FEDERAL COURT OF AUSTRALIA

EMAS Offshore Pte Ltd v The Ship “APC Aussie 1” (No 2)
[2009] FCA 1583

ADMIRALTY –– arrest –– costs of arrest, custody and release of ship –– payment in compliance with demand by Marshal –– plaintiff pays pursuant to an undertaking given under r 41 of the Admiralty Rules 1988 (Cth) –– defendant/relevant person pays money into court as security for the plaintiff's claim, and also pays money demanded by Marshal pursuant to an undertaking given under r 53 in order to obtain release of ship –– ship released after payments and r 53 undertaking by defendant/relevant person –– as a result the amount of the cost of custody of the ship paid twice in compliance with the rr 41 and 53 undertakings –– r 41 undertaking not provide for demand by Marshal for costs of release ––  r 53 undertaking not provide for demand by Marshal for costs of arrest –– Admiralty Act 1988 (Cth) s 34 providing limited rights against plaintiff for wrongful arrest

Held: The costs and expenses of the arrest be paid out of the amount provided to the Marshal by the plaintiff;  the defendant’s payment to the Marshal should bear all other costs and expenses of the Marshal, including those in connection with keeping the ship and its release;  the equivalent of the amount paid for the costs of the arrest should be added, from money paid to Marshal by defendant/relevant person, to security paid into court

Admiralty Act 1988 (Cth) s 34

Admiralty Rules 1988 (Cth) rr 41, 52, 53, 75C

Australian Securities and Investments Commission v DB Management Pty Ltd (2000) 199 CLR 321 cited

Patrick Stevedores No 2 Pty Limited v Ship MV “Turakina” (No 2) (1998) 84 FCR 506 considered

EMAS OFFSHORE PTE LTD v THE SHIP "APC AUSSIE 1"

NSD 625 of 2009

RARES J

23 DECEMBER 2009

SYDNEY

THE COURT ORDERS THAT:

1.                  $95,000 of the money paid to the Marshal by the plaintiff be released to the plaintiff.

2.                  The defendant pay the plaintiff’s costs of the notice of motion filed on 27 August 2009 and re-filed on 17 November 2009

3.                  The Marshal to prepare a statement identifying the total costs and expenses of:

(a)                the arrest;

(b)               the custody and release of the barge “APC Aussie 1”; and file and serve that statement on or before 24 December 2009 and, if neither party files with the Marshal and serves the other with, any objection to the calculations therein on or before 21 January 2010 to;

(c)                apply those sums as calculated:

(i)         pay to the plaintiff any amount still held by him and overpaid by it;

(ii)        pay into the fund already paid into Court by the defendant a sum equivalent to the amount the Marshal calculated as the costs of the arrest;

(iii)       pay to the defendant any balance remaining.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                     This dispute raises a novel question about the interaction of the undertaking given by a plaintiff under r 41 of the Admiralty Rules 1988 (Cth) to pay to the Marshal money in respect of his costs and expenses of arresting a ship with the undertaken given under r 53 by an applicant for release of the ship to pay the costs and expenses of the Marshal in relation to the custody of the ship while under arrest.  Here, both the plaintiff, EMAS Offshore Pte Ltd,   and the defendant, APC Marine Pty Ltd, which was the owner of the barge that had been arrested, the “APC Aussie 1”, paid the Marshal the whole of the costs and expenses he had incurred.  Thus, he held twice as much as he needed.  Both parties rely in differing ways on the payment by the other.

The demands made by the Marshal in respect of costs and expenses

2                     On 31 July 2009, I refused EMAS leave to amend to add a wholly new claim that had arisen after T-D Joint Venture Pty Limited had ceased to be a relevant person following termination of its charter of the “APC Aussie 1”:  EMAS Offshore Pte Ltd v The Ship “Aussie 1” (2009) 258 ALR 454.  APC paid $1,439,601.05 into Court in order to secure the release of the barge.  At the same time, APC filed an application to Court for release of ship or other security under r 52(1) of the Admiralty Rules, being in form 19 prescribed under the Rules.  In the form 19, APC was named as applicant and owner of the barge.   The grounds on which the release was sought were described as:

“Payment of the amount claimed by the Plaintiff (including interest and costs) in the sum of $1,439.601.05 into Court as security for the plaintiff’s claim in the proceedings.”

3                     In addition, the form 19 contained a statement that APC had telegraphically transferred the amount of $92,100 into the Marshal’s Fund:

 “… for the costs and expenses of the Marshal in relation to the custody of the ship, ‘APC Aussie 1’, while under arrest, including the costs and expenses associated with the release of that ship.”

4                     On 30 June 2009, EMAS, a Singaporean company, had paid $5,000 in answer to the initial demand of the Marshal for his costs and expenses of the arrest.  On 30 July 2009 EMAS met a second demand by the Marshal for a further $60,000 and soon after, paid a further $35,000 to meet a subsequent demand of the Marshal.

5                     The total of the Marshal’s costs and expenses, exclusive of goods and services tax was $91,673.63.  Thus, at about the time of the release on 31 July 2009 and immediately after, the Marshal held $192,100 in respect of the total of his costs and expenses incurred during the period that the barge was under arrest.

APC pays a further $25,000 in respect of certain costs

6                     In addition, APC explained in an affidavit by Scott Chesterman, its solicitor, filed at the time at which the release from arrest was sought, that an amount of $25,000 had been included in the sum paid into Court as “costs of arrest and release”.  APC asserted that this was a payment in respect of the Marshal’s costs.

7                     I do not accept that characterisation of the $25,000.  Having regard to Mr Chesterman’s explanation, it was a payment of security made in respect of APC’s potential liability for the costs that EMAS might recover as its costs in the proceedings.  The $25,000 amount was the only portion of the total sum paid into Court by APC that could represent security for its liability for EMAS’ legal costs of the proceedings.  EMAS by then had obtained the arrest, incurred legal costs in respect of the arrest, the proceedings against the barge and then against APC, after it entered an appearance.  Thus, I am satisfied that the $25,000 represented a payment of security for EMAS’ potential entitlement to an order for its taxable costs of the arrest and release quite apart from whatever amounts EMAS had had to pay to the Marshal in respect of his costs and expenses.

The present claims

8                     EMAS argued that the form 19, lodged by APC to secure the barge’s release, identified the only purpose for which APC had paid the $92,100, namely to meet the Marshal’s costs and expenses in connection with the custody of the barge while it was under arrest, including its release.  On the other hand, APC argued that the money should be held as security for what it might ultimately be liable to pay at the end of the proceedings, when final orders were made, including for costs.

9                     EMAS now seeks that it be repaid the $100,000 that it had paid to the Marshal in answer to his calls for security.  APC opposed that relief.  It argued that the $100,000 paid by EMAS to the Marshal should be used to discharge the costs and expenses of the arrest and release and that the balance of $8,326.37 be refunded to EMAS.

10                  In contrast, APC sought that some of the $92,100 it had paid into the Marshal’s fund to secure the release of the barge be held as security for any liability it may ultimately be found to have to EMAS.  APC argued that the $25,000 should be treated as an overpayment of what was due to the Marshal.  APC argued that the $92,100 that it had paid on 30 July 2009 should be used to pay $66,674 into the same account as the $1,439,601.05 so that it would be security, with the $25,000, for any entitlement EMAS may later establish against APC for the Marshal’s costs of the arrest and release.  APC said that the balance of the $92,100, namely $25,426, should be repaid to it, treating this sum as an overpayment of security it had made to obtain the release.

11                  Neither party contended that the Marshal was entitled to retain more than the amount necessary to pay the actual costs and expenses he had incurred (or, before they were crystallised, an amount on account of those costs and expenses). I have not been referred to any case that has considered how to apply a double payment in full to the Marshal of his demands for actual costs and expenses by each of the parties in compliance with their undertakings under rr 41 and 53. 

12                  Under s 34(1)(a)(ii) of the Admiralty Act 1988 (Cth) if, a party unreasonably and without good cause obtains the arrest of a ship under the Act, that party or person will be liable in damages to any party to the proceeding or to a person who has an interest in a ship who suffered loss or damage as a direct result.  Thus, if it were established that the arrest was unjustified (i.e. obtained unreasonably and without good cause) a person in APC’s position would be entitled to claim damages from the person in EMAS’ position who caused the arrest to be made.  EMAS argued that s 34(1)(a)(ii) provided the only basis on which it could be required to pay for the costs and expenses payable by APC to obtain the release pursuant to it undertaking under r 53.  And EMAS contended that in any event APC had paid the $92,100 unconditionally, in accordance with the form 19 it lodged by APC to obtain there lease.

13                  Importantly, when an application for an arrest warrant is made, r 41 provides that the application itself constitutes an undertaking to the Court to pay to the Marshal on demand an amount equal to the amount of the costs and expenses of the Marshal in relation to the arrest, including costs and expenses in relation to the ship while it is under arrest.  The rule provides that this undertaking is given by the person who actually makes the application for the arrest warrant.  Thus, if the application is made personally by a plaintiff, it will be personally liable on the undertaking under r 41, if it is made by a plaintiff’s Australian legal practitioner, the practitioner will be personally liable.  When an application is made to release a ship from arrest, relevantly under r 52 and 53, that application too constitutes an undertaking to the Court made by whomever personally makes it, to pay to the Marshal on demand the amount of the Marshal’s costs and expenses in connection with the custody of the ship while it was under arrest, including the costs and expenses associated with the release from arrest of the ship or property.

14                  Next, neither party sought to apply at the present time under r 75C which provides:

“75C    Orders relating to undertakings and securities

(1)        This rule applies if the court accepts more than one undertaking or security in relation to the Marshal’s costs and expenses.

(2)        The court may make directions and orders in relation to:

(a)        the just and fair allocation of responsibilities between those undertakings or securities; and

(b)        if appropriate, the release of a person from an undertaking, with or without conditions.”

Consideration

15                  The purpose for the undertaking under r 41 is to ensure that the Marshal will be able to meet the costs and expenses first, of the actual arrest and, secondly, of preserving and maintaining the ship or other property while it is under arrest.  The purpose of the arrest, of course, is to obtain security for the plaintiff’s claim and to encourage a relevant person to file an appearance in personam.

16                  The purpose of the undertaking in r 53 given to obtain the release from arrest of the ship under rr 51 and 52 is different.  It is to meet the costs and expenses actually incurred by the Marshal “… in connection with the custody of the ship or property while it was under arrest, including costs and expenses associated with its release from arrest”.  Notably, the forms of undertaking in rr 41 and 53 have different scopes.  The former covers the costs and expenses of the actual arrest, while the latter does not extend that far.  And, the undertaking under r 53 covers the costs and expenses of the release, while that under r 41 does not.  It is an important feature of r 53 that the Marshal is not authorised to demand the initial costs and expenses of the arrest.  That, however, does not prevent the plaintiff seeking proper provision for these as a condition of the release of the ship.

17                  Once the ship has been released, the Marshal will no longer be able to resort to it as security for his costs and expenses.  Thus, a person seeking the release must pay, or undertake to the satisfaction of the Marshal under r 53(2) to pay, to the Marshal the costs and expenses as provided in r 53(1) and form 19.  Often, the person seeking release will be a relevant person who has provided security for the plaintiff’s claim.  The relevant person should also bear primary responsibility for the costs and expenses of the Marshal because it regains the ship from arrest.  If no relevant person had appeared, then in the ordinary course, the ship would be sold and all the Marshal’s costs and expenses in relation to its arrest and custody would be paid out of the proceeds as a priority claim.

18                  In Patrick Stevedores No 2 Pty Limited v Ship MV “Turakina” (No 2) (1998) 84 FCR 506 at 509E-F, Tamberlin J said that it was neither necessary nor appropriate to approach the undertakings, as then provided for in the Rules, on the basis that they were mutually exclusive.  He also said that the undertakings did not have to be read down so as not to cover costs or expenses that may be encompassed by other undertakings that might be given by other persons.  He observed that the Marshal could not claim double reimbursement in respect of the same costs or expenses.  His Honour suggested that the parties should negotiate and resolve, as between themselves, the working out of the entitlements and obligations of each party who had provided an undertaking.  However, this was prior to the introduction of r 75C.

19                  The undertaking that form 19 requires extends to the whole of the period of the arrest and the release, because the applicant for release must apply under r 52(1) in accordance with form 19 for the release of the ship.  Once the person seeking the release of the ship from arrest provides a payment to the Marshal, or a sufficient level of confidence in the undertaking given, the ship will be released.  Ordinarily, the person seeking the release of the ship will be the relevant person or someone acting for the relevant person.  If the arrest has been short, the costs and expenses are not likely to be large.  But, if the arrest has been for a long period of time (until the relevant person has been impelled to appear or to provide the security necessary to recover the ship from arrest) prima facie, there could be a hardship on a plaintiff if APC’s construction of the operation of the Rules were correct.

20                  As Tamberlin J pointed out the Marshal cannot obtain double reimbursement.  In the present case, the Marshal obtained security from EMAS, in the form of cash paid pursuant to his demands.  But, the Marshal did not pay any costs and expenses prior to receiving the form 19 and payment from APC.  Giving effect to APC’s argument would produce the consequence that EMAS would now have to pay all of the Marshal’s costs and expenses while APC would simply provide security for those payments to be available in the event that it were held liable for them at the conclusion of the proceedings.  Such a construction does not lie easily with the requirements of r 52(1), r 53 and form 19.  Nor, does it sit easily with the ordinary and natural meaning of s 34(1)(a)(ii) that limits the right of, among others, a relevant person in APC’s position to recover damages from a plaintiff in EMAS’ position for wrongful arrest.

21                  If the person seeking the release of the ship were not, prima facie, liable to pay all of the costs of and in connection with her custody and release, there could be a serious inhibition on the exercise by plaintiffs of their rights to arrest.  And, this construction would extend the limited form of liability of a person who caused an arrest created by the Parliament in s 34 in cases where the power to arrest had been misused.  I reject APC’s argument that a defendant who seeks the release of its ship, would simply be required to provide security for the costs and expenses which the plaintiff had already paid to the Marshal in connection with its arrest.  A literal meaning of the Rules does not support that construction:  Australian Securities and Investments Commission v DB Management Pty Ltd (2000) 199 CLR 321 at 338 [34]-[35].

Conclusion

22                  I am of opinion that at the present time the costs and expenses of the actual arrest should be paid out of the amount that EMAS has paid to the Marshal and the balance of its payment of $100,000 returned to it.  And, all other costs and expenses of the Marshal, including in connection with keeping the barge in custody and its release, should be paid out of the $92,100 paid by APC to secure the release.  So much of the balance of those funds, equal to what was paid out of EMAS’ $100,000, should be added to the amount paid into court by APC as security to abide the ultimate disposition of the proceedings.  EMAS may later be able to establish its entitlement to this sum under r 75C or in the substantive proceedings.

23                  This allocation of responsibility reflects the prima facie distribution of the burden of the undertakings in rr 41 and 53 which EMAS and APC respectively assumed when each of them became bound to honour them.  And it ensures that the security available to EMAS will not be diminished by the costs of the arrest in the event that it is successful in the end result.

24                  The parties asked that I make no order in relation to the costs of the present application, until after they had had an opportunity to consider these reasons and make submissions on the basis of stances each taken in the negotiations prior to the hearing.  I will direct that the parties bring in short minutes to give effect to these reasons.

Associate:

Dated:         23 December 2009