Sirius Shipping Corporation v The Ship Sunrise [2006] NSWSC 1393 | Case summary

6/2003 - SIRIUS SHIPPING CORPORATION v THE SHIP SUNRISE JUDGMENT 1 HIS HONOUR: There is an unwritten legal maxim of great validity that when something goes procedurally wrong in a case, problems will continue to occur. The present is an illustration of the truth of that maxim. 2 In March of this year, I heard a dispute as to which of the parties had the better title to the Ship Sunrise. I found in favour of the Second Relevant Person, Capital Finance Australia Ltd (to which I will refer as "Capital"). 3 The other parties to the proceedings were the plaintiff, Sirius Shipping Corporation, a Vanuatu Corporation, ("the Plaintiff"), Richard Evans ("Evans"), the First Relevant Person and Hunt Pacific Finance Pty Ltd ("the Broker"), the Third Relevant Person. 4 I gave judgment on 10 May 2006 ([2006] NSWSC 398). 5 I must note the pleadings. The Plaintiff claimed ownership of the Ship. It issued its writ on 26 September 2003 and its statement of claim on 7 November 2003. The statement of claim named the Ship as defendant and pleaded that Evans and Capital also claimed the Ship and that Capital had possession of it. 6 Evans did not appear and took no part in the hearing. 7 On 17 February 2004, Capital filed the first cross claim which was against the Plaintiff claiming the Ship with a back up claim. This was amended on 28 September 2004 to add a claim against Evans for damages for breach of a purchase agreement between himself and Capital and also a claim against the Broker for indemnity under the "Introducer Agreement" between Capital and the Broker. 8 Paragraphs 20 and 21 of the first amended cross claim read as follows: "20. Clause 4.1(k) of the Introducer Agreement provided that Hunt Pacific warranted in respect of each Proposal that if the Finance Contract is a lease or some other facility which requires Capital to buy goods from some other person, Capital will acquire absolute property in the goods free from all competing interests as soon as it pays for them … . 21. Clause 5.1 of the Introducer Agreement provided that Hunt Pacific indemnifies Capital against all loss, damage, liabilities, costs, charges, taxes and expenses (including legal expenses on a full indemnity basis) of whatever kind or nature suffered or incurred by Capital which arise directly or indirectly from, or in respect of: (a) any failure by Hunt Pacific to observe its obligation under this agreement; (b) any warranty given by the Introducer in this agreement being untrue or misleading; and (c) any statement, act or omission of Hunt Pacific, its employees or agents." 9 Paragraph 25 of the first amended cross claim read as follows: "If it is found that Capital has not acquired absolute property in the Vessel and the Invoice is not authentic, then Hunt Pacific's warranty referred to in paragraph 20 was untrue and misleading and has been breached." 10 A second cross claim was filed on 6 January 2005, the cross claimant being the Broker and the cross defendants, the Plaintiff and Evans. Essentially, the cross claim sought relief under the Trade Practices Act 1974 (Cth) or Fair Trading Act 1987 in respect of any loss the Broker may suffer because of its liability to Capital. 11 The case commenced before me on 13 March 2006. Mr I H Wallach of counsel appeared for the Plaintiff, Mr P T Russell of counsel for Capital and Mr J M White for the Broker. 12 In accordance with the directions of the Admiralty List Judge, each of the barristers just mentioned filed a skeleton argument. I will only mention those parts of the skeleton arguments that are relevant to the present problem. 13 Mr Russell's document of 9 March 2006 put that: "15. In the event that the Invoice is not authentic and Capital Finance does not acquire absolute property in the Sunrise free from all competing interests as soon as it paid for them, then Capital Finance contends that [the broker is liable]. 16. Accordingly, Capital Finance contends that [the Broker] … is liable to indemnify Capital Finance in accordance with clause 5.1 … in respect of … ." 14 There then followed five heads of damage including the costs and expenses of these proceedings and the costs of repossession. However between each head of damage were the words "and/or". 15 The five heads were substantially revised in Mr Russell's written submissions of 16 March 2006 which stated them to be: (1) The moneys owing by Evans of $799,995.26; (2) The payment of $600,000; (3) Loss on sale; (4) Costs and expenses of repossession; (5) Costs and expenses of these proceedings on the indemnity basis. 16 Mr Russell's statement of issues included as No 8, "Is Capital Finance entitled to an order for damages pursuant to clause 5.1 of the Introducer Agreement or otherwise?" 17 Mr White's document in paragraph 59 read: "In the event that Sirius is found to have validly retained title to the Sunrise and is not otherwise postponed to Capital's interest in it, the question of Hunt Pacific's potential liability to Capital then becomes relevant." 18 Mr White than went on to deal with the quantum of damages claimed and submitted that at the worst, the Broker's liability was created by Capital failing to acquire good title to the Ship. In any event, the claim for damages was flawed in transforming an obligation to ensure good title into a guarantee of the value of the asset. Furthermore, the costs of repossession etc had nothing to do with title. 19 In the light of normal practice and because the parties had filed skeleton arguments, there were no opening addresses. 20 At the hearing, the Broker applied to withdraw an admission and amend its defence to the first cross claim because there was an argument that the wrong company in the Capital group had sued. There was fierce opposition from Mr Russell, mainly based on the ground that he may have to obtain further evidence. I allowed the withdrawal of the admission and the amendment. I gave reasons for this in [2006] NSWSC 164. 21 In my reasons at [4] I said: "There is no problem, I would have thought, with proceeding with this case as far as I can and then granting an appropriate adjournment for these matters to be properly considered and any further evidence filed." 22 I mention this because there was filed an affidavit sworn 29 September 2006, by a solicitor instructing Mr Russell that she was in court on 15 March and it is her recollection and belief that because of the leave granted to the Broker to amend its defence, the cross claim against the broker would not be determined until after judgment had been given on the issues between Capital and the Plaintiff and further argument had been heard. 23 This affidavit is odd because: (1) it is contrary to my reasons of 15 March 2006 which were delivered to the parties on 20 March by my Associate; (2) it ignores the fact that in his supplementary submissions of 16 March, Mr Russell actually made submissions on this part of the cross claim; and (3) the solicitor made no protest that the case had been dealt with otherwise than in accordance with her recollection for five months. 24 There were closing addresses. No transcript was taken, but my detailed notes record that Mr Russell addressed from 12.28 pm to 2.53 pm (with an hour's break for lunch). He then applied to supplement his submissions in writing, which leave was granted. My notes of Mr Russell's submissions do not record any submissions on the cross claim. The focus of the submissions, as one would expect, was on the ownership of the Ship and the authenticity of a vital invoice. 25 Mr White also did not mention the cross claim as far as I can see. 26 Mr Russell supplemented his submissions in writing given to me on 16 March 2006. 27 Paragraph 61 of those submissions read: "In the event that the Invoice is not authentic and Capital Finance does not acquire absolute property in the Sunrise … then Capital Finance contends that … ." 28 However, paragraphs 63-4 could be read as making a claim for indemnity for the damages previously noted on a wider basis. 29 As far as I can see, Mr Russell never addressed Mr White's submissions noted above that the claim for damages was in any event flawed. 30 In my reasons of 10 May 2006 I found that the Invoice referred to above was not authentic, but that Capital was still entitled to the Ship. 31 Paragraph 125 of my reasons read, relevantly, as follows: "In view of my findings and analysis, it is unnecessary to deal with questions of … any liability of Hunt Pacific obliged to indemnify Capital Finance for not obtaining good title." 32 It is clear that I was of the view in May that based on the way the case was pleaded and conducted, it was only if Hunt Pacific's conduct was misleading and Capital did not acquire title that the claim on the warranty was relevant. This view was reinforced by the style of the submissions by Capital's counsel in prefacing the matter dealing with the cross claim for indemnity in words such as "in the event that Capital does not acquire title then …". 33 The judgment was delivered on Wednesday, 10 May 2006. I left for overseas the following Saturday, 13 May, and did not return to the Court until 31 July. My note of 10 May is that Mr Russell took the judgment on behalf of Capital and I made orders in accordance with paragraph 126 of the reasons which I set out below. No-one made any protest to me before I left the court on Friday 12 May. 34 Paragraph 126 of the reasons was as follows: "The claim by Sirius must be dismissed and a declaration made on the first cross claim in accordance with prayers (a) and (b) that Capital Finance is the owner of the Sunrise and for encumbrances to be removed. The second cross claim is dismissed as being otiose." 35 I am told that there were discussions between the parties affected between 15 May and 6 June with a view to avoiding any further involvement of the court, though I am not told the content of those discussions. 36 The court file shows that on 7 June, the solicitors for the Broker asked the court to relist the proceedings for determination of the question of costs. The court advised that I would not be returning to the court until the end of July. 37 A holding appeal was filed by the Plaintiff on 7 June 2006. I am not aware as to the current status of any appeal process. 38 The first I became aware that there was any problem with respect to my dealing with the first cross claim was in August 2006. 39 I gave reasons on 1 September 2006 ([2006] NSWSC 905) allowing the Ship to be sold. In the course of those reasons I noted that under the Uniform Civil Procedure Rules 2005, Part 36 rule 11, as the Associate's Record of my decision was entered on the court's computer the orders must be taken to have been entered on the date shown on the computer, that is, 11 May 2006. 40 This meant that the second cross claim was formally dismissed as otiose on 11 May. 41 Capital filed a notice of motion on 12 September 2006 seeking the following orders (omitting those subsequently abandoned): 1. To the extent so required, leave be granted to the Second Relevant Person to prosecute the Second Relevant Person's Amended Cross Claim dated 28 September 2004 and for it to be determined as follows: a. the Third Cross Defendant pay the Second Relevant Person's costs and expenses of, and associated with, the repossession of the vessel; b. The Third Cross Defendant pay the Second Relevant Person's costs of these proceedings. 2. To the extent so required, leave be granted to the Second Relevant Person to reopen its case and adduce further evidence in relation to those matters in 1 above. 42 The motion came on for hearing before me on 6 October, 2006. It is clear that of the five heads of "damage" in the first cross claim, the only ones being pursued were the last two, viz, costs of repossession and costs of these proceedings. 43 In his submissions, Mr Russell put that I had just not dealt with these matters in my judgment thus, he submitted, there was no judgment on the issues and they could now be raised. 44 However, the order of the court was recorded under the new Rules that the second cross claim was dismissed as otiose. No recording was made as to the fate of the first cross claim as amended other than the determination of the claim as between Capital and Sirius. 45 I must confess that I did not take the view that there was any postponement of the issues between Capital and the Broker. I also took the view that the issues between those lastmentioned parties only arose if I did not find that Capital had good title to the Ship. The wording of the written submissions indeed reinforces those views. 46 It follows that what was entered includes a determination that no order should be made on the cross claim between Capital and the Broker. 47 The lawyers for Capital now say that their understanding was otherwise. I find it difficult to understand this, but, as I usually accept what lawyers tell me on this sort of issue, had the problem of the misunderstanding been drawn to my attention prior to entry of judgment, I would probably have allowed reopening. However, as soon as the judgment was entered on 11 May, as the second cross claim was dismissed, the situation changed. 48 I first thought that my departure for overseas may have affected the matter. However, the deemed entry of judgment on 11 May is the determinative date, so that my absence had no effect. In any event, an early application could have been made to whoever was the duty judge for a stay. 49 Capital then submits that it is appropriate to allow the case to be reopened in the light of what has occurred, whether because there was no actual judgment entered in respect of the part of the first cross claim between Capital and the Broker or in the inherent jurisdiction. 50 Once final judgment is entered, unless the court reserves a matter, the court becomes functus. One cannot say that the order entered was only to deal with part of the case. 51 The only matter reserved was the costs of the second cross claim. 52 Mr White submits that there is no basis for reopening the case and, indeed, it is impermissible to do so. Furthermore, as the second cross claim against Mr Evans has been dismissed, even if it were permissible to reopen the matter, that should not be done because of the prejudice that that would cause the Broker. 53 For the reasons set out above, I accept that submission. 54 Further, this is not a case for the application of the Slip Rule as, even though the lawyers for the Second Relevant Person might have been labouring under a delusion, no one else was. 55 Thus it is not necessary to deal with the submissions made by Mr Russell on the construction of the Introducer Agreement. 56 It is always a matter of regret that some mistake frustrates the decision of a point on the merits. However, the introduction of the automatic judgment rule and the delay in drawing the court's attention to a possible misunderstanding mean that I cannot reopen the case. 57 It may be that Capital can litigate the question of indemnity in a separate action, though estoppels may operate. It may be that Capital might seek leave to appeal out of time. I do not need to consider those matters. 58 It follows that the notice of motion must be dismissed with costs.

Sirius Shipping Corporation v The Ship Sunrise

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