Daebo International Shipping Co Ltd v The Ship Go Star

IN THE FEDERAL COURT OF AUSTRALIA IN ADMIRALTY WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 373 of 2011

JUDGES: KEANE CJ, RARES & BESANKO JJ DATE: 3 DECEMBER 2012 PLACE: SYDNEY (BY VIDEOLINK TO PERTH)

REASONS FOR JUDGMENT 1 On 7 November 2012 the Court allowed the appeal in this matter and directed the parties to confer and file short minutes of orders (including as to costs) to give effect to our reasons: Daebo Shipping Co Ltd v The Ship Go Star [2012] FCAFC 156. The parties largely agreed on those orders. However, they disagreed on the question of how costs should be ordered both in the Full Court and in the proceedings before the primary judge. We will use the same descriptions of the parties in these reasons as in our earlier reasons.

Issues 2 The owners argued that there were two distinct issues in both the trial and the appeal and that, as a result of the appeal, each side had succeeded on one. They contended that accordingly, each side should bear its own costs because each of the principal issues occupied approximately equal time and effort in both the trial and appeal. In addition, the owners argued that they should not be ordered to pay Daebo's costs of the proceedings below on an indemnity basis from 9 March 2011. Daebo sought such an order because the result of the appeal has meant that the owners failed to achieve a better result at the trial than provided in an offer of compromise that Daebo made on 9 March 2011 under O 23 r 2 of the Federal Court Rules 1979 (Cth). The owners also sought a stay to prevent Daebo obtaining payment out of moneys held as security pending their filing an application for special leave to appeal.

Consideration - Costs 3 The two principal issues litigated between the parties concerned a similar subject matter, namely Daebo's loss of the value of the bunkers on board Go Star when the owners terminated the head charter. However, the claim based on the owners' unlawful interference in Daebo's contractual relations with its sub-charterer, Nanyang, on which Daebo succeeded on appeal, gave it substantial relief, albeit not as great as that sought on the claim on which it failed (for conversion or detinue of the bunkers). The difference in value was accounted for by the difference in price of bunker oils provided for in the Nanyang charterparty as compared to the prevailing market price. 4 In our opinion, Daebo was entitled to pursue each claim. Each involved substantially the same evidence, although, some more evidence was necessary on the claim for unlawful interference in contractual relations. Daebo acted reasonably in pursuing each claim, even though it failed on one. It would not be appropriate to deprive Daebo of part of its entitlement to costs of both proceedings by dividing them on the basis of the parties' successes on different issues. This was not a matter in which there was such a bright line between the separate claims that it could be said to be just to make an apportionment 5 The owners did not accept Daebo's offer of compromise made on 9 March 2011 in the sum of USD355,000 within 14 days of its making. The offer represented a significant compromise of Daebo's claims for relief. The offer specified that it consisted of three components as provided by O 23 r 4. Those compounds were: USD201,065.62 for the value of the bunkers and hire (being broken up into USD167,150.62 for bunkers and USD33,915.00 for loss of hire between 3 and 15 January 2009); USD34,205.94 for prejudgment interest from 3 January 2009; USD120,000 as a contribution to costs. 6 In the event, this Court held that Daebo was entitled to recover USD289,786.60 for the value of the bunkers and lost hire plus interest: Daebo [2012] FCAFC 156 at [110]. The owners did not suggest that the amount for which they were found liable on appeal, when taken together with interest and costs up to 9 March 2011 would be less than Daebo's offer of compromise of USD 355,000. The owners argued that Daebo's offer under O 23 was a "Calderbank" offer. It was not. It was an offer made under the then Rules with the costs consequences that those Rules entailed. The owners had obtained a similar order from the primary judge against Daebo based on their success at trial. 7 In those circumstances there is no reason not to adhere to the prima facie entitlement of Daebo under O 23 r 11(4) to have its costs of the proceedings below taxed on a party/party basis up to and including 9 March 2011 and thereafter on an indemnity basis. Daebo's unaccepted offer represented a real compromise of its claims.

Consideration - Interest 8 The parties agreed an order for post judgment interest on and from 7 November 2012. However, that agreement was expressed in the alternative, namely a daily interest rate of USD93.59 or USD44.31. The lower rate equated to the current US dollar interest rate payable by Daebo to its bank, Korea Exchange Bank. They had agreed on prejudgment interest to that date using the lower rate in a total sum of USD69,797.17. We infer that, the higher of the rates took account of the policy in r 39.06 of the Federal Court Rules 2011 (Cth) of fixing a post judgment interest rate of 6% above the cash rate offered by the Reserve Bank of Australia. Since the parties appeared to be content to leave the selection of the rate to the Court, it is appropriate to use the higher of the agreed rates. In arriving at the judgment sum ordered today we have used the figure for agreed interest to 7 November 2012 and added USD2,339.75 (being 25 days interest at the higher rate).

Consideration - Payment out of Secured Funds 9 On 9 February 2009, the owners provided security for Daebo's claim to obtain the release of Go Star from arrest. The owners paid that security into Court and it was placed in a controlled moneys account with St George Bank Ltd. Daebo sought an order for payment of its entitlement to the judgment sum and interest from the security fund. The owners argued that they will seek special leave to appeal from the High Court and resisted the making of any payment. No application for special leave to appeal is before us, nor could it have been until the Court has made the orders that will be pronounced when these reasons are published. 10 However, the owners have now had over three weeks in which to formulate and put before us some basis on which they might be able to attract a grant of special leave. That is an unsatisfactory basis for the owners to seek a further stay of orders giving effect to the judgment against them. In that context, only a short further period should be allowed before the orders will be immediately enforceable unless some ground for a stay is established. 11 Since both parties are not ordinarily present in Australia, it would not have been appropriate to order any payment out of the security until these proceedings are finalised by the orders made today. If an application for special leave to appeal is subsequently made to the High Court the owners can make an application to a single judge for a stay beyond the 7 days we will order before the stakeholder bank will be required to pay out the judgment sum plus interest. Further applications for payment out of any moneys paid by each party into Court as security can be made to a single judge. 12 Daebo sought to be released from the usual undertaking as to damages that it gave to the Court on 16 September 2011. It gave that undertaking as a condition of preventing payment out of the moneys paid into Court by the owners pending the disposition of the appeal. It would not be appropriate to release Daebo from the undertaking. If the orders we will make today remain undisturbed, the undertaking will not have any work to do and no order is necessary to effect a release. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Keane CJ, Rares & Besanko JJ.