C E Holdings Ltd v The Vessel "Catbird Suite"

IN THE HIGH COURT OF NEW ZEALAND
WHANGAREI REGISTRY
CIV2003-488-146

BETWEEN C E HOLDINGS LIMITED
First Plaintiff

AND LESLIE ERIC KNIGHT
Second Plaintiff

AND THE VESSEL "CATBIRD SUITE"
First Defendant

AND THOMAS TUCKER BRADSHAW
Second Defendant

AND NORTHLAND SHELF COMPANY NUMBER 106 LIMITED
Third Defendant

Hearing: 3 September 2003

Appearances: K F Gould for Plaintiffs
D R James for Defendants

Judgment: 3 September 2003

(ORAL) JUDGMENT OF HEATH J

Solicitors:
Dennis M Graham, PO Box 99188, Newmarket, Auckland
Palmer Macauley, PO Box 576, Kerikeri

Counsel:
K F Gould, PO Box 1011, Shortland Street, Auckland

Introduction

[1] This proceeding was issued in the Admiralty jurisdiction of the Court. It arises out of a written agreement dated 26 March 2003. The parties to the agreement are Mr Knight and Mr Bradshaw.

[2] The Admiralty jurisdiction was invoked in order to secure the plaintiffs' claim through the arrest of a vessel, known as the "Catbird Suite". The proceeding was commenced on 8 May 2003 and a warrant to arrest was executed on 15 May 2003 by a Bailiff of the High Court at Whangarei.

[3] The agreement entered into between Mr Knight and Mr Bradshaw provided for Mr Bradshaw to sell to Mr Knight 25 shares in a company called Northland Shelf Company Number 106 Ltd for a sum of $250,000. The vessel is the sole asset owned by Northland Shelf Company.

[4] A copy of the written agreement is annexed to an affidavit of Mr Bradshaw in support of his application to transfer this proceeding from the Admiralty jurisdiction to the ordinary jurisdiction of the Court. One of the terms of the agreement was that Mr Knight take responsibility for costs incurred for improvements and corrections to the vessel done after 25 February 2002. Further, the agreement provided that "materials, work and/or services provided to Northland Shelf Company by Mr Knight and/or his boat building company will be at cost". Implicit in that provision is an understanding, to put it neutrally, that work would be carried out on the vessel by Mr Knight's company, which is the first plaintiff, C E Holdings Ltd.

Matters before Court

[5] There were two applications set down for hearing today. The first was an application by Mr Bradshaw to transfer the proceeding to the ordinary jurisdiction of the court under s12 of the Admiralty Act 1973. Section 12 provides:

12 Transfer of proceedings from or to admiralty jurisdiction

The Court may, of its own motion or upon application, at any stage order that any proceedings be transferred from or to the Court in its admiralty jurisdiction.

[6] The second was an application by Mr Gould on behalf of Mr Knight for timetabling directions and a direction that a settlement conference be convened.

Jurisdiction

[7] I deal first with the issue of transfer of jurisdiction. Mr James argued that the claim in respect of the shareholding in the company which owns the vessel does not fall within the Admiralty jurisdiction of the Court. Mr Gould did not feel able to contend to the contrary.

[8] I agree with the submissions made by Mr James for two reasons. First, a claim between shareholders of a company which owns a vessel does not fall within any of the categories listed in s4(1) of the Act so as to invoke Admiralty jurisdiction. Second, an action in rem is not sustainable because, even assuming a claim existed under s4(1), the case does not fall within either of the provisos to s5(2) of the Act.

[9] Nevertheless, there are claims made in the Statement of Claim which may give rise to claims within the Admiralty jurisdiction. I refer to the claims for supply of materials by Mr Knight's boat building company, C E Holdings Ltd, which, prima facie, falls within s4(1)(l).

[10] The payment of wages to the crew of a ship falls, prima facie, within s4(1)(o) of the Act. Payments in respect of dock, port or harbour charges fall, prima facie, within s4(1)(m) of the Act. The facts as currently pleaded are not sufficiently clear to justify using the provisos of s5(2) of the Act to exclude those claims from the Admiralty jurisdiction.

[11] I acknowledge that that approach is benevolent to the plaintiffs as there is no cause of action currently pleaded alleging a collateral contract to do any of the things which fall within the Admiralty jurisdiction by way of agreement with the owner of the vessel.

[12] I intend to make orders requiring the filing and service of an amended Statement of Claim so that the plaintiffs can re-plead on those issues to state expressly the legal basis of their claims.

[13] I reserve leave for the defendants to make a second application to transfer under s12 if on consideration of an amended claim they remain of the view that the Admiralty jurisdiction has not properly been invoked.

Arrest issues

[14] The next issue concerns the fate of the arrested vessel. The vessel is worth much more than the amount claimed on the best pleaded case of the plaintiffs under the Admiralty jurisdiction of the Court.

[15] The only basis upon which the plaintiffs are entitled to some form of security for their claim is if the in rem jurisdiction under the Act can be invoked. It is inappropriate to retain the vessel under arrest if appropriate security can be given in lieu thereof. I intend to order release of the vessel from arrest forthwith upon deposit into this Court by the second or third defendant in the sum of $65,000 which has been calculated as a best estimate of likely recovery together with relevant costs in respect of those matters which I hold fall currently within the Admiralty jurisdiction of the Court.

Disposition

[16] For those reasons the present application to transfer to the ordinary jurisdiction is dismissed but I make an order releasing the vessel from arrest upon payment into Court of the sum of $65,000. That order is made under r 778(3) of the High Court Rules 1985. The release will take place upon the Registrar issuing a release in Form 77 to the High Court Rules once payment into Court has been effected.

Timetabling issues

[17] That leaves the timetabling applications made by Mr Gould and the issue concerning a settlement conference. I make the following directions:

a) An amended Statement of Claim shall be filed and served by 5pm on 1 October 2003.

b) A Statement of Defence to the amended Statement of Claim shall be filed and served by 5pm on 22 October 2003.

c) Verified lists of documents shall be filed and served by all parties by 5pm on 5 November 2003.

d) Inspection of documents shall be completed by 5pm on 19 November 2003.

e) The Registrar is directed to convene a telephone conference with counsel for the first available date after 19 November 2003 before a Judge or Master of this Court. I anticipate either the trial directions will be made at that time or a settlement conference convened.

[18] I am not prepared to direct the compulsory convening of a settlement conference at this stage. I have made my views clearly known to counsel as to the desirability of settlement discussions. I add that this is a case which cries out for commercial resolution.

Costs

[19] Having heard from counsel on the question of costs, I take the view that it is preferable to await amended pleadings and to ascertain whether any further application to transfer to the proceedings from the Admiralty jurisdiction is made. Accordingly I reserve the costs of today's applications. I note that counsel have been engaged for approximately one half day.