Australia: Arrest of tug boats for unpaid costs of providing master and crew

In brief - Federal Court dismisses appeal in relation to three of four vessels

In the case of Ships "Hako Endeavour", "Hako Excel", "Hako Esteem" and "Hako Fortress" v Programmed Total Marine Services Pty Ltd [2013] FCAFC 21, the issues were: were the arrests of the tugs valid? Had the bareboat charter been terminated? To whom had the services been supplied? Was the claimant the creditor who was entitled to sue? Was it subrogated to the crew's maritime lien?

This was a decision of the Full Court of the Federal Court comprising Siopsis, Rares and Buchanan JJ.

Four writs each claim $1.2 million for provision of master and crew

Programmed Total Marine Services Pty Ltd (PTMS) arrested the four tugs identified in the title of the proceedings. Each had a different owner and each writ claimed approximately $1.2 million in respect of the costs of providing a master and crew pursuant to a deed between PTMS, Boskalis Australia Pty Ltd (Boskalis) and Hako Offshore Pte Limited (Hako Offshore).

PTMS asserted in the writs that, inter alia, Hako Offshore was the demise charterer of each ship and that PTMS had been subrogated to each master's and crew's maritime lien for their wages.

Primary judge refuses to set writs aside

At first instance the primary judge had refused, on the application of the owners, to set aside the writs. The arguments raised were:

  • in relation to the "Hako Fortress" the owner had withdrawn the vessel and terminated the demise charter with Hako Offshore before the commencement of the proceedings
  • Hako Offshore was not a demise charterer because it was not in possession and control of each ship as it did not employ the master and crew, who were employed by PTMS
  • the goods and services for which PTMS's claims were made were not supplied to the ships but were rather supplied to Hako Offshore
  • each debt on which PTMS relied for its claims was not owed to it but had been assigned under the deed to Boskalis
  • no maritime lien could be asserted by PTMS because it had engaged the masters and crew as its servants or agents and they, having been paid under their contracts with PTMS, had no lien for their wages

Hako Offshore was the demise charterer of each of the ships

In his judgment Rares J held that the primary judge had erred in applying the common law test for summary judgment to determine some of the challenges brought by the shipowners, other than the issue as to whether PTMS had established that Hako Offshore was the demise charterer of each of the ships: which he correctly, it was held, had determined in light of the High Court's decision in "Shin Kobe Maru" v Empire Shipping Company [1994] 181 CLR 404 for the purposes of deciding whether the court had jurisdiction.

Rares J then cited the "Iran Amanat" v KMP Coastal Oil Pte Limited [1999] 196 CLR 130 case where the High Court held that the question of jurisdiction must be answered by reference to the nature of the plaintiff's claim as put forward without reference to the further point of whether it is likely to succeed or not, but it was also recognised that the resolution of factual issues may be necessary for questions such as ownership.

The question concerning "relevant person" was whether the person nominated as such had the relevant "nexus" with the ship, not whether that person is or is likely to be found liable.

"Hako Fortress" had been withdrawn from the demise charter

On the issue as to whether the "Hako Fortress" had been withdrawn from the demise charter Rares J held that it had. Rares J held that the terms of the bareboat charter (Barecon 2001) did not require the owners physically to re-take possession of the ship following her withdrawal and the termination of the charter party.

Rares J also rejected the argument that the charter parties were not bareboat charters because PTMS employed and then supplied the master and crews who received instructions from PTMS and Boskalis, so that Hako Offshore was not in control or possession of the ship. That did not derogate, it was held, from the clauses in the charter parties pursuant to which Hako Offshore was granted full possession and complete control of the ship.

Citing numerous Australian authorities that have followed Lord Brandon's decision in the "River Rima" [1988] 1 WLR 758, Rares J also rejected the argument that the services which were the subject of the claims were not supplied to the ships, but to Hako Offshore.

PTMS not paid, so interests in invoices not assigned

Rares J also rejected the argument based on provisions of the deed between Hako Offshore and PTMS, which created an obligation for Boskalis to purchase from PTMS the amount due under each invoice at the time that it became due and payable. It was said that those provisions created an immediate assignment to Boskalis of each debt payable to PTMS by Hako Offshore.

Rares J held that this overlooked the wording of the clause which provided that PTMS' rights, title and interests in each invoice debt "will have been assigned by PTMS to Boskalis upon receipt by PTMS of the full amount of the assignment fees". As PTMS has not been paid by Boskalis (or Hako Offshore), PTMS had not assigned any interest in those debts.

Seaman's lien a personal right that is extinguished when paid

Rares J rejected the argument made by PTMS that it was subrogated to the claims by the masters and crew of the ships since the maritime lien for seafarers' wages is extinguished once the wages are paid. He also held that a seaman's lien was a personal right that was extinguished when it was paid and in so doing followed an earlier decision of Hill J in the "Petone" [1917] P198, in which a third party, being an agent of the purchaser of the ship, paid the master's and crew's wages when the ship arrived at port and then sought to proceed in rem against the ship in reliance on subrogation to the wages lien.

Hill J held: "In my view the weight of authority is strongly against the doctrine that the man who has paid off the privileged claimant stands in the shoes of the privileged claimant and has his lien, whether it be regarded as a general doctrine or as applied to wages only".

Accordingly the first instance decision in relation to the "Hako Fortress" was overturned but the appeals in relation to the other three vessels all failed.

Both Buchanan and Siopsis JJ agreed with the decision of Rares J.

Stuart Hetherington
Trade and Transport
Colin Biggers & Paisley

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