Debis Financial Services (NZ) Ltd v The Cray Fishing Vessel "Stryker"

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
CIV-2003-485-002372

IN THE MATTER OF Admiralty Action in Rem

BETWEEN DEBIS FINANCIAL SERVICES (NZ) LIMITED
Plaintiff

AND THE CRAY FISHING VESSEL "STRYKER"
First Defendant

AND ROBERT JAMES WARD LANAUZE AND DELWYN LINDSAY ANN LANAUZE
Second Defendant

AND THE CHIEF EXECUTIVE OF THE MINISTRY OF FISHERIES
Intervener

Hearing: 1 December 2003

Appearances: M J Logan for Port Nicholson Fisheries Ltd
J A Knight for Plaintiff
M S Hancock and U R Jagose for MAF
C K Skagen for Mr and Mrs Lanauze

Judgment: 19 December 2003

JUDGMENT OF NEAZOR J

[1] This proceeding is an action in rem and in personam relating to sums of money owing under a loan agreement between the plaintiff and the second defendants, secured by way of a legal mortgage of the vessel "Stryker". The vessel has been the subject of a writ of arrest issued by the Registrar of the Court on the application of the plaintiff. It is also the subject of seizure by the Ministry of Fisheries in respect of alleged offences under the Fisheries Act. Port Nicholson Fisheries Ltd claims that under a mortgage of chattels registered over the vessel it has the right to dispose of the vessel.

[2] The present dispute is about who has the right to deal with the vessel. It has been set in train by an application by Port Nicholson Fisheries Ltd for an order setting aside the warrant of arrest for release of the ship.

[3] The essential facts are that an application for a warrant of arrest was signed on 17 October 2003 and filed under Part 14 of the High Court Rules on 24 October 2003. The Registrar, having ascertained that no caveat had been entered against the arrest of the vessel, issued the warrant of arrest on that day.

[4] The vessel was then fishing out of the Chatham Islands. The Registrar went to the Chathams on 30 October to effect the arrest of the vessel but learned when he got there that the Ministry had seized it. On 8 November the Chatham Islands Police Officer served the warrant on a fisheries officer and placed a copy of it on the vessel. The vessel has remained at the Chatham Islands and in the custody of the Ministry.

[5] On 11 November 2003, Port Nicholson Fisheries Ltd gave notice to Mr Lanauze under s 109(1)(b) and s 185 of the Personal Property Securities Act 1999 of the exercise of its right to take apparent possession of the vessel. That company filed its notice of appearance in the proceedings on 10 November 2003.

[6] Mr P C Molloy, a fisheries officer employed by the Ministry of Fisheries, deposed to the Ministry's involvement. On 16 October 2003 he had inspected the landings of the vessel at the Chatham Islands Airport as a matter of routine. He found that some rock lobster which had been landed from the vessel was "berried" and made arrangements for a further inspection in Wellington when the consignment reached the licensed fish receiver. It is an offence under Regulation 41 of the Fisheries (Commercial Fishing) Regulations 2001 for a commercial fisher to take or possess rock lobster that is carrying external eggs or for any person to sell, possess for sale or process for sale rock lobsters to which the regulation applies. On 16 October 2003 approximately 49kg of rock lobster were seized by fisheries officers in Wellington. Further investigation is required to ascertain whether the rock lobsters were taken or possessed contrary to the regulations.

[7] On the basis of what he knew and on his belief resulting from that information that the vessel "Stryker" had been used in the commission of an offence, on 29 October 2003 he seized the vessel under s 207 of the Fisheries Act 1996. No issue has been raised about the actions of the Ministry or its officers. Thereafter the vessel was delivered to the Port of Waitangi in the Chatham Islands and, so far as the Ministry is concerned, it is held there in the custody of the Chief Executive pursuant to s 207(2) of the Fisheries Act 1996. Mr Molloy deposed that the Ministry became aware of the warrant for the arrest of the "Stryker" on 30 October 2003 when the plaintiff's solicitor gave advice to that effect. The Ministry became aware of Port Nicholson Fisheries Limited's application on 11 November 2003.

[8] Once a vessel has been seized by the Ministry, the provisions of ss 207-210 of the Act set out in detail how it is to be dealt with. Section 207(2) provides that any property seized shall be delivered into the custody of the Chief Executive of the Ministry. Section 207(4) requires that the decision whether to lay an information or charge for an alleged offence in respect of which any property has been seized shall be made as soon as reasonably practicable after the property is seized. At this stage there is no question arising under that subsection. Provision is made under s 208 for the chief executive to release seized property under bond, under s 209 for seized property to be held by the Crown if it is not released and under s 210 for seized property to be released in two other circumstances. For completeness, it should be noted that s 255 of the Act provides that on the conviction of any person for an offence against the Act for which the maximum penalty is a fine which exceeds $5,000 but does not exceed $100,000, any property used in the commission of the offence, (which would include any vessel), shall be forfeit to the Crown, unless the Court for special reasons relating to the offence thinks fit to order otherwise. The offence provision under which the fishery officer acted in this case carries liability on summary conviction to a fine not exceeding $100,000. Under s 256, the Court has jurisdiction to provide relief either in whole or in part from the effect of forfeiture on those who have an interest in the forfeited property. Section 255E(l) provides that if any property is forfeited to the Crown under the Act, that property vests in the Crown absolutely and free of all encumbrances.

[9] The relevant texts of the sections relating to dealing with property after seizure are as follows:

208. Chief Executive may release seized property under bond - (1) On application by -

(a) A person from whom property has been seized under section 207 of this Act; or

(b) The owner or person entitled to possession of the property seized, -

the Chief Executive may, at any time until an information or charge is laid for the alleged offence in respect of which the property is seized, release the property to any such person under bond in such sum and under such sureties and conditions (if any) as the chief executive may specify.

(2) It is a condition of every bond under this section that, upon the forfeiture under this Act of the property that is the subject of the bond, the person to whom the property is released shall forthwith return the property to the custody of the chief executive unless the chief executive advises the person in writing that the property does not have to be so returned.

(3) If any person to whom property is released under subsection (1) of this section fails to comply with the conditions of any bond or with any condition specified by the chief executive, -

(a) The property may be reseized at any time at the direction of the chief executive; and

(b) The provisions of this section shall apply to the property as if it had been seized under section 207 of this Act; and

...

209. Seized property to be held by the Crown if not released - All property seized under section 207 of this Act ... except where such property or proceeds have been forfeited to the Crown under section 211 of this Act, shall, subject to section 208(l) of this Act, be held in the custody of the Crown -

(a) Until a decision is made not to lay any information or charge for any alleged offence in respect of which the property was seized; or

(b) If a charge or information is laid for an offence in respect of which the property was seized, until the completion of such proceedings, and, if the property is forfeit, until the disposal of the property under this Act or such sooner time as the Court may determine.

210. Crown to release seized property in certain circumstances - (1) If any property has been seized under section 207 of this Act, and such property ... remains in the custody of the crown, then such property or proceeds shall forthwith be released from the custody of the Crown -

(a) If a decision is made not to lay an information or charge:

(b) On the acquittal of all persons charged with any offence for which forfeiture of the property or proceeds is a consequence of conviction.

(2) If any information or charge has been laid for any alleged offence in respect of which the property was seized under section 207 of this Act and that property ... remains in the custody of the Crown, the Court may at any time release the property ... on application by -

(a) The person from whom the property was seized; or

(b) The owner or person entitled to the possession of the property seized; -

and any such release may be subject to such sureties and conditions as the Court may specify.

211. Seized property forfeited to the Crown if ownership not established - (1) If the ownership of any property cannot be ascertained by the chief executive within 90 days from the date of seizure, the property seized shall be forfeit to the Crown and shall be disposed of as directed by the chief executive.

(2) If there is a dispute as to the ownership of any property that has been seized under this Act, the chief executive may apply to a court for directions as to the holding and disposal of the property and the Court may give such directions accordingly.

[10] Turning to the action in rem, the Admiralty Rules provide in Form 76 (the warrant of arrest) for a direction to the Registrar to keep the ship under safe arrest pending further orders of the Court. Once the ship has been arrested, movement of it or interference with it constitutes a contempt of Court and is punishable accordingly by virtue of Rule 776(11) of the High Court Rules. It is accepted that the Registrar is responsible for the care and custody of the vessel whilst it is under arrest. The warrant of arrest is valid for 6 months commencing on the day of issue unlesss sooner withdrawn, but successive warrants may be issued, Rule 776(14). There are provisions in Rule 778 for release of property arrested under a warrant of arrest unless the property has been sold under an order of the Court. Under Rule 784 the Court may either before or after final judgment order that any property under the arrest of the Court be appraised or sold with or without appraisement. If the property is sold the Registrar must pay into Court the gross proceeds of the sale and must bring into Court the account relating to the sale.

[11] The position of the three parties is

(a) Port Nicholson Fisheries Ltd: the Ministry has at present the right to decide what is to be done with the vessel, and it is not available to be the subject of an arrest until the Ministry's rights are resolved in a way which would release the vessel to those with an interest in it; the company saying that its claim has priority in that event. The essence of the company's submission is that the two systems of control cannot co-exist.

(b) Ministry of Fisheries: The Ministry's claim has priority over any claim sought to be protected by the warrant of arrest, and it was not open to the plaintiff to require the Registrar to execute the warrant of arrest after the vessel had been seized and taken into custody under s 207 of the Act. In Mr Hancock's words "one right rules all" and there cannot be split responsibility in respect of the vessel.

(c) Plaintiff: The power of seizure under s 207 does not limit the power of the Court to arrest the vessel - the actions are not mutually exclusive and can have effect together.

(d) Mr and Mrs Lanauze: Mr Skagan submitted that at this point the owners would be eligible to seek release of the vessel by the Chief Executive to enable it to be used for economic activity, but that if there was concurrent jurisdiction through the Fisheries Act and in the Court through the High Court Rules they might also have to deal with the competing interest holders.

Detailed Submissions

Ministry of Fisheries:

- The Ministry's custody should take precedence because it arose first in time.

- It has the right of custody and control and that it was not possible for both the Ministry and the Registrar to claim custody.

- Seizure of the vessel commences custody until one of two events happens: the decision is made not to prosecute or there is an acquittal.

- The performance of the responsibilities of whoever has custody of the vessel requires that one party alone should have full and exclusive control.

- The need for one party custody becomes evident when the possibility of two outcomes in terms of the benefit of forfeiture and civil proceedings is considered.

- That the decision in Readhead (infra) would allow competing priorities to co-exist, but the New Zealand legislation provides for competing claims to be dealt with by the court if forfeiture occurs, which is consistent with the scheme and purpose of the Act.

- Support for the Ministry's position is derived from the legislative provisions as to penalties which include forfeiture as one of a number of deterrent elements, recognised as such in Equal Enterprise Ltd v Attorney-General [1995] 3 NZLR 293, 295.

- Recognition of other claims to custody of the vessel would undermine that part of the penalties scheme.

- The warrant of arrest could stay in place subject to the Chief Executive's powers under the act, ceasing to be of effect if the vessel was forfeited, but having effect if the Chief executive was required under the Act to release the vessel from custody.

- If the Chief Executive released the vessel on bond, the property remains in the control of the Chief Executive and the claim of custody and control stays in place.

Port Nicholson Fisheries Ltd:

- On seizure the custody of the vessel must go to the Chief Executive.

- There are only two mechanisms for release - under bond by virtue of s 208(l) before charge, and by the Court order after a charge is laid.

- Apart from those provisions s 209 requires that the vessel must be in the custody of the Crown.

- There is no provision for release into the custody of the Registrar.

- The decision in Government of the Republic of Spain v SS "Arantzazu Mendi " The Arantzazu Mendi [1939] AC 256 indicates that the Admiralty Marshal's position after arrest of a ship is that the Marshal has custody, not possession.

- That the decision in Abel Fisheries Ltd v Stuart [1997] 2 NZLR 87 is that custody under the NZ Fisheries Act provisions denotes care and control and the right to physical possession, and thence the right to decide where and under what conditions the vessel is to be held.

- That there can be no joint custody and the decision in Readhead is distinguishable because

(a) the Australian legislation had no provision equivalent to s 209

(b)  to allow the admiralty jurisdiction to over-ride the Ministry's claim would be contrary to s 209(l) which requires continued possession by the Ministry

(c) to allow the vessel to be dealt with through the civil procedure would provide a way of avoiding the Fisheries Act provisions.

- If the vessel is returned by the Ministry the company claims a priority of entitlement to it by virtue of contractual and statutory rights in respect of charges.

- The warrant should be set aside.

Plaintiff:

- It is entitled to maintain its rights.

- There is no provision in the Act which limits other rights on seizure; the position is otherwise upon forfeiture.

- A construction of the Act should be adopted which reconciles any inconsistency.

- The purpose and powers of the Ministry and the Registrar at this stage are compatible and s 207 should be interpreted accordingly.

- The purpose both of arrest and the Fisheries provisions are the same: to conserve the vessel for whichever of the parties proves ultimately to have an established right.

- Possessory rights continue to exist notwithstanding the arrest.

- The only area of conflict between the Ministry's custody and the Registrar's could arise in respect of movement of the vessel, but again the same purpose is to be served by the control of both, and such a dispute is capable of resolution.

- That arrest and seizure can co-exist without limiting the effectiveness of either.

- Australian authority (Readhead) and English authority (The Queen of the South [1968] 1 All ER 1163) would allow both.

- Custody by two parties is not inconsistent with meeting the responsibilities of custody.

- Arrest does not prevent release under bond of the vessel from seizure.

- The vessel could be arrested if it was released under bond.

- If release under bond is allowed but arrest is not the owner could improve his position at the expense of others who have their own claim.

- There is no need for the result for which Port Nicholson Fisheries Ltd argue.

[12] The decision in Abel Fisheries Ltd is not determinative of this case, but it does emphasize the protective nature of the action under the Fisheries Act and of the warrant of arrest. It related to s 80 of the Fisheries Act 1983, which in all material respects was identical with provisions in the 1996 Act. It was held that the effect of the word "custody" in the section was to give the Chief Executive the right to physical possession of the property and the right to decide where and under what conditions the property is to be held. That was regarded as a wider concept than had been described in Government of the Republic of Spain v SS "Arantzazu Mendi" The Arantzazu Mendi [1939] AC 256 in relation to the Admiralty Marshal's position after arrest of a ship:

This seems to me based upon a misapprehension of the position created by the arrest. The ship arrested does not by the mere fact of arrest pass from the possession of its then possessors to a new possession of the Marshal. His right is not possession but custody. Any interference with his custody will be properly punished as a contempt of the Court which ordered arrest, but, subject to his complete control of the custody, all the possessory rights which previously existed continue to exist, including all the remedies which are based on possession.

[13] Each case, however, recognises that before any final determination is made about the vessel, the significant element of custody is that it carries power of control over what happens to the vessel and where it goes (if anywhere) and the responsibility of preserving it.

[14] In Readhead and others v Admiralty Marshal, Western Australia District Registry and others (1998) 157 ALR 660, the conflict arose further along in the process than in this case. The vessel concerned was apprehended for a breach of fisheries legislation on 17 October 1997. It was brought to port and seized by an authorised fisheries officer under the relevant Act and remained in port under that seizure until 14 January 1998. The Admiralty Marshal executed an arrest warrant on 20 February 1998 and then assumed responsibility from the Australian Fisheries Management Authority for the maintenance and security of the ship. On 20 March 1998 on the application of a bank in the admiralty proceedings, summary judgment was given on its claim and the sale of the ship was ordered in accordance with Admiralty rules. The Fisheries Authority had not given any directions for the release of the ship, nor had there been any determination in respect of charges, a consequence of conviction being that the Court could order forfeiture of the vessel.

[15] The judgment was as to whether a purchaser of the ship pursuant to the Court-ordered sale would obtain an unencumbered title to the ship or would take subject to the power of control and detention asserted by the authorised officer and subject to an order for forfeiture of the Court of Petty Sessions if and when one was made by that Court. It was held in effect that neither the claim in Admiralty nor the claim under the Act were inconsistent with each other, that if the ship was sold by order of the Court the purchaser's title would not be fettered by the Fishery Authority's claim, by then still undetermined, but that when deciding whether to order a sale, the Court in the exercise of its discretion could well take into account the attitude of persons interest in the disposition of the ship towards the Govemment's claim if an order for forfeiture was made.

[16] In Queen of the South, seizure by the Port of London Authority under statutory powers for non-payment of rates due to it was made after the plaintiff had brought an action in rem for services rendered to the ship and had arrested it. It was argued in that case that the seizure was unlawful whilst the ship was under the arrest of the Court in the plaintiff's action. Brandon J said:

I do not see why the interveners [the Authority] should not exercise their statutory right of detention even while the ship is under arrest provided that they do not interfere with the marshal's custody, which it is not suggested that they have done. To hold otherwise would involve implying an unnecessary qualification in s 75 of the Act of 1920 [which authorised the seizure].

[17] The remainder of the judgment does not help because it concerned the competing parties who each then had a right to press their claim against the ship.

Discussion

[18] There is no room for debate on the facts that the Chief Executive has legal custody of the ship. The events required under the Act to bring the statutory custody into effect all happened before there was any arrest of the vessel which would bring the Registrar's control by virtue of the writ into effect. By virtue of that custody, the Chief Executive has the responsibility for the ship and the power in respect of it indicated in the Abel Fisheries judgment.The only qualification of that power is in respect of movement of the vessel, which would be controllable also under the warrant of arrest. It is not a significant diminution of the Chief Executive's control if the consent of the Registrar under R 776(11) is required before such action is taken. In case of difficulty the matter can be referred to the Court under R 776A or R 795.

[19] The suggested difficulties with dual control are in my view illusory. The Registrar is to keep the ship under safe arrest. If and so long as the Registrar is satisfied that pursuant to a statutory power the Ministry has the vessel in custody which is protective in nature, there is no need for more to be done in that regard. The Ministry's protective obligation continues so long as it asserts its right to custody.

[20] The argument that one party needs to have full and exclusive control of the vessel if the requirements of custody are to be met is in my view not supported by authority. So long as the parties claiming custody, or having some other obligation to preserve the ship do not interfere with each other (The Queen of the South) there is no need to declare that only one can assert its right.

[21] In my view, the Ministry's submission that if the vessel is released on bond the property remains in the control of the Chief Executive is not correct. Section 208 provides that the Chief Executive may "release" the property under bond; if the vessel becomes forfeit the person to whom it was released is to "return the property to custody of the Chief Executive unless the chief executive advises ... that the property does not have to be so returned." If the property is not returned it may be "reseized".

[22] It may well be that to release the vessel on bond so long as it was subject to a warrant for arrest would be pointless; and it may be that it would have a negative effect from the Ministry's point of view by opening the way to other parties obtaining an order for sale of it. Whether these issues arise depend, however, on the decision of the Chief Executive whether to release the vessel; they are not imposed on the Ministry because the warrant exists. It is not evident that Parliament would have intended the Ministry to decide in a way which might benefit the owner whose vessel has been seized, at the possible expense of others who have a claim by reason of commercial dealings with the owner.

[23] Nor does the argument about the purpose of the Act's provision about forfeiture as part of a regime of strong penalties intended to be a deterrent to offences which are difficult to detect assist with the present problem. I cannot accept that the legislature intended for that reason that the Fisheries Act should foreclose any other protective action in respect of the vessel. At the present stage it must be recognised that the vessel may never become forfeit because no prosecution is brought or because a prosecution fails, or because the Court decides not to order forfeiture, and that even if it does become forfeit, the Court may give relief to the owner or other persons interested.

[24] The argument may be very significant if at some stage sale of the vessel is contemplated so that the disposition of the money it realises will come in issue, as in Readhead, but it is not logically relevant at this stage.

[25] The fact that competing priorities can be dealt with after forfeiture, particularly when there may never be a forfeiture, is not an argument for excluding protective action before forfeiture.

[26] 1 agree with Mr Knight that there is a significant difference in the Act's provisions relating to seizure and forfeiture: one has no express effect on third party rights; the other has.

[27] Mr Logan submitted that it was significant that the Act contained no provision for the release of the vessel into the custody of the Registrar. That is not surprising: the Chief Executive's courses of action are to keep custody or release the vessel to one of the persons nominated under s 208(l). So long as the Chief Executive has custody the requirements on the Registrar will be minimal. The full obligations of his role will fall on the Registrar only once the Chief Executive has released the vessel from his custody. That is not a matter of a decision by the Chief Executive to "transfer" custody; it comes about by operation of law.

[28] In my view Mr Knight's submission that the purpose of both the Chief Executive's custody and the writ of arrest is preserve the vessel pending some final disposition is of central importance in deciding this dispute. The final disposition will not be affected by which authority exercises interim control over the vessel, particularly if the Court, if any question of sale in the admiralty proceedings arose, took care, following Readhead, to see that the Chief Executive's interest, inchoate as it might then be, was protected.

[29] The argument based on s 209(1) of the Act must be addressed. The submission was that to allow the admiralty Jurisdiction to over-ride the Ministry's claim would be contrary to that subsection which requires continued possession (properly "custody") by the Ministry. In my view there is no difficulty: the Chief Executive had and continues to have custody, unless the decision is made to release the vessel, or custody comes to an end by statute. All that the existence of the warrant of arrest does in the circumstances is to add a requirement directed to the preservation of the vessel. Any conflict between the admiralty jurisdiction and the Chief Executive's custody arises not from the warrant of arrest, but later if an order from the Court is sought in the action, execution of which would conflict with the Chief Executive's statutory custody.

[30] None of the arguments in my view leads to the conclusion that there is a necessary conflict between the effects of seizure under the Fisheries Act and the responsibility which lies on the Registrar under the warrant or the High Court Rules. There is accordingly nothing to indicate that the issue of the warrant was invalid, or to indicate that for any other reason it should be set aside or the ship released from arrest.

[31] The application is dismissed. Costs are reserved, but I note that all parties had an interest which they wished to clarify in this application.

Chapman Tripp, Wellington for plaintiff
Oceanlaw New Zealand, Nelson for Port Nicholson Fisheries Ltd
Crown Law Office, Wellington for Ministry of Fisheries