Dan-Bunkering (Singapore) Pte Ltd v The Ship Yangtze Fortune

Federal Court of Australia|2022-12-20|Before: Stewart J

The following orders set out below take effect on the filing by the plaintiff of a duly completed Form 26 to the Admiralty Rules 1988 (Cth).
The Marshal sell the ship Yangtze Fortune under the Admiralty Rules 1988 (Cth).
The method of sale be determined by the Court.
The Marshal engage a shipbroker to value the ship in writing and advise as to the method of sale most appropriate to realising the best advantage to the body of creditors.
The Marshal retain a solicitor experienced in the judicial sale of ships to act on the sale of the ship.
Pending further order, the Marshal and the shipbroker not disclose the valuation referred to in order 4 to the parties or anyone else apart from the Marshal's delegates.
The costs of the sale be recoverable from the fund constituted by the proceeds of the sale. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background 1 The ship Yangtze Fortune was built in 2005 as a container vessel, but was later converted to a livestock carrier. The gross tonnage of the ship is 11,672 mt with a length overall of 132.6 m and a breadth of 19.2 m. The vessel is flagged in Liberia. 2 In an affidavit filed on behalf of the plaintiff in the WA proceeding mentioned below it is said that the vessel sailed to Australia from China for the purpose of loading 5,200 head of breeder livestock at Portland, Vic, in September this year for carriage to China. The plaintiff was advised that the vessel had sustained a crack in her hull whilst en route to Portland and, apparently for that reason, is said not to have presented for loading. 3 The ship was at anchorage off Portland from about 27 September 2022.

WA proceeding 4 On 9 November 2022, Australasian Global Exports Pty Ltd issued a writ against the ship in the Western Australian registry of the Court (under case number WAD238/2022). The writ names Yangtze Fortune Co Ltd, a Hong Kong corporation, as the relevant person and demise charterer. It claims damages in the sum of US$2.3 million plus A$1 million for breach of a booking note dated 13 September 2022. The writ was served on the ship off the port of Portland on 17 November 2022 by an Admiralty Marshal. 5 Yangtze Fortune Co Ltd has entered a conditional appearance in the action, citing its relationship with the ship as bareboat charterer. It is represented by Aus Ship Lawyers of Sydney.

First NSW proceeding 6 On 11 November 2022, Dan-Bunkering (Singapore) Pte Ltd issued a writ against the ship in the New South Wales Registry of the Court (under case number NSD958/2022). The writ also names Yangtze Fortune Co Ltd as the relevant person. It claims US$549,695 plus interest on an invoice dated 6 June 2022 for bunkers supplied to the ship at Zhoushan Port, China. 7 An application was made, and granted by a registrar of the Court, for a warrant of arrest. 8 On 2 December 2022, the ship was arrested by an officer of the Australian Border Force in his capacity as Admiralty Marshal. The ship was at that time still anchored off Portland. 9 Once again, Yangtze Fortune Co Ltd represented by Aus Ship Lawyers entered a conditional appearance in the action, citing its relationship with the ship as bareboat charterer. 10 A number of caveats against release from arrest have been issued in the NSW proceeding. They are by the following caveators: (1) Australasian Global Exports Pty Ltd, the plaintiff in the WA proceeding on the same claim as that asserted in that proceeding, on 2 December 2022; (2) UMMS Projects and Livestock Pte Ltd, as former technical and crew manager of the ship pursuant to a ship management agreement with Yangtze Fortune Co Ltd, on 13 December 2022; (3) China Merchants Energy Trading (Singapore) Pte Ltd, as bunker supplier, on 16 December 2022; (4) RMS Marine & Offshore Service (Singapore) Pte Ltd, for SG$37,913.21 for necessaries supplied on account of Yangtze Fortune Co Ltd as demise charterer, on 19 December 2022; and (5) RMS Marine Service Co Ltd, for US$220,157.59 for necessaries on account of Yangtze Fortune Co Ltd as demise charterer, on 19 December 2022.

The second and third NSW proceedings 11 On 19 December 2022, RMS Marine Service Co Ltd and RMS Marine & Offshore Service (Singapore) Pte Ltd commenced proceedings against the vessel in respect of the same claims as recorded in their caveats against release as recorded above. The proceedings are NSD1122/2022 and NSD1123/2022 respectively. They are represented by Colin Biggers & Paisley, who also represent the plaintiff in the first NSW proceeding.

The first case management hearing 12 At the first case management hearing of the WA and first NSW proceedings on 14 December 2022, the plaintiff in the NSW proceeding applied from the Bar for orders for the judicial sale of the vessel because of its present circumstances - to which I will come. Although the bareboat charterer had that day entered an appearance on behalf of the defendant to defend the proceeding and it was represented in the hearing, there was no evidence before me that the owner of the vessel had notice of the application. The shipowner has an obvious and continuing interest in any potential orders for the sale of the vessel. 13 Mr James, who appeared for the bareboat charterer, consented to an order that the bareboat charterer give the shipowner notice of the application. On that basis, I made orders requiring any party opposing orders for the judicial sale of the vessel to file any evidence and submissions in support of such opposition by noon on Monday, 19 December 2022 and returning the matter for hearing at 11.15 am today, ie, Tuesday, 20 December 2022. 14 Mr James read an affidavit today that proves that the shipowner was given notice of those orders on 14 December. It has not filed any affidavit or submissions opposing the judicial sale of the vessel, and it has not appeared at the hearing. 15 In those circumstances, I am content to proceed to consider whether the vessel should be sold. 16 I should add that Mr James explained at the first case management hearing that the bareboat charterer contends that it terminated the bareboat charterparty in mid-November 2022 with the consequence that it is no longer in possession or control of the vessel. Its contention is that possession and control have reverted to the owner, subject to the custody of the vessel whilst under arrest being with the Marshal. There may be some complexity to that question in view of the Master and crew presumably formerly having been employed by the bareboat charterer, and it not being apparent who they are now employed by, if anyone. Fortunately, it is not necessary to going into those issues for present purposes.

The circumstances of the vessel 17 The Admiralty Marshal reports that the ship had been at anchorage since 27 September 2022 until it was moved to a lay-by berth in Portland Port on 15 December 2022 following a direction made by me at the first case management hearing. The 36 crew members on board had been at anchorage for that whole period of nearly 3 months. They have reportedly not been paid for the last six or seven weeks. 18 The owner has also not been provisioning the vessel. The result is that the Marshal has had to purchase bunker fuel as well as victuals. To date, the Marshal's expenditure on maintaining the custody of the vessel amounts to approximately $270,000 plus a further approximately $700 per day in respect of the Marshal's liability insurance. Further costs are likely to mount quickly in the coming weeks. 19 Because the vessel is a livestock carrier, a significant number of the crew on board are not necessary for the safe custody of the vessel whilst under arrest - they were on board for the purpose of looking after the intended cargo of livestock. The minimum safe crewing level can be maintained with a significant number of crewmembers being repatriated. Given the apparent lack of interest or involvement of the shipowner, there appears to be little point in maintaining the complement of crew at any level above the minimum required to maintain the safe custody of the vessel. AMSA has reportedly advised that that number is 16. However, it may be that the crew members who are in excess of the minimum required will not be willing to leave the vessel until they have been paid in full. These are matters that the Marshal will have to deal with, but they illustrate the escalating expenses to maintain the vessel under arrest. 20 The Marshal reports that the vessel undertook a temporary repair for the crack in its hull. The repair appears to be holding as the vessel moved to King Island a few weeks ago to avoid bad weather and then returned to the Portland anchorage without any apparent adverse consequences. 21 The Marshal reports that from documentation provided by the Master it appears that the vessel's marine hull and machinery insurance is set to expire on 31 December 2022. If that occurs, all claimants' security will be imperilled.

The applicable principles 22 Rule 69 of the Admiralty Rules 1988 (Cth) provides for orders for valuation and sale of property under arrest. Although r 69(1)-(2) provide for the application by a party to a proceeding for an order that a ship that is under arrest be sold, r 69(5) provides that if the ship is deteriorating in value, the court may, at any stage of the proceeding, either with or without application, order that it be sold. That is to say, the court can on its own motion order the sale of a ship, or it can do so on the application of a party. 23 Rule 70 provides that the sale of a ship ordered to be sold under r 69 must be conducted by the Marshal. The court may direct that the sale be by auction on a public tender or any other method. 24 It was explained by Brandon J in The Myrto [1977] 2 Lloyd's Rep 243 at 260 that the question whether an order for the appraisement and sale of a ship under arrest in an action in rem should be made pendente lite arises normally only in a case where there is a default of appearance or defence. In such a case, it has been a common practice for the court to make such an order on the application of the plaintiff on the ground that, unless the order is made, the security for their claim will be diminished by the continuing costs of maintaining the arrest to the disadvantage of all those interested in the ship, including, if they have any residual interest, the owners. 25 The principles expounded by Brandon J have been adopted in this Court on many occasions: Marinis Ship Suppliers (Pty) Ltd v The Ship Ionian Mariner (1995) 59 FCR 245 at 249 per Ryan J; Norddeutsche Landesbank Girozentrale v The Ship "Beluga Notification" (No 2) [2011] FCA 665 at [25] per Rares J; Bank of China Ltd v The Ship "Hai Shi" [2013] FCA 224 at [6] per Rares J; Bhagwan Marine Pty Ltd v The Ship "Lauren Hansen" (No 2) [2020] FCA 1482 at [16] per McKerracher J; Bank of New Zealand (Security Trustee) v The vessel MY Island Escape [2022] FCA 1230 at [23] per Feutrill J. 26 The deterioration of the ship whilst under arrest and the erosion of the security that it offers to creditors by the mounting costs of maintaining it while under arrest are also pressing considerations: Hilane Ltd v MV Silver Star [2013] ZAECPEHC 61; 2014 (2) SA 392 (ECP) at [16]-[17] per Eksteen J. 27 The authors Sarah C Derrington and James M Turner QC in The Law and Practice of Admiralty Matters (2nd ed, Oxford University Press, 2016) at [7.61] identify a number of matters as being among those on which evidence may relevantly be adduced in support of an application for sale pendente lite. The list amounts to a ready reference of potentially relevant considerations. It is as follows: (1) the overall value of the claim; (2) the number of cautions against release and other claims against the ship and their likely value; (3) the value of the ship and its likely diminution in value during the course of the arrest; (4) the costs of maintaining the vessel's arrest, including such costs as port and berth charges, ship's keeper, crew wages and emoluments, supply of domestic fuel to the vessel, and so on, and the consequent diminution in the claimant's security; (5) any (prospect of) deterioration in the condition of the vessel; (6) any necessary work to be done on the ship either to keep it afloat or to enable it to be moved; (7) the unwillingness of the shipowner to contribute to the costs of the arrest; (8) the financial position of the shipowner and its unwillingness or inability to provide security for the ship's release; (9) the likely intervention of claimants with higher priority; (10) humanitarian considerations in relation to the crew; and (11) whether, if the claimant obtains judgment in its favour, the judgment can be satisfied by the defendant without the need to sell the ship in any event. 28 The discretion to order the sale of a ship in circumstances such as the present where, although the action is defended, the party that has put on the appearance to defend, namely the former bareboat charterer, does not oppose the sale, is broad. Central considerations in the present case include the interests of the plaintiff in having security for its claim, the interests of other creditors of the ship in order to preserve the security for their claims, the welfare of the crew and the prospects of the owner, or any other party, intervening to maintain the ship in all respects including provisioning it and paying the crew pending the outcome of the litigation, or to put up security to enable the release of the vessel. 29 In the present case, no party, whether the shipowner or any bareboat charterer or mortgagee, has intervened to maintain the vessel while it is under arrest or even to continue to pay the crew. The vessel has all but been abandoned. It continues to deteriorate and the expenses to maintain it continue to mount. It seems that its sale at some point is inevitable, and the sooner that that is ordered and done the better for all concerned. I have in mind in particular the highly disadvantageous circumstances of the crew and that the shipowner has not opposed the sale or indicated any willingness to secure the claims. 30 In the latter regard, the number and nature of the proceedings against the vessel and caveats against its release from arrest is notable. Clearly, the vultures are circling. I see little to no prospect that the judicial sale of the vessel can be avoided. 31 Although there is no particular evidence that the physical condition of the vessel is deteriorating any more than normal wear and tear, I am conscious of the significant age of the vessel, the temporary repair that has been undertaken and the evident need for a permanent repair, and the likelihood that the vessel is not being maintained as it normally would be given the shipowner's lack of involvement with the vessel and the position of the crew. The vessel has also spent a long time at anchorage, and it may have to be returned to anchorage for long periods in the future. I therefore consider the vessel to be deteriorating. 32 In the circumstances, I am satisfied that there should be orders for the sale of the vessel. I see no other available course. 33 Rule 69(2) requires that an application for the sale of a ship must be in accordance with Form 26. The significance of that is that Form 26 includes the undertaking referred to in r 69(4) that the applicant for the sale undertakes to pay on demand to the Marshal an amount equal to the costs and expenses involved in complying with the order for the sale. 34 Because of the manner in which this matter developed last week, the plaintiff did not file a Form 26, however it has today undertaken to do so. In the circumstances, I propose to make the orders for sale conditional on the plaintiff filing the Form 26. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.

Admiralty Rules 1988(Cth)rr 69, 70

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