Maritime Claim Priorities under PPSA 2009

• Author: James O'Donovan
• Position: Professor of Law, University of Western Australia. This paper was presented at the Federal Court of Australia National Admiralty Seminar in Sydney Australia on 9 November 2010
• Pages: 118-125

(2011) 25 A&NZ Mar LJ

MARITIME CLAIM PRIORITIES UNDER THE PERSONAL PROPERTY SECURITIES

ACT 2009

Jame s O’ Do no van∗

1 The nature of maritime claims

Two thirds of the world is covered by water and the rest appears to be covered by mortgages and mortgage

debentures. Some of these securities are maritime claims over goods and other forms of personal property in

port and on the high seas. The purpose of this paper is to analyse the nature of maritime claims and suggest a

hierarchy of priorities. There are three broad classes of maritime claims: mortgages or charges; maritime liens

and statutory rights of action in rem.1

1.1 Maritime liens

Maritime liens usually include claims for salvage, seafarers’ wages, and damage done by a ship.2 They

encumber only maritime property such as the ship and its rigging, its cargo and freight. As these claims are

vitally important to maritime commerce, they are given the highest priority.3 Maritime liens even rank ahead of

registered and unregistered mortgages and statutory liens. 4 Generally, maritime liens are payable in the inverse

order of their attachment.5 However, they are not covered by the Personal Properties Securities Act 2009 (Cth)

(‘PPSA 2009’) because they arise by operation of law.6 Nevertheless, as we shall see, their priority is recognised

in the PPSA 2009, s 73, and they can be enforced by an action in rem under s 15 of the Admiralty Act 1988

(Cth). When an action in rem is commenced the holder of the maritime lien becomes a secured creditor

retrospectively from the time of the events giving rise to the cause of action.7

1.2 Statutory rights in rem

By contrast, statutory rights in rem usually arise as a result of a contract relating to the supply of goods or

services to a ship.8 They have a relatively low priority and can only be enforced against the ship directly if the

ship still belongs to the person liable for the claim. 9 A statutory right in rem is not a security interest when it

arises but, on one view, it becomes a secured claim when proceedings are instituted by the issue of a writ.10 This

converts the statutory claim into a security interest. 11

Australian courts have taken the view that an action in rem, at least prior to the unconditional appearance of a

relevant person, is an action against the ship, not the owner or demise charterer of the ship.12

∗ Professor of Law, University of Western Australia. This paper was presented at the Federal Court of Australia National Admiralty Seminar

in Sydney Australia on 9 November 2010.

When a relevant

person enters an appearance the action proceeds as if it were an action in personam but it does not cease to be an

1 Bankers Trust International Ltd v Todd Shipya rds Corp (The ’Halycon Isle’) [1981] AC 221, 240.

2 See Harmer v Bell (The ’Bold Buccleugh’) (1851) 7 Moo PC 267; 13 ER 884 and Admiralty Act 1988 (Cth) ss 4(3), 14, 15. Such claims

can be enforced by an action in rem against the ship. But the provisions of the Act (other than s 34) do not create a new maritime lien or

other charge: s 6.

3 Nigel Meeson, Admiralty Jurisdiction and Practice (LLP, 3rd ed, 2003) [6.43] n 22.

4 Harmer v Bell (The’ Bold Buccleugh’) (1851) 7 Moo PC 267; 13 ER 884, 890.

5 The Veritas [1901] P 304.

6 See PPSA 2009 s 8(1)(c); Admiralty Comr’s v Valverda (Owners) [1938] AC 173, 186.

7 Re Reo Grande Do Sul Steamship Co (1887) 5 Ch. D 282; The’Monica S’ [1968] P 741.

8 See Admiralty Act 1988 (Cth) s 4(3), dealing with general maritime claims. See also s 19.

9 Admiralty Act 1988 (Cth) s 17. See also s 19 (right to p roceed against surrogate ships) and s 18 (right to proceed against the ship where the

person liable for the c laim is the demise charterer of the ship ).

10 The Zafiro [1960] P 1. See also Admiralty Act 1988 (Cth) s 15 (a statutory lien arises when property is arrested in an action in rem) and

The Cella (1888) 13 PD 82; The ’Monica S’ [1968] P 741, 771.

11 Re Aro Co Ltd [1980] 2 WLR 453. See also The ‘Pacific’ (1864) 167 ER 356 at 359; (1864) Browning and Lushington 243, 246 and The

‘Two Ellens’ (1872) LR 4 PC 161 at 170. Cf Benson Brothers Shipbuilding Co (1960) Ltd v The ‘Miss Donna’ [1978] 1 FC 379, where the

Canadian Federal Court held that even the arrest of the ship did not convert the claimant into a secured creditor.

12 Aichhorn & Co KG v The Ship ‘MV Talabot’ (1974) 132 CLR 449, 454 -456; Caltex Oil v The Dredge ‘Willemstad’ (1976) 136 CLR 529,

538.

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