Transfield ER Futures Limited v The Ship 'Giovanna Iuliano'

REASONS FOR JUDGMENT 1 This is a costs judgment. The Plaintiff accepts that it is obliged to pay the Second Defendant's costs of the proceedings. The dispute is about the basis on which the costs should be assessed. The Second Defendant seeks its costs on an indemnity basis. The Plaintiff contends that costs should be payable on the usual party and party basis. 2 On 22 May 2012, the substantive issue in the proceeding was heard and determined. On 28 May 2012, reasons for judgment were published: Transfield ER Futures Limited v The Ship 'Giovanna Iuliano' [2012] FCA 548. In general terms, the Court held that the plaintiff had failed to properly invoke the Court's in rem jurisdiction under the Admiralty Act 1988 (Cth) (the Act) and the arrest of the Ship 'Giovanna Iuliano' (the Ship) was not justified. The Writ and Arrest Warrant were set aside and the Ship was released from arrest forthwith. 3 The Second Defendant submitted that the following facts and matters justified its costs being assessed on an indemnity basis: 1. the Court concluded that the Plaintiff had failed properly invoke the Court's in rem jurisdiction under the Act and the arrest of the Ship was not justified; 2. the Plaintiff bore the onus of showing that its claim under the freight forward swap agreements (FFAs) was a claim connected to the Ship within s 4(3) of the Act (the Issue); 3. the Court concluded that there was no connection between the FFAs and the Ship; and 4. the Plaintiff could not refer to any decided any case law in Australia or the United Kingdom where a claim in relation to a FFA had founded jurisdiction for the arrest of a ship. In light of those facts and matters, the Second Defendant submitted that it was open to the Court to "presume" that the proceeding was commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or clearly established law. 4 The Second Defendant made a separate submission based on the fact that the Ship was arrested and that such an arrest constituted a fundamental interference with a person's right to their property. Put simply, the Second Defendant submitted that such a step should not be taken lightly and, because s 34(1)(a)(ii) of the Act provides for an award of damages arising out of an arrest of a ship where that person acts unreasonably and without good cause, the Court's discretion as to costs should be exercised to ensure the owner is fully indemnified for its costs: cf Nautilus Australia Ltd v The Ship 'Rossel Current' (Unreported, QSC, Ambrose J, 26 March 1999, at [9]). 5 The Plaintiff did not agree. It accepted that the nature and effect of a FFA in the context of an arrest of a ship had not been the subject of any decided any case law in Australia or the United Kingdom. However, the Plaintiff relied upon the fact that during the course of the substantive hearing, Counsel for the Second Defendant had, in my view, properly, told the Court that the Issue was contentious around the world and needed to be settled, at least amongst practitioners. 6 In the circumstances of this case, the Plaintiff should pay the Second Defendant's costs of the proceeding on a party and party basis, such costs to be taxed in default of agreement. The circumstances of this case are distinguishable from that considered by Ambrose J in Nautilus. The Issue was contentious and not the subject of any binding or persuasive authority. Unlike the position in Nautilus, there were no other facts or matters which supported costs being ordered to be paid on an indemnity basis. I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.