Raukura Moana Fisheries Ltd v The Ship "Irina Zharkikh" (No 2)

IN THE HIGH COURT OF NEW ZEALAND
IN ADMIRALTY
CHRISTCHURCH REGISTRY
ADMIRALTY ACTION IN REM
AD NO 1/00

BETWEEN RAUKURA MOANA FISHERIES LTD
Plaintiff
AND THE SHIP IRINA ZHARKIKH
Defendant

AD NO 2/00

BETWEEN RAUKURA MOANA FISHERIES LTD
Plaintiff
AND THE SHIP KSENIA ZHARKIKH
Defendant

Date of Hearing: 3 October 2001
Appearances: T J Broadmore for the Plaintiff
P A David and A Tetley for Shipowners
Date of Judgment: 3 October 2001

ORAL JUDGMENT OF WILLIAM YOUNG J

Introduction

[1] This is an application by Raukura Moana Fisheries Ltd to be released from undertakings which it gave not to arrest the two vessels which are the nominal defendants in these proceedings

[2] The application falls to be determined in the context of a factual background which I have already referred to at length in a judgment which I delivered on 29 March this year. I trust that I will, therefore, be forgiven if I take my discussion of that factual background largely from what I said in that judgment.

Factual background

[3] The case concerns two fishing vessels, the Irina Zharkikh and the Ksenia Zharkikh. They were owned respectively by Fishing Viv Ltd and Spratt Ltd, companies which are registered in Vanuatu. I will usually refer to these companies as "the shipowners" (except where it is appropriate to distinguish between them). They are in common ultimate beneficial ownership, if I can use that phrase "beneficial ownership" loosely.

[4] In September 1998, Raukura Moana Fisheries Ltd entered into charter arrangements with Fishing Viv Ltd in relation to the Irina Zharkikh and Spratt Ltd in relation to Ksenia Zharkikh and two other Vanuatu companies in relation to another two vessels the Kapitan Lomaev and Mys Chaykovskogo. The two Vanuatu companies which own the Kapitan Lomaev Mys Chaykovskogo are in the same ultimate beneficial ownership as the shipowners.

[5] Under these arrangements the four vessels were to catch fish against quota held by Raukura Moana Fisheries Ltd.

[6] These charters terminated on 30 September 1999 with the conclusion of the 1998-1999 fishing year. The Kapitan Lomaev and the Mys Chaykovskogo then left New Zealand waters. The Irina Zharkikh and the Ksenia Zharkikh were, however, both laid up at Lyttelton and thus remained within the jurisdiction of this court.

[7] Investigations were commenced by the Ministry of Fisheries in relation to fishing activities carried on from these four vessels during the 1998-1999 fishing year. These investigations were obviously well under way in October of last year.

[8] The four fishing vessels had been operated off the West Coast of the South Island. They primarily targeted hoki. The Ministry's primary concerns related to failures to declare by-catch and small and damaged hoki.

[9] While the investigation was underway but before charges were laid, Raukura Moana Fisheries Ltd commenced proceeding in this Court seeking an indemnity against any adverse financial consequences which it might suffer as a result of suspected breaches of the fisheries legislation by the masters and crews of the Irina Zharkikh and the Ksenia Zharkikh. This was on 5 October last year.

[10] These claims were based on the charter agreements which were entered into in respect of those two vessels.

[11] Each charter was in identical terms. It provides for the owner to charter the vessel to Raukura Moana Fisheries Ltd for the 1998-1999 fishing year. The relevant clauses of the agreements provided as follows:-

9. Owner's Responsibilities

The Owner shall be responsible for the following:

9.1 Fishing plan - The efficient organisation and management of fishing operations with a view to fully realising any fishing plan agreed between the parties. …

9.9 Identification of fish product - Accurately identifying and marking all fish product produced by the vessel in full compliance with the requirements of the Fisheries Act 1983 and 1996 and Regulations.

…

11. Operation of vessels

11.1 Fishing methods and areas - The owner shall fish for the species and using the fishing methods authorised by the Charterer's quota and fishing permit and in the fishing areas designed [sic, semble designated] for that quota and species.

11.2 Compliance with New Zealand Laws - The Owner shall ensure that the master of each vessel, his officers and crew are fully aware of their strict obligations under all New Zealand laws and regulations pertaining to fishing operations within the EEZ and the master's, officer's and crew's strict liability for offenses under these laws including the Fisheries Act 1983 and 1996.

11.3 Reporting - The Owner shall ensure that the master of each vessel is fully aware of and carries out his strict obligations to comply with all the requirements to accurately complete as required, Catch Landing Returns, Trawl Catch Effort and Processing Returns as set out in the Fisheries (Reporting) Regulations 1990 and all other reports, returns and documentation as may be required by MFish, the Department of Conservation and the Charterer.

11.4 Excess of Quota - The Owner agrees to ensure that no vessel will take any fish species in excess of quota allocated to it in this charter agreement apart from unavoidable by-catch taken as a result of the lawful taking of quota allocated to the vessels in the charter agreement. Should any vessels unlawfully take any fish species being in excess of allocated quota the Owner will indemnify the Charterer against all losses, fines, penalties or costs, seizures and forfeitures imposed on the Charterer arising from any vessel over fishing or taking of fish without quota or howsoever.

11.5 By catch - The Charterer shall bear all costs of product seized by, or surrendered to, or penalties imposed by the New Zealand Government for by catch taken in excess of quota resulting from the lawful taking of fish species against quota allocated to charter vessels in this charter agreement.

11.6 Indemnity - The Owner shall bear all risk of the fishing operation and hereby indemnifies the Charterer against all costs, claims, demands, liabilities, expenses and any loss or damage incurred by the Charterer, or against the Charterer, including but not limited to fines, seizures and forfeitures ordered against the Charterer, or otherwise incurred by the Charterer arising howsoever out of any act, neglect or default of the Owner, master, officers or crew, ... The foregoing includes but is not limited to …

11.6.3 Breach of the provisions of the Fisheries Act 1983 and 1996 and any regulations thereunder ... and any other laws, regulations or statutes applicable to fishing operations or the operation of fishing vessels.

...

12. Compliance with Charter Agreement and New Zealand Fisheries Laws

12.1 Compliance by masters and crew - The owner shall prior to the commencement and throughout the term of the charter:

12.1.1 Ensure that all masters and crews of vessels are fully informed of the terms and conditions of the charter agreement and the equipment, catch, vessel and forfeiture provisions of the fisheries laws and regulations of New Zealand.

12.1.2 Inform masters and crew of the severe penalties (including fines up to $NZ250,000.00 and the seizure of vessel and cargo per offense) under New Zealand law for breach of or failure to comply with the fisheries law for breach of or failure to comply with the fisheries laws and regulations of New Zealand [sic].

12.1.3 Ensure strict compliance by masters and crews with the requirements of all New Zealand fisheries laws and regulations including the strict obligations to keep, maintain and furnish on demand, records, returns and documentation as required by the Mfish in respect of the catch and operations of vessels operating within the EEZ ...

12.4 Owner's Acknowledgement - The Owner on signing of this agreement acknowledges the strict obligations placed on vessels, masters, officers and crews to comply with all New Zealand legislation and the severe consequences to it and the Charterer in the case of a guilty conviction for any breach.

The charters also contained submissions to arbitration.

[12] If the offences suspected by the Ministry were, indeed, committed by the masters and crews of the Irina Zharkikh and the Ksenia Zharkikh, then, it would appear, at first sight anyway, that the shipowners must indemnify Raukura Moana Fisheries Ltd against any resulting adverse consequences. Further, breaches of the quota management system by the masters and crews of the two vessels, would necessarily involve breaches of the charter agreements and would thus expose the shipowners to claims for damages at the suit of Raukura Moana Fisheries Ltd. On the other hand, if Raukura Moana Fisheries Ltd (via its senior staff) were directly parties to any quota management frauds, then there may be an issue as to the enforceability of the indemnities in respect of the consequences of such frauds.

The commencement of proceedings and the giving of security

[13] As I have indicated, the present proceedings were commenced on 5 October last year at a time when the investigation by the Ministry was underway but before any charges were laid.

[14] Given that the claims by Raukura Moana Fisheries Ltd, arise out of charter agreements, they give rise to statutory actions in rem pursuant to ss 4(1)(h) and 5(2) of the Admiralty Act 1973.

[15] In each case, the notice of proceedings in rem contained the following averment:-

The plaintiff claims the sum of $37,801.54 being legal fees incurred to date, and such other sums as may be incurred by the plaintiff for its liabilities, costs, expenses and losses in respect of an investigation by the Ministry of Fisheries into alleged breaches of the Fisheries Act 1983 and 1996 by the owner and/or the Master and the crew of the Defendant vessel, in respect of which costs and expenses the owner of the Defendant vessel has agreed to indemnify the plaintiff under the terms of a Charter Agreement entered into in 1998.

[16] In each case, in the statement of claim clause 11.6 of the charter agreement was set out. There was then a pleading that the owner:-

[i]s required to indemnify the Plaintiff for all the costs referred to in paragraph 7 above, including all on-going costs.

[17] The prayer for relief in each case sought:

Judgment against the Defendant ship in the amount of all costs and expenses incurred as a result of the Ministry's investigation.

[18] The vessels were not initially arrested. But, in the context of threats of arrest, Raukura Moana Fisheries Ltd and the shipowners entered into an arrangement under which the owners gave security, in respect of each vessel, in the sum of $150,000.

[19] These arrangements were recorded in joint memoranda of counsel dated 1 December 2000. These memoranda are in identical terms. They start with the words "May it Please the Court" and then provide:-

[1] This consent memorandum is filed on behalf of the Plaintiff and the Defendant in respect of security for the Plaintiff s claim. It is filed to record the terms upon which the parties have agreed to address this issue.

[2] The Plaintiff has sought security in the sum of $150,000 for its claim. The Defendant says:-

(a) That the Plaintiff is not entitled to security because its claim is based on a charterparty which is subject to an arbitration clause; and

(b) The security sought is excessive.

[3] The Defendant wishes to ensure that it can deal with the Defendant vessel free from the Plaintiffs claim without further delay. The Plaintiff will not agree to withdraw its request for security.

[4] In the circumstances, the Plaintiff and the Defendant are agreed that the Defendant will pay into court $150,000 with the Defendant reserving its rights in respect of 2(a) and 2(b). If those issues are not capable of agreement between the parties, the Defendant will make the appropriate application to the court.

[5] Upon payment into court of the $150,000, the Plaintiff undertakes that it will not arrest or otherwise detain the Defendant vessel in respect of its claim in this proceeding.

The initial applications by Fishing Viv Ltd and Spratt Ltd

[20] Having given security, the shipowners then applied for orders that:-

1. The proceedings be stayed; and that

2. The security for the claims (in the amounts of $150,000 plus interest in each proceeding) be paid back in part or in full.

[21] These applications were heard by me on 7 March 2001. At the conclusion of the hearing I reserved judgment. I will say a little more shortly about the arguments that were addressed to me at that hearing.

Events which followed the hearing on 7 March 2001

[22] On 8 March (that is the day after the hearing on 7 March) charges against Raukura Moana Fisheries Ltd were laid associated with the fishing activities carried out from the Irina Zharkikh, the Ksenia Zharkikh, the Kapitan Lomaev and the Mys Chaykovskogo.

[23] Raukura Moana Fisheries then amended its claims. Very broadly, the differences between the claims as amended and the claims as filed are as follows:-

1. The claims as amended expressly sought separate relief in relation to costs associated with the Ministry's investigation, costs associated with prosecution and deemed value assessments.

2. As well as claims on the indemnity provisions, the plaintiff sought damages (in a way which effectively mirrored its asserted rights to indemnity).

[24] On 14 March, Raukura Moana Fisheries Ltd arrested the two vessels on the basis of the amended claims. It also obtained a Mareva injunction, on an ex parte basis, on evidence that sales, or possibly charter arrangements, were in the process of negotiation between the shipowners and third parties.

[25] This produced, in turn, further applications by the shipowners seeking release of the vessels from arrest, the discharge of the Mareva injunction and costs on an indemnity basis.

[26] I heard this application on 23 March. By that time I had not delivered judgment in relation to the issues presented to me on 7 March. On 29 March 2001, I delivered a reserved judgment in which I addressed all issues then outstanding.

Judgment of 29 March

[27] In my judgment of 29 March I directed a stay of the proceedings (given the submissions to arbitration in the charters and the Arbitration Act 1996) but upheld the entitlement of Raukura Moana Fisheries Ltd to retain the security which had been provided. I did not discharge the injunction but indicated that if it was to remain in place, Raukura Moana Fisheries Ltd would have to provide security in support of its undertaking as to damages.

[28] Most relevantly for present purposes, I held that the arrests of the two vessels on 14 March were in breach of the undertakings set out in the consent memoranda and I ordered that they be released.

The arguments for the shipowners as presented on 7 March

[29] It is necessary now to refer briefly to the arguments which were addressed to me on 7 March by the shipowners in relation to the application for stay and release of security.

[30] The principal argument advanced was that the impact of the submissions to arbitration in the charter agreements, the Arbitration Act 1996 and the decision in the House of Lords The Republic of India v India Steamship Co (The Indian Grace) (No 2) [1998] AC 878, took away from Raukura Moana Fisheries Ltd the practical benefits of the statutory action in rem procedure provided for in the Admiralty Act. In the end, I dismissed those arguments in my judgment which I delivered on 29 March and they are now only of background significance to the case.

[31] More relevantly for present purposes, there was also an argument presented on behalf of the shipowners to the effect that the security demanded and paid was excessive. On this latter point, the shipowners' argument, on 7 March, was based on a very narrow view of the nature of the claims which were then before the court. The shipowners, in effect, sought to confine the claims to indemnity to investigation costs actually incurred up to 5 October 2000, the date that the proceeding were commenced. If the claims by Raukura Moana Fisheries Ltd were confined to investigation costs as at 5 October or, indeed, as at December 2000, it followed that the security was excessive.

[32] The apparent correlative of this argument (if correct) was that it was open to Raukura Moana Fisheries Ltd to amend its proceedings (as it later did) to seek broader relief and arrest the vessels in relation to the amended claim (which it also later did). In other words, the shipowners' 7 March argument was consistent with the view that the claims for which security was given were confined to investigation costs only. If so, the undertakings given by Raukura Moana Fisheries Ltd not to arrest the vessels were confined to arrests in respect to claims for investigation costs only and could hardly, fairly, be treated as precluding the arrest of the vessels for more extensive claims associated with the consequences of prosecution.

[33] At the resumed hearing on 23 March this year, the shipowners resiled from the arguments as presented on their behalf on 7 March. They claimed that the subsequent arrests of the vessels by Raukura Moana Fisheries Ltd were in breach of the undertakings contained in the joint memoranda of counsel.

My interpretation of the scope of the undertakings

[34] 1 think that there were three possible meanings which the phrase "its claim" which appears in both consent memoranda could bear. They are:-

1 . Claims to be reimbursed for the costs incurred as at the date the proceedings were commenced (or possibly as at the date the consent memoranda were executed in relation to investigations ("Interpretation 1"); or

2. Claims to be reimbursed for all costs incurred or to be incurred in relation to pre-prosecution investigations whether incurred before or after 5 October ("interpretation 2"); or

3. Claims to be reimbursed for all consequences for Raukura Moana Fisheries Ltd associated with breaches of the charter agreements and occurring downstream of the investigation being carried out by the Ministry as at the date the proceedings were commenced ("interpretation 3").

[35] At the hearing on 7 March, the shipowners contended for interpretation 1, or perhaps variations of it, and Raukura Moana Fisheries Ltd contended for interpretation 2. On either of these interpretations, Raukura Moana Fisheries Ltd was not precluded from arresting the vessels by reason of the undertakings in the consent memoranda.

[36] In my judgment of 29 March, I adopted interpretation 3. On this basis, I concluded that the arrests of the vessels were, indeed, in breach of the undertakings given in the consent memoranda and accordingly I ordered that the vessels be released.

Events subsequent to 23 March

[37] I should refer to some events which took place after the hearing on 23 March.

[38] On 28 March, the two other vessels the Kapitan Lomaev and the Mys Chaykovskogo were arrested in South Africa by Raukura Moana Fisheries Ltd.

[39] On 30 March, the two vessels the Irina Zharkikh and the Ksenia Zharkikh were seized by the Ministry of Fisheries.

[40] On 2 April, Raukura Moana Fisheries Ltd abandoned the Mareva injunction.

[41] On or about 18 April, and pursuant to a deed entered into on that date, the two vessels seized in South Africa were released on the basis that a further $400,000 was to be provided by way of security in relation to the claims of Raukura Moana Fisheries Ltd.

[42] On 25 May, pleas of guilty were made by Raukura Moana Fisheries Ltd to charges laid under the fisheries legislation. The result of the convictions which followed was that the Irina Zharkikh and the Ksenia Zharkikh were forfeited to the Crown.

[43] These vessels were redeemed on 18 July by the shipowners and they have now been sold. They remain, however, in New Zealand.

[44] Arbitral proceedings between Raukura Moana Fisheries Ltd and the shipowners (and also the owners of the Kapitan Lomaev and the Mys Chaykovskogo) have yet to be resolved.

[45] In these proceedings Raukura Moana Fisheries Ltd is prosecuting claims alone the lines of the claims set out in the statement of claim filed in these proceedings. These are opposed, as I understand it, by the owners of all four vessels on the basis that Raukura Moana Fisheries Ltd, by reason of its own conduct, is not entitled to rely on the indemnities and, further, the owners of the vessels claim to be entitled to other money which they say is due to them under the charter agreements. The broad position is that Raukura Moana Fisheries Ltd is claiming a little under $600,000 against the owners of the four vessels and faces claims the other way of a little over $1,000,000.

[46] The shipowners have also signalled an intention to claim damages from Raukura Moana Fisheries Ltd amounting to approximately $NZ180,000 and $US370,000 associated with the breaches of the undertakings not to arrest the vessels. The costs to which these proposed claims for damages relate are associated with the seizure and forfeiture of the vessels and underpinning the proposed claim is the contention that the vessels would not have been seized by the Ministry and later forfeited if they had not been arrested by Raukura Moana Fisheries Ltd in breach of the undertakings.

The issues which I must resolve

[47] There is no claim presently before the Court by the shipowners for damages. The present application by Raukura Moana Fisheries Ltd is an attempt to cut-off at the pass the possibility of such a claim

[48] I see three issues which I must resolve:-

1 . Are the consent memoranda to be treated as orders of the Court by reason of Rules 10 and 794 of the High Court Rules?

2. If so, is there jurisdiction to release Raukura Moana Fisheries Ltd from the undertakings?

3. If so, should I do so as an issue if discretion?

[49] I propose to discuss the issues in the case in the succeeding sections of my judgment by reference to these issues.

Are the consent memoranda to be treated as orders of the Court by reason of Rules 10 and 794 of the High Court Rules ?

[50] Rule 794 of the High Court Rules provides:-

Any agreement in writing, between the parties to a cause or matter, that is dated and signed by the parties or their solicitors may be filed if the Registrar thinks it is reasonable to file the agreement and thinks that a Judge would under the circumstances have allowed it to be filed, and, on its filing, the agreement becomes an order of the Court.

[51] By way of completeness I note that Rule 10 of the High Court Rules also provides:

(1) Where, by these rules, the leave of the Court is required in any matter of procedure and all parties and persons to be affected thereby consent thereto, any party may, instead of filing an interlocutory application in respect thereof, file a memorandum signed by all such parties or persons, or by their respective solicitors, or by counsel or other person appointed under these rules to represent any such party or person, signifying such consent and the terms and conditions thereof.

(2) On the filing of a memorandum under subclause (1), the Registrar shall either-

(a) Make and seal an order in terms of the memorandum; or

(b) Refer the memorandum to the Court.

(3) If the Registrar refers the memorandum to the Court under subclause (2)(b), the memorandum shall be treated as an interlocutory application for the requisite leave.

I have noted Rule 10 only by way of completeness because I do not see it as applicable to the circumstances of this case, this because the consent memoranda could not be regarded as being in substitution for "the leave of the court ... in any matter of procedure".

[52] As to Rule 794, the consent memoranda are agreements in writing between parties to proceedings and have been signed by the solicitors for the parties, albeit designated on the memoranda as "counsel", and they have been filed in Court. There is, however, no evidence that the Registrar or any member of the Court staff addressed the other issues referred to in Rule 794, namely whether it was reasonable to file the agreements and whether a Judge would have allowed them to be filed. It is, indeed, unlikely that these issues were addressed.

[53] Mr Broadmore, in substance, invited me to deal with this aspect of the case on the basis that the consent memoranda were filed and were plainly proper documents to be filed.

[54] I think it is clear that when the parties lodged the memoranda, they did not specifically invoke Rule 794 and, likewise, did not invite the Registrar to consider them in terms of that rule.

[55] The consent memoranda could be regarded as primarily recording a bargain between the parties recorded by way of memoranda only with a view to informing the Court as to why $300,000 was going to be paid into Court. This is the view which Mr David, for the shipowners, urged on me.

[56] Other factors which may be relevant and which point in the opposite direction are that the documents are, indeed, entituled in the proceedings, are addressed to the court (commencing as they do with the words "May it please the court"), deal with money paid into court, and, in substance, reserve leave to apply to the court for further orders. Had Raukura Moana Fisheries Ltd arrested the vessels, an order for their release on an interim basis along the lines provided for in the consent memoranda would have been likely. If there had been a simply contractual agreement as to security, I am not entirely sure that this court would have had jurisdiction to deal, on an interlocutory application, with an argument that the security demanded and paid was excessive. So the consent memoranda do rather look to me as if they were intended to be treated as orders in terms of Rule 794.

[57] If it is the case that the Registrar did not address the issues referred to in the second part of Rule 794 - and I think this is almost certainly the case - then this could be regarded as being in the nature or a slip or an irregularity.

[58] Over the forcefully expressed protest of Mr David, I see the issue whether these memoranda should be regarded as being within Rule 794 as ultimately a matter of impression. On this issue, I find more convincing the arguments put forward on behalf of Raukura Moana Fisheries Ltd which I summarised above than the competing arguments and I am prepared to act on the basis that the memoranda are, indeed, orders of the Court.

If the consent memoranda are treated as orders of the Court, do I have jurisdiction to release Raukura Moana Fisheries Ltd from its undertakings?

[59] The courts are reluctant, to say the least, to revisit a consent order or undertaking which can be regarded as disposing of an action, see Harvey v Croydon Rural Sanitary Authority (1884) 26 Ch D 249. Obviously, the Court has jurisdiction to do so, if grounds are established which would justify the setting aside of a contract. Authority for this proposition is provided by Phillips v Phillips [1993] 3 NZLR 159. Whether the jurisdiction is confined to circumstances where such grounds are made out, is not universally accepted, see for instance the judgment of Fisher J in Ryde Holdings Ltd v Sorenson (1995) 8 PRNZ 339 where other authorities on this point are reviewed. For myself, I am inclined to the view that a settlement of litigation which is embodied in the form of a consent order should only be set aside on grounds which warrant the setting aside of a contract. This was a view which was obviously favoured by Cooke P in Phillips at 166 and was acted on by the other judges in that case (although I note that the point in issue seems to have been conceded by counsel and not argued).

[60] In the context of an undertaking or a consent order which is in lieu of an interim injunction, or can be regarded as being an interlocutory order, the Court has power to intervene and to revisit the consent order or undertaking on grounds which are not necessarily confined to the grounds which would warrant the setting aside of a contract. This jurisdiction obviously applies where there has been a unilateral mistake as to the nature of the undertaking (or order), see Mullins v Howell (1879) 11 Ch D 763. But, as well, it appears that the courts act on the basis that there is a general jurisdiction to review orders or undertakings which are of an interlocutory nature. As to this, see Mullins v Howell, supra, Cutler v Wandsworth Stadium Ltd (1945) 172 LT 207, Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 and Meates v Taylor (unreported, CA 208/89, judgment delivered 30 July 1990 at pages 16 and 17.

[61] To the extent to which the two lines of cases to which I have referred turn on the difference between interlocutory and final orders, this distinction must be applied in a way which reflects substance and not just form. So, where an undertaking or consent order which is formally of an interlocutory nature determines the rights of the parties in a substantive sense, the courts are most unlikely to reopen it, except on grounds that would warrant the setting aside of a contract, see for instance the discussion in Wilkshire v The Commonwealth (1976) 9 ALR 325 at 331.

[62] As well, there is substantial support in the authorities for the view that where an interlocutory consent order can be treated as being genuinely contractual it should only be set aside on grounds that would justify the setting aside of a contract. As to this, see the remarks of Lord Denning in Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 All ER 377 at page 380:-

We have had a discussion about 'consent orders'. It should be clearly understood by the profession that, when an order is expressed to be made 'by consent', it is ambiguous. There are two meanings to the words 'by consent'. That was observed by Lord Greene MR in Chandless-Chandless v Nicholson [1942] 2 All ER 315 at 317, [1942] 2 KB 321 at 324. One meaning is this: the words 'by consent' may evidence a real contract between the parties. In such a case the court will only interfere with such an order on the same grounds as it would with any other contract. The other meaning is this: the words 'by consent' may mean 'the parties hereto not objecting'. In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties. In every case it is necessary to discover which meaning is used. Does the order evidence a real contract between the parties? Or does it only evidence an order made without obligation?

We were referred to several cases. In Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273, [1895-9] All ER Rep 868 there was a consent order dealing with a large amount of machinery and plant. Everyone had agreed that it should be sold on certain terms. That was clearly a contract between the parties with which the court would not interfere except on the same grounds as any other contract. In Purcell v F C Trigell Ltd [1970] 3 All ER 671, [1971] 1 QB 358 the correspondence (which is set out in the facts of the case) showed that there was a real contract agreed between the parties that, unless a particular order for interrogatories was complied with, the matter should be struck out. In that case I said that the court has a discretion to vary or alter the terms of the order for interrogatories, even though made by consent. There is a case mentioned in The Supreme Court Practice 1982, vol 1, p 16, para 3/5/1, namely Australasian Automatic Weighing Machine Co v Walter [1891] WN 170. That concerned an order by consent to transfer shares. Again it was a case in which there was a real contract between the parties. Equally, in Intervale Group of Companies Ltd v Knighton [1976] CA Transcript 302, Bridge LJ, after analysing all the facts, came to the conclusion-

‘that there was here an unconditional binding contract in law between the parties that the order of 10 February should be made, as it was.'

Scarman LJ added that, in the circumstances of the case, 'from Bridge LJ's analysis of the facts, there was here a contract'. The most recent case was in the same category: see Chanel Ltd v F W Woolworth & Co Ltd [1981] 1 All ER 745, [1981] 1 WLR 485. It seems to me that all those cases can be, and should be, explained on the basis that there was a real contract between the parties evidenced by the order which was drawn up.

I cannot put any such interpretation on the order which was drawn up in this case. It often happens in the Bear Garden that one solicitor or legal executive says to the other: 'Give me ten days.' The other agrees. They go in before the master. They say: 'We have agreed the order.' The master initials it. It is said to be 'by consent'. But there is no real contract. All that happens is that the master makes an order without any objection being made to it. It seems to me that that is exactly what happened here. The solicitors for the plaintiffs were saying: 'We do not object to the order. Give us the extra ten days from the time of inspection, and that is good enough.' It seems to me quite impossible in this case to infer any contract from the fact that the order was drawn up as 'by consent'.

[63] In the present case it was not suggested by Mr Broadmore that there were grounds which he could invoke which would justify the setting aside of a contract. So if the Siebe Gorman approach is correct, the application by Raukura Moana Fisheries Ltd must fall. Mr Broadmore was then driven to contend that I should not follow the approach taken by Lord Denning. He made the point that virtually any consent order can be regarded as involving some element of quid pro quo and could thus be regarded as being contractual. Yet the fact remains that consent orders of an interlocutory nature are, from time to time, set aside on grounds other than those which would warrant the setting aside of a contract.

[64] There is substance to Mr Broadmore's argument. It may well be that that substance is reflected in the slightly unusual language used by Lord Denning, in particular, for instance, his reference to "a real contract", a phrase which appears more than once in the passage which I have set out. The use of this phrase is consistent with the ultimate issue being viewed as one of substance and not form.

[65] If I saw the merits of the case as to the way in which my discretion, if I have one,ought to be exercised, I would have reserved my decision to consider the issues which I have just been discussing in more detail. For the moment, however, it is sufficient to say that I incline to the same view which appealed to Cooke P in Phillips v Phillips and also support the approach taken by Lord Denning in Siebe Gorman with perhaps the gloss that, in the end, the issue must be addressed as one of substance rather than one of form. In particular, I do not see why a contract which happens to have been recorded in the form of a consent order should be any more easy to set aside than a contract which has not been so recorded.

[66] Given my views (which I am about to express) of the merits as to how any discretion which I ought to exercise should be exercised, there is no need for me to reach a definitive conclusion on the issues which I have just been discussing.

If there is jurisdiction to release Raukura Moana Fisheries Ltd from the undertakings should I do so as a matter of discretion?

[67] There are really two aspects to the argument of Mr Broadmore as to why the undertakings should be discharged. The first was that they were given by Raukura Moana Fisheries Ltd under a mistake as to their impact or effect. The second is that they can be discharged without affecting the shipowners in any adverse way.

[68] The solicitor for Raukura Moana Fisheries Ltd who signed the consent memoranda on behalf of the company was Mr Logan. He said in an affidavit which was filed in relation to the proceedings in March this year that he had assumed that the $300,000 to be paid by way of security was intended to cover only the costs of investigation. It was on the basis of this evidence that Mr Broadmore claimed that the undertaking was given by reason of a mistake as to its effect.

[69] That contention must be read in light of a letter which the same solicitor wrote on 28 November 2000 (ie just before the consent memoranda were finalised) in which he said:-

With regard to the Security, our client has already incurred costs of $112,643.44 as a result of the Ministry's investigation into the activities of the charter vessels. Those investigations to date have included over 2 weeks of interviews often involving two lawyers attending separate interviews. Our client seeks to recover these costs from the Russian owners pursuant to the indemnity contained in the Charter Agreements.

We believe that the Ministry's investigation may be in the final stages, but if charges are laid as a result of the investigation obviously costs will continue to escalate.

Given the amounts involved, our client would only be prepared to withdraw its claim over the vessels provided a bond or deposit of at least $300,000 is provided on satisfactory terms.

[70] I do not want to be unfair about this but there is a sense in which Mr Logan has attempted to put something of a gloss on this letter. He says that the letter should be regarded as having been superseded by the terms of the consent memoranda (which were drafted by the solicitors acting for the shipowners) and he treated those as being confined to claims in respect of investigation costs. It is inescapable, however, that the figure $300,000 which represents the total of the security required to be provided comes from this letter and in justifying this letter he did refer to the possibility of prosecution. Indeed, it is difficult to see how the figure of $300,000 could have been appropriate, on the arithmetic referred to in the letter, unless it also encompassed the costs of prosecution.

[71] I note, as well, what was said by another of the solicitors acting for Raukura Moana Fisheries Ltd, Mr Sullivan, in his affidavit of 19 February 2000:-

Should charges be laid the total of legal costs incurred in defending those charges alone could well exceed the security provided. If the company is convicted then the combination of fines and forfeiture will almost inevitably mean that the total costs to Raukura Moana resulting from the activities of these two vessels will exceed $300,000.00.

Again, this suggests that Raukura Moana Fisheries Ltd was then acting on the basis that the security it then obtained could be justified as to amount by reference not only to the investigation costs (strictly construed) but also to the possible consequences of prosecution.

[72] I accept that when the vessels were arrested by Raukura Moana Fisheries Ltd on 14 May this year, that company and its advisers were acting in good faith. I rather think, however, that their state of mind was largely, or at least significantly, a product of what happened at the hearing on 7 March and clarifications and refinements to their thinking which generally occurred after the consent memoranda were entered into. So I am not persuaded that there was a relevant mistake on the part of Raukura Moana Fisheries Ltd as to the scope of the undertakings at the time they were given.

[73] A finding of mistake on the part of Raukura Moana Fisheries Ltd would not be essential to the jurisdiction to release it from the undertakings if the consent memoranda are subject to the general power of the court to revise interlocutory orders. Nor, indeed, would a finding that there was a mistake necessarily warrant the release of Raukura Moana Fisheries Ltd from the undertakings it gave.

[74] Whenever an attempt is made to set aside a consent order a very significant factor is likely to be the impact that this might have on the other parties, in this case the shipowners.

[75] Mr Broadmore, for Raukura Moana Fisheries Ltd, claims that there was no relevant impact and, in substance, this came down to his contention that the claim for damages which has been signalled and which he is seeking to derail, is not well-founded. Principally this is because the seizure and forfeiture of the vessels would have occurred irrespective of the arrests. Mr Broadmore says (and there is affidavit evidence to this effect) that the Ministry would never have allowed the vessels to leave New Zealand waters. There are other issues which he raised but this factor that the losses claimed (if able to be proved) would have occurred anyway - is the most significant of his arguments.

[76] 1 think that Mr Broadmore may well be right in terms of his factual analysis and the shipowners may well be struggling if they do, indeed, seek damages from Raukura Moana Fisheries Ltd. But there remains a strong element of the back-to-front to this argument. If it is, indeed, the case that there is no loss and thus no entitlement to damages, there is no need to set-aside the undertakings. Further, it would be premature, in the absence of a formulated claim for damages, for me to conclude that there is no case as to damages. If they make a claim for damages, the shipowners would be entitled to test the views expressed in the affidavits as to the likelihood of seizure if the vessels had attempted to leave New Zealand waters in the latter half of March this year. It is, a statement of the obvious that if Raukura Moana Fisheries Ltd was not to some extent concerned about the claim and its possible merits, there would be no point to the present application.

[77] Further, although I recognise that this, in part, involves a reiteration of considerations earlier referred to, I see the consent memoranda as involving a genuine bargain of a quid pro quo nature between the parties, which has been acted on. Raukura Moana Fisheries Ltd wishes to be released from its undertakings but has not agreed to the shipowners being repaid the $300,000 which they provided by way of security in consideration for the undertakings they received. As well, if Raukura Moana Fisheries Ltd was released from the undertaking there would be nothing to stop further arrests despite the on-sales of the vessels to a third party or third parties.

[78] Finally, the reality is that the security which Raukura Moana Fisheries Ltd has obtained in total is broadly appropriate to the claim which it wishes to make against the shipowners - that is all four shipowners. It has $700,000 by way of security together with interest which no doubt is accumulating and this to secure a claim which is a little under $600,000. So the bargain which it made with the shipowners and which is reflected in the consent memoranda was, as events have turned out, an appropriate one.

[79] So even if I had the power to do so, I would not see it as appropriate to release Raukura Moana Fisheries Ltd from its undertaking.

Disposition

[80] The result is that the application is dismissed.

[81] I make an order for costs on a 2C basis and reasonable travelling and accommodation expenses to be agreed and in default of agreement to be fixed by the Registrar.

Solicitors:

M S Sullivan & Associates, Nelson (PO Box 921) for plaintiff
Russell McVeagh, Auckland (PO Box 8) for the defendants