Navios International Inc v The Ship HUANG SHAN HAI

JUDGE: RARES J DATE OF ORDER: 27 JULY 2011 WHERE MADE: SYDNEY

1. Further steps as otherwise required by the Admiralty Rules are stood-over until 3 February 2012, or such earlier date as the Court might fix, when the matter is to be relisted for directions Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY GENERAL DIVISION NSD 1150 of 2011

JUDGE: RARES J DATE OF ORDER: 27 JULY 2011 WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. Further steps as otherwise required by the Admiralty Rules are stood-over until 3 February 2012, or such earlier date as the Court might fix, when the matter is to be relisted for directions. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY GENERAL DIVISION NSD 1151 of 2011

JUDGE: RARES J DATE OF ORDER: 27 JULY 2011 WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. Further steps as otherwise required by the Admiralty Rules are stood-over until 3 February 2012, or such earlier date as the Court might fix, when the matter is to be relisted for directions. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY GENERAL DIVISION NSD 1148 of 2011

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY GENERAL DIVISION NSD 1149 of 2011

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY GENERAL DIVISION NSD 1150 of 2011

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY GENERAL DIVISION NSD 1151 of 2011

JUDGE: RARES J DATE: 27 JULY 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 Cosco Bulk Carrier Co Limited is the owner of the ship Huang Shan Hai. It seeks to post bail to secure her release from arrest. This dispute involves two issues. The first issue concerns the sufficiency of two sureties who have executed bail bonds as security to obtain the release. The second issue is whether Cosco, a Chinese corporation, carrying on business in Hebei, should be entitled to an order under r 54(2) of the Admiralty Rules 1988 (Cth) that bail can be given by filing a bail bond signed by only one surety rather than two. These four proceedings were commenced on 13 July 2011 by related plaintiffs. Navios International Incorporated applied for the arrest of the ship. Its related companies, Customised Development SA, Hyperion Enterprise Inc and Orbiter Shipping Corporation filed caveats against release of the vessel. Each of the plaintiffs had chartered vessels to Cosco. 2 Huang Shan Hai was arrested by the Marshal in Geraldton, Western Australia, on 14 July 2011. Cosco immediately entered notices of appearance in each of the four proceedings. On the next day, by consent, I granted the Marshal permission to permit the ship to load a cargo of 59,056 WMT of iron ore lump, as she had been intended to do. She remains at anchor at Geraldton. Since the arrest, the parties have engaged in negotiations with a view to arriving at satisfactory arrangements for the release of the vessel so that she could sail with her cargo of iron ore. 3 Because these negotiations dragged on, I caused the matter to be listed before me on 22 July. That was done with a view to crystallising the dispute and resolving what may be necessary either to break the impasse or to make other arrangements for what was to happen to the ship, in the event that no relevant arrangements could be entered into.

The underlying dispute 4 Each plaintiff has commenced arbitration proceedings in London, under their respective charter party with Cosco, seeking to recover unpaid hire. The four writs were amended today to update the amounts sought by way of security. There is no dispute between the parties that the total unpaid hire under the four charter parties currently amounts to USD7,281,136.12. The plaintiffs claimed further security, in the event that the vessel were to be released, in addition to the amounts of charter hire currently due but unpaid, for USD1,019,359.06 in respect of interest at 5% for two and a half years compounded and USD500,000 in respect of legal costs for the conduct of the arbitrations in relation to the four sets of claims. The parties agree that these amounts total USD8,800,495.18. In addition, the plaintiffs estimated that the costs of the arrest up to today were AUD79,319. 5 Cosco has foreshadowed that, in its defence in the arbitration proceedings, it will assert that it was entitled to withhold hire payments. This is because it claims that it had recently become aware of a liability imposed on it to pay corporate income tax at the rate of 10% and business tax at the rate of 5% on charter party hire. It asserts that this liability arose because the plaintiffs owed, but had not paid, those taxes to authorities in the Republic of China under that country's law. No material has been adduced that reconciles the amounts retained by Cosco with what is said to be owing to the Chinese authorities. However, that is a matter that will be the subject of the arbitration.

The history of Cosco's attempts to provide security to obtain the ship's release 6 The substantial dispute between the parties that requires immediate resolution has been how Cosco can provide sufficient security in order to procure the release of the ship. 7 According to the evidence of its solicitor, Robert Springall, Cosco has made a number of attempts to approach financial institutions, including Australian trading banks, to make suitable arrangements to obtain the release of the ship from arrest. Ultimately, Cosco has proposed providing security from Bank of China Limited, a company incorporated in China and listed on the Shanghai and Hong Kong stock exchanges. When the matter was before me on 22 July, the plaintiffs indicated that they would object to any bail bond proffered by Bank of China as a surety under Pt VII of the Admiralty Rules 1988 (Cth). I then made directions that any objection to a bail bond be returnable before me today, on the basis that the parties anticipated that a bail bond would have been filed on that day.

The proffered bail bonds 8 It took longer than anticipated on 22 July for Cosco to put in place arrangements with Bank of China. Cosco was only able to procure bail bonds in each proceeding from the Bank late yesterday. Even then, a further problem emerged and later yesterday, Cosco served on the plaintiffs a re-executed bond signed by an officer of the Bank of China who had its authority to do so in its Sydney branch. Slightly earlier yesterday afternoon, Cosco served bail bonds from Au-sea Shipping Pty Limited in each proceeding. Late yesterday the plaintiffs served objections to each proposed bail bond given by Bank of China and Au-sea. 9 The bail bonds proffered by Bank of China and Au-sea are in identical amounts, but are offered separately, rather than as a joint and several bond, as contemplated by r 54. It is common ground that these bonds currently fall short of the total security to which the plaintiffs are entitled as at today by USD26,562. Cosco has offered an undertaking by Mr Springall to the Court, to make up each shortfall in the event that I were otherwise to permit Cosco to file one or both sets of bonds, so as to obtain the release of the ship. It is also common ground that, for the moment, Mr Springall's undertaking will be sufficient security for the outstanding sum.

The scheme for bail in Pt VII of the Admiralty Rules 1988 10 Part VII of the Rules provides for the granting of bail so as to secure a plaintiff adequately for the value of its claim. Rule 54 provides that bail must be given by filing a bail bond in accordance with Form 20 and unless the Court or Registrar otherwise orders, the bond must be signed by two sureties (r 54(2)). A party on whose behalf bail is to be given must serve a notice of the bail and a copy of the bond on each other party to the proceedings (r 55). Thereafter, a party served with a notice of bail has 24 hours to file a notice of objection against the sufficiency of the proposed surety in accordance with Form 22. Ordinarily, the Registrar determines whether the proposed surety is sufficient. However, in this matter, I ordered, with the encouragement of the parties, that any issue as to sufficiency be returned before me because of the importance of securing, if possible, the release of the fully laden ship as soon as possible, or otherwise making orders as to what was to happen to her. 11 Under r 56(3A) and (3B) the proposed surety must file and serve on each other party to the proceeding an affidavit regarding its financial circumstances that sets out its current and non-current assets, actual and contingent liabilities, as well as any current proceedings in which the proposed surety is a party. The affidavit must state whether in the five years before its date the proposed surety has been the subject of any demand under a law relating to bankruptcy or insolvency, or has been made bankrupt, placed in administration or receivership or has been the subject of bankruptcy or winding up proceedings or of a garnishee order. 12 The Rules give the Registrar power to direct the proposed surety to file and serve a supplementary affidavit setting out additional information regarding its financial circumstances or any other circumstances relating to its sufficiency, as the Registrar considers appropriate (r 56(3C)). A proposed surety who has been served with a notice of hearing of the objection under r 56(3) must attend at the Court on the hearing date and thereafter, from day to day, unless the Registrar excuses that person (r 56(4)). 13 Within seven days after any material adverse change occurs in relation to a matter or circumstance mentioned in an affidavit filed under r 56, the proposed surety must file and serve on each other party to the proceeding another affidavit setting out the changed details in relation to the matter (r 56(4B)). 14 If the Registrar determines that the proposed surety is sufficient, then, unless the Court otherwise orders, the costs of or incidental to the objection must be paid by the party objecting (r 56(5)). A bail bond cannot be filed before the end of 24 hours after notice of bail has been served under r 55 (r 57(1)). If an objection is filed during the 24 hour notice period, the bond must not be filed until the Registrar has determined that the proposed surety is sufficient (r 57(2)). A surety is bound by a bail bond from the time when the bond is filed (r 58). The Court may vary or reduce the amount of bail filed (r 59). The costs of and incidental to obtaining bail are taken to be costs in the proceedings (r 60). 15 The prescribed form of bail bond (Form 20) states that the surety submits to the jurisdiction of the Court and consents to execution being issued against the surety for a sum not exceeding the amount for which bail is posted if the defendant does not satisfy any judgment in the proceeding.

Principles for fixing the amount of bail or security 16 The usual practice of Courts of Admiralty is that a ship that has been arrested will only be released on the provision of sufficient security to cover the amount of the claim plus interest and costs. That quantum is calculated on the basis of the plaintiff's reasonably arguable best case. This is to ensure that a requirement to provide security does not work oppression on the ship and those interested in obtaining her release from arrest: The "Moschanthy" [1971] 1 Lloyd's Rep 37 at 44 per Brandon J; approved in The "Bazias 3" and The "Bazias 4" [1993] QB 673 at 682D-F per Lloyd LJ, with whom Ralph Gibson and Butler-Sloss LJJ agreed and in The "Gulf Venture" [1984] 2 Lloyd's Rep 445 at 449 per Sheen J. Sheppard J followed that principle in relation to fixing the quantum of security to obtain release of a ship under r 52 in Freshpac Machinery Pty Limited v Ship "Joana Bonita" (1994) 125 ALR 683 at 686-687. He referred to the discussion of the principles in the report of the Australian Law Reform Commission, Civil Admiralty Jurisdiction, (ALRC 33) at [300]; see also Owners of the Ship "Carina" v Owners or Demise Charterers of Ship "MSC Samia" (1997) 78 FCR 404 at 409-411 per Tamberlin J.

The adequacy of the affidavit under r 56(3A) made on information and belief 17 Cosco relied on affidavits by Mr Springall as to the matters required to be verified by affidavit under r 56(3A). Initially, the plaintiffs argued that an affidavit on information and belief by a solicitor could not satisfy the requirements in r 56(3A). This was because that rule required, so they contended, the proposed surety itself to file and serve the affidavit and did not permit the deponent to be someone, such as a solicitor or third party, different from the surety. 18 I reject that argument. The rules contemplate, because of the use of the pronoun "its" in r 56(3A) itself, and the express terms of r 54(4), that a surety can be a corporation. Because it is a legal construct, a corporation cannot swear or affirm an affidavit. An affidavit can only be sworn or affirmed by an individual. It follows that the precise identity of the deponent of an affidavit required under r 56(3A) cannot be discerned from the words of the rule itself. Nor does the requirement for a proposed surety, who has been served with a notice of hearing of an objection, to attend at the Court unless excused, indicate that, for the purposes of r 56(3A), the affidavit itself must be sworn or affirmed by an officer of the corporation or any particular individual. However, the identity of the deponent of such an affidavit may affect the weight that the Court will give to evidence as to a surety's financial circumstances. 19 The plaintiffs also argued that I should exercise the power under r 56(3C) of my own motion to require each of Bank of China and Au-sea to file further affidavits. That rule gives the Registrar power to direct a proposed surety to file and serve a supplementary affidavit. 20 In my opinion, the power under r 56(3C) ordinarily will be exercised only after a party seeks that the Registrar make an order that further information be given by way of a supplementary affidavit. In the usual course, this power would not be exercised on the Registrar's (or the Court's) own motion. If the evidence were not sufficient to satisfy the Registrar or the Court that the surety was sufficient for the purposes of allowing the bail bond to be filed, then the objection would be upheld. In consequence, the defendant would not obtain the release of its ship. I am not prepared to make an order under r 56(3C) in the absence of an application by the plaintiffs that I do so. I do not regard the existence of the power to make such an order as a reason not to accept the evidence of Mr Springall. 21 The hearsay rule does not apply to the evidence in an interlocutory proceeding if the party who adduces it also adduces evidence of its source, as Mr Springall did: s 75 of the Evidence Act 1995 (Cth). Officers from both Bank of China and Au-sea were present in Court today. The defendant offered to call them to give oral evidence to verify what Mr Springall had said as to those companies' respective financial positions in his affidavits on information and belief. The plaintiffs did not seek to avail themselves of that opportunity. For these reasons, I am of opinion that it was open to Cosco to rely upon Mr Springall's affidavits for the purposes of r 56(3A).

The financial position of Bank of China 22 Bank of China's audited accounts for the year ended 31 December 2010, prepared in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance, reveals its total equity position as being RMB676,150,000,000, or approximately USD104,850,000,000. 23 The Bank has been registered as a foreign company in Australia since 19 August 1985. Its Australian registered office is located in Sydney. Bank of China is a foreign authorised deposit-taking institution licensed to accept deposits in Australia in accordance with the requirements of the Australian Prudential Regulation Authority and the Banking Act 1959 (Cth). Section 11F of the Banking Act provides that if a foreign authorised deposit-taking institution, whether in or outside Australia, suspends payment or becomes unable to meet its obligations, its assets in Australia are to be available to meet its liabilities in Australia in priority over all other liabilities of the institution. 24 The Bank has assets in Australia that considerably exceed the amount of approximately USD8.8 million claimed as security by the plaintiffs. It owns a large number of real properties in Australia that are unencumbered, including two office blocks in the central business district of Sydney as well as more than 15 residential apartments and houses in Sydney used by the Bank's employees. One of its properties is an eleven floor office block in York Street, Sydney, previously managed by Rowan Ramsey of CB Richard Ellis Pty Limited, a real estate agent specialising in the sale of property in Sydney's commercial central business district. That block has approximately 4,500 square metres of office space. Mr Ramsey estimates it to be worth between AUD27 and 31.5 million based on the value per square metre of that office space. 25 The Bank is currently a party to one set of proceedings in this Court. There is no evidence to suggest that those proceedings would cause any material impact on its financial position. Mr Springall's evidence has satisfied me of the other matters required to be addressed by r 56(3B) in relation to Bank of China.

The financial position of Au-sea 26 Au-sea was incorporated in Australia in 1999. Mr Springall also gave evidence as to Au-sea's financial position, saying that it had a registered office in St Kilda Road, Melbourne. He annexed to his affidavit a set of unsigned and unaudited management accounts for the year ending 30 June 2010. The management accounts showed that Au-sea's net income for the year ended 30 June 2010 was $84,360. It appears to have had some brokerage business together with some other income being derived by way of interest. The balance sheet reveals that a trust had some role in Au-sea's affairs because they disclose trust distributions receivable. Its net assets appear to have been $912,188. Significantly, there is no current evidence as to what has happened in relation to Au-sea's assets and liabilities in the 13 months since the unsigned management accounts were prepared. Nor has Au-sea made any disclosure as to what, if any, role the trust referred to in those accounts plays in its overall business. 27 No information was provided in Mr Springall's affidavit or otherwise about what Au-sea's business or its current financial position is other than in respect of the matters required under r 56(3B)(b), (c) and (d). An officer of Au-sea, Lisa Taotao, told Mr Springall that it was not currently party to any legal proceedings, and had not in the previous five years been the subject of any demand under a law relating to bankruptcy or insolvency, or been made bankrupt, placed in administration or receivership, or been the subject of bankruptcy or winding-up proceedings or of a garnishee order.

Cosco's application to dispense with the requirement for two sureties 28 The parties' central arguments turned on the sufficiency of Bank of China being the sole surety in circumstances where two bail bonds were proferred separately, rather than as a joint and several bond, each bond being signed by only one surety. During the hearing, Cosco conceded that it had no basis to suggest that Au-sea would be a sufficient surety by itself for the purposes of posting bail to secure the release of Huang Shan Hai. It argued that it had included Au-sea for the purposes of providing a second surety so as to satisfy r 54(2). However, until pressed by me, Cosco had not applied for dispensation from the requirement in r 54(2) that a bail bond be signed by two sureties so that it could rely solely on the bail proposed to be posted by Bank of China. 29 The plaintiffs did not contend that the Bank was uncreditworthy. Rather, they argued that there may be difficulties in enforcing the consent to execution being issued against it, given by the Bank in the bail bond itself. This was because, so the plaintiffs argued, first, the Bank might raise issues in relation to the application of foreign law in enforcing its obligation to make payment under the bond, secondly, there might be uncertainty about the authority, under foreign law, of any agent who signed the bail bond on behalf of the Bank and, thirdly, uncertainties might arise if the Bank ceases to carry on business in this country while the arbitration proceedings are pending and before any award is made. A faint suggestion was made in the plaintiffs' written submissions, but not pressed in oral argument, that there may be uncertainties with regard to political or other pressures brought to bear on Bank of China in relation to the payment of its debts. 30 None of those arguments should be accepted. Bank of China is an authorised deposit-taking institution regulated by the Banking Act. Its assets in Australia will be available to meet its liabilities here in priority to all foreign and other demands made upon it, in the event that it defaults in paying its debts in this country or anywhere else: s 11F of the Banking Act. If the bail bond is accepted, Bank of China will have consented to execution being made against it in respect of any judgment in these proceedings. Such a judgment would include one enforcing any arbitration award. I am of opinion that by giving the consents in the bail bonds, the Bank will have provided a sufficient and satisfactory promise to justify it being allowed to stand as sole surety. There is no evidence or other reason to think that the Bank will not pay its debts under any judgment given or enforced by this Court, or that it does not, or will not have, sufficient assets in this country to meet those obligations. No suggestion was advanced, nor on the evidence could it be made, that the Bank would, for some reason, take a course of evading its obligations under the bail bonds. I am satisfied that Bank of China has sufficient assets in this country, and generally, to honour its consents to execution against it in the event that the plaintiffs, or any of them, secure judgment in the future in the amounts of any of the bonds or some lesser amount. 31 The plaintiffs also argued that questions had been raised in other jurisdictions about courts accepting the sufficiency of security posted by foreign corporations. They referred to an article by Paul Matthews: Releasing ships from arrest [1983] LMCLQ 99, particularly at 100-101, that referred to an apparently unreported decision of Staughton J in the Commercial Court of England and Wales in the Saudi Star. The author noted that his Lordship had found that a guarantee from an American insurance company was a satisfactory bail and that it was no objection that the surety was a foreign corporation. The author of the note appears to have considered his Lordship's reasoning to be unsatisfactory. 32 I reject this argument. Admiralty Courts are often satisfied that it is appropriate to accept letters of undertaking or other security from protection and indemnity (P&I) clubs as well as from insurance companies to secure the release of ships. The Courts do this regardless of the fact that these clubs or companies are frequently foreigners in the jurisdiction with little or no assets in the forum. International maritime trade and commerce could not be carried on if Admiralty Courts, with no better reason than the fact that a P&I Club or insurer was based in a foreign jurisdiction, rejected letters of undertaking that were proffered by them. Indeed, Mr Stewart, counsel for the plaintiffs, drew attention to this being the position in the Republic of South Africa, referring to the decision of Kruger J in The "Bow Neptun": Star Tankers AS v Methyl Company Ltd (2005) SCOSA B322 at B325 (Durban and Coast Local Division of the High Court of South Africa) who accepted a letter of undertaking from a P&I Club as adequate security, following a decision of that country's Supreme Court of Appeal in an earlier case, The "Merak S": Sea Melody Enterprises SA v Bulktrans (Europe) Corporation 2002 (4) SA 273 (SCA) at 279 [7]. 33 There is no reason to think that, having regard to the way international commerce is conducted today, a foreign bank such as Bank of China, is not capable of being found to be a sufficient surety in circumstances where it is regulated in the forum under statute, such as the Banking Act, and carries on business of a very substantial kind. 34 On the other hand, it is of some concern that Cosco proffered Au-sea as a surety at all, given the manifestly inadequate material which it provided as to its ability to make any substantial assets available to satisfy judgments that could total over USD8.8 million. On the most generous reading of the unaudited and unsigned management accounts that are over one year old, Au-sea had assets that were just over 10% of that sum. In my opinion, although Au-sea is not, on this material, a "man of straw", it is plainly not a sufficient surety. 35 During the course of argument I put to counsel for Cosco that the reality of its position was that it was seeking dispensation from the requirement that there be two sureties under r 54(2). He ultimately accepted that position. That being so, while the parties have both sought to take advantage of particular tactical points during the course of their dispute, in substance, this is an application for me to accept the sufficiency of Bank of China as a sole surety. The parties should not have had to engage in a sideshow in relation to Au-sea as it would always have been necessary for Cosco to satisfy either the Registrar or the Court that it was entitled to a dispensation from r 54(2) by accepting Bank of China as sole surety.

The policy of r 54(2) 36 Next, the plaintiffs argued that if the above suggested difficulties with Bank of China were not accepted as reasons why it ought not be found to be a sufficient surety, there was a real purpose in the requirement in r 54(2) for two sureties. They pointed to recent well known and significant failures of banks involved in international trade and commerce. They contended that the purpose of r 54(2) in requiring, unless the Court otherwise ordered, two sureties, was to offer a sufficient degree of financial support for the promise in a bail bond to meet any judgment in the future. 37 The argument concerning the policy of r 54(2) should not be gainsaid. In his article, Matthews suggested that Staughton J had held in relation to the guarantee of the American insurance company to the effect that ([1983] LMCLQ at 101): "… the court was entitled to say that the proposed surety was a satisfactory bail (there would have to be two of course), and it was no objection that a surety was a foreign corporation." (emphasis added) 38 An important purpose of the usual requirement in r 54(2) for two sureties to give a bail bond is the protection that this offers to a plaintiff. Once the arrested ship is released, the bail bond is the only security to which the plaintiff can resort to satisfy any judgment debt for its maritime claim. In the ordinary course, it is unlikely that if one surety is unable to meet the shipowner's liability to the plaintiff, the other surety will also default. The obvious rationale for the procedure in relation to an objection to bail in r 56 is to guard against the possibility that a proposed surety will not be able to pay the amount of the bond when it is due. The bail bond is given as a substitute for the res, or ship. 39 It follows that, if all sureties default under a bail bond in meeting a judgment debt, a successful plaintiff may find that it cannot recover its debt at all because it may not be able to re-arrest the ship. Whether or not it can will depend on the application of s 21(1) of the Admiralty Act 1988 (Cth) to the circumstances at the time of the attempt to re-arrest. That section provides that a ship or other property arrested in a proceeding on a maritime claim may not be re-arrested in the proceeding in relation to that claim unless the Court so orders: "… whether because default has been made in the performance of a guarantee or undertaking given to procure the release of the ship or property from the earlier arrest or for some other sufficient reason." 40 Thus, in deciding whether to dispense with the requirement for two sureties in r 54(2), the Court must consider the risk that the proposed sole surety will default if called upon to meet the bond, taking into account the development of modern commercial practice. There may be situations where a particular bank or other deposit-taking institution regulated under the Banking Act may not be a sufficient sole surety for a particular claim, but this is not such a case. 41 The use of bail bonds appears to have become obsolete in recent years as was noted by the learned authors of The Law and Practice of Admiralty Matters, Sarah C Derrington and James M Turner (Oxford University Press, 2006) at [7.16]; see too the report of the Australian Law Reform Commission , Civil Admiralty Jurisdiction, (ALRC 33) at [300] and MSC Samia 78 FCR at 409E-G per Tamberlin J. They all noted that the modern widespread use of P&I Club letters of undertaking, bank guarantees or letters of undertaking, cash paid into Court and other forms of private arrangements for the provision of security agreed between parties has, to a large extent, supplanted the practical utility of bail bonds. 42 I am of opinion that in matters of international trade and commerce the Admiralty Courts can and should, so far as is practicable and appropriate, utilise their existing powers to accommodate the needs and usages of modern trade and commerce. Here, as was accepted in argument, the sums involved in this dispute would have been secured without any question if a guarantee or bail bond had been issued by one of the four major Australian trading banks. There is no reason to think, on the evidence, and the plaintiffs did not suggest, that Bank of China was uncreditworthy in respect of the proposed bonds. Indeed, its audited net equity at 31 December 2010 of over USD100 billion, and its significant Australian assets, comfortably satisfy me that Bank of China should be permitted to post the bail bonds as sole surety.

Conclusion 43 I am satisfied that it is appropriate for Bank of China to be the sole surety for bail bonds in the sums proposed, as supplemented by Mr Spingall's undertaking. The reasons why I have come to this conclusion are as follows. First, the Bank is regulated under Australian law by the Australian Prudential Regulation Authority in respect of its Australian banking business, and has been registered here for over 25 years. Secondly, it is a significant financial institution with substantial unencumbered assets in this country. Its Australian assets will be available to satisfy any judgment pursuant to s 11F of the Banking Act in the event that it were to encounter financial difficulties, which, based on its most recent audited accounts, would be unlikely.

Costs 44 Cosco argued that each party had had a measure of success and that on this application each should bear its own costs. In my opinion, that is not appropriate. Cosco's real application must always have been, having regard to the deficiency of the evidence supporting Au-sea as a surety, that Bank of China be the sole surety and that the requirement of two sureties in r 54(2) be dispensed with. I will make orders that provide for Cosco to file, in each proceeding, a notice of motion reflecting its application for an order dispensing with the requirement for a second surety under r 54(2) and granting it leave to file the bail bond by Bank of China that is in evidence in each proceeding. 45 In the circumstances, Cosco should pay the costs of the objection to bail and its motion. First, the plaintiffs' objections succeeded to the extent that I have not accepted Au-sea as a surety; secondly, I have had to make an order under r 54(2) in favour of Cosco on its belated application. That application would have required it to apply to the Court. And, although I have not accepted the objections raised by the plaintiffs to Bank of China being the sole surety, the evidence necessary to satisfy me as to its sufficiency was necessary in any event. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.