The Arrest of Ships - some legal issues

• Author: Gregory Nell SC
• Position: Seven Wentworth Chambers Sydney NSW. This paper was presented at the Federal Court of Australia Admiralty and Maritime Law Seminar on ?SHIP ARRESTS AND INSOLVENCY' on 21 May 2009. The author gratefully acknowledges the assistance of Julie Soars, barrister in preparing this paper, although accepts that any errors or omissions in this paper are...
• Pages: 39-62

THE ARREST OF SHIPS – SOME LEGAL ISSUES

Gregory Nell SC∗

Introduction

Whilst Admiralty jurisdiction is not confined to the pursuit of proceedings in rem, it is the action in rem

and the ability thereby to arrest a ship or other property that is most associated with the exercise of

Admiralty jurisdiction and which distinguishes the exercise of that jurisdiction from the way in which

claims are more conventionally pursued before Australian courts, namely by way of in personam

proceedings against an individual defendant.

As the Full Court of the Federal Court of Australia said in Tisand Pty Ltd v Owners of the Ship MV ‘Cape

Moreton’ (Ex ‘Freya’):1

The arrest of ships is a recognised feature of international maritime commerce and international maritime

jurisdiction. Very often legitimate claims will go unsatisfied unless there is recourse to an effective and

efficient system of maritime arrest. Ships, their owners and insurers are expected, in the ordinary course of

their businesses, to be ready to deal with in rem claims arising in connection with the use or deployment of

the ship or the business of the owner or charterer.

There are three issues concerning the action in rem and the associated ability to arrest the ship or other

property the subject of in rem proceedings that I address in this paper, relevant to the theme of this seminar,

namely the interaction between Admiralty and insolvency. These are:

• the advantages associated with the ability to arrest a ship or other property, in comparison to

the interim relief to similar effect that might be obtained in an action in personam;

• recent issues concerning the scope of those claims that may be pursued in rem and for which a

ship or other property may be arrested; and

• some issues that may arise where there is a jurisdictional challenge to in rem proceedings or

the arrest of a ship in such proceedings and which are also relevant to the obligations of the

plaintiff when commencing such proceedings.

The exercise of in rem jurisdiction

In general terms, an action in rem involves the pursuit of a maritime claim (or a claim in the nature of a

maritime lien or other charge) in a proceeding that is brought directly against a ship or other property which

is either the subject of that claim (or lien or charge) or belongs to the person who is alleged to be liable for

that claim. Admiralty lawyers commonly refer to the ship or other property that is the subject of in rem

proceedings as the res.

Although in Australia the action in rem is not confined to ships and may extend to ‘other property’, it is

only certain limited types of property – generally cargo and freight – that might properly be the subject of

∗ Seven Wentworth Chambers Sydney NSW. This paper was presented at the Federal Court of Australia Admiralty and Maritime Law

Seminar on ‘SHIP ARRESTS AND INSOLVENCY’ on 21 May 2009. The author gratefully acknowledges the assistance of Julie

Soars, barrister in preparing this paper, although accepts that any errors or omissions in this paper are those of the author alone.

1 (2004) 210 ALR 601 at 607.

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in rem proceedings. The ability to commence in rem proceedings against the bunkers or fuel on board a

ship independently of any proceeding against the ship itself has been significantly constrained (if not ruled

out completely) by the recent decision and dicta of the Full Court of the Federal Court in Scandinavian

Bunkering AS v the bunkers on board the fishing vessel “Taruman”.2 Moreover, the types of claims that

might be pursued as an action in rem against ‘other property’ and the circumstances in which such claims

might be pursued against such ‘other property’ are also somewhat limited, much more so than proceedings

in rem against a ship. For these reasons I intend to confine my comments in this paper to the arrest of ships

(as its title implies).

An action in rem is only available in the exercise of Admiralty jurisdiction. Since 1 January 1989 the

exercise of Admiralty jurisdiction in Australia has been pursuant to the Admiralty Act 1988 (Cth) (the Act)

and the Admiralty Rules 1988 (Cth) (the Rules) which are made pursuant to section 41 of the Act. Both the

Act and the Rules govern and apply to all Admiralty proceedings in Australia, irrespective of the Court in

which the proceedings are commenced and whether it is a State or federal court.

The Act distinguishes between actions in personam and actions in rem. In relation to the latter, section 14

of the Act provides:

14 Admiralty actions in rem to be commenced under this Act

In a matter of Admiralty or maritime jurisdiction, a proceeding shall not be commenced as

an action in rem against a ship or other property except as provided by this Act.

Accordingly, the Act is an exhaustive code as to the pursuit of in rem proceedings and the claims that may

be pursued in an action in rem.

Section 10 of the Act confers jurisdiction to entertain in rem proceedings upon only the Federal Court of

Australia and the Supreme Courts of each of the States and Territories. Whilst the Federal Magistrates

Court and State courts other than the Supreme Court have been invested with jurisdiction in respect of

proceedings commenced under the Act as actions in personam (pursuant to section 9 of the Act), those

courts have not been invested with in rem jurisdiction. They may only exercise in rem jurisdiction upon the

remission of in rem proceedings from the Federal Court or a Supreme Court pursuant to section 28 of the

Act.

It is not necessary for a ship the subject of an in rem proceeding to be arrested in that proceeding and a

claim may be pursued as an action in rem against that ship without it being arrested. But it is the ability to

arrest a ship and the consequences of that arrest that give rise to one of the main advantages of the action in

rem where it is available, namely the ability of a plaintiff either to obtain security for its claim or in the

absence of such security to have recourse to the ship to meet that claim and any judgment that the plaintiff

may subsequently obtain in respect of that claim.

Security for the Plaintiff’s claim

If the owner of the ship under arrest (or threatened with arrest) wishes to obtain the release of that ship

from arrest (or to avoid the threatened arrest) so as to thereby regain the possession and use of that ship and

to avoid a judicial sale of that ship, then it can only do so by providing the plaintiff with some alternate

security for its claim. This security may be in the form of a bail bond pursuant to Part VII of the Rules, a

letter of undertaking, letter of guarantee, bank guarantee or cash deposited with the Court. In this way, a

plaintiff in a proceeding in rem may obtain security for its claim by the arrest or threat of arrest of the ship

the subject of that proceeding and present in the geographical jurisdiction of the Court.

This ability to obtain security for a claim in advance of judgment is not generally available where the claim

is pursued in an in personam proceeding (even where the in personam proceeding is in the exercise of

Admiralty jurisdiction). Clearly there are benefits to a plaintiff where such security is provided. It avoids

2 (2006) 151 FCR 126.

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