Iran Amanat v Kmp Coastal Oil

KMP Coastal Oil Pty Ltd v Owners of Motor Vessel Iran Amanat (1997) 75 FCR 78

Islamic Republic of Iran Shipping Lines, the appellants, are the owners of a number of ships, including the Iran Chamran, the Iran Adl and the Iran Amanat. In October 1996 the respondent, KMP Coastal Oil Pte Ltd, a corporation which carries on in Singapore the business of supplying bunker fuel, commenced an action in rem against the appellants in their capacity as the owners of 85 vessels, including the three named above. At the time the Iran Amanat was in the Port of Geelong, Victoria. The writ claimed the arrest of the Iran Amanat. The vessel was arrested at Geelong.

The writ claimed judgment in the sum of US$150,399 together with security, damages, interest and costs. The particulars of claim were expressed as follows:

The Plaintiff's claim is for the sum of US$132,751.08 for goods and/or materials supplied to the Defendants' ship "Iran Chamran" for her operation or maintenance at the Port of Singapore, during the month of April 1996 at the request of the Defendants, their servants or agents and for goods, and/or materials supplied to the Defendants' ship "Iran Adl" for her operation or maintenance at the Port of Singapore, during the month of May 1996, at the request of the Defendants, their servants or agents [together with interest].

There is no dispute that bunker fuel was supplied to the Iran Chamran and the Iran Adl by the respondent in April and May 1996, and there is no issue as to the price, quantity or quality of the fuel supplied. Nor is there any dispute that the Iran Chamran, the Iran Adl and the Iran Amanat were, at all material times, including the times referred to in ss 17 and 19 of the Act, owned by the appellants. If the case proceeds to a final hearing, the issue will be whether the appellants are liable to pay for the fuel supplied by the respondent. Evidence led at the hearing on jurisdiction before Tamberlin J satisfied him that, at the time of the supply of the bunker fuel in Singapore, the Iran Chamran and the Iran Adl were on time charter to a company named Hoverton Investment Ltd, that the terms of the time charter obliged the charterer to provide and pay for all fuel, and that, although the invoices for the fuel were addressed, respectively, to each vessel and/or the master, owner/operators, followed by references to other companies, the appellants conferred no authority on the charterer or anyone else to contract with the respondent on their behalf, were not parties to the contracts for the supply of fuel, and were not obliged on any other basis to pay for the fuel. There is an issue as to the correctness of those findings, which were made following an urgent hearing seeking the release of the Iran Amanat for want of jurisdiction, partly on the basis of hearsay evidence, and without the benefit of discovery or any other interlocutory process. However, the Full Court, which concluded that Tamberlin J had erred in his approach to the question of jurisdiction, considered it unnecessary and inappropriate to express a view on that issue, which remains to be determined at a final hearing.

There was no application to Tamberlin J for summary dismissal of the proceedings on the ground that they were frivolous or vexatious or disclosed no reasonable cause of action. The appellants' application for release of the vessel was based solely on the ground of want of jurisdiction.

Tamberlin J approached the matter upon the basis of the principle stated by this Court in Owners of the Ship Shin Kobe Maru v Empire Shipping Co Inc [2] as follows:

Where jurisdiction depends on particular facts or a particular state of affairs, a challenge to jurisdiction can only be resisted by establishing the facts on which it depends. And, of course, they must be established on the balance of probabilities in the light of all the evidence advanced in the proceedings held to determine whether there is jurisdiction. 1. (1994) 181 CLR 404 at 426.

In the light of that principle, his Honour said:

The short question for decision is whether the debts incurred in respect of the bunker fuel supplied by the plaintiff, on which the arrest application was based, were incurred by the owner.

Having made the findings of fact set out above, Tamberlin J answered that question in the negative, resolved the jurisdictional issue in favour of the appellants, and ordered the release of the ship. The Full Court considered that Tamberlin J asked himself the wrong question. In order to explain why that view was taken it is necessary to refer to the relevant statutory provisions.

Part II of the Act confers jurisdiction on the Federal Court, and invests State courts with federal jurisdiction, in respect of proceedings commenced as actions in personam on a maritime claim or on a claim for damage done to a ship (s 9), and in respect of proceedings that may, under the Act, be commenced as actions in rem (s 10).

Part III of the Act deals with rights to proceed in Admiralty. It includes ss 17 and 19 which are in the following terms [3] :

17. Where, in relation to a general maritime claim concerning a ship or other property, a relevant person:

(a) was, when the cause of action arose, the owner or charterer of, or in possession or control of, the ship or property; and

(b) is, when the proceeding is commenced, the owner of the ship or property;

a proceeding on the claim may be commenced as an action in rem against the ship or property.

19. A proceeding on a general maritime claim concerning a ship may be commenced as an action in rem against some other ship if:

(a) a relevant person in relation to the claim was, when the cause of action arose, the owner or charterer of, or in possession or control of, the first-mentioned ship; and

(b) that person is, when the proceeding is commenced, the owner of the second-mentioned ship.

1. As to the interrelation between ss 17 and 19, see Laemthong International Lines Co Ltd v BPS Shipping Ltd (1997) 190 CLR 181

There being no dispute as to the appellants' ownership at the times referred to in pars (a) and (b) of the two vessels to which the respondent supplied fuel, and of the vessel which had been arrested, the issue which arose as to the application of s 19 was not materially different from the issue which would have arisen if the fuel had been supplied to the Iran Amanat, the other features of the case being unchanged, and if s 17 had been invoked as the basis of jurisdiction. Conversely, if either the Iran Chamran or the Iran Adl had been arrested, the same issue would have arisen. The circumstance that the arrest was of a surrogate ship was the occasion, but not the point, of the controversy.

It was common ground that the respondent's claim was a general maritime claim as that expression is defined in s 4 of the Act. It was a claim in respect of goods, materials or services supplied to a ship for its operation or maintenance (s 4(3)(m)).

The focal point of the argument was whether the appellants satisfied the description of "a relevant person". Section 3(1) contains the following definition:

"relevant person", in relation to a maritime claim, means a person who would be liable on the claim in a proceeding commenced as an action in personam.

According to the Full Court, the question which Tamberlin J asked himself meant that he treated that definition as though the words "would be liable" meant "is liable" and, accordingly, decided, at an interlocutory hearing, the ultimate, and only, issue in the case: whether the owners were liable to pay for the fuel supplied to the two sister ships of the arrested vessel.

The legislative provisions set out above originated in a draft Bill attached to a 1986 Report of the Australian Law Reform Commission on Civil Admiralty Jurisdiction [4] . The language of the draft Bill originated in that of the Administration of Justice Act 1956 UK [5] . There is no doubt that the Parliament followed the language of the English statute, which, by 1988, had been construed and applied in a number of cases. The earliest English authority on the meaning of the critical words, (a decision to which Tamberlin J was not referred by counsel), was The "St Elefterio" [6] , which was decided in 1957.

1. Australian Law Reform Commission, Civil Admiralty Jurisdiction, Report No 33 (1986). 2. Subsequently contained in Supreme Court Act 1981 UK, s 21(4). 3. [1957] P 179.

16. The St Elefterio had carried a cargo on a voyage to Liverpool. The plaintiffs had bought the cargo from the shippers and later resold it. The ultimate purchasers rejected the goods on the ground that they were not shipped on the dates specified in the bills of lading. The plaintiffs claimed damages against the owners of the vessel, alleging that the bills of lading were wrongly dated and that, in consequence, they had suffered loss. They commenced an action in rem against the owners, and arrested the vessel. The owners moved to set aside the writ in rem and the warrant of arrest on the basis that the court had no jurisdiction in rem to entertain the action. The main argument turned upon the construction of s 3(4) of the 1956 United Kingdom Act, which was the progenitor of ss 17 and 19 of the Act [7] . Counsel for the owners argued that, under s 3(4), the right to proceed in rem was only exercisable if there existed a liability in personam. He went on to raise various legal arguments as to why the owners of a vessel, in such a case, could not be made liable to persons in the position of the plaintiffs for issuing incorrect bills of lading.

1. Section 3(4) provided: "In the case of [a relevant claim], being a claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the Admiralty jurisdiction of the High Court may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against - (a) that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or (b) any other ship which, at the time when the action is brought, is beneficially owned as aforesaid."

17. Willmer J summarised [8] the owners' argument as being that, under s 3(4), a plaintiff could not arrest a ship "unless he can prove - and prove at the outset - that he has a cause of action sustainable in law". This argument was rejected. His Lordship said [9] :

In my judgment that proposition rests upon a misconception of the purpose and meaning of s 3(4). As it appears to me, that subsection, so far from being a restrictive provision, is a subsection introduced for the purpose of enlarging the Admiralty jurisdiction of the court. As I view it, its purpose is to confer, and to confer for the first time in England, the right to arrest either the ship in respect of which the cause of action is alleged to have arisen or any other ship in the same ownership. That is an entirely new right so far as the law of England is concerned, although it previously existed in other countries, including Scotland; and the reason for conferring that right now is for the purpose of bringing this country into line with other countries as a result of an international convention. In my judgment the purpose of the words "the person who would be liable on the claim in an action in personam" is to identify the person or persons whose ship or ships may be arrested in relation to this new right (if I may so express it) of arresting a sister ship. The words used, it will be observed, are "the person who would be liable" not "the person who is liable", and it seems to me, bearing in mind the purpose of the Act, that the natural construction of those quite simple words is that they mean the person who would be liable on the assumption that the action succeeds. This action might or might not succeed if it were brought in personam; that would depend upon the view which the court ultimately took of the various contentions raised by [counsel]. But clearly, if the action did succeed, the person or persons who would be liable would be the owner or owners of the steamship St Elefterio. In such circumstances, in the absence of any suggestion that the action is a frivolous or vexatious action, I am satisfied that the plaintiffs are entitled to bring it and to have it tried, and that, whether or not their claim turns out to be a good one, they are entitled to assert that claim by proceeding in rem. 1. The "St Elefterio" [1957] P 179 at 185. 2. The "St Elefterio" [1957] P 179 at 185-186.

18. At the time of the enactment of the Australian legislation in 1988, the views of Willmer J had been accepted in England as settling the construction of the corresponding English provisions [10] . In The "Moschanthy" [11] , Brandon J said the question of jurisdiction must "be answered by reference to the nature of the nature of the plaintiff's claim as put forward, without reference to the further point whether it is likely to succeed or not". His Lordship was there referring to the question whether a defendant is a "person who would be liable on the claim in an action in personam". In terms of ss 17 and 19 of the Act, the question is whether someone is a relevant person, a question which, by reason of the definition of relevant person, understood in the light of the decision in The "St Elefterio" , raises a question as to putative, not actual, liability. By contrast, as a number of decided cases illustrate, a challenge to jurisdiction may also require the resolution of factual issues as to ownership, which, in the context of the Australian legislation, go to whether pars (a) and (b) of s 17 or 19 are satisfied [12] . To adopt the language of McPherson A-CJ in Ocean Industries Pty Ltd v Owners of MV Steven C [13] , pars (a) and (b) are concerned with facts that may need to be established, whereas the liability to which the definition of "relevant person" refers is hypothetical. The difference between the conditional nature of the inquiry raised by the definition of "relevant person" and the unconditional nature of the inquiry raised by pars (a) and (b) is important.

1. See, eg, The "St Merriel" [1963] P 247 at 256-258; The "Moschanthy" [1971] 1 Lloyd's Rep 37. 2. [1971] 1 Lloyd's Rep 37 at 42. 3. See I Congreso del Partido [1978] 1 QB 500; The "Aventicum" [1978] 1 Lloyd's Rep 184; Baltic Shipping Co Ltd v Pegasus Lines SA [1996] 3 NZLR 641 Laemthong International Lines Co Ltd v BPS Shipping Ltd (1997) 190 CLR 181 4. [1994] 1 Qd R 69.

19. In some of the reported cases, the court has been dealing with two motions: one, a challenge to jurisdiction; the other, a claim to strike out proceedings on the ground that they were frivolous or vexatious. However, no motion of the second kind being before Tamberlin J, he was concerned only with the question of jurisdiction, a question which, in relation to whether the appellants were relevant persons, turned upon the nature of the claim, not its strength.

20. The Australian legislation having been enacted against the background of English legislation and authority set out above, the definition of "relevant person" should be understood as having the same meaning as the courts had given to the corresponding words in the English statute. When the Parliament has enacted legislation, affecting the subject of international shipping, and followed a statutory precedent from overseas which has by then received a settled construction, there is every reason to construe the statutory language in the same way in this country unless such construction is unreasonable or inapplicable to Australian circumstances. The Full Court of the Supreme Court of Queensland in Ocean Industries Pty Ltd v Owners of MV Steven C , applied the reasoning in The "St Elefterio" to the Australian legislation. It was correct to do so.

21. Counsel for the appellants sought to distinguish The "St Elefterio" . He argued that, in considering whether the appellants were relevant persons for the purpose of s 19, the question whether the owners of the vessels to which fuel was supplied were liable to pay for the fuel stood in a different category from any other issue of fact or law going to the merits of the respondent's claim. The circumstance that, in the present case, unlike The "St Elefterio" , there were no such other issues was accidental. That was how the jurisdictional issue came to be identical with the ultimate issue in the case, but, even so, it was argued, that issue had to be determined once a challenge to jurisdiction was made. The problem with such an argument is to identify a logical basis, consistent with the meaning of the definition of relevant person, for treating one aspect of a dispute as to potential liability in a proceeding commenced as an action in personam differently from another. In The "St Elefterio" , for example, an attempt was made, unsuccessfully, to distinguish between issues of fact and issues of law [14] . In the present case, the appellants dispute the allegation, made in the writ, that the bunker fuel was supplied at their request. The issue thus presented, as examined by Tamberlin J, raised questions of fact and law. On any view, however, it was an aspect of the nature of the respondent's claim that the fuel was ordered by or on behalf of the appellants, their servants or agents, and that the appellants are persons who would be liable on the claim in a proceeding commenced as an action in personam. It is not apparent why a dispute as to whether the appellants were parties to the contracts for the supply of fuel, involving questions of actual or apparent authority, and evidence as to the conduct of those who arranged the supplies, is in a different category from a dispute, (if there were a dispute), as to whether any fuel was in fact supplied, or any other dispute concerning the alleged liability of the appellants to pay for the fuel.

22. It was submitted that the decision of the Full Court was inconsistent with the decision of this Court in Shell Oil Co v The Ship Lastrigoni [15] . In that case, (which was not decided under the Act), necessaries (bunkers) were supplied to a ship under time charter. An action in rem was commenced. On a challenge to jurisdiction, Menzies J set aside the writ and the arrest of the vessel. It is important to note the issues that arose for consideration. The plaintiff claimed a maritime lien as the basis of its right to proceed in rem. However, it was common ground that the owner was not a party to the contract for the supply of fuel. The assertion of a maritime lien was based on two grounds. The first was that the existing authorities established that a supply of fuel to a ship of itself created a maritime lien which could be enforced by an action in rem. The second was that this was the effect of a certain statutory provision. Both of those propositions were rejected by Menzies J, who observed in his judgment [16] that proceedings "in Admiralty are intended to facilitate the enforcement of liabilities, not to allow pressure to be put upon a person who is himself under no liability in respect of the liabilities of others". The issues which arose for consideration were significantly different from those in the present case.

1. (1974) 131 CLR 1. 2. Shell Oil Co (1974) 131 CLR 1 at 6.

23. The decision of the Full Court of the Federal Court was correct. The appeal should be dismissed with costs.