is not until the vessel has been withdrawn that the demise comes to an end for it is only then that the charterer has lost exclusive possession of the vessel. That the charterparty describes the charterer’s possession before delivery as that of “gratuitous bailment” is not to the point. The real relation between the charterer and the vessel cannot be disguised by the use of an inapposite label or description. I appreciate, however, that others take a different view.
16 The next issue is whether the 4 October letter effected termination. At first this seemed to be comparatively simple but, on reflection, it does raise a difficult point of principle on which there appears to be no authority directly in point. To understand the problem that has arisen it is necessary to set out the letter. It reads:
“Further to our telephone conversation today (Alasdair Smith/Mr Lyall McLachlan), we note you have failed to pay the October 2006 hire payment in respect of this vessel. This payment was due to be received by Owners on 2 October 2006. We further note that you have today gone into administration and that you expect to be in a position to give us further information as to the company’s plans in the next 48 hours.
This state of affairs is not acceptable, so please note as follows:
If, contrary to your advice today, your failure to remit this hire payment is covered by the anti technicality wording of Part II Clause 28(a)(1) i.e it is owing to oversight, negligence, errors or omissions on your part or on the part of your bankers, then we request you to rectify this within 10 banking days of the date of this letter i.e. 17 October 2006. If you do not the Charter will terminate.
However, if your failure to remit hire does not fall within the anti technicality wording then you should consider this letter as immediate notice of termination of the Charter in accordance with Part II Clause 28(a)(1) of the Charter.
Please confirm your position by return and should you wish to allege (contrary to your advice today) that your failure to remit the October 2006 hire is due to oversight, negligence, errors or omissions, then we request you to provide us with the reason why this has occurred, a copy of your instructions to your bank to pay and confirmation that this will be rectified by 17 October 2006.
Owners reserve all their rights including, but without limitation, the right to draw down on the Letter of Credit dated 20 February 2006.
We look forward to hearing from you.”
17 I make the following observations about the letter. The first paragraph refers to the conversation during which Mr Smith was advised that the October hire had not been paid because of the lack of funds and of the appointment of the administrators. Mr Smith was also told that the “anti-technicality” proviso did not apply. In those circumstances it is difficult to understand why it was necessary to include the third paragraph. My guess is that Frontline wanted to guard against even the remotest possibility that the owner would be accused of repudiating the charterparty.
18 The owner contends that the fourth paragraph constitutes the notice of termination. ASP says that when regard is had to the entirety of the letter that paragraph could not stand as a notice of termination for it is neither clear nor unequivocal. In this regard the parties accept that under English law, which is the governing law, a notice of termination must clearly and unambiguously indicate that the owner has decided to terminate the charter. In The Aegnoussiotis [1977] 1 Lloyd’s Rep 268, Donaldson J said (at 275): “No particular form of words or notice is required [to terminate a charter], but the charterers must be informed that the owner is treating the non-payment of hire as having terminated the charterparty.” Although notice of termination may be informal, what is required is “an unequivocal act or statement [by the owner] communicated to [the charterer] showing that [the owner intends to terminate the charter]”: The Mihalios Xilas [1979] 2 Lloyd’s Rep 303, 307 per Lord Diplock. Put rather more simply, the owner must make plain his decision to terminate the charter, not to lawyers but to the person who is to act on the notice.
19 Frontline’s letter is plainly equivocal. It purports to cover two options but commits to neither. On one hand, it demands payment within ten days under threat of termination. On the other hand, it seeks to terminate the charter with immediate effect. The charterer is required to determine which of the options applies by reference to the application of the “anti-technicality” proviso.
20 On reading the letter my initial impression was that it was ineffective for lack of clarity. It also read as if the owner was uncertain whether it was entitled to terminate the charter and was putting the onus on the charterer to make that decision. This seemed to me to offend against a principle of primary importance in all commercial transactions, namely that the parties must know where they stand. This could hardly be achieved by a conditional termination of the kind employed here.
21 I have reflected further on the letter, reviewing it in the light of several cases that I came across since reserving my decision. They are cases in which it had been held that a notice to quit was not invalid simply because an aspect was uncertain, provided it could be presumed that the tenant knew the facts, and sometimes the relevant law, which would render the notice certain. These cases are not on all fours with the present case. In each the landlord expressed a clear intention to terminate the tenancy. The lack of clarity concerned the date on which the termination was to take effect. The date was not specified in the notice, but a formula to ascertain the date was provided. In some cases the formula was deficient and others it was not. The cases are of assistance here as regards whether, and if so in what circumstances, a termination notice may legitimately require the recipient to have regard to facts and circumstances outside the four corners of the notice to clear up any uncertainty. I need only mention three of the cases to illustrate the principle.
22 The first case is P Phipps and Company (Northampton and Towcester Breweries) Ltd v Rogers [1925] 1 KB 14 which, if I may say so, is the high watermark of this line of authority. The case concerned a yearly tenancy of a public house. Either party could determine the tenancy “upon giving to the other of three months’ previous notice in writing of his or her intention to do so expiring on any one of the days appointed as special transfer sessions by the justices for the district in which the premises are situate…” The landlord gave the tenant a notice to quit which read: “We do hereby give you notice to quit and deliver up to us (or such other person as we may appoint) on the earliest day your tenancy can legally be terminated by valid notice to quit given to you by us at the date of the service hereof ...”. The notice was declared invalid. Bankes LJ said (at 20) that: “It is not necessary that a notice should be clear and unambiguous in expressed terms provided it can be rendered clear and unambiguous by the application of the maxim ‘Id certum est quod certum reddi potest’. [‘That is sufficiently certain which can be made certain’.] There are many decided cases in the books where the Courts have imputed to the tenant knowledge which, when applied to the notice to quit served upon him, renders clear what would without that knowledge have been neither clear nor unambiguous.” Bankes LJ, however, said that he was not prepared to impute or attribute to the tenant the knowledge of the facts or of the law that was required to enable the tenant to determine the day upon which the tenancy would come to an end. The situation was that several difficult construction questions and questions of fact had to be sorted out before the notice could be rendered certain. Among the points that needed to be resolved was whether the reference to “three months” meant three calendar months or three lunar months; whether an annual licensing meeting was or was not a special transfer session; and when the special transfer sessions were in fact going to be “held”. Bankes LJ was unwilling to extend the maxim to embrace such a complex enquiry. Atkin LJ rejected the notice on similar grounds. He said (at 28): “But it appears to me to defeat the whole object of notice to leave the date to be ascertained by the tenant as a problem not of fact but of law … A tenant receiving such a notice might have to consult his solicitor, who might have to consult counsel, who might have to advise an application to the Court for a declaration by action or summons.” Scrutton LJ was in dissent. He was of opinion that a long-settled line of authorities had treated landlords and tenants as both knowing the law and had assumed that the tenant must know the necessary facts. This, he said, bound him to conclude that the notice was valid.
23 The second case is Addis v Burrows [1948] 1 KB 444. There premises were let on a yearly tenancy “until the tenancy be determined at the end of the first or any subsequent year by one of the parties giving to the other of them six calendar months previous notice in writing.” On the face of the tenancy agreement the period of the tenancy was from 1 January 1944 to 30 June 1945, not a term of one year. The lessors served a notice to quit on 28 June 1945. The notice required the tenant to quit “at the expiration of the year of your tenancy which will expire next after the end of one half year from the service of this notice”. The Court of Appeal decided that the tenancy granted was for eighteen months and thereafter on a yearly tenancy. It also held that the notice to quit was valid. Evershed LJ dealt with the sufficiency of the notice in a lengthy passage between pages 452-456. He said (at 453) that that notice “puts plainly on the tenant the obligation of ascertaining the date meant by the form of words used. Prima facie, the problem is not very difficult. As [Lord Greene MR] observed during the argument, the tenant requires for its solution two things only, a modern calendar and the tenancy agreement. Armed with those two things he asks himself first: When was this notice served on me? … [H]e is next required to find out when one half year ends after the service of the notice. … [T]hen only remains the question: when does the year of his tenancy current on December 29, 1945, come to an end? It is true that involves the interpretation of the tenancy agreement. But, if I am right in the view which I have expressed, he should have no great difficulty in answering that question.” Evershed LJ distinguished Phipps v Rogers. He said (at 455) of that case that there was “an accumulation of difficulties provided by the joint effect of the language of the tenancy agreement and the very unusual form of the notice to quit.” Later (also at 455) he pointed out that the court had come “to the conclusion that the tenant was involved in so many difficulties that there was a failure on the landlord’s part either to give a certain date or to supply the tenant with a formula from which certainty could be ascertained and that, therefore, the notice was not good.” By way of contrast, as regards the case before the court the judge said that any ambiguity was capable of a clear answer.
24 Asquith LJ delivered a short judgment in which he pointed out, at 457, that in Phipps v Rogers it was observed that “each case must be decided on its own facts and circumstances” and that “the circumstances there were that the tenant was forced by the form of notice to answer questions both of law and fact interlocked with each other and calling for a much more complex calculus than anything involved in the [instant] case.” The other judge, Lord Greene MR, also put Phipps v Rogers to one side as being a difficult case to understand, observing, at 458, that the difficulties presented to the tenant in that case were difficulties of construction and difficulties of fact. He rejected the suggestion that a termination notice giving rise to a difficult question of construction was necessarily invalid.
25 The last case is Allam & Co Ltd v Europa Poster Services Ltd [1968] 1 WLR 638. I need not go into the facts. I cite the case for the observation by Buckley J who looked closely at Phipps v Rogers and Addis v Burrows and (at 652) said this: “No doubt if those cases are both good law, as I must assume that they are, the question of the validity of the notice, the interpretation of which involves some question of law, must become a question of degree. There must be cases which, because of the difficulty or complexity of the case, fall within the principle of Phipps v Rogers. There must be others which, notwithstanding that some question of law arises, because of the simplicity or comparative simplicity of the problem fall within Addis v Burrows.”
26 The cases appear to me to establish the following propositions. A notice to quit will not necessarily be invalid if the date upon which the tenancy is to determine is not specified in terms but the tenant is informed of the means by which the date can be ascertained. If the means is a reference to facts which the tenant is deemed to know that will make good the deficiency. If the facts cannot be imputed, in very limited circumstances it may be possible to have regard to facts which the tenant can easily discover. Even if some interpretation of a document is required that may suffice, provided the construction does not raise any difficult point.
27 Unfortunately there is no bright line test by reference to which a notice can be held good or bad. It is a question of degree in each case. On any view, however, there must be some measure of restraint regarding the extent to which the tenant can be asked to travel outside the notice. I mean by this that an uncertain notice could not be made good by some open-ended enquiry. Further, in each case the enquiry must be objective; regard is to be had to external facts which the tenant is deemed to know (constructive knowledge) or to facts which he is required to discover. The court does not enquire into a tenant’s actual knowledge of the material facts. I note that in none of the notice to quit cases was the judge interested in discovering what the tenant actually knew or what he thought of any of the construction questions that arose. The focus of attention, correctly in my view, was the notice itself: was it good or bad in an objective sense. Anyway, if a subjective enquiry were permissible there would be no end to the litigation that would ensue. Moreover, if the validity of a notice depended upon the actual state of knowledge of a particular tenant the consequence would be startling. The clever tenant with the knowledge of an amateur lawyer would always be evicted but his average neighbour would not.
28 In my opinion the foregoing principles can be applied to other kinds of notices, including those that determine charters. Nothing said in the cases suggests that the principles are confined to notices to quit.
29 I am now in a position where I can deal with the validity of Frontline’s notice. The view I have come to is that it is not an effective notice to terminate the charter. First, it does not state that it is the owner’s intention to bring the charter to an end. The letter indicates that when written the owner did not know whether the charter could be terminated. It had not formed the view – or at last not had stated that it was of the view – that there had been a breach of the charterparty which gave rise to a right to terminate under cl 28. The reality is that the owner was hedging his bets. Second, and this is perhaps no more than an expansion of the first point, with this letter the owner left it to the charterer to determine whether the owner could bring the charter to an end. That is the only sense I can give to the fifth paragraph – “Please confirm your [the charterer’s] position by return”. The charterer was being asked to advise whether in its opinion the “anti-technicality” proviso applied and its decision would then dictate whether the charter was over. This is an impermissible reversal of roles. It was for the owner to decide whether there had been a breach that entitled it to terminate the charter. Third, even if the letter did constitute a statement that the owner elected to terminate the charter and the only issue was whether the decision had been conveyed with sufficient clarity, the owner is in difficulty. That is, it is impossible to avoid the conclusion that the notice is uncertain. Often times it will be impossible for the charterer to determine whether the “anti-technicality” proviso applied. For one thing, difficult questions of construction can arise. What precisely is meant by “oversight”, “negligence”, “errors” or “omissions”? By way of example, is the word “negligence” used in its common law meaning or does it mean “careless”; is “error” confined to errors of fact or does it include errors of law? For another thing, it is easy to imagine circumstances in which the application of the proviso to the facts of a particular case will yield no clear answer to the question – Does the proviso apply? To my mind it is clear that this is not a form of notice where the equivocation can be cured by what a charterer is deemed to know or is required to find out. The letter is clever but it is a bad notice.
30 For completeness I should say that even if it were permissible to look beyond the form of the notice and the presumed knowledge of the charterer and test the validity of the notice by reference to its actual knowledge, there is still a problem. Frontline had been told by Pan Australia that the reason for the non-payment was lack of funds and that it was not due to any oversight, negligence, error or omission. Despite this, the notice from Frontline left open the possibility that the proviso applied. This would indicate to Pan Australia that some doubt remained in the mind of the owner. That is, the form of the notice was likely to create doubt, if none already existed, in the mind of the charterer as to whether the proviso applied. This unsatisfactory state of affairs is sufficient to hold the notice bad.
31 The result is that the charterparty was on foot when the action in rem was commenced and so there was jurisdiction to bring the action. It is therefore necessary to decide whether I should revoke the order by which leave was granted to bring the action. For this purpose I need to recount some procedural history. On 6 October 2006 the plaintiff applied under s 440D(1)(b) of the Corporations Actfor leave to commence the action against the vessel and to apply in that action for its arrest. The application was brought on without notice to Pan Australia. There was evidence that if notice of the application were given the owner might take steps to determine the charter if it were still on foot. In that event an action in rem could not be brought and ASP would be left without security for its debt.
32 In those circumstances I granted leave to commence the action but on ASP’s undertaking that if the order granting leave was revoked ASP would discontinue the action. I reserved to Pan Australia, its administrators and any other person that may be affected, liberty to apply to vary or revoke the order. This is how Pan Australia comes before me on its present application.
33 The general purpose of the moratorium provisions to which I have referred is to prevent outside intervention that could jeopardise the continuation of the company’s business during its administration: National Australia Bank Ltd v King (2003) 45 ACSR 413. By keeping outsiders at bay there is greater likelihood that the objects of Pt 5.3A will be achieved: Re Ansett; Intrepid Aviation Partners VII LLC v Ansett Australia Ltd (2001) 115 FCR 175. Those objects are to maximise the chances of the company or as much as possible of its business continuing in existence and, if that is not possible, to achieve a better return for the company’s creditors and members than would result from an immediate winding up of the company: see s 435A.
34 Holding those objects in mind, I am nonetheless of the view that the leave order should not be revoked. Shortly after their appointment the administrators decided that they did not wish to retain the vessel and wrote to the owner advising that the vessel would be redelivered. Thus, the administrator cannot say – indeed they do not say – that the removal of the vessel from their control by its arrest will impede the administration.
35 The administrators seek the revocation because they have a potential buyer for the business and the sale may not go ahead unless the buyer is able to charter the vessel. They also say that if the action in rem remains on foot the owner will incur legal costs that will be passed on to the company in administration. I think there is little substance in the first point. If the vessel is arrested the owner will put up security and obtain its release. That will happen quickly, as it always does with a vessel that can easily be demised. There is some substance to the second point. I accept the owner will incur some costs in sorting out the quantum of ASP’s claim and a portion of the costs will be payable by Pan Australia, leaving less for the other unsecured creditors. But the costs will not be excessive, in my opinion. Anyway, I am of opinion that the interests of the general body of unsecured creditors should be subordinated to those of ASP whose claim over the vessel is proprietary in nature. See also in relation to a similar application: Morris v Ship Kiama (Mubum) (1998) 16 ACLC 945.
36 For the foregoing reasons, I will make orders that Jaymont’s motion be dismissed with costs and Pan Australia’s application be dismissed but with no order as to costs. There will also be an order that ASP have leave to apply in proceeding no. VID 1099 of 2006 for the arrest of the vessel.
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I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. |
Associate:
Dated: 20 October 2006
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Counsel for the Plaintiff in proceeding nos. VID 1092 of 2006 and VID 1099 of 2006: |
Mr S Horgan |
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Solicitor for the Plaintiff in proceeding nos. VID 1092 of 2006 and VID 1099 of 2006: |
Holman Fenwick & Willan |
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Counsel for the Defendant in proceeding no. VID 1092 of 2006: |
Mr J Evans |
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Solicitor for the Defendant in proceeding no. VID 1092 of 2006: |
Russell Kennedy |
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Counsel for the Defendant in proceeding no. VID 1099 of 2006: |
Mr H N G Austin |
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Solicitor for the Defendant in proceeding no. VID 1099 of 2006: |
Monahan + Rowell |
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Date of Hearing: |
12 October 2006 |
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Date of Judgment: |
18 October 2006 |
