FEDERAL COURT OF AUSTRALIA

McConnell Dowell Constructors (Aust) Pty Ltd v The Ship ‘Asian Atlas’

[2011] FCA 174

THE COURT ORDERS THAT:

The notice of motion of the defendant and cross-claimant dated 8 December 2010 be dismissed.

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 Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    This is an application by notice of motion by the defendant and the cross-claimant for an order that there be a temporary stay of this proceeding pending the outcome of an arbitration proceeding in Singapore, or, in the alternative, for an adjournment of this proceeding until the end of this year. The defendant is the ship, ‘Asian Atlas’, and the cross-claimant is the owner of the ship, Asian Atlas Limited. For ease of reference, I will simply refer to the defendant except where it is necessary to distinguish between the two.

2    In support of its notice of motion dated 8 December 2010, the defendant relies on an affidavit of Ms Hazel Brasington sworn on 7 December 2010. Ms Brasington is a solicitor and a member of the firm representing the defendant. The plaintiff and cross-respondent (‘plaintiff’) opposes the application and relies on an affidavit of Mr Paul Hopwood sworn on 23 December 2010. Mr Hopwood is a solicitor and a member of the firm representing the plaintiff.

BACKGROUND TO THE APPLICATION

3    This proceeding was instituted by the plaintiff on 4 September 2009. The plaintiff is the disponent owner of a jack-up barge, called the ‘Santa Fe’. Asian Atlas Limited is a company incorporated in Hong Kong. On or about 7 July 2009, the plaintiff entered into a charter agreement with a third party freight forwarder, called Skelton Sherbourne, for the transportation of the Santa Fe from Cape Lambert in Western Australia to Adelaide. In the charter agreement, the plaintiff was described as the ‘Shipper’ and Skelton Sherbourne as the ‘Owner’. On 13 July 2009 Skelton Sherbourne entered into a charter agreement with Asian Atlas Limited for the transportation of the Santa Fe as deck cargo on board the defendant vessel. Both contracts included a term to the effect that the contract was governed by, and to be construed in accordance with, the laws of England, and that any disputes arising under the contract were to be submitted to arbitration in Singapore.

4    The loading of the Santa Fe onto the Asian Atlas at Cape Lambert was delayed for 13 days from 5 August 2009 to 18 August 2009. The question of who was responsible for the delay is an issue in this proceeding. The plaintiff’s case is that on 5 August 2009 at Cape Lambert the Santa Fe was damaged during an unsuccessful attempt to load it onto the Asian Atlas by a ‘floatover’ process. This led to delay while repairs were made to the barge and the ship. The barge was subsequently loaded successfully and the Asian Atlas arrived in Adelaide. Asian Atlas Limited issued invoices for demurrage to the plaintiff and exercised a lien over the barge. On 4 September 2009 the plaintiff issued a writ seeking the arrest of the Asian Atlas and contractual damages. At that time the plaintiff alleged that it had entered into a contract with Skelton Sherbourne which was acting as agent for the owner of the ship. The ship was arrested. Upon the plaintiff paying $US1.2 million into Court as security pending the determination of the shipowner’s demurrage claims the barge was unloaded and the ship was released from arrest.

5    The plaintiff filed a Statement of Claim on 5 November 2009. It no longer asserted a claim for breach of contract. Instead the plaintiff bases its claim on the tort of negligence and seeks damages for the repairs to the barge, work and repairs the plaintiff carried out on the Asian Atlas, wasted expenditure, and delay. On 25 January 2010 the Asian Atlas filed a defence, and cross-claim in the name of its owner, Asian Atlas Limited. In its cross-claim Asian Atlas Limited seeks damages from the plaintiff for damage to the Asian Atlas, and it makes a claim for demurrage. Skelton Sherbourne is not a party to the proceeding in this Court, although at one stage the plaintiff indicated to the Court that it was considering whether it would join two other parties to the proceeding.

6    The parties exchanged lists of documents in June 2010. A mediation between the parties occurred in August 2010 but the proceeding did not resolve. On 15 September 2010 orders were made for the exchange of witness statements and experts’ reports within 12 weeks of that date. At a directions hearing on 15 December 2010 the operation of the orders for the exchange of witness statements and experts’ reports was suspended pending the determination of this application.

7    On 26 October 2010 the defendant through its legal representatives began an arbitration proceeding against Skelton Sherbourne in Singapore. The plaintiff subsequently received a notice to arbitrate from Skelton Sherbourne. Two arbitrators have been appointed by the parties; they are yet to agree on a third. Points of Claim have not yet been exchanged. Only the solicitor’s letter initiating the arbitration process was put before the Court on this application and it is not entirely clear what issues will be canvassed in the course of the arbitration proceeding. It is clear enough that Asian Atlas Limited’s claim against Skelton Sherbourne for demurrage and other breaches of contract will be the subject of the arbitration.

8    In November 2010 the plaintiff and Shelton Sherbourne resolved their differences. The plaintiff has agreed to indemnify Skelton Sherbourne in relation to any demurrage claim against it by Asian Atlas Limited, and its solicitors will represent Skelton Sherbourne at the arbitration.

Relevant principles

9    In Sterling Pharmaceuticals Pty Limited v The Boots Company (Australia) Pty Limited (1992) 34 FCR 287 (‘Sterling’), Lockhart J considered a motion for orders that a proceeding in the Federal Court either be stood out of the list or stayed until the hearing and determination of proceedings pending in the High Court of New Zealand. His Honour said that the Court had a general power to control its own proceedings and that included the power to order a temporary stay in circumstances where proceedings are pending in another court and it is desirable that those proceedings should proceed to their conclusion first. His Honour (at 290-291) identified a number of considerations relevant to an application for such an order:

•     Which proceeding was commenced first.

•     Whether the termination of one proceeding is likely to have a material effect on the other.

•    The public interest.

•    The undesirability of two courts competing to see which of them determines common facts first.

•    Consideration of circumstances relating to witnesses.

•    Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.

•    The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.

•    How far advanced the proceedings are in each court.

•    The law should strive against permitting multiplicity of proceedings in relation to similar issues.

•    Generally balancing the advantages and disadvantages to each party.

10    I now turn to consider the application of these principles to the facts of this case.

DISPOSITION OF APPLICATION

11    The proceeding in this Court has been on foot considerably longer than the arbitration, which was commenced only late last year. It is true that there are a number of pre-trial steps to be undertaken before this matter will be ready for trial, including the filing of witness statements and experts’ reports. Nevertheless it is fair to say that the proceeding before this Court is much more advanced than the arbitration proceeding. A third arbitrator is yet to be appointed. The defendant submits that it acted reasonably in not bringing the arbitration proceedings earlier than it did because it hoped that the mediation which was held in August 2010 would resolve the matters between the parties, and also because of the potential joinder of other parties to these proceedings which had been foreshadowed by the plaintiff. That may be so but it does not gainsay the fact that this proceeding is considerably more advanced than the arbitration proceeding.

12    There is a strong interest in avoiding a multiplicity of proceedings. The parties agree that this proceeding and the arbitration proceeding will canvass similar factual issues. A key question in both is that of who was responsible for the delay in loading the Santa Fe onto the Asian Atlas and for the damage that occurred to both the barge and the ship in the course of the loading operation. Much of the evidence that is relevant to this proceeding will also be relevant to the arbitration proceeding and vice versa. The plaintiff intends to call a number of witnesses in this proceeding whose evidence it considers will also be relevant in the arbitration proceeding.

13    The plaintiff points to the fact that the parties in this proceeding are different to the parties in the arbitration proceeding and the causes of action are different. That is certainly relevant to the question of the extent to which there is an overlap or common facts, but is not of itself decisive as the decision in Sterling illustrates.

14    The plaintiff also submits that these proceedings may assist in resolving the arbitration proceedings because the resolution of certain factual issues might create an estoppel of the kind that arose in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, which would prevent the defendant from raising matters against Skelton Sherbourne in the arbitration. In response the respondent contends that in view of what it submits is Skelton Sherbourne’s right to a stay of any proceedings brought against it in this Court (International Arbitration Act 1974 (Cth) s 7(2)), its decision not to join Skelton Sherbourne to this proceeding could not later be the subject of an ‘Anshun’ estoppel. For reasons which will become clear, I do not need to address this submission.

15    The defendant submits that the arbitration proceedings are more likely to resolve all of the issues in dispute between the parties than the proceeding in this Court. It is possible that if the contractual claims between the parties and Skelton Sherbourne are resolved satisfactorily through the arbitration this proceeding will no longer be necessary. No contractual claims are brought in this Court and the Court will therefore not be determining them.

16     The defendant also submits that these proceedings will be less likely to resolve factual issues common to any contractual claim and the claim in negligence because the plaintiff’s case might fail at the first hurdle in that it may not establish that the defendant owed it a duty of care. It referred to cl 21 of both charter agreements, which made provision for responsibility for various kinds of loss or damage as between the parties. It reads:

21.2(a)    The following shall be for the sole account of OWNER without any recourse to SHIPPER, its sub-contractors, servants or agents, whether or not the same is due to breach of this contract, negligence or any other fault on the part of SHIPPER, its servants or agents:

(i)    loss or damage of any nature whatsoever and howsoever caused to or sustained by the Vessel or any property owned/hired by OWNER, its subcontractors, servants or agents on board the Vessel;

(ii)    loss or damage of any nature whatsoever caused to or suffered by any third parties by reason of contact with the Vessel or obstruction created by the presence of the Vessel;

(iii)    loss or damage of any nature whatsoever suffered by OWNER or by third parties in consequence of the loss or damage referred to in (i) and (ii) above;

…

OWNER will indemnify SHIPPER, its subcontractors, servants or agents in respect of any liability to a third party or any claim by a third party arising out of any such loss or damage…

21.2(b)    The following shall be for the sole account of SHIPPER, without any recourse to OWNER, its sub-contractors, servants or agents, whether or not the same is due to breach of this contract, negligence or any other fault on the part of OWNER, its servants or agents:

(i)    loss or damage of any nature whatsoever and howsoever caused to or sustained by the Cargo or any property on the Cargo or any other property belonging to SHIPPER, its sub-contractors, servants or agents;

(ii)    loss or damage of any nature whatsoever caused to or suffered by third parties by reason of contact with the Cargo or obstruction created by the Cargo;

(iii)    loss or damage of any nature whatsoever suffered by SHIPPER or by any third parties in consequence of the loss or damage referred to in (i) and (ii) above;

SHIPPER will indemnify OWNER, its sub-contractors, servants or agents in respect of any liability to a third party or any claim by a third party arising out of any such loss or damage.

17    In the charter agreement between Asian Atlas Limited and Skelton Sherbourne, the former is referred to as the ‘Owner’ and the latter is referred to as the ‘Shipper’. As I have said, in the charter agreement between the plaintiff and Skelton Sherbourne, the plaintiff is referred to as the ‘Shipper’ and Skelton Sherbourne as the ‘Owner’.

18    The defendant referred to the decision of the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 (‘Woolcock’). That case involved an allegation that a duty of care was owed by a firm of consulting engineers who had designed foundations for a warehouse and offices in Townsville to a party who later purchased the premises to take reasonable care in designing the foundations. By a majority, the Court held that the firm owed no such duty to take reasonable care to avoid the economic loss suffered by the later owner of the building. This was the case because no such duty had been owed to the original owner, who had refused the advice of the engineers to pay for geotechnical investigations, and whose relationship with the engineers did not therefore involve an element of reliance on the owner’s part or the assumption of responsibility on the engineers’ part. The contractual relationship with the original owner defined the task of the engineers and a duty of care that would require the engineers to do more or different work than the contract with the original owner required or permitted could not be imposed. Nor was the later owner vulnerable to the economic consequences of any negligence on the part of the engineers, since it could have protected itself against that economic loss in a number of ways.

19    The defendant’s submission is that the contractual relationship between Skelton Sherbourne and itself, with its terms allocating liability for various kinds of loss or damage, negates the existence of a duty of care in the defendant to prevent the kinds of loss and damage claimed by the plaintiff, because it would require the defendant to do more than it was required to do under its charter agreement with Skelton Sherbourne. The defendant also submits that the plaintiff was not vulnerable to the defendant’s negligence because it could have taken steps to prevent economic loss. Only a small part of the plaintiff’s claim relates to physical damage, being the damage to the Santa Fe. The plaintiff argues that it should be regarded as a ‘third party’ to the contract, for whom provision is also made.

20    As is evident, the application of the reasoning in Woolcock to the present case is not without difficulty and the likelihood of the trial judge finding that the defendant owed a duty of care to the plaintiff to take steps to prevent the kind of loss the plaintiff is said to have suffered cannot be assessed at this stage. The defendant makes no application to strike out the plaintiff’s Statement of Claim. As there has been no suggestion that the existence of a duty of care be tried as a preliminary question, it is likely that the factual matters in issue between the parties will be heard and determined in the course of the trial, no matter what conclusion is finally reached as to the existence of a duty of care.

21    The defendant also submits that the arbitration proceeding would more swiftly and completely resolve the issues between the parties because Skelton Sherbourne is a party to the arbitration but cannot be a party to this proceeding because if it were joined to this proceeding, it would be entitled to a mandatory stay pursuant to the provision for arbitration between it and the plaintiff and defendant, which would be given effect in accordance with s 16 of the International Arbitration Act 1974 (Cth). As I have said, the plaintiff and Skelton Sherbourne have reached an agreement that the plaintiff will indemnify Skelton Sherbourne for the demurrage claims and its solicitors will act for Skelton Sherbourne in the arbitration proceeding. I do not regard the absence of Skelton Sherbourne from this proceeding as likely to affect the resolution of the substantive factual issues between the parties.

22    The defendant submits that the fact that both the charter between Skelton Sherbourne and the plaintiff and the charter between Skelton Sherbourne and the defendant nominate arbitration in Singapore as the forum for the resolution of any disputes arising out of the charters, is significant. They also submit that as witnesses will be called from Malaysia, Hong Kong and Singapore, Singapore is the natural forum for the resolution of these disputes. These matters are of weight but I must also remember that having properly invoked the jurisdiction of an Australian court the plaintiff has a prima facie entitlement to have its case heard and determined by that court (Sterling at 294).

23    The defendant also submits that the security held in Court might not necessarily be released on the outcome of the litigation. The order for the security made on 9 September 2009 provided for the provision of the security ‘pending final resolution of the claims between the plaintiff, shipowner and Skelton Sherbourne, or until further order of the Court’. The defendant submits that the security could therefore not be released until the arbitration was concluded. The plaintiff submits that there is no power in the Court to order the retention of a security pending the outcome of an arbitration to which it is not party and which is not commenced in this Court. This point was not fully argued before me and I do not think it appropriate to express any view in relation to it.

24    I accept that there is a significant overlap in terms of the issues in this proceeding and the issues in the arbitration proceeding. It is desirable that a multiplicity of proceedings be avoided given the risk of conflicting findings and the waste of time and money associated with two proceedings. Nevertheless the proceeding in this Court is considerably more advanced than the arbitration proceeding, and is likely to be concluded earlier. There is no reason to believe that the arbitration proceeding is any more likely to resolve expeditiously all of the issues between the parties than the current proceeding. The plaintiff is entitled to have its action heard and determined in this Court. In my opinion it would be inappropriate to order a temporary stay or to adjourn these proceedings for a lengthy period.

CONCLUSION

25    The notice of motion of the defendant and cross-claimant must be dismissed. I will hear the parties on the question of costs.

Associate:

Dated:    4 March 2011