Mt Maunganui Seafoods v Collins

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
AD 18-SD 01

BETWEEN MT MAUNGANUI SEAFOODS a duly incorporated company having its registered office at Tyne Street, Mt Maunganui
First Plaintiff

NAV STATION LIMITED a duly incorporated company having its registered office at corner Gaunt & Daldy Streets, Auckland and carrying on business as an equipment supplier
Second Plaintiff

AND JOSEPH COLLINS c/- Fishing Vessel Tiakina, Opua
First Defendant

AND FISHING VESSEL "TIAKINA"
Second Defendant

Hearing: 14 August 2001

Counsel: R G Ewen for Plaintiffs
No appearance for First Defendant
S J Grey for Second Defendant

Judgment: 13 September 2001

RESERVED JUDGMENT OF PRIESTLEY J

Solicitors:
Wynyard Wood, PO Box 6048, Fax 09 309 1044, Auckland
M S Sullivan and Assocs, PO Box 921, Fax 03 548 4195, Nelson

Background

[1] The second defendant ("the vessel") is jointly owned by Mr D G Speedy and his wife B D Speedy ("the owner"). The vessel is registered on the New Zealand Shipping Registry, its registry port being Wellington.

[2] On 23 May 2001 the plaintiffs invoked the admiralty jurisdiction of the High Court. An in rem proceeding was commenced against the vessel and the vessel was arrested that day at the port of Opua.

[3] The plaintiffs are owed money by the first defendant. In personam claims were commenced against him. As at the date of hearing the first defendant had not been served and could not be located. Owing to the first plaintiff is the sum of $78,467.48 being moneys supplied for fuel, ice and a refit. The sum owing to the second plaintiff for supplied commercial fishing equipment is $17,391.07.

Issue

[4] The parties agreed to seek the Court's decision on a preliminary issue. That issue was whether or not at the time of the vessel's arrest (23 May 2001) the first defendant had a demise by charter of the vessel from its owner.

Relevant Law

[5] Section 5(2)(b) of the Admiralty Act 1973 provides:

5. Actions in rem -

(1) In any case in which there is a maritime lien or other charge on any ship, aircraft, or other property for the amount claimed, the admiralty jurisdiction of the [High Court] may be invoked by an action in rem against that ship, aircraft, or property.

(2) In addition to the rights conferred by subsection (1) of this section, the admiralty jurisdiction of the [High Court] may be invoked by an action in rem in respect of all questions and claims specified in subsection (1) of section 4 of this Act ...

Provided that -

...

(b) In questions and claims specified in paragraphs (d) to (r) ... of subsection (1) of section 4 of this Act arising in connection with a ship where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the jurisdiction of the [High Court] may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against -

(i) That ship if, at the time when the action is brought, it is beneficially owned as respects all the shares therein by, or is on charter by demise to, that person; or (Emphasis added)

(ii) Any other ship which, at the time when the action is brought, is beneficially owned or on charter by demise as aforesaid.

(3) Where in the exercise of its admiralty jurisdiction the Court orders any ship or other property to be sold, the Court shall have jurisdiction to hear and determine any question arising as to the title to the proceeds of sale.

[6] I was greatly assisted by focussed submissions from counsel. I have also considered various relevant authorities to which I refer later.

[7] As is apparent from the preliminary issue which the parties agreed needed determination, the plaintiffs' in rem proceeding against the vessel stands or falls on whether, at the time of the vessel's arrest, it was on a charter by demise to the first defendant. (Section 5(2)(b)(i)). There is no dispute that the first defendant is a person liable on the plaintiffs' in personam claim.

The facts

[8] The parties agreed on most factual issues which were specified in a joint memorandum. Affidavit evidence filed, however, was amplified by cross-examination before me. The viva voce evidence of the owner Mr G G Speedy in particular painted a much fuller picture than his affidavits alone.

[9] The owner and the first defendant entered into a written agreement dated 29 February 2000 for the sale of the vessel to the first defendant. The agreed purchase price was $200,000 to be paid by an immediate $500 deposit and direct weekly credits of $500 thereafter with the outstanding balance to be paid in one lump sum on 1 June 2000.

[10] In terms of the agreement the first defendant on payment of the deposit, was entitled to take possession of the vessel but title did not pass until payment of the full purchase price paid on settlement date. Risk passed to the first defendant on taking possession as did responsibility for paying all berthage and maintenance costs.

[11] Certain predictable remedies were stipulated if the first defendant, as purchaser, failed to pay the purchase price. These included the right to cancel the agreement fifteen working days after giving written notice.

[12] The first defendant took possession of the vessel on 29 February 2000 and, as stipulated in the agreement, sailed it to Tauranga for a refit. It was during this phase that the first defendant incurred the debts owing to the plaintiffs. After the refit the first defendant used the vessel for a number of commercial fishing expeditions.

[13] The first defendant apparently fell behind in various payments and was clearly unable to meet the first June 2000 settlement date. The agreement was varied to defer payment of the outstanding balance of the purchase price until 1 October 2000 and extended further to 24 January 2001. No other variations were concluded.

[14] On 9 April 2001 a solicitor acting for the owner prepared a written notice of final demand requiring full payment for the vessel to be made by 24 April 2001. This notice was served on the first defendant on l0 April. No payment was made on due date.

[15] On 1 May 2001 Mr Speedy travelled to Opua for the specific purpose of serving on the first defendant a notice cancelling the agreement. That notice was served. The first defendant did not leave the vessel voluntarily. There was some involvement by the New Zealand Police. Further discussions between Mr Speedy and the first defendant resulted in the first defendant staying on the vessel.

Events of 1 May 2001

[16] The events at Opua on 1 May 2001 and the discussions between Mr Speedy and the first defendant are of critical importance to the determination of the preliminary issue. The owner (effectively representing the vessel) contends that service of the cancellation notice on the first defendant on 1 May 2001 was sufficient to bring any charter by demise to an end; that from thenceforth the first defendant remained on the vessel solely as a caretaker; and that termination of the charter for demise removes the basis of any in rem claim against the vessel. The plaintiffs for their part contend that the charter by demise was not lawfully brought to an end and in particular that there was no repossession and/or redelivery of the vessel to its owners. A closer examination of the facts is thus required.

[17] Affidavit evidence was received from Constable A J Tele'a of the New Zealand Police at Kaikohe. His affidavit exhibits a job sheet which can be accurately summarised thus :

I was rung by Dave Speedy from Auckland who explained to me that he was travelling up North to Opua with a crew to repossess [the vessel].

Speedy explained to me that this was a repossession job but they had a couple of worries and concerns regarding [the first defendant] who is reported to have a couple of firearms on board and they were worried in case there would be a confrontation when they arrived in the afternoon.

[At 1600 hours I arrived at Opua wharf]. [Speedy] told me that it appears [the first defendant] is not on board but there were approximately four people drinking beer at the front of the boat .... [The vessel] was taking in water at the front and would need a major salvage operation of sorts to pump the water out.

I spoke to some of the occupants... they said that they were only temporarily living and staying there....

I asked them to take their personal belongings and possessions off the boat because the boat was now going to be repossessed ....

They all complied ...

[18] Constable Tele'a then left the Opua wharf but returned approximately an hour later having been alerted to the fact that there was a risk of some major disorder. There was discussion with the first defendant about his firearm's licence. The police officer was told by the first defendant that he had a stake of approximately $150,000 in the vessel and papers to prove ownership. The first defendant asserted there was no need for the police to be there any more because he and Mr Speedy had made an arrangement and sorted matters out. Mr Speedy for his part told the police officer that everything was fine and that an agreement had been made.

[19] An affidavit in support of the vessel was sworn by R L Bridge who accompanied Mr Speedy to Opua on I May. He deposed that he and the three crew members had been engaged to sail the vessel back to Tauranga once it had been repossessed. The instructions from Mr Speedy were to prepare the vessel and sail it that evening.

[20] Mr Bridge further deposes:

3. Upon our arrival at the Opua Wharf we found the Tiakina and immediately set about pumping water from the vessel. It was in an advanced state of disrepair and, in my opinion, required considerable attention in order to make it seaworthy.

3A. The police arrived at Mr Speedy's request. They checked Mr Speedy's paperwork and suggested that Mr Collins be given reasonable time to remove his gear from the boat. The police then left but remained on standby.

4. Mr Speedy remained on the wharf while we were pumping water from the vessel. We had a pump going that was creating considerable noise.

5. A short time after we commenced working on the vessel Mr Collins arrived at the wharf. I could not hear the conversation between Mr Collins and Mr Speedy but, judging from the body language and facial expressions, it was obvious to me they were arguing heatedly. As a result of this confrontation that was occurring the police were required to attend.

6. After we had finished pumping the vessel dry we were instructed by Mr Speedy to leave the vessel and return with him to Auckland. We returned to Auckland that same evening.

[21] Mr D G Speedy's affidavit on which he was cross-examined deposes:

5. It is correct that I reached a new agreement with Mr Collins after the sale and purchase agreement had been cancelled. The new arrangement was that I reluctantly consented to Mr Collins being given a couple of days to remain on the boat in order to sort out his personal belongings. This arrangement suited me because I was concerned that if the boat had remained unmonitored in its present condition it could have sunk at its moorings. It was further agreed Mr Collins was to ensure the boat remained pumped and dried out and that the only time the boat could leave the wharf was to pump the bilges out in the open sea and not while moored at the wharf.

...

7. In summary, Mr Collins had no authority from me to use the boat for his own purposes or in any other way than the care taking role that we had verbally agreed upon.

8. 1 would like to point out that I wanted to take possession of the boat from Mr Collins while it was moored at the Opua Wharf on 1 May 2001. Accompanying me to the wharf that same day was a Mr Rodney Bridge of Helensville, Auckland, a ticketed boat skipper, and a crew I had engaged to take possession of the boat and deliver it to Tauranga. Once Mr Bridge had viewed the dubious condition of the vessel he determined it was not fit to travel all the way to Tauranga and was happy to allow Mr Collins to take it to Auckland for me instead. It was my intention to sell the vessel once Mr Collins had delivered it to Auckland for me. At no stage did I give any consent to Mr Collins to continue fishing at any point subsequent to that conversation.

9. The reason for the delay in Mr Collins delivering the vessel to Auckland for me can be accounted for by the sorry state the vessel was in. Numerous repairs had to be effected to enable the vessel to be safely delivered to Auckland. These repairs included pumping and drying it out, a new electric motor for the bilge pump, repairs to one of the three phases of the electrics and some paintwork.

[22] This stance of Mr Speedy was amplified somewhat in cross-examination. Relevant portions of the transcript include :

Q. When you went to the wharf on 1 May you intended to repossess the boat?
A. That was our intention yes.

Q. You didn't did you?
A. No it was physically impossible to.

Q. It was your intention that Mr Collins should bring the boat back to Auckland and physically hand it over to you?
A. Correct.

Q. In the meantime he was in possession of it?
A. Well he was caretaker of it yes.

Q. Mr Collins is in charge of the boat and the only control you had over him was to phone him is that right?
A. Phone him yes.

Q. He didn't reply to most calls?
A. Correct.

Q. You could have repossessed the boat on 1 May and repaired it yourself and arranged for someone else to bring it back to Auckland is that correct?
A. I could have but the problem is I had paid the berthage on it until 1 August and I couldn't see any problem with rushing it back to Auckland

Q. In any of those telephone discussions with you was there talk about selling the vessel overseas?
A. A couple of times yes.

Q. In a way you wanted to keep Mr Collins happy?
A. Unfortunately Charlie Austin from Mt Maunganui Seafood told me he had a reputation of stripping boats ....

Q. You wanted to keep him happy?
A. That's exactly why I wanted to keep him happy.

Q. Mr Spranger says in his affidavit "I phoned Mr Speedy about the situation and I was told by Mr Speedy that he had come to an arrangement and that Mr Collins had more time to pay?
A. I might have said that.

[23] My findings of fact on the basis of all the evidence so far as the events of 1 May 2001 and their surrounding circumstances are concerned are as follows:

• Prior to April 2001 the owner was anxious to conclude the sale of the vessel to the first defendant.

• The owner's patience drew to an end and he resolved to cancel the agreement for sale.

• The owner travelled to Opua with a designated skipper (Mr Bridge) determined to repossess the vessel, put on his own crew and to sail the vessel to Tauranga.

• The owner expected some form of resistance from the first defendant which led him, in a pre-emptive way, to arrange a police presence.

• The combination of the first defendant's reluctance or refusal to leave the vessel coupled with the need to pump out the vessel and make it safe resulted in the owner resiling from his original intention and deciding instead to leave the first defendant aboard the vessel to sail to Auckland in due course.

• The agreement for sale and purchase of the vessel between the owner and the first defendant was cancelled by delivering the appropriate cancellation notice to the first defendant.

• Having cancelled the contract by service of the notice on 1 May 2001 the owner's approach over the next few weeks, so far as the first defendant being aboard the vessel was concerned, was equivocal.

• The owner permitted and acquiesced in the first defendant's ongoing involvement with the vessel which included returning to Opua on 9 May with a new pump which was delivered to the first defendant on board the vessel; leaving the timetable for the sailing of the vessel to Auckland to the first defendant to his discretion; acquiescing in the first defendant organising possible sales of the vessel; and indicated to a third party that the agreement with the first defendant for sale of the vessel might still be alive.

• The owner was anxious not to antagonise the first defendant.

The status of first defendant prior to 1 May 2001

[24] In terms of s 5(2)(b)(i) of the Admiralty Act 1973 an in rem action against a ship is legitimate if a person liable in respect of an in personam claim was, at the time the action was brought, the beneficial owner of the ship or the ship was on a charter by demise to that person.

[25] Prior to 1 May 2001 the first defendant was clearly the beneficial owner of the ship by virtue of his rights as purchaser under the agreement for sale and purchase. It was accepted by counsel for the vessel that the first defendant was beneficial owner of the ship and was also in control or possession of the vessel at the time the in personam causes of action arose. It was further accepted that the first defendant was the beneficial owner of the vessel under the agreement for sale and purchase until its cancellation on 1 May 2001. Clearly the first defendant's rights as a purchaser ceased once the agreement was cancelled. Despite any findings relating to the owner's equivocal attitude, there is no evidence to suggest that the agreement for sale and purchase was ever reinstated. Thus, the first defendant ceased to be a beneficial owner of the vessel on 1 May.

[26] As to the alternative limb, the vessel being on charter by demise to the first defendant, I am satisfied on all the evidence that there was such a charter in operation from 29 February 2000 to 1 May 2001. The first defendant had possession of the vessel. His rights were unrestricted. There was no barrier to him embarking on any voyage during the period his right to possession under the agreement was afoot.

[27] Although counsel for the vessel does not concede there was in fact a charter by demise no cogent (or indeed any) submissions were made to the effect that there was no such charter or some other relationship afoot. Rather counsel's submissions were directed to the absence of any charter by demise at the time the proceeding was commenced and the vessel arrested.

[28] Ms Grey referred me to Lloyds Practical Shipping Guides: Maritime Law which defines a demised charter as:

... an agreement whereunder the charterer literally '"takes over" the ship and has possession of it together with the right of management and control ... and will also be responsible for victualling and supplying the ship.

[29] Counsel submitted that demise charter agreements are usually established by extensive documents setting out in detail the parties' respective rights and obligations. It was further submitted that it was not appropriate to imply a demise charter except in the clearest of circumstances.

[30] I am satisfied on the basis of the evidence before me that not only was the first defendant in possession of the vessel pursuant to his contractual rights under the agreement but additionally that very right of possession constituted (until such time as the agreement was completed or cancelled), a demise by charter.

[31] Scrutton on Charter Parties (20th ed) states:

A charter by demise operates as a lease on the ship itself, to which the services of the master and crew may or may not be superadded. The charterer becomes for the time the owner of the vessel; the master and crew become to all intents his servants, and through them the possession of the ship is in him. (59).

[32] The same authority also cites with approval the dictum of Lord Esher in Baunwoll v Gilchrest [1892] 1 QB 253, 259, subsequently approved in the House of Lords ([1893] AC 8) :

The question [whether or not the charter amounts to a demise] depends, where other things are not in the way, upon this: Whether the owner has by the charter, where there is a charter, parted with the whole possession and control of the ship, and to this extent, that he has given to the charterer a power and right independent of him, and without reference to him to do what he pleases with regard to the captain, the crew, and the management and employment of the ship. That has been called a letting or demise of the ship. The right expression is that it is a parting with the whole possession and control of the ship.

[33] That on the facts is precisely what the owner permitted the first defendant to do in relation to the vessel between 29 February 2000 and 1 May 2001.

Termination of charter of demise

[34] This factual and legal analysis has been necessary to illuminate the issue. The respective submissions of the plaintiffs and the second defendant collide on this narrow point. Did the events of 1 May 2001 terminate the charter by demise with the result that the vessel was not subject to such a charter when it was arrested three weeks later?

[35] Counsel for the vessel is undoubtedly correct when she submits that had the first defendant left the vessel on 1 May 2001 as the owner intended, then there would have been no jurisdiction to arrest the vessel at the plaintiffs' request. In her submission the events of 1 May resulted in the first defendant staying on the vessel in a different capacity from that of a charterer. Although present on the vessel he was there as a caretaker pursuant to arrangements negotiated with the owner. Counsel submitted that to support the arrest the onus was on the plaintiffs to establish that the first defendant remained the demised charterer of the vessel up to 23 May. In her submission the first defendant no longer had any authority to use the vessel after 1 May other than to make it seaworthy and to return it to Auckland.

[36] The plaintiffs' stance is simple. Counsel points to the evidence which in his submission was sufficient to show that the first defendant remained in possession of the vessel after 1 May. The actions of the owner in Mr Ewen's submission were insufficient to terminate the charter by demise. There had been no effective repossession or redelivery of the vessel to the owner. Such steps were necessary to bring the charter by demise to an end.

Decision

[37] The answer to the question lying at the heart of the issue for me depends on whether there has been some act of an actual, symbolic or constructive nature which is tantamount to a delivery of possession of the vessel back to its owner.

[38] In this regard I have found great assistance in the decision of Giles J in Mobil Oil New Zealand Lid v The ship "Rangiora" [2000] 1 NZLR 49.

[39] it is not necessary for me to refer to the facts of that decision. They were complex but the primary legal issue was when a demise charter came to an end.

[40] Authorities on this issue suggest no simple answer. Giles J considered at length the extensive review of the authorities carried out by Tamberlin J in the Federal Court of Australia decision (also involving a demised charter) Patrick Stevedores No 2 Pty Limited v MV "Turakina" (1998) 154 ALR 666.

[41] Having drawn extensively on Tamberlin J's analysis Giles J then summarised the law for the purpose of determining what he described as "the fulcrum of the the case" (72) which was whether notice of withdrawal or termination of a charterer's right of possession was sufficient to determine the charterparty or whether instead a physical retaking of possession was necessary.

[42] The legal platform to decide that central issue was thus erected by Giles J:

Tamberlin J then drew his consideration of the authorities together and concluded at p 675 that:

"Although the above authorities do not expressly decide that redelivery of possession is necessary in order to terminate a charter by demise, they proceed on the basis that there is a significant distinction between a time or voyage charter and a demise charter. This distinction resides in the fact that in a non-demise charter there is no requirement for delivery or transfer of possession to the charterer at the commencement of the charter. Accordingly, redelivery cannot require a transfer back of possession. In such a case, the services provided to the charterer are terminated upon notice of withdrawal. However, in the case of a demise charter the vessel itself is let and possession is taken by the charterer. Therefore, once the vessel is withdrawn from the service of the charterer, an obligation to redeliver possession arises because possession has been delivered at the commencement of the charter. Redelivery, in its natural and ordinary meaning, denotes a delivery back of that which was originally delivered."

In the "Turakina", as with the present vessels, as at the time of commencement of the proceedings there had been no act of actual or symbolic delivery of possession back to Deil. Neither was there any act capable of being construed as constructive redelivery - a concept I would not be prepared to rule out.

However, as did Tamberlin J, I conclude that at English law a demise charter is effectively brought to an end when the right to possession and control is withdrawn (the notice of termination) and redelivery is achieved. Neither act need be consensual. I reject Mr Broadmore's submission to the contrary. To so hold would enable a defaulting demise charterer to prolong the owners' vulnerability and exposure to s 5(2) liability. Most Admiralty jurisdictions contain such a provision. It cannot be the case that the law leaves it to the whim of a party in breach to decide when and how the innocent party can effectively bring an end to the relationship. That is not the law of contract and this charter-party is a contract to which general principles apply. Provided the default relied upon gives a right to termination (which it does) then cancellation is effected by giving notice. I much prefer Mr David's pragmatic approach whereby withdrawal is unilateral (although dependent upon established breach) but that the owner must nevertheless recover possession, actual, symbolic or constructive. I incline to the view that it would suffice for the owner to attend upon the vessel by an agent and announce to the world that it has retaken possession of the ship. Such a proclamation would not be affected by considerations such as the taking of accounts over provisions, spares and bunkers or removing cargo or terminating the employ of master and crew - to whom the owner enjoys no contractual obligation in a demise charter situation. It would signify positive action reclaiming possession. But on the evidence that did not occur. Alternatively, an owner could issue proceedings seeking possession. Or the parties could record redelivery.

In my view, recovery of possession is necessary and the law recognises that by allowing for a charter-hire obligation to continue until it is effected.

[43] This approach of Giles J was recently adopted by Fisher J in Bridon New Zealand Limited v The Ship "Wybia" & Anor (Auckland High Court, AD 926, 13 June 2000). I intend to adopt the same analysis and the same legal platform as Giles J.

[44] The sole but critical task which remains is for me to decide whether the events of 1 May 2001 resulted in redelivery of the vessel to its owners. For there to be termination of the demise charter the owners must recover possession of the vessel actually, symbolically or constructively. I have no doubt that this is what Mr Speedy intended to achieve when he travelled to Opua on 1 May. However, redelivery is not what occurred.

[45] The obstacles in the way of a finding of redelivery are significant. It is undisputed that the owner served notice of cancellation of the agreement on the first defendant on the vessel. This, however, falls short of an announcement "to the world" that the owner had retaken possession of the vessel. The opportunity to make such an announcement in the presence of various witnesses including a police officer was not taken up. Instead Mr Speedy informed Constable Tele'a that he had reached an agreement with the first defendant. To the outside world no change had been effected. The first defendant was left in possession of the vessel. The owner's chosen new skipper was not put aboard. The owner left the scene. No-one apart from Mr Speedy (and arguably the first defendant from whom there is no evidence) knew that the first defendant's status had changed from that of skipper in possession to that of mere caretaker with the limited responsibility of pumping out the vessel and sailing it to Auckland.

[46] On the facts as I have found them there was clearly no redelivery of the vessel to its owner. Possession remained unchanged. In my judgment the events of 1 May 2001 fell considerably short of any symbolic recovery of possession by the owner. Although taking possession was Mr Speedy's intention he equivocated in the face of opposition from the first defendant. His decision to leave the first defendant aboard the vessel to pump it out (rather than evicting the first defendant and engaging somebody else to pump out the vessel) coupled with his desire not to antagonise the first defendant, in my judgment prevent any finding of recovery of possession of the vessel by symbolic or constructive means.

[47] The owner let the situation drift. There had been no change in the owner's stance by 23 May 2001. In the intervening three weeks the owner's actions had been limited to delivering a pump to the first defendant on the vessel and endeavouring to contact him by telephone.

[48] It thus follows, for the reasons which I have stated, that the charter by demise which was unquestionably operating between 29 February 2000 and 1 May 2001 had not been brought to an end when the vessel was arrested on 23 May 2001. The first defendant still had such a charter by demise at the time of the vessel's arrest.

Orders

[49] The preliminary issue is determined by this Court holding that, as at 23 May 2001, the first defendant's charter by demise of the second defendant vessel was operative.

[50] This decision on a preliminary issue does not affect in any way other procedural or substantive defences which might be available to the second defendant.

[51] The proceeding is to be listed for mention in the Duty Judge list on Monday 15 October to deal with any further directions which the substantive proceeding may require.

Costs

[52] Counsel expressed some confidence that they would be able to resolve outstanding issues once this preliminary issue had been decided. Hopefully they can do so without further assistance from the Court. Counsel sought the reservation of costs.

[53] Leave is reserved to the plaintiffs to file a memorandum on the issue of costs if costs cannot be resolved within 42 days. The second defendant filing a memorandum on the same issue 14 days thereafter.