09 October 2024
5 min read
#Transport, Shipping & Logistics
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The case of Iveco S.P.A v The Ship Höegh London [2024] FCA 901 brings into focus the structural differences between admiralty jurisdictions when obtaining the arrest of a vessel to enforce claims.
In this case, the vessel was prosecuted based on arrest rights that might exist in South Africa but not in Australia. The failure to recognise these important jurisdictional differences resulted in a costly mistake for the arresting parties.
The MV HÖEGH LONDON (the vessel) was arrested in rem by four plaintiffs who had engaged a South African law firm to instruct local lawyers in Australia to execute the arrest of the vessel for alleged damage to cargo that was carried on board from Australia and delivered to Port Elizabeth, South Africa.
However, there were irregularities with the arrest application.
The first was that the in rem warrant of arrest named the first defendant as Höegh Autoliners AS (the time charterer of the vessel) and the second defendant as Höegh Autoliners Shipping AS (the registered owner of the vessel). However, under Section 14 of the Admiralty Act 1988 (Cth) (Admiralty Act), in rem proceedings are required to identify a ‘ship or other property’ as the defendant. As a result, the warrant of arrest did not comply with the Admiralty Act.
The second issue was that the plaintiffs appeared to be commencing both an in rem and in personam claim in the same proceeding, which is prohibited by the Admiralty Rules 1988 (Cth) (Admiralty Rules). Under the Admiralty Rules, a vessel can only be arrested and security obtained for claims against the owners or demise charterers of a vessel. In this case, the plaintiffs had brought proceedings against the owner and time charterer of the vessel. Section 17 of the Admiralty Act allows a plaintiff to proceed in rem based on the owner’s liabilities and, under section 18 of the Admiralty Act, based on the demise charterer’s liabilities. However, there is no basis to pursue an action in rem in respect of the in personam liability of a party having some other relationship with the vessel, such as being the time charterer. Accordingly, the plaintiffs had no basis to pursue an in rem arrest of the vessel for the alleged liability of the time charterer (Höegh Autoliners AS) for the damage to the cargo.
The Court noted that in South Africa (the jurisdiction of the plaintiffs’ primary lawyers) it is possible to commence an action in personam against a time charterer by attaching the bunkers of a vessel as the time charterer’s property to found or confirm proceedings in a South African Court against that time charterer. However, an attachment of that nature is not permitted in Australia. This is a key difference between South Africa and Australia’s Admiralty laws.
In this case, it appears that the plaintiffs’ instructing lawyers from South Africa were unaware of this difference and therefore refused to release the vessel from arrest when provided with a letter of undertaking (LOU) for the claim amount in the name of the owner of the vessel and not the time charterer. Perhaps understandably, the plaintiffs were seeking to obtain security from the contractual party (the time charterer) against whom their claim for damage to the cargo during carriage rested. For this reason, the plaintiffs refused to release the vessel until an LOU was presented in the name of the time charterer.
As a result, the owners of the vessel had no alternative but to bring an urgent application for the release of the vessel from arrest so that it could resume trading.
At the hearing of the application for release of the vessel, the plaintiffs’ Australian lawyers attempted to rely on the argument that insufficient security for the claim had been provided and that they were entitled to security that would answer to any liability of the time charterer for damage to the cargo. The lawyers also advised that they were unable to take complete instructions from their instructing lawyers in South Africa due to the time difference and therefore could not consent to the release of the vessel from arrest on an urgent basis.
The Court ultimately dismissed the plaintiffs’ argument, stating that, under Australian Admiralty law, a plaintiff is only entitled to security as against the owner or demise charterer of the vessel and not some other party, such as a time charterer. The Court highlighted that it is a serious matter to arrest a vessel, particularly a vessel that is trading on a schedule and was imminently due to depart. The Court also stated that the plaintiffs should therefore be prepared to defend the basis on which they arrested the vessel and do so on short notice. The need or desire to obtain instructions from overseas was not a proper basis to delay the inevitable release of the vessel from arrest. Further, because the plaintiffs had refused to consent to the release of the vessel from arrest after being provided with security in the form of an acceptable LOU, the Court ordered the plaintiffs to pay the costs of the vessel owners’ application for release of the vessel from arrest.
This case highlights one of the many differences between Australia and South Africa’s Admiralty laws. Maritime practitioners and persons within the maritime industry should bear in mind that the enforcement of claims varies depending on the admiralty jurisdiction in which proceedings are commenced or defended around the world. This case also illustrates the fast-paced nature of the maritime industry and the need to be aware of the commercial impact an arrest can have on a trading vessel. If a vessel remains under arrest when it should be released, such as when sufficient security is provided, the arrest could become wrongful. Under Australian law, a person who wrongfully and without good cause arrests a vessel, or, unreasonably and without good cause refuses to consent to its release from arrest, can be held liable for damages.
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