Most Read Contributor in Australia, September 2016
In a decision delivered on 11 September 2015, the Federal Court
of Australia has upheld the arrest of the "Sam Hawk" in
respect of a claim for a foreign maritime lien arising from the
supply of bunkers to the vessel.
This decision is significant because it reverses the prior law
in Australia and paves the way for the recognition and enforcement
in Australia of foreign maritime liens, even where such liens do
not exist independently under Australian law.
The practical effect of this decision is that the claims in
respect of which vessels can be arrested in Australia has now
expanded significantly, meaning that Australia is an even more
arrest and enforcement-friendly jurisdiction.
The "Sam Hawk" was owned by SPV Sam Hawk Inc
(Owners) and time chartered to Egyptian Bulk
Carriers (Egyptian Bulk). The charter party
contained a 'no lien' clause. Egyptian Bulk entered into a
bunker supply contract with Reiter Petroleum, of Canada, to stem
the vessel in Istanbul, Turkey. The bunker supply contract was
expressly subject to Canadian law, purported to grant a contractual
maritime lien over the vessel and was also said to be subject to
U.S. law in relation to the existence of a maritime lien for the
supply. Reiter Petroleum entered into a separate arrangement for
the supply with KPI Bridge Oil, with the ultimate physical supplier
being Socar Marine. Owners were not privy to or a named party to
the supply arrangements.
However, Owners did ask Egyptian Bulk for the identity of the
bunker supplier and were given Socar Marine's details. Prior to
the supply, Owners sent a 'no liability' notice to Socar
Marine, advising that Owners accepted no liability to pay for the
supply and payment was the sole responsibility of Egyptian Bulk.
Socar Marine refused to sign and return the notice. However, the
Master of the bunker barge did accept, sign and return an identical
notice prior to stemming the bunkers.
Egyptian Bulk did not pay for the bunkers, as a result of which
Reiter Petroleum arrested the vessel at Albany, Western Australia.
Owners provided security for the release of the vessel under
protest and commenced these proceedings, seeking that the arrest be
struck out and the security returned.
Australian law does not recognise a maritime lien for the supply
of necessaries, including bunkers. Prior to this case, following
the Privy Council decision in the "Halcyon Isle" (
AC 221) the existence of a maritime lien was held to be a matter of
procedure, which was to be determined under Australian law for any
claims commenced in Australia. However, a recent High Court of
Australia case held that matters which relate to a party's
rights, such as the grant of a maritime lien and right to arrest a
vessel, are matters of substance, not procedure. As such, questions
as to the scope of those rights fall to be determined by the proper
law of the relevant contract, transaction or circumstances, which
may not be Australian law. In resolving these questions of
substance, Australian law may recognise and give effect to rights
existing under foreign law.
Indeed, Reiter Petroleum claimed that the proper law of the
supply was U.S. (the choice of law for questions relating to
maritime liens) or Canadian (the law of the contract) law and that
each granted a maritime lien over the vessel, regardless of the
fact that the supply was made for Charterer's account.
Whilst Owners contested the validity of the claims for lien
under U.S. and Canadian law, the Court held that such issues were
ultimately matters for final hearing. Owners' arguments were
not strong enough to warrant the summary dismissal of the
Unless resolved by agreement, the matter will proceed to a final
hearing in the usual way, at which time we will know whether Reiter
Petroleum's claims for a maritime lien are held to be
Consequences for bunker suppliers and
Regardless of the final outcome, this decision means that
Australian courts will uphold the arrest of a vessel in Australia
in respect of an arguable claim based on a foreign maritime lien.
Whilst the ultimate success of any such claim will depend on the
particular circumstances in each case, this decision means that the
circumstances in which bunker suppliers can arrest vessels in
Australia, at least in order to obtain security for an arguable
claim, have now been significantly increased.
As a result, bunker suppliers should consider Australia an even
more friendly jurisdiction in which to seek security and enforce
claims and Owners should be prepared to face an increase in such
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
This decision will be significant to aviation industry participants in assessing whether claimants in the context of international or domestic carriage by air have commenced claims in an appropriate forum in Australia.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).