Geraldton Port Authority v The Ship "Kim Heng 1888"

THE ESSENCE OF THE CLAIM IN THE IN REM PROCEEDING

1. The defendants to the in rem proceeding seek to amend their defence by adding a further paragraph to the following effect:

(a) a three year limitation period applied to these claims by reason of s 37(1)(b) of the [Admiralty Act]

(b) the present action was not commenced until after the expiration of three years from the time when these claims first accrued and these claims are now statute barred

1. That amendment will be permitted.
2. The Authority's claim in damages is based on s 113 of the Port Authorities Act 1999 (WA) and on breach of duty of care owed by the defendants to the Authority. The Authority also claims breach of contract in the originating writ but this is not fleshed out in the statement of claim. It is common ground that in usual circumstances the limitation period for commencing a claim based in tort would be six years after the cause of action accrued. The claim based upon s 113, a statutory cause of action created by the Port Authorities Act 1999 (WA), is more complicated. That section imposes liability upon a ship owner for damage caused by a vessel to a port facility whether or not the damage is caused through a person's wilful or negligent act or omission (s 113(2)). The proceeding was not commenced until a little more than five years after the damage occurred. The Port Authorities Act 1999 (WA) itself does not provide any time limitation period for commencing a proceeding but at the time the damage to the Port facilities allegedly occurred, the relevant limitation legislation was to be found in s 38(1) the Limitation Act 1935 (WA) (with the current Act coming into place the month after this proceeding commenced and applying only to causes of action accruing on or after its proclamation).
3. It is unnecessary at present to decide whether there is any other limitation period prescribed for the in rem proceeding. The Authority does not suggest that there is any limitation period other than that provided for by s 37(1)(b) of the Admiralty Act, namely, a three year period. The Authority does not admit that it is out of time for the in rem claim but does not appear to dispute that the proceeding had to be commenced within three years of the damage accruing. (The Authority says that it may be at least theoretically possible that there was ongoing economic loss after the initial damage such that not all damage would have occurred at a date more than three years prior to the institution of the proceeding). Again, it is not necessary to determine this issue.
4. Against that background, the only question for determination is this. Is there some good reason why, on the one hand, the Authority should not be permitted to discontinue its proceeding (there is an argument about costs)? Alternatively, should the limitation defence amendment not be ruled upon now so that the in rem proceeding be dismissed with costs for being out of time?

(1) A party claiming relief may discontinue a proceeding in whole or in part by filing a notice of discontinuance, in accordance with Form 48.

(2) The party may file the notice of discontinuance:

(a) without the leave of the Court or the other party's consent:

(i) at any time before the return date fixed in the originating application; or

(ii) if the proceeding is continuing on pleadings - at any time before the pleadings have closed; or

(b) with the opposing party's consent - before judgment has been entered in the proceeding; or

(c) with the leave of the Court - at any time.

(7) Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.

1. Where the leave of the Court is sought to discontinue proceedings, the Court will normally allow a plaintiff to do so providing no injustice will be caused to the defendant. It is not desirable that a plaintiff should be compelled to litigate against his or her will: O'Neill v Mann [2000] FCA 1680 (at [11]) per Finn J who cited with approval Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876 (at 879). Finn J also observed (at [13]) that there is an underlying policy in the Rules that the discontinuing party should be liable for the other party's costs unless the Court orders otherwise. But as his Honour noted, so various can the reasons be in circumstances of discontinuance, that such a policy cannot safely be said to have hardened into a 'usual rule'.
2. The Authority resists a costs order. It argues that as the legal work for the defendants in the in rem proceeding will be used in defending the in personam proceeding, costs should await determination in the in personam proceeding.
3. The Authority also stresses that there is no abuse of process in commencing two sets or proceedings, indeed, to the contrary by operation of Rule 18 of the Admiralty Rules 1988 (Cth), the Authority could not combine its claims in rem and in personam in the one proceeding but had to commence separate proceedings.
4. Rule 18 provides as follows:

18 Separate commencement of in rem and in personam actions

A proceeding commenced as an action in personam must not be commenced by the same initiating process as the process by which a proceeding is commenced as an action in rem.

1. Similarly, it does not appear to be argued and could not be, in light of r 18 that the existence of concurrent proceedings (one in rem the other in personam) amounts to an abuse of process. In Sealawn Pty Ltd v Andirina Pearle [2000] WASC 54, Bredmeyer M considered a circumstance in which the plaintiff had commenced three actions. The first was an action in the District Court of Western Australia against the owner of three vessels for goods and services. There were then two actions in rem commenced in the Supreme Court of Western Australia against the actual vessels with conditional appearances being filed in each case. The vessels were arrested, the money paid into Court and the vessel released from arrest in each case. The plaintiff sought to remit the District Court action to the Supreme Court to consolidate it with the two other actions. That procedure was not opposed except as to costs with counsel for the defendants contending that there had been an unnecessary duplication of costs in bringing three separate actions. Bredmeyer M rejected that argument saying (at [5]):

[5] I consider it was not wrong for the plaintiff to bring the initial action in the District Court. The claim was a simple one, for payment for goods and services supplied and well within the monetary limit of the District Court. I consider it was also not wrong for the plaintiff to have brought the two Admiralty actions in rem in this Court. The benefit of those procedures is that it gives the plaintiff security for the sums of money claimed. It is akin to applying for a Mareva injunction. It was not possible to obtain those orders in the District Court as the District Court does not have Admiralty jurisdiction. Secondly, it was not possible to sue Longcape Investments Pty Ltd in personam in the Admiralty actions because, by r18 of the Admiralty Rules (Cth), a proceeding commenced as an action in personam cannot be commenced by the same initiation process as the process by which a proceeding is commenced as an action in rem. If it is desired to bring an action in rem and an action in personam, each action must be begun by separate writs. It is not vexatious or an abuse of process to start an action in personam and then later an action in rem: Halsbury's Laws of Australia, Vol 17 para 270-para 2140, Footnote 4, citing Administracion Nacional de Combustibles Alcohol y Portland-ANCAP v Ridgley Shipping Inc [1996] 1 Lloyd's Rep 570 at 573 per Longmore J. If the defendant is ultimately unsuccessful in this action, then it is unfortunate for the defendant that three actions have been commenced and three filing fees incurred, rather than one action. But given our Rules and the law, that is inevitable. The vessels could not be arrested in a District Court action and the in personam claim for $26,480.76 could not have been added as a separate cause of action against Longcape Investments Pty Ltd in the two Admiralty actions. Moreover, as I understand it, a separate Admiralty action for the arrest of each vessel was not wrong. Goods and services were supplied to each vessel. I consider the appropriate costs orders are O 8 as asked by the plaintiff, and O 9, "costs of this application are in the cause of the consolidated action". I will make those orders and O 1 to O 7 and O 10 as asked.

1. The argument advanced by the defendants turns in part on s 37 of the Admiralty Act. Relevantly it provides as follows:

(1) A proceeding may be brought under this Act on a maritime claim, or on a claim on a maritime lien or other charge, at any time before the end of:

(a) the limitation period that would have been applicable in relation to the claim if a proceeding on the claim had been brought otherwise than under this Act; or

(b) if no proceeding on the claim could have been so brought--a period of 3 years after the cause of action arose.

(2) Subsection (1) does not apply if a limitation period is fixed in relation to the claim by an Act, an Imperial Act, an Act of a State or an Act or Ordinance of a Territory, including such an Act or Ordinance in its application in a part of Australia.

... (emphasis added)

1. The defendants in the in rem proceeding say that once a claim has been submitted to the jurisdiction of the Court (not a proceeding), one consistent limitation period applies. They argue that they would be prejudiced (which is a matter to be taken into account when leave to discontinue is sought) because the advantage they have obtained by pleading the limitation defence (almost certainly to be determined in their favour) would be removed.
2. The Authority contends that there is insufficient evidence at this stage to indicate a proper basis for summary dismissal of the Authority's in rem proceeding on the limitation ground. The defendants to the in rem proceeding point out, however, that the only explanation for the discontinuance application is the existence of the limitation defence. The application to discontinue was made after the defendants provided their submissions in respect of the time limitation defence. The defendants argue that the true reason why the Authority wishes to discontinue the in rem proceeding is to attempt to avoid the operation of the defendants' limitation defence.
3. Importantly, the defendants in the in rem proceeding argue that the Authority should not be allowed to discontinue that proceeding at a point immediately before the time limitation defence is argued 'because precisely the same issue of time limitation will arise again in the in personam proceeding'. The defendants say they should not be required to repeat the litigation on this aspect of a case in the in personam proceeding.
4. The defendants in the in rem proceeding argue that as the Authority initially chose to pursue the proceeding in rem, it has already submitted both the claim in rem and the related claim in personam to the jurisdiction of the Court. This argument depends upon the view to be taken in the present application of observations made in Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 and Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' [1976] HCA 65; (1976) 136 CLR 529 (at 538-539). I will discuss that issue in the next section. Having submitted those claims to the Court's jurisdiction, the defendants say that s 37 of the Admiralty Act has operated so as to limit the time for bringing all of the claims already submitted to the Court's jurisdiction. The defendants submit that the result cannot be overcome 'by the device of recommencing the in personam claims separately in different proceedings. Section 37 prescribes the time limit in respect of claims, not proceedings'.
5. The defendants' argument is based on the submission that there is a fundamental distinction between 'claim' and 'proceeding' in the Admiralty Act. They contend that a claim is the set of circumstances which is being pursued as the basis for liability while a proceeding is the procedural mechanism by which the Court is made aware of those claims in that set of circumstances and asked to adjudicate on liability. In the same way, s 37 refers to a proceeding which may be brought under this Act on a maritime claim or on a claim on a maritime lien or other charge.
6. Section 37 is not easy to understand as noted by Davies, M and Dickey, A, in Shipping Law (3rd ed, 2004, Lawbook Co) where the learned authors say (at 446):

In New South Wales, Tasmania and the Northern Territory, the relevant legislation specifically provides that it dose not apply to actions brought in rem against the ship itself [Limitation Act 1969 (NSW), s 22(1); Limitation Act 1974 (Tas), s 8(1); Limitation Act 1981 (NT), s 20(2)]. There is no equivalent provision in Western Australia but the Western Australian equivalent of s 396(1) speaks of an action against "the vessel owner" without mentioning the ship itself, [Supreme Court Act 1935 (WA), s 29] unlike s 396(1), which expressly applies to actions "against a ship or its owners". Thus, it is implicit that actions in rem are not governed by the Western Australian provision. Section 37(1) of the [Admiralty Act] is apparently designed to apply in this situation [see Australian Law Reform Commission, Civil Admiralty Jurisdiction (ALRC 33) 1986, para 253]. It applies only when no other limitation period, Imperial, Commonwealth or State, would apply, [s 37(1) of the Admiralty Act] and it provides: ...

The drafting of the section is rather unfortunate, and its effect is not entirely clear. Any plaintiff proceeding in rem against a ship under the Admiralty Act could have proceeded in personam against its owner by invoking the ordinary, non-Admiralty jurisdiction of the Court. That would mean that s 37(1)(b) would have no effect at all, because s 37(1)(a) would always apply the limitation period that would apply if the action were brought in personam. However, the apparent intention of s 37(1) is that para (a) should apply to in personam proceedings in the Admiralty jurisdiction conferred by the Admiralty Act, and para (b) should apply to actions in rem. That intention can only be effected by reading the section as if it included the words 'of the same kind' after the word 'proceeding' in each of the lettered paragraphs.

1. In the Admiralty Act there is no general definition of either 'claim' or 'proceeding' contained in s 3. Section 4, however, does define various types of maritime claims. It does so by reference to the circumstances or the facts of the claim.
2. Both parties to the present dispute rely upon the approach taken by the learned authors to suggest that the apparent intention of s 37(1) is that para (a) should apply to in personam proceedings in the Admiralty jurisdiction conferred by that Act and para (b) should apply to actions in rem. For present purposes, it appears to me that the construction placed in it by the learned authors and adopted by the parties appears to be correct.

THE IN REM PROCEEDING AS IF IT WERE AN ACTION IN PERSONAM

1. The defendants, as I understand it, argue that although there is only one claim under the in rem proceeding, all aspects of it are to be dealt with in that proceeding (which they say is out of time). That argument is advanced by reference to the following obiter but learned observations in the judgment of Allsop J in Comandate (at [109]) with which Finkelstein J agreed. (Finn J found it unnecessary to consider this aspect of the matter under appeal):

Once an in rem claim has been served on the ship, an appearance may be filed under r 23 by someone who has a relationship with the ship or property against which the action in rem has been commenced. Certainly if the party who files a notice of appearance is a relevant person, the consequence is that, as Gibbs J said in Caltex Oil v The Dredge 'Willemstad', the action proceeds as if it were an action in personam (without ceasing to be an action in rem) against that person. Once a relevant person files an appearance, the plaintiff will file a statement of claim "on each party who has entered an appearance" and the relevant person becomes liable to have judgment entered against it personally and to the full extent of the claim, not limited by the value of the ship: Caltex Oil v The Dredge ' Willemstad'; The 'Dictator'; The 'Gemma'; The 'Dupleix'; and The 'Banco' [1971] P 137. If a person files a notice of appearance who is not a relevant person, eg a mortgagee, demise charterer (where the claim is against the owner) or an owner to whom the ship has been transferred after the commencement of the writ, there is no call to characterise the action as other than in rem. If the relevant person does not appear, the claimant is limited to the res, which is available to the claimant as one of all maritime claimants who may come in to assert their rights over the ship or the funds from the sale: The 'Banco'; The 'Queen of the South' [1968] P 449; The 'Leoborg (No 2)' [1963] 2 Lloyd's Rep 441; and The 'Silia' [1981] 2 Lloyd's Rep 534. In these circumstances, it can be taken that the relevant person has made a choice not to come in and defend any interest in the ship which would have come at the price of submitting itself to personal liability for the full amount of the claim. Indeed, there may be no other party who is interested in defending the claim, in which case the plaintiff will proceed against the ship, obtain judgment against the ship, have the ship sold under court process and, after payment of the costs and expenses of the arrest and sale, take its share of the proceeds in competition with other maritime claimants on the ship. (emphasis added)

1. The relevant passage relied upon by Allsop J from Gibbs J in The Dredge 'Willemstad' (at 538-539) was this, where his Honour said:

An action in rem is an action against the ship itself: see Aichhorn & Co KG v The Ship M V Talabot (1974) 48 ALJR 403 at 403-4 However, when the defendants to such an action have entered an appearance, judgment may be enforced against them personally, and to the full extent of the damages proved, even though those damages exceed the value of the ship: The Dictator [1892] P 304 ; [1891-94] All ER Rep 360; The Gemma [1899] P 285 ; [1895-99] All ER Rep 596; The Dupleix [1912] P 8; The Banco [1971] P 137 at 151 ; [1971] 1 All ER 524. After appearances have been entered the action proceeds as if it were an action in personam although it does not cease to be an action in rem: The Broadmayne [1916] P 64 at 77; The Banco, supra ([1971] P at 151), The Conoco Britannia [1972] 2 QB 543 at 555 ; [1972] 2 All ER 238. Moreover, it appears that where an action has been commenced in rem a defendant may be added against whom the plaintiff has only a right in personam, and that an action may be commenced by means of a single writ against a number of defendants, against some of whom the plaintiff has an action in rem and against others an action in personam only: Roscoe, Admiralty Practice, 5 ed, pp 263-4. Further, there is recent authority that the court has inherent jurisdiction to allow the intervention in an action in rem of a party who has no interest in the property arrested, when the effect of the arrest is to cause that party serious hardship, difficulty or danger: The Mardina Merchant [1975] 1 WLR 147 ; [1974] 3 All ER 749. (emphasis added)

1. The issue that Comandate was dealing with was not so much the question of what happened to the in rem proceeding after the appearance was filed, a topic incidental for its determination but whether there were, in truth, proceedings between the parties rather than in rem proceedings from the inception. Lord Steyn with whom Lord Browne-Wilkinson, Lord Hoffman, Lord Cook of Thorndon and Lord Hope of Craighead held in the Republic of India & Another v India Steamship Co Ltd (No 2) [1997] UKHL 40; [1998] AC 878 that the action in rem should be recognised for what it is, an action between the plaintiff and, in the language of the Admiralty Act, 'the relevant person', i.e., the parties not the rem. Allsop J held that the views expressed in India Steamship Co Ltd (No 2) misstated the nature of an action in rem. His Honour described such an action (at [108]-[109]). Before the passage (at [109]) that I have cited, his Honour said (at [108]):

[108] It is necessary to identify some fundamental issues about the action in rem, which before The "Indian Grace" appeared to have been settled, although, in fairness, comments such as those by Brandon J in The "Conoco Britannia" [1972] 2 QB 543 at 555; [1972] 2 All ER 238 at 245 foreshadowed some re-evaluation of the nature of the action in rem. (I will limit myself to dealing with actions in rem against the ship and ignore questions of other property. Also, the authorities given are not exhaustive.) The claim is served upon the ship. The ship must be in the geographical jurisdiction of the court. Service ex juris is not permitted. Once the action is commenced a change in ownership will be ineffective to prevent the action proceeding against the ship: The "Monica S" [1968] P 741; [1967] 3 All ER 740 and The "Cape Moreton". This obtains whether the claim underlying the action is a maritime lien: s 15 of the Admiralty Act or a maritime claim sufficient to ground an action in rem: ss 16, 17, 18 and 19 of the Admiralty Act. Subject to the extension of surrogate or sister ship arrest, the action in rem lies only against the ship in connection with which the claim arises: The "Beldis" [1936] P 51, and see the word "concerning" in ss 16, 17, 18 and 19 and the words "in respect of" in s 15.

1. But at [110], Allsop J stressed that a cause of action in rem does not merge in a judgment in personam. At [111] his Honour stressed that the procedural theory relies for its effective operation upon the reality of the claim against the ship being separate and distinct from the claim in personam.
2. The parties are entirely in agreement that after an unconditional appearance is filed by a named defendant in an in rem proceeding then the proceeding continues both in rem but also against that person on an in personam basis. This is the Australian position as reinforced by the Full Court in Comandate. It does not necessarily follow from this, however, that what would be a six year limitation period for any in personam claim in that proceeding is converted to a three year limitation simply because the proceeding was initially issued in rem only against the ship. That is another step altogether and one which is neither necessary or desirable to take at this point of the litigation between the parties.
3. I take the observation of the Court on this topic (on which the defendants base their argument) to simply be an acknowledgement that while the claim in rem continues, a plaintiff may also be able to pursue an in personam claim (on different legal foundations) against the unconditionally appearing 'relevant persons'. If anything there is one proceeding with two different claims, one in rem and one in personam but the inter-changeability of terms such as claim, proceeding and action throughout the Admiralty Act does not permit one to read into the words of s 37 the argument which the defendants now advance.
4. There are many cases emphasising the undesirability of determining a limitation point prematurely. There is no need at present to determine the limitation point. It will remain arguable, if it is presently arguable. For reasons expressed above, I am not persuaded that the point is sufficiently strong so as to accede to the defendants' submission that its dismissal motion should be determined in its favour at this point.
5. The only real issue presently to be addressed is the application for leave to amend to claim the limitation point in the in rem proceeding which application will be granted and the application for leave to discontinue, which application will also be granted but on condition that the Authority pay costs to the defendants.
6. I do not consider it was the legislative intent that a plaintiff would lose the benefit of a six year limitation period for an in personam claim just because a very similar claim was first issued in rem. No precedent to support that outcome has been identified and I have been unable to do so. That said, in the present situation, if the Charterers have a good argument under s 37 of the Admiralty Act, that argument will survive for the in personam proceeding. The very reason they seek to advance it now is to avoid having to do so (again) in the in personam proceeding. The argument has not yet been raised or determined in that proceeding. From a prejudice perspective, their point, such as it may be, will be kept alive.
7. The defendants in the in rem proceeding also point to the fact that the Authority has 'elected' to brings the claims as in rem proceedings. By reason of the 'election' to make the claims in rem and the benefits such a claim can confer upon a plaintiff, it is argued that the Authority is now prevented from going back upon that choice and making only in personam claims.
8. It is certainly true that in rem proceedings have the capacity to give a plaintiff, in this case, the Authority, the security of the vessels against which the proceedings are commenced or some substitute security such as letters from a P & I Club (as in this case). The reality is that those letters were provided, I infer, upon the threat of in rem claims being made immediately after the incident. They have been in existence now for over six years. The Authority contends that the demand which was made might equally be construed as a threat to seek proceedings of a Mareva nature in accordance with the famous case of Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd's Rep 509.
9. The Authority's submission on this aspect, in my view, is not realistic. There was clearly a real threat, in my view, to arrest the ships and to proceed in rem. No mention of a Mareva application was made in the demands under consideration.
10. The defendants argue that where claims may be made either in rem or in personam, there is an inconsistency between the rights to which a plaintiff is entitled depending on the mode of making them. Having elected for the benefit of the security provided by in rem proceedings, 'the plaintiff is not entitled to rescind that election, and substitute a new election to make its claims by way of in personam claims'. I cannot accept this argument. The authorities to which I have referred (Sealawn and Administracion Nacional de Combustibles Alcohol y Portland-ANCAP v Ridgley Shipping Inc [1996] 1 Lloyd's Rep 570 (at 573) per Longmore J) and r 18 of the Admiralty Rules make it clear that a party may proceed on both bases but not in the same proceeding. That is what the Authority has done. There is a strong inference that it is out of time on the in rem proceeding but there is no reason it should not pursue the in personam proceeding if it is within time, a debate yet to arise. It should be permitted to discontinue but not without paying costs.

1. The filing of an unconditional appearance does not convert a cause of action or a proceeding in rem to a proceeding in personam. Rather, following the filing of the unconditional appearance by 'relevant persons' in an in rem proceeding, the proceeding will continue as against those persons as if the proceeding against them were a proceeding in personam while otherwise continuing in rem. In other words, relief could be, theoretically, obtained against those persons, if it were sought, beyond the relief claimed against the ships in the in rem proceeding.
2. Finally, in relation to costs of these motions, the spoils of the particular fight addressed in these reasons have been shared reasonably evenly. My impression is that the appropriate order is that there be no order as to costs of the applications to which these reasons are directed. I will make that order but will review it if any party wishes to file written submissions to the contrary within seven days. If so, the opposing party will have seven days to respond. The issue of costs, if any, will be determined on the papers.
3. The Court orders:
   1. The defendants be granted leave to amend their defence in terms of the proposed amendments in the defendant's submissions filed on 10 October 2011.
   2. The plaintiff have leave to discontinue the application.
   3. The plaintiff do pay the costs of the defendants, to be taxed if not agreed.
   4. There be no further order as to costs in relation to the applications to which these reasons are directed unless any party files written submissions to the contrary within 7 days, in which case the opposing party or parties will have 7 days to reply.
   5. Any further determination on costs be on the papers.

I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.