The "Cape Moreton"
In this case, the most important decision in admiralty law in Australia since 2003, the Full Court of the Federal Court of Australia found that the phrase "the owner" in Australia’s Admiralty Act 1988, relating to when actions may be brought against vessels in rem in Australia, does not necessarily include the person registered as the owner of the vessel. A writ in rem had been issued upon the MV "Cape Moreton" in respect of a claim for damage to cargo where the presumptive debtor was the owner of the vessel at the time the cause of action arose but had sold the vessel to a bona fide purchaser for value one month prior to proceedings having been issued. The new purchaser had not yet, however, obtained registration of the vessel, the presumptive debtor remaining entered as owner on the Liberian Register. The Court found that the presumptive debtor was not "the owner" of the vessel under the Act at the time proceedings were commenced. The Writ was therefore set aside
DMC Category Rating: Developed
Under section 17 of the Australian Admiralty Act 1988 (Cth), an action in rem in respect of a "general maritime claim" (being, generally speaking, claims other than those concerning title in or possession of a ship) may be commenced where the "relevant person", being the presumptively liable person against whom the claim could be commenced in personam:
Here it was without doubt that Freya was "the owner" of the vessel, in any sense of the phrase, when the cause of action arose. The issue was whether Freya, by virtue of being the registered owner, was also "the owner" of the vessel at the commencement of the proceeding such as to satisfy s17(b) of the Act. Unlike corresponding legislation in the United Kingdom which specifies that at the time proceedings are commenced, the relevant person must be the "beneficial owner of [the] ship as respects all the shares in it", the Australian Act does not include any express qualification of the phrase "the owner". Previous Australian case authority had determined that the phrase "the owner" did at least include beneficial owner, but had not determined whether the phrase necessarily included the registered owner.
In making its findings, the Court firstly considered how the phrase "the owner" should be construed, with reference to the ordinary meaning of the phrase, Australian and international commentary/authority as to its meaning, and the context in which the Australian Admiralty Act was enacted. The Court noted that in The "Maria Luisa" concerning the surrogate arrest provisions of the Act (which allow a person entitled to commence proceedings against a ship to proceed instead against another ship owned by the same presumptive debtor), the Full Federal Court of Australia found that "the term ‘owner’ means any person who is vested with such ownership as to have the right to sell, dispose of or alienate the ship". Although that case was decided in the context of whether "owner" included the "true" or "beneficial" owner of the vessel, its definition of "owner" in a proprietary sense was bolstered by a review of the context in which the Act was enacted. In particular, a review of English and Australian law under the Admiralty Court Acts 1840 and 1861 (Imp) demonstrated that by the mid 20th century, the statutory action in rem required a proprietary connection between the presumptive debtor and the ship at the relevant time (which was, according to one authority, the time that proceedings were commenced.)
Additionally, the Court considered that the Australian Law Reform Commission ("ALRC"), on whose recommendations the Admiralty Act was enacted in its current form and effect thereby given in Australia to most of the provisions of the Arrest Convention, had clearly intended for a ship to be the property of the presumptively liable relevant person, or be chartered by demise by that person, at the commencement of the suit for the ship to be subject to in rem jurisdiction and arrest. In particular, the ALRC had recommended that Australia’s arrest regime be broadly brought into line with that of comparable countries and that no substantive rights be created by way of a new maritime lien (which would arguably arise if a clear link, in a proprietary sense, was not maintained between the party presumptively liable and the property belonging to that party, the subject of arrest). The Court opined that the requirement of proprietary ownership was also embedded within the provisions of the Arrest Convention itself.
The Court considered secondly the legal consequences of registration. There was no evidence led as to the law of Liberia so, the Court was prepared to deal with the matter on the basis that if foreign law was relevant to the assignment of the ship, that law contained a statute in the same form as the Shipping Registration Act 1981 (Cth). Although that Act provides that the Register is evidence of title only, it also expressly confers power of absolute disposition on the party who is named on the Register as "owner". Nevertheless, the Court held that this statutory power was "empty of real and practical meaning or significance" since Alico had paid for the ship in full, taken unconditional delivery of her, and the agreement between Freya and Alico provided that title was to pass fully on the occurrence of these events. Freya could not have exercised the statutory power bestowed on it under the Act lawfully or honestly without the consent of Alico. For these reasons the Court considered that Freya was not "the owner" of the vessel at the time proceedings were commenced.
As the Court explained in its well-reasoned judgment, plaintiffs seeking to arrest ships under the Act may still rely on registration as prima facie evidence of ownership and it will be for the defendant or other relevant party to show that the registered owner is not "the owner" under the Act. Bona fide purchasers of vessels can in the meantime take comfort that actions in rem cannot be maintained against their vessels in respect of general maritime claims for which other persons (even if still registered as owner) are liable.
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