UFL Charters Ltd v The Ship "Malakhov Kurgan" (No 3)

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
CIV 2006-409-001370

ADMIRALTY ACTION IN REM

BETWEEN UFL CHARTERS LIMITED
Plaintiff

AND THE SHIP "MALAKHOV KURGAN"
Defendant

Hearing: 8 July 2008

Counsel: T W Evatt for the Plaintiff
No appearance for the Defendant

Judgment: 8 July 2008

ORAL JUDGMENT OF WILD J

[1] By application filed on 25 June, the plaintiff seeks judgment by default and an order that the proceeds of the sale of the defendant ship "Malakhov Kurgan" be paid to the plaintiff on account of the judgment.

[2] The application is grounded on the defendant's failure to file a statement of defence in this proceeding, but there is perhaps rather more of a background to the application than that.

[3] By statement of claim filed on 4 August 2006 the plaintiff commenced an admiralty action in rem against the defendant ship. The plaintiff is a New Zealand company which had chartered thc defendant ship from its Russian owner. The claim was for USD2,921,918.60 which the plaintiff claimed was owing under the charter agreements. The sum was the difference between the charter fees payable by the plaintiff on the one hand, and the operating and other expenses for the ship which the plaintiff had paid, but which in terms of the charter agreements were payable by the owner of the ship,

[4] The ship had been arrested by the Registrar of this Court on 21 June 2006, on the plaintiff's application.

[5] On 21 July 2006 the owner of the ship, SSE Ukrrybflot, filed an appearance and applied for an order staying the proceeding on the ground that there was an arbitration clause in the charter agreements under which the plaintiff was suing.

[6] On 26 July 2006 the plaintiff applied for an order that the ship be appraised and sold and the proceeds paid into Court.

[7] Ronald Young J dealt with those opposing applications in a judgment he delivered on 17 October 2006. First, he stayed the in personam part of the proceeding, that is the proceeding against the ship's owner as opposed to the in rem proceeding against the ship itself. Second, he declined the plaintiff's application for appraisement and sale of the ship. In doing so he gave directions that the ship's owner attend promptly to the pending classification inspection of the ship, and pay the outgoings being incurred while it was berthed in Port Lyttelton. Those outgoings were running at about $5,825 per week.

[8] The ship's owner did not comply with Ronald Young J's directions. Consequently, in a judgment given on 27 June 2007, Chisholm J made an order for appraisement and sale of the ship.

[9] Following that order, the ship was appraised and valued at approximately USD285,000. The Registrar then offered the ship for sale by tender in the usual way. The best tender received by the Registrar was USD112,500, less than half its appraised value.

[10] Concerned at a pending sale at what appeared to be a substantial undervalue, the owner of the ship applied on 21 July 2007 for an order releasing the ship from arrest, provided the owner paid into Court a sum equivalent to the highest tender received by the Registrar.

[11] In a judgment he delivered on 10 December [sic: September] 2007, Panckhurst J declined an application by the owner of the ship to release it from arrest, on condition that the owner first paid into Court the amount of the highest tender. Panckhurst J took the view that such a course, which he considered was unprecedented, would challenge thc integrity of the process of selling ships arrested by Courts in their Admiralty jurisdiction.

[12] The ship was sold by the Registrar on 1 October 2007 for USD112,500 plus GST. This sum converted into NZD156,266,62 GST inclusive and those monies were paid into Court.

[13] In the meantime, the in personam action had gone to arbitration before Dr E D Wylie QC, on 7 April 2007. Although the owner had filed a statement of defence and counterclaim, the owner did not appear at the arbitration. The arbitrator awarded the plaintiff USD 1,175,328.

[14] After payment of Court costs, berthage fees to the Lyttelton Port Company, and various expenses incurred during the arrest of the ship, only about $13,000 remains in Court. So it is only that small amount of money that will be available to the plaintiff to satisfy thc judgment it seeks.

[15] I am satisfied that judgment should go to the plaintiff. The defendant is undoubtedly in default of filing a statement of defence, but it has also given up more generally in defending the proceedings against the ship in rem, and its owners in personam, as is borne out by the chronology I have outlined.

[16] As I mentioned, the plaintiff's statement of claim in this proceeding sought a total of USD2,921,918.60. The plaintiff now seeks judgment for the lesser sum of USD1,175,328 being the wages it paid the crew of the ship under the various charter agreements. That approach is consistent with the approach it took in the arbitration proceeding against the ship's owners, in which it successfully obtained an award for that amount.

[17] Accordingly I enter judgment for the plaintiff in the sum of USD1,175,328, and I order that the remaining proceeds of the sale of the ship held by the Registrar be paid out to the plaintiff in satisfaction of that judgment. As any award of costs is pointless, I make none.

Solicitors: White Fox and Jones, Christchurch for the Plaintiff
Anthony Harper, Christchurch for the Defendant