Hurtigbat Vestfold Sverige Line AS v The Ship "Om"
IN THE HIGH COURT OF NEW
ZEALAND
AUCKLAND REGISTRY
AD.37/00
IN THE MATTER of an Admiralty
Action in rem
BETWEEN
HURTIGBAT VESTFOLD SVERIGE LINE AS
Plaintiff
AND
THE SHIP "OM"
First Defendant
AND
THE SHIP "ORLOVKA"
Second Defendant
AND THE SHIP "OSHA"
Third Defendant
Hearing: 4 October 2000
Counsel: Ian Gault and
Mathew Cheung for plaintiff/applicant
Andrew Tetley for first defendant/respondent
Judgment: 26 October 2000
JUDGMENT OF LAURENSON J
Solicitors: Bell Gully, DX CP
20509, Auckland
Russell McVeagh McKenzie Bartleet & Co, DX CX 10085,
Auckland
Introduction
[1] This is an interlocutory application for particular discovery and inspection to enable an in rem plaintiff to obtain information in connection with a preliminary argument as to jurisdiction.
Background
[2] The plaintiff issued a notice of proceeding in rem on 15 August 2000 pursuant to ss.4(1)(h),(l),(m) and/or (o) and s.5(2)(b)(ii) of the Admiralty Act 1973.
[3] This notice was served in respect of three ships - the "Om", "Orlovka" and "Osha". These are sister ships to the "Ondozero", and "Osveyskoye" and "Oymur" in respect of which proceedings in personam and rem had been issued in Norway in order to recover moneys due to the plaintiff by Karelrybflot JSC, a fishing company based in the Karel Republic in the Russian Federation.
[4] Judgment had been obtained in the Norwegian action on 15 June 2000. The New Zealand proceeding in rem seeks to enforce the Norwegian judgment.
[5] On 8 September 2000 AS Kareltrast, a company incorporated in Belomorsk in the Karel Republic filed a notice of application to set aside the notice of proceeding in rem and for release of the three defendant ships.
[6] This application stated that Karelrybflot is not the beneficial owner or charterer by demise of any of the defendant ships and that these are beneficially owned by Kareltrast which is not liable for the plaintiff's claim in personam.
[7] The plaintiff is required to prove on the balance of probabilities that this Court has jurisdiction in the matter. To do so it must prove that -
[a] Karelrybflot is liable in respect of the Norwegian judgment;
[b] That the defendant ships are sister ships to those in respect of which the Norwegian judgment was obtained;
[c] Karelrybflot was the beneficial owner of the ships when the present notice of proceeding was issued on 15 August 1999.
[8] The plaintiff filed a notice of objection to the Kareltrast application on 15 September 2000 and, on 22 September 2000, an application for particular discovery pursuant to r.300 and inspection of the ships pursuant to r.793.
[9] The plaintiff's notice of opposition states that Karelrybflot was at all material times the beneficial owner of the ships. The applications for particular discovery and inspection seek to obtain information relation to the beneficial ownership of the three ships.
[10] Both the plaintiff and Kareltrast have supplied information including documents seeking to support their respective positions. Whilst it is not the function of this Court at this stage to resolve the issue of the beneficial ownership, I have to say that none of the information supplied appears on the face of it, to necessarily resolve the issue of beneficial ownership as at 15 August 2000.
[11] The purpose of this hearing was to determine whether the plaintiff is entitled to the orders for particular discovery and/or inspection.
[12] Counsel for Kareltrast submitted that the answer to this question is simple -
[a] This Court cannot embark on a consideration of the in rem proceeding until the objection to jurisdiction is resolved;
[b] The plaintiff's applications for particular discovery and inspection are interlocutory applications;
[c] So too is Kareltrast's application to set aside the in rem proceeding;
[d] An interlocutory application has no independent existence of its own and jurisdiction to entertain it can only arise from and must be dependent upon the originating proceeding, see Advanced Cardiovascular Systems Inc v Universal Specialities Limited [1997] 1 NZLR 186,189;
[e] A "proceeding" is defined in r.3 as meaning-
Any application to the Court for the exercise of its civil jurisdiction other than an interlocutory application.
[f] If, therefore, this Court proceeds to consider and then determine the plaintiff's interlocutory application it is thereby necessarily accepting jurisdiction to hear and determine the in rem proceeding which is the subject of an objection as to jurisdiction.
[g] Accordingly, while the objection to jurisdiction remains unresolved it is not open to the Court to consider the plaintiff's two applications because the Court's jurisdiction to do so depends on the Court having jurisdiction in the originating (in rem) proceeding.
[13] The plaintiff has argued, however, in the light of observations made by the Court of Appeal in two decisions that because the orders for particular discovery and inspection are in fact directed to obtaining information to enable it to address the jurisdiction issue then there is jurisdiction to make the orders made.
[14] The first of these two decisions is Baltic Shipping Company Limited v Pegasus Lines SA [1996] 3 NZLR 641. This was an appeal from a decision of the High Court refusing an application to set aside admiralty proceedings for a writ of arrest of a ship on the ground of lack of jurisdiction. Two issues arose, namely whether the claim fell within the provisions of s.4(1)(h) of the Admiralty Act 1973 so as to allow the respondent to maintain an action in rem against the ship; and what was the correct approach to be adopted by the Court when jurisdiction on an in rem claim was challenged, i.e. whether the matter is to be judged solely by reference to the pleadings, or should the Court also consider the merits of the pleaded claim?
[15] In the course of his judgment McGechan J made certain cautious observations as to the position of an in rem plaintiff faced with the obligation of proving any factual preconditions in the course of justifying the jurisdictional requirements. He said at p.656 -
With those factual preconditions out of contention, there is no doubt the respondent in rem plaintiff has shown pleadings which fit within the statute interpreted on The Antonis P Lemos lines, and jurisdiction is established.
In that situation, some caution is warranted in further exposition. It is a field in which dicta may well end up as jetsam. However, without prejudgment, in light of the approach adopted in The Ship "Shin Kobe Maru" (1994) 181 CLR 404 (and notwithstanding The Akademik Shokalskiy) it would be wise for in rem plaintiffs to be ready themselves to prove any "factual preconditions" (in The Ship "Shin Kobe Maru" (1994) 181 CLR 404 sense), and on the balance of probabilities. It is appreciated there can be real practical difficulties in doing so at a threshold interlocutory stage; difficulties perhaps compounded in New Zealand by isolation from major maritime centres. Those difficulties are not to be under rated. This case exemplifies some. There may need to be room for benevolence in relation to time limits; use of s.3(1)(c) of the Evidence Amendment Act (No 2) 1980; and even perhaps early discovery of documents. There could be a case for a change to the obligatory character of R.5(4) of the High Court Rules, which appears to prevent deferral of the jurisdictional question until trial or to an issue posed under R.418. However, notwithstanding these difficulties, there must be some concern as to any approach to proof of jurisdictional facts (on both onus and standard) which puts New Zealand out of step with current British and Australian maritime law. Admiralty is an area where international consistency has more than usual importance: cp The Tolten [1946] p.135, 142, an approach noted (pp.2-3) in the report of the Law Reform Committee on Admiralty Jurisdiction, 29 March 1972, which underlies the current legislation.
[16] The second case is Vostok Shipping Co Ltd v Confederation Ltd [2000] 1 NZLR 37. Here the Court of Appeal was concerned with an appeal against an order setting aside an arrest. The Court held unanimously at para [21] -
But, though holding that the matter of jurisdiction had to be dealt with on the motion, Robert Goff J said that evidence would be admitted for the purpose of the ruling on jurisdiction and there could be oral evidence, for example, by cross-examination of deponents of affidavits. In Baltic Shipping this Court said that ownership must, if in issue, be decided on the motion to set aside and must be decided on evidence and not merely on pleadings. It seems to us that, even allowing for the urgency of the matter, there is no reason why the High Court should not allow an adjournment of the application to set aside the proceeding to give time for the assembling of the necessary evidence and, if necessary, for deponents to be brought to this country for cross-examination so that the important question of ownership, or any other factual issue arising under s.5 as a matter going to jurisdiction, can be determined without undue haste and consequent prejudice to a party which perhaps may not have immediate access to all relevant factual materials. If the application to set aside is heard in this manner it will be little different from a R.418 hearing.
[17] On the basis of these two statements, the plaintiff submitted the Court of Appeal had given a clear indication that it recognised the difficulties of an in rem plaintiff when undertaking the onus of proving jurisdiction and that more importantly, the Court had indicated the possibility that conventional information gathering procedures should be available to such a plaintiff.
[18] Be that as it may, the question still remains as to whether the Court has the necessary power to do so and particularly taking into account the clear statement in Advanced Cardiovascular as to the status of interlocutory applications pending resolution of the preliminary jurisdictional issue.
[19] Advanced Cardiovascular was concerned with whether or not the Court could entertain an application for summary judgment (an interlocutory application) prior to resolution of an objection to jurisdiction. For the reasons which I have already noted, it found it could not. The matter is dealt with at length at p. 189 by Henry J who delivered the decision of the Court -
Rule 131 is explicit in its terms as to the function of the Court on hearing an application under R.131(3). If satisfied that it has no jurisdiction to hear the proceeding it must dismiss the proceeding. If satisfied it has jurisdiction, the application must be dismissed and the appearance set aside. "Proceeding" is defined in R 3 and excludes an interlocutory application. An interlocutory application has no independent existence, and jurisdiction to entertain it can only arise from and must be dependent upon the status of the originating proceeding. An application for summary judgment is an interlocutory application (R. 138) and accordingly this particular application is part of a proceeding which is under challenge as to jurisdiction. If the Court entertains the summary judgment application it is thereby necessarily accepting jurisdiction to hear and determine the proceeding. It is difficult to see how the Court can thereafter logically decide that it has no jurisdiction. It is the jurisdiction of the Court to entertain the claim which is now at issue, and that must be determined prior to the Court embarking on a hearing of the proceeding, whether substantively or in any interlocutory way. If the summary judgment application were to proceed, ACS would have to submit to the jurisdiction if it desired to defend. That would almost certainly involve the filing of affidavits, as well as an appearance by counsel to argue the issues.
Mr Randerson submitted that the Judge could, or rather should, have dismissed the application by ACS and set aside its appearance, but only in so far as each related to the summary judgment application thereby preserving its rights if a trial became necessary. In our opinion such a course is not open. The inquiry under R. 131(3) or (5) is not directed to an interlocutory application which forms part of a proceeding, but to the proceeding itself. Rule 131 does not envisage successive applications at different stages. It appears that the question of successive applications for a stay was not argued before the Court in Kang. It does not arise for determination in this appeal.
We do not think R. 131(7), which allows the Court to impose terms and conditions in exercising its powers under the rule, is of any assistance to USL. It is concerned with matters which may be ancillary to the mandatory primary order.
We are therefore of the view that there is procedural error in allowing the summary judgment application to go to hearing before the initial question of jurisdiction is determined. The real question therefore is whether ACS's application to dismiss the proceeding should be upheld, or, as is propounded in the cross-appeal, it should be dismissed leaving the action to continue. In the latter event, however, the issue of a stay on the ground of forum non conveniens could still require consideration.
[20] In my view as matters stand at the moment and adopting the reasoning of Henry J in Advanced Cardiovascular there is simply no room to argue that discovery can be ordered in the present case.
[21] The issue is whether by reason of the statement made by the Court of Appeal in Vostok that Court has indicated that there should be some reappraisal of the position such that this Court may assume jurisdiction to make orders at a point when -
[a] The Court's jurisdiction in the substantive matter is still to be resolved; and
[b] On a basis which is not dependent on an interlocutory procedure which is in turn dependent on that substantive proceeding.
[22] In relation to these matters I note the following -
[a] The statement in Vostok referred specifically to the possibility of deponents being brought to the Court for cross-examination so that inter alia the important question of ownership could be determined. A party has power under r.508 to compel the attendance of a witness for cross-examination. This rule states -
Cross-examination of deponent -
(1) Any party desiring to cross-examine a deponent who has sworn an affidavit on behalf of an opposite party may serve on that opposite party a notice in writing (which may be by letter addressed to the opposite party's solicitor) requiring the production of the deponent for cross-examination before the Court at the trial.
(2) The notice shall be served, and copies thereof filed in the Court and delivered to all other parties who have taken any step in the proceeding, not less than 3 clear days before the day fixed for the trial.
(3) Unless the deponent is produced accordingly, his affidavit shall not be used as evidence except by the special leave of the Court.
(4) The party to whom the notice is given shall be entitled to compel the attendance of the deponent for cross-examination in the same way as he might compel the attendance of a witness to be examined.
The sanction applied by this rule is that if the deponent does not attend then the deponent's affidavit may, subject to the discretion of the Court, not be read.
Rule 508(4) entitles the party giving notice to attend to compel the attendance of the deponent in the same way as the party may compel the attendance of a witness to be examined. That power is contained in r.497 which refers to the issue of a subpoena. There is no obligation on the witness to attend in the absence of a subpoena. A subpoena to a witness overseas cannot be enforced. if an overseas witness or deponent refuses to attend, that witness, therefore, cannot be compelled to do so and hence it is at least questionable whether a Court would be entitled to refuse leave for the affidavit to be read.
The short point as I see it is that even if the Court was prepared to countenance the issue of a subpoena for the purpose of determining jurisdiction, the powers available to it may not in the final result be effective.
[b] If one assumes for the moment that the statement in Vostok also included the possibility of an order being made for particular discovery and/or inspection, given the reasoning referred to in Advanced Cardiovascular it seems that the power to do so could only be assumed under the Court's inherent jurisdiction. That jurisdiction is recognised in s. 16 of the Judicature Act 1908. It states -
General jurisdiction - The Court shall continue to have all the jurisdiction which it had on the coming into operation of this Act and all judicial jurisdiction which may be necessary to administer the laws of New Zealand.
In the commentary on this section in McGechan Laws of New Zealand (para J16.05), there appears the following -
Inherent jurisdiction
The inherent jurisdiction is a power allowing the Court to summarily deal with matters that arise before it to ensure the machinery of justice is able to turn smoothly. It is possessed by superior Courts of record and exists as only one part of the Court's general jurisdiction.
A Court has the ability to exercise its inherent jurisdiction when it is faced with a difficulty that cannot be dealt with in a satisfactory manner using only the powers conferred by statute or the rules of Court. When such a difficulty arises, the Court will invoke the inherent jurisdiction in order to further the administration of justice. The inherent jurisdiction has been described as a reserve or fund of powers, a residual source, which the Court may draw on when necessary, whenever it is just and equitable to do so. See Jacob, "The Inherent Jurisdiction of the Court" (1970) CLP 23, 51.
The Court of Appeal has stated that it is both unwise and unnecessary to seek to define the scope of the Court's inherent jurisdiction: R v Moke and Lawrence [1996] 1 NZLR 263: (1995) 13 CRNZ 386 (CA), at p.267; p.391.
In my view the dicta referred to in Vostok and Baltic Shipping do indicate that there may be a gap in the rules which may justify recourse to the Court's inherent jurisdiction in order to provide a remedy.
[c] On the face of it the decision in Advanced Cardiovascular indicates that if such a gap is present then any remedy under the existing rules is prevented by the rules.
[d] I suggest it may be possible, however, to draw a distinction between the circumstances which arose in that case as opposed to the circumstances of the present case. In the former case the issue arose in relation to an interlocutory application, namely an application for summary judgment which was quite divorced from any question of jurisdiction. The present application is directly related to that issue. The question arises therefore, whether an exception could be contemplated whereby the exercise of the inherent jurisdiction should be appropriate where the assumption of jurisdiction is solely for the purposes of determining the jurisdictional issue.
[e] There is I suggest some authority for concluding that such a justification does exist. I refer to r.299 which permits the making of an order for particular discovery before a proceeding is commenced. On the face of it this rule permits the making of an interlocutory order for particular discovery which clearly is not dependent on the status of another originating proceeding and which does not have an independent existence. According to the commentary at 299.04 of McGechan reference is made to the origins of this rule as follows -
The equitable remedy of a bill of discovery permitted a plaintiff to bring an action against an "interested" party to make that party discover the names of persons who may have wronged the plaintiff, to enable the plaintiff to take action against any possible wrongdoers. This remedy is still available: Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133; 2 All ER 943 (HL). It seems that r.299 has its origins in this type of jurisdiction: British Markitex Ltd v Johnston (1987) 2 PRNZ 535, although it is much wider in scope and may have eclipsed the earlier procedure entirely. See Thomson v Westpac Banking Corp (No 2) (1986) 2 PRNZ 505.
The present r.299 echoes similar statutory jurisdictions which have been created in recent years. Examples are to be found in RSC 0 24 R.7a (UK), R.60.01 (SA), 0.32.05 (NT), and 0.32.05 (Vic).
Conclusion
[23] In the light of these matters I conclude -
[a] By reference to r.299 it cannot be said that all interlocutory applications are necessarily dependent on the existence of another originating proceeding; and
[b] Because the Court of Appeal has indicated there is a perceived need to extend the procedures of this Court to enable a proper evaluation of preliminary jurisdictional issues then,
[c] By the exercise of the Court's inherent jurisdiction it may be possible to justify the making of an order for discovery as sought in the present case.
[24] I am, however, reluctant to make any firm finding in this regard for three reasons -
[a] For reasons which I will refer to, I am satisfied that even if it was possible to make such an order and/or an order for inspection, it would be inappropriate to do so in the present case;
[b] As McGechan J stated in Baltic Shipping Co Ltd before this Court assumes a jurisdiction to make preliminary interlocutory orders in such cases, there must be some concern as to any approach to proof of jurisdictional facts (on both onus and standard) which puts New Zealand out of step with current British and Australian maritime law. Admiralty is an area where international consistency has more than usual importance.
[c] As the Court of Appeal in England has indicated in A.J. Bekhor & Co Limited v Bilton [1981] 2 All ER 565, the Court must exercise care before determining whether orders for discovery should be made as a result of the exercise of the Court's inherent jurisdiction.
[25] Therefore if it was to be determined that it would be possible to obtain an order for discovery for the purpose of arguing a preliminary jurisdictional issue, then that determination should not be made without full argument as to the wider implications which could arise within the context of international admiralty jurisdictions.
This Case
[26] When considering an application for an order for discovery the Court has a discretion whether to do so or not. The exercise of that jurisdiction is basically dependent on the Court being satisfied pursuant to r.312 that the order is necessary.
[27] In the present case Kareltrast has filed affidavits indicating that ownership of the ships in question was recorded as at 5 January 2000 as being in the name of Kareltrast, in other words well before the present proceeding in rem was filed on 15 August 2000.
[28] In the usual course such evidence would be determinative of any question of ownership. The plaintiff, however, seeks to go behind that position by suggesting that the change of ownership was fraudulent and came about as a result of an intention to defeat creditors.
[29] That issue has been considered in relation to the same ships and finally determined on appeal reported in Kareltrust v Wallace & Cooper Engineering (Lyttelton) Limited [2000] 1 NZLR 401. So far as I can determine the appellant in that case Kareltrust is the same entity as Kareltrast in the present application. In the Kareltrust the Court of Appeal found -
The effect of an order made under s.60 of the Property Law Act was that the impugned transaction was avoided and was treated as having been set aside from the time of the order, or at the time of any earlier act of avoidance, to the extent which was necessary to satisfy the claims of creditors, and to that extent also the title to the asset would be regarded as having reverted to the transferor/debtor. Until a creditor had manifested an election in favour of avoidance the transaction was effective to transfer title away from the debtor. Consequently the transaction was not void ab initio and the transferee could not be regarded as having held the property upon trust for the transferor right from the time of the transaction.
[30] Clearly in this case even if it could be said that the plaintiff has manifested an election in favour of avoidance, that election has not been given until after title was apparently perfected, i.e. at the latest by 5 January 2000.
[31] For these reasons, I conclude that even if discovery and inspection was permitted, the result of those procedures could not produce any information which could avoid the ownership known to be in the name of Kareltrast.
[32] For these reasons, I conclude that even if discovery and inspection could be ordered any information so obtained would be of no use to the plaintiff and accordingly it cannot be said that either of the two procedures is necessary.
[33] Accordingly, the plaintiff's applications for particular discovery and inspection are dismissed. Kareltrast is entitled to costs on the application pursuant to r.48E. I fix these in accordance with the formula 2B under the Rules.