FEDERAL COURT OF AUSTRALIA

Bank of China Limited v The Ship “Hai Shi” (No 2) [2013] FCA 225

THE COURT ORDERS THAT:

1.    Judgment be entered for the plaintiff against the defendant in the sum of USD71,829,612.15.

2.    Interest be payable on the judgment sum in Order 1 at the rate of two per cent (2%) per annum above the prevailing one (1) month LIBOR Rate, plus an additional two per cent (2%) per annum thereon from 22 February 2013 and until payment of the judgment sum in Order 1 is made.

3.    The Marshal sell the MV HAI SHI (Ship) under the Admiralty Rules 1988 (Cth).

4.    The Marshal shall retain Mr John Bonsor of Australian Independent Shipbrokers to act as broker and to assist the Marshal in the sale.

5.    The method of sale be determined by the Court.

6.    The Marshal retain a solicitor experienced in the sale of commercial ships to act for the Marshal on the sale of the Ship.

7.    The Marshal arrange for the Ship to sail to the Port of Brisbane, as soon as practicable, and proceed to an anchorage in Moreton Bay, provided that the plaintiff receives at least 5 working days’ notice prior to the voyage.

8.    The plaintiff be permitted, until further order, to place a representative on board the Ship to remain on board until the sale of Ship is completed.

9.    The Marshal is to pay any fees payable to the Australian Maritime Safety Authority in respect of Ship such as, but not limited to, the Marine Navigation levy and the Protection of the Sea levy, as and when they fall due.

10.    The plaintiff be at liberty to repatriate, at its cost, the crew to a level not lower than the Ship’s minimum manning requirements.

11.    The plaintiff be at liberty to engage a ship’s agent to arrange and provide victualling, fuel and other goods and services reasonably required for the Ship and to arrange any medical services for the crew. The plaintiff pay all costs associated with the services provided by the ship’s agent.

12.    The plaintiff be at liberty to pay crew wages, and any repatriations costs, as and when they fall due.

13.    The plaintiff pay all costs associated with the move of the Ship, and such costs as contemplated by Orders 10-12 above, such costs to be the plaintiff's costs of the arrest and preservation of the Ship.

14.    The Marshal open an account with the Commonwealth Bank of Australia in Sydney, entitled “Admiralty Marshal – sale of the Ship Hai Shi” in United States currency. No amount is to be drawn from the account without further order of the Court.

15.    The persons entitled to draw on the account pursuant to any order of the Court are to be any two of Michael Wall, District Registrar NSW; Geoffrey Harold Segal, Deputy District Registrar NSW; and Anthony Peter Tesoriero, Deputy District Registrar NSW.

16.    The defendant pay the plaintiff’s costs of these proceedings.

17.    The matter be stood over to 3 May 2013 at 9:30 am for further directions.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    On 7 February 2013, I made orders for reasons I gave then that the plaintiff bank deliver to the relevant person, Yang Sheng Shipping Singapore Pte Limited, at its physical addresses in Hong Kong and Singapore, set out in the facility agreements between it and the bank, all the documents filed in the proceedings, the marshal have the defendant ship, Hai Shi, valued in writing, engage a ship broker to value it and advise on the sale: Bank of China Ltd v The Ship M/V “Hai Shi” [2013] FCA 224. (I have used the same descriptions in these reasons as I used in my earlier reasons.)

2    No appearance has been filed by the owners of Hai Shi. The time for filing an appearance expired yesterday under r 23(1) of the Admiralty Rules 1988 (Cth), following service on the vessel on 31 January 2013. In the International Bunker proceedings, Yang Sheng as the relevant person filed an appearance care of Pacific King Ship Management (HK) Co Limited that had a different address in Hong Kong from any of the ones in the facility agreements between the bank and Yang Sheng. That appearance was not filed by lawyers but appears to have been filed solely by Yang Sheng, but it has not taken any similar step in these proceedings

3    The bank applied by an interlocutory application filed on 20 February 2013 for judgment in the sum of USD71,829,612.15 together with interest on the judgment sum at the default rate in the facility agreements being, in effect, 4% above the one month LIBOR rate from the date of judgment.

4    Since 7 February 2013, the marshal has been advised by the shipbroker appointed, John Bonsor of Australian Independent Shipbrokers, that it would be preferable for the ship to be moved to the port of Brisbane from Hay Point. Mr Bonsor considered that the safety of the ship, the ability to provide her with freshwater, provisions, fuel and the availability of easy access to her for the purposes of facilitating the sale, would be advanced as compared to leaving her at anchor off Hay Point where she now is. He also advised that the best method of sale should be by sealed bid.

5    It is necessary for the ship to be insured since the bank received notice from China P & I Management, Beijing, on 6 February 2013 of the termination of Hai Shi’s hull and machinery and protection and indemnity insurances the previous day. The bank has arranged insurance for port risks at the present time but this will not cover Hai Shi’s transit to Brisbane. The bank seeks to be given five days notice of the proposal to move the ship in order to effect an extension of cover for that purpose and the marshal has no difficulty in accommodating that request.

6    I am satisfied by the affidavit evidence of Tsoi Anny, a clerk in the employ of Tsui & Co Solicitors in Hong Kong, who act for the bank there, that Yang Sheng was served in Hong Kong at the latest address identified in its facility agreement with the bank of 1 April 2011. In addition Siu Mei King, another clerk at Tsui & Co served Pan Man, who was the authorised representative of Yang Sheng in Hong Kong, at another address there on 8 February 2013. The affidavit of Christina Chan Yien Ping, an assistant vice president of the bank in Singapore has satisfied me that the bank attempted to serve Yang Sheng at its former known address in Raffles Place, Singapore but that when Ms Ping attended there, the unit number of the Yang Sheng’s former address on the 47th floor no longer existed, that whole floor now being occupied by another entity that appeared to have no relation to Yang Sheng.

7    Under the facility agreement dated 8 July 2008 between Yang Sheng and the bank, Yang Sheng became obliged to pay interest at the default rate of interest as defined therein, if it failed to make payment on the due date of any payment obligation. The default rate was defined as 2% above the prescribed rate, being the normal rate of interest (cl 1), that in turn being defined as 2% above the prevailing one month LIBOR rate for that interest period or such rate as might be determined by the bank from time to time (cl 4(1)). The bank’s evidence is that no other rate has been prescribed so that, in effect, the default rate of interest is 4% above the one month LIBOR rate for the relevant period. The general manager of the Singapore branch of the bank issued a certificate dated 19 February 2013, certifying that at 22 February 2013 the amount outstanding would be USD71,829,612.15 inclusive of all banker’s charges and accrued interest up to today, and that the default interest rate applicable hereafter will be 4% above the one month LIBOR, as I have said.

8    I am satisfied that the bank is entitled to judgment in the sum it seeks together with interest thereafter at the rate it seeks under the terms of the facility agreement. In The Ship “Beluga Notification” (No 2) [2011] FCA 665, I discussed the principles upon which the Court would order a valuation and sale of a ship under arrest before final judgment. It suffices to say that here the likelihood of Yuang Sheng taking any further steps in the proceedings is not great. Mr Bonsor’s suggested method of sale appears to me to be appropriate.

9    The bank’s application for valuation and sale was filed on 5 February 2013 and served on the master on 5 February. In my opinion it is imperative that the ship be sold. The crew have not been paid and STX Pan Ocean Shipping Ltd is also seeking to protect its own interests in respect of bunkers on board in which it claims a proprietary right under the charter party that it had with Yuang Sheng.

10    Mr Bonsor has not yet advised a timeframe within which, or precisely how, the sale process should proceed, except to the extent that he considered sealed bids to be appropriate. The bank has indicated it wishes to undertake an appraisal of the current state of Hai Shi and whether any work should be done to improve the prospect of receiving a higher price in the sale process. Mr Bonsor may need to do to see what, if any, work could conveniently be done to make her likely to realise the best price in the circumstances. In those circumstances I think that, until the ship is brought to Brisbane and some appraisal is made it would not be appropriate to give directions as to the conduct of the sale at the moment.

11    For these reasons I will make orders that judgment be entered for the bank in the amount certified to be owing as at today, the ship be sold, Mr Bonsor be appointed to act as broker and assist the marshal in the sale and other orders regulating the sale. I will order the marshal to arrange for Hai Shi to sail to the port of Brisbane as soon as practical on the basis that five days’ notice of that intended movement be given to the bank.

12    The bank seeks the ability to have a person placed on board while the ship is in transit, and to remain there until the ship is sold. It envisages that it is likely an engineer would perform that function. I will make an order until further order permitting that to occur.

13    Fees are now due to the Australian Maritime Safety Authority in respect of Hai Shi’s liabilities for the marine navigation levy and the protection of the sea levy, and there may be other fees payable. I will direct the marshal to pay those fees. The marshal will be able to recover any such payments by calling on the undertaking given by the bank under r 51 of the Admiralty Rules 1988 (Cth).

14    For these reasons I will make the orders sought by the bank.

Associate:

Dated:    14 March 2013