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OCEAN LAW ADMIRALTY LAW – A BLUNT TOOL BY HAYLEY CAMPBELL BSC, LLB, SOLICITOR A dmiralty law can be extremely effective and, depending on which side you're on, can have some devastating effects. The statutory provisions relating to arresting a vessel are found in the Admiralty Act 1973 and part 25 of the High Court Rules, and although the topic can't be covered at any depth in this limited space, it may be useful for persons working in any field of endeavour involving vessels to have at least a basic idea of how the concept of arresting a vessel and in rem proceedings work. There was a case decided recently in Auckland, PDL International PTE Ltd v The Ship Ratstor, in which the ship had been arrested. The reader will note the ship is named as the defendant in the case. This may seem odd, but it is in fact one of the most important aspects of admiralty law – if you have a certain type of claim relating to a vessel (or if someone has one relating to your vessel) proceedings can be issued directly against that vessel. This is called an action in rem. In fact, not only can you sue the vessel, but also you can have it arrested and have it held under arrest until your claim is settled. Any vessel capable of being used in navigation can be arrested. If the claim isn't settled through the court proceedings, the court will direct the vessel be sold. The proceeds of sale are then used to settle claims against the vessel. Generally, in our experience, the impact of having a major income earning asset out of action works to encourage a speedy resolution. When is it possible to take an action in rem? A person can either have a claim under common law – called a maritime lien – or a claim under the Admiralty Act 1973. Grounds for claims include: • disputes relating to ownership • damage to goods carried on a vessel • costs of goods supplied to a vessel • construction or repair of a vessel • claims based on charter agreements, and • any claim by a master or member of the crew of a ship for wages. Once it has been determined there is an actionable claim, how is the arrest of a vessel obtained? The arrest is actually quite simple. The person pursing the claim, called a plaintiff, has to issue proceedings against the vessel in the High Court and apply for a warrant of arrest. Once the warrant is issued, the vessel is served by the registrar affixing a copy of the warrant to the bridge or some other obvious place and leaving a copy with the person who appears to be in charge of the vessel. Once served, the vessel is in the custody of the registrar of the High Court and no-one may have any dealings with the vessel except with the registrar's express authority. This ability to take action directly against the vessel has both pros and cons. Although having a major income-earning asset out of action is generally a good incentive for the owner to resolve claims and will often result in success for the plaintiff, it's not all roses. Possibly the biggest drawback with taking an action in rem is that the action must generally be taken against the ship while the vessel is still in the ownership of or under charter to the person who owes the debt, otherwise the claim is defeated. There are limited exceptions to this, principally in relation to maritime liens. The other danger, which occurred in the case PDL International PTE Ltd v The Ship Ratstor, is that the arrest costs may often exceed the amount the plaintiff is seeking to recover. The cost of keeping the vessel "under arrest" is expensive. The filing fee for an arrest application is also fairly hefty at $920, and the arresting party also has to provide the registrar with an indemnity for fees and expenses to be incurred in arresting the ship, and give security if required for the registrar's expenses. If you've ever had a vessel sitting idle, you will know this is not a cheap exercise. If the claim is not satisfied and the vessel is sold by the court, there is a pecking order relating to who gets paid first, with no guarantee the plaintiff will be at the top of this order. First in line is payment of the costs and expenses of the registrar, followed in order by the costs and expenses of the producer of the fund in court (generally speaking the arresting party), followed by maritime liens, possessory liens, mortgages, and statutory claims under section 4 (1) of the Admiralty Act 1973. If an owner of a vessel is going to be the subject of an arrest, then that person may caveat against arrest, which can offer some form of protection. A caveat will in effect normally prevent the vessel from being arrested, but to obtain the caveat, the person applying for it will have had to have undertaken to pay into court a specified amount. If that person subsequently receives a notification of a claim, they have three days to provide security for that claim, normally by paying an amount into court. If the person fails to provide security the claimant can apply to have the caveat against arrest removed. The caveat will only prevent arrests for claims that do not exceed the amount specified in the undertaking. In other words, the person seeking the caveat against arrest needs to give security that is likely to exceed any potential claim. If you are contemplating arresting a vessel, however, you should consult a solicitor with particular expertise in maritime law. 14 New St, Nelson. PO Box 921, Nelson 7040. T +64 3 548 4136. F +64 3 548 4195. Freephone 0800 Oceanlaw. Email justine.inns@oceanlaw.co.nz www.oceanlaw.co.nz 52 Professional Skipper September/October 2011