Consideration
16 In my opinion, this is not a suitable proceeding in which I should permit the plaintiff to rely upon what, in the ordinary course of litigation, would be its right to proceed against the defendant on default under r 5.23. That is because the defendant has no presence in this jurisdiction, and its default has arisen solely because it has gone into liquidation in Hong Kong after appearing here. In those circumstances, the plaintiff will be able to submit a proof of debt in the liquidation and have it considered in the ordinary way.
17 It would not be appropriate for the Court to give a default judgment in this jurisdiction on the basis of the deemed admission of allegations in the statement of claim having regard to the real and problematic questions which I have identified. First, there is a real issue about whether a time charterer has an interest in the ship at all for the purposes of s 34(1) of the Act. That question involves considering whether s 34(1) requires only a mere economic interest of the plaintiff, as hirer of the ship, or requires the person to have a proprietary or possessory interest in her.
18 Secondly, there are real questions about whether or not in the circumstances the defendant did obtain the arrest of Bulk Peace unreasonably and without good cause, particularly in light of the observations which the members of the Full Court made on that topic. It would be unsatisfactory for that matter to be decided under r 5.23 on the basis of a mere pleaded assertion of the ultimate fact to be proved, rather than upon an examination of the evidence and state of mind of the defendant at the time the arrest was obtained, as would happen in ordinary contested litigation.
19 Thirdly, there is a real question as to whether each head of damage claimed by the plaintiff was suffered "as a direct result" of the arrest, apart from the straightforward, but relatively small, claim for loss of the value of the hire of Bulk Peace over the period of her arrest and the expenses of operating the ship, such as provision of bunkers and any other ordinary incidents of the charter party that the charterer had to pay during the period while the vessel was idle and unable to be employed. Moreover, the claims for the losses that the pleading asserted extended to losses said to have arisen from the terminations of the time charters of the other two vessels, which seem even more problematic. It is difficult to see how those terminations cause the plaintiff to suffer loss or damage as a direct result of the arrest of Bulk Peace. There must be real questions as to whether, if a third party cancels its contract either without a particular contractual right to do so or in breach of contract with the time charterer, that event creates loss or damage to the time charterer "as a direct result" of the wrongful arrest of the vessel. These issues as to remoteness are the more acute in relation to the termination of the time charters of Bulk Harvest and Bulk Genius, neither of which appeared to have been owned by Well Far or to have any pleaded connection with HNA.
20 The defendant's claim of its entitlement to arrest Bulk Peace was not, and could never have been, founded upon the time charter of her by the plaintiff. That is because the right to arrest Bulk Peace depended upon the defendant establishing that HNA was her owner for the purposes of s 19(b) of the Act. It is possible that a court would find that the plaintiff's loss of the time charter of Bulk Peace to Rio Tinto was a direct result of her being under arrest. However, it is difficult on the bare assertions in the statement of claim to see what risk of arrest either of the other differently owned ships presented to Rio Tinto, to justify its termination of the charter parties for them.
21 Moreover, s 20(1) and (3) prohibited the arrest of a second ship on a proceeding in rem under ss 15, 17, 18 and 19 of the Act, unless the service of the writ on the first ship had been set aside or the proceedings relating to her had been discontinued, dismissed or struck out or the arrest was invalid and she had been released from arrest. Thus, while the arrest of Bulk Peace continued, it is difficult to see what risk of interruption for the other two charters could have arisen to justify termination of them as a direct, or indeed any, result of the arrest. And, if the arrest were set aside or invalid, it is also difficult to see how either Bulk Harvest or Bulk Genius were at risk of arrest under s 19(b), given the absence of any pleaded ownership connection of them to HNA.
22 All of these issues, in my opinion, involve difficult questions of fact and law, which in the circumstances of the defendant having gone into liquidation, it would not be appropriate to resolve on a default judgment application. True it is that the defendant has no protection in this jurisdiction under s 471B of the Corporations Act 2001 (Cth) or under any current application for the recognition of the Hong Kong liquidation or any related liquidation as a foreign, or foreign main, proceeding under the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law, that is given force of law in Australia by s 6 of the Cross-Border Insolvency Act 2008 (Cth) or under any consequent orders that could be made to stay these proceedings. Nor is there any suggestion that there will be any such proceeding here, given the apparent absence of any assets or presence of the defendant in this jurisdiction.
23 A decision to grant a default judgment of the kind and with the incidents of enforcing each and every claim in the statement of claim, in my opinion, would have far-reaching consequences for the understanding of how s 34 of the Act operates in a case of wrongful arrest. This would be quite unsatisfactory where in truth there had been no ability of the Court to consider or resolve the three significant legal issues that I have identified, let alone the underlying complex factual issues that the statement of claim raised. Such a default judgment would have the potential to create a chilling effect on plaintiffs wishing to avail themselves of their right to arrest ships in the Admiralty jurisdiction, which the Parliament chose to create, in proceedings that may be brought in rem under Pt III of the Admiralty Act in accordance with the careful and considered views of the Australian Law Reform Commission in ALRC 33 and its clear intent to limit the circumstances in which the claim of wrongful arrest in s 34 might be enforced.
24 In my opinion, in all of the circumstances it is not appropriate that these proceedings be determined on the interlocutory application for default judgment under r 5.23. It is not in the interests of justice that this be the first case to apply the important provisions of s 34(1), where there are the highly problematic claims that are made in the proceedings which may or may not be able to be proved, were they contested, but which, in my opinion, require careful attention, evidence and argument before they should be adjudicated, even in a situation where one party has not appeared in default.
25 That said, I am indebted to counsel for the plaintiff for his careful, if adventurous, argument to persuade me to proceed down this path, in which he collected and drew attention to a number of authorities that will no doubt be helpful if and when an application is filed under s 34 in the future that results in a contested hearing.