Australia: Ship arrest in Australia – an update

Last Updated: 5 March 2017
Article by Nathan Cecil and Stephanie Triefus

With the Hanjin crisis and resulting scramble for security now settling down, it is timely to review when and how a ship can be arrested in Australia. Australia is an arrest and enforcement-friendly jurisdiction and has the advantage of a dedicated Maritime court. Arresting a ship in Australia is straightforward and can generally be achieved within 24 hours.

Australia is not a party to any arrest conventions, however the Admiralty Act 1988 (Cth) and the Admiralty Rules 1988 (Cth) largely reflect the position under the 1952 Arrest Convention.

Maritime claims

Under the Admiralty Act, claims can be made in rem against a ship for maritime liens (section 15), proprietary maritime claims (section 16) and general maritime claims (section 17).

Maritime liens attach to a ship and are enforceable against the ship notwithstanding changes in ownership. The four maritime liens actionable in Australia are for:

  • salvage reward;
  • damage done by a ship;
  • wages of the master or member of the crew; and
  • Master's disbursements.

For a short period following the decision in Reiter Petroleum Inc v The Ship "Sam Hawk" [2015] FCA 1005, it was thought that in some circumstances, foreign maritime liens outside the above list may be enforceable in Australia. However, the Full Court of the Federal Court overturned this decision in September 2016. It appears that Australia will continue to follow the UK position, whereby a maritime lien will only be enforceable if it corresponds to a local Australian maritime lien.

Proprietary maritime claims attach to a ship in rem and include claims relating to:

  • the possession, title, ownership or mortgage of a ship or of a share in a ship or of a ship's freight;
  • claims between co-Owners of a ship relating to the possession, ownership, operation or earnings of the ship;
  • enforcement of a judgment against a ship; and
  • interest in relation to the above.

General maritime claims attach to a ship in rem and include claims in connection with:

  • damage done by a ship (whether by collision or otherwise);
  • liability of the owner of a ship arising under the Protection of the Sea (Civil Liability) Act 1981;
  • loss of life, or personal injury;
  • an act or omission of the owner or charterer of the ship in the navigation or management of the ship, including in connection with the loading of or unloading of goods, embarkation or disembarkation of persons, and the carriage of goods or persons on the ship;
  • loss or damage of goods carried by a ship;
  • an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship, whether by charterparty or otherwise;
  • salvage, general average, towage, or pilotage of a ship;
  • goods, materials or services for a ship's operation or maintenance;
  • the construction of a ship, alteration, repair or equipping of a ship;
  • a liability for port, harbour, canal or light tolls, charges or dues, or tolls, charges or dues of a similar kind, or a levy in relation to a ship;
  • disbursements incurred by a master, shipper, charterer or agent on account of a ship;
  • an insurance premium, or for a mutual insurance call, in relation to a ship;
  • wages or other amounts owing to a master, or a member of the crew;
  • the enforcement of, or a claim arising out of, an arbitral award made in respect of a proprietary or general maritime claim; and
  • interest in respect of the above claims.

Proceedings on maritime liens and proprietary maritime claims

Proceedings on a maritime lien or proprietary maritime claim in respect of a ship can be commenced as an action in rem against the ship.

Proceedings on Owner's and/or Demise Charterer's liabilities

Proceedings on a general maritime claim against an Owner or Demise Charterer of a ship can be brought where the Owner/Demise Charterer:

  • was, when the cause of action arose, the Owner or Charterer of, or in possession or control of, the ship; and
  • is, when the proceeding is commenced, the Owner/Demise Charterer of the ship.

Can sister/surrogate ships be arrested?

Australian law permits the arrest of one ship as surrogate for another, but in circumstances slightly narrower than jurisdictions such as South Africa. Proceedings on a maritime claim against a surrogate/sister ship can be brought where the relevant person (the person liable for the claim):

  • was, when the cause of action arose, the Owner or Charterer of, or in possession or control of, the first ship; and
  • is, when the proceeding is commenced, the Owner of the second-mentioned ship.

This right of surrogate ship arrest does not extend to maritime liens, as maritime liens attach only to the ship in respect of which the claim arises. However, if the circumstances of the claim also give rise to a maritime claim, then surrogate ship arrest may be available.

Under Australian law, the 'Owner' of a ship or surrogate ship means the beneficial or true Owner, which may be a person other than the Registered Owner. Typically, a beneficial or true Owner would have the power unilaterally to sell or otherwise dispose of a ship.

Ship arrest procedure

In order to arrest a ship in Australia a party must file a Writ commencing proceedings and, at the same time or shortly after, an Application for Arrest Warrant, Arrest Warrant and an affidavit in support. The Admiralty Marshal will arrange to serve the documents by affixing them to the mast, bridge or a conspicuous part of the ship. The Application for Arrest Warrant includes a personal undertaking, either by the arresting party themselves or their legal representative, to pay the Marshal's costs and expenses of the arrest.

Arrest can be carried out at any time on any day of the week and regardless of whether the ship is at berth, anchor or sailing to or from an Australian port.

The costs of arresting a ship include filing fees and a deposit for the costs and expenses of the Marshal. The deposit is generally A$5,000 for capital city ports and A$10,000-A$15,000 for remote ports. Even if the deposit is not received, the Marshal will execute the Arrest Warrant in reliance on the arresting party's undertaking to pay.

Counter-security is not required in order to arrest a ship.

Where arrest is not available under the Admiralty Act, an applicant could instead apply for a freezing order (also known as a Mareva injunction) prohibiting the removal of the ship from the jurisdiction. In order to obtain a freezing order, the applicant would need to establish that it has a prima facie cause of action and a good arguable case as well as that any judgment for the applicant will not be satisfied due to the danger of the defendant absconding or the assets being removed from the jurisdiction or disposed of.

How to release a ship from arrest - What security is required?

To release a ship from arrest a party can apply to the Registrar or the Court (Admiralty Rules, r51).

The Registrar may release a ship upon application if the Registrar is satisfied that:

  • the claim amount (on the basis of the 'reasonably arguable best case') or the value of the ship, whichever is lesser, has been paid into court or a bail bond has been filed; or
  • the arresting party has consented to the release.

Arresting parties will typically consent to release if they have been provided with a Letter of Undertaking from a P&I Club or insurer or a bank guarantee.

The Registrar may refuse to release the ship unless satisfactory arrangements for payment of the Admiralty Marshal's expenses have been made.

The Court has the discretion to order the release from arrest of the ship or property on such terms as are just.

The arrested ship can generally be released within a day of security being provided and accepted.

How to contest an arrest?

An arrest can be challenged in court for lack of jurisdiction if it does not fall within the rights to claim under ss15-19 of the Admiralty Act.

A claim can be made for damages for unjustified arrest by a person with an interest in the ship or who has suffered loss or damage as a direct result when:

  • a party unreasonably and without good cause:
    • demands excessive security in relation to the proceeding; or
    • obtains the arrest of a ship or other property; or
  • a party or other person unreasonably and without good cause fails to give a consent required for the release from arrest of a ship or other property.

Possibility to sell the ship during or after proceedings

The court may, on application by a party to a proceeding and either before or after final judgment in the proceeding, order that a ship or other property that is under arrest in the proceeding:

  • be valued;
  • be valued and sold; or
  • be sold without valuation.

If the ship or property is deteriorating in value, the court may, at any stage of the proceeding, either with or without application, order it to be sold.

The purchaser receives a clean title and any claims are to be made on the proceeds of sale.

What is the limitation period?

The Admiralty Act provides that the Limitation Acts of the States and Northern Territory apply. These vary according to jurisdiction and type of claim. For claims brought only under the Admiralty Act, the limitation period is three years from the date the cause of action arose.

How we can help

Our national Transport team are experts in procuring the arrest and release of ships from arrest. We are available to assist at any hour and in any Australian jurisdiction.

Our Transport team have helped a number of companies wade through the turbulence left by the Hanjin collapse. Feel free to get in touch if you need any assistance.

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 individuals listed.

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Authors
Nathan Cecil
Stephanie Triefus
 
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