Reiter Petroleum Inc v The Ship ‘Sam Hawk’ [11.09.15]

In a landmark decision, the Federal Court of Australia has upheld the arrest of a vessel on the basis of a foreign maritime lien arising from the supply of bunkers.

Implications

This decision means that claims giving rise to maritime liens in other jurisdictions are now capable of establishing jurisdiction in Australia for the purpose of a vessel arrest.

Owners should expect an increase in attempts to arrest vessels in Australia.

Background

The Sam Hawk (the vessel) was owned by SPV Sam Hawk Inc. (the owner), a Hong Kong company, and time chartered to Egyptian Bulk Carriers (the charterer). Under the charterparty, the charterer was responsible for arranging and paying for bunkers. In doing so, the charterer was not authorised to bind the vessel or owner to any contracts for necessaries (such as bunkers).

The charterer entered into a contract (the bunker supply contract) with Reiter Petroleum (Reiter) to stem bunkers in Istanbul. The bunker supply contract was subject to Canadian law. It purported to grant Reiter a contractual maritime lien over the vessel, and provided that US law was to be used to determine the existence of a maritime lien.

Reiter entered into separate arrangements for the supply of the bunkers with an intermediary company, which then coordinated the physical supply of the bunkers by Socar Marine (Socar). The owner was not involved in any of the negotiations of these arrangements, nor was it named as a party to them.

Prior to receipt of the bunkers, the owner issued notices to both Socar and the master of the bunker barge, stating that neither the owner nor the vessel were liable for payment of the bunkers (no liability notices).

The charterer failed to pay for the bunkers. Reiter commenced in rem proceedings, arresting the vessel in Albany, Western Australia.

The owner provided security under protest. It commenced proceedings before the Federal Court of Australia for the arrest to be set aside for want of jurisdiction or summarily dismissed. The owner relied on the majority decision of the Privy Council in The Halycon Isle [1981] to argue that questions as to existence of a maritime lien are procedural, and are therefore determined in accordance with the law of the forum. Consequently, as Australian law did not recognise the supply of bunkers as giving rise to a maritime lien, Reiter had failed to establish the Court’s jurisdiction under s.15 Admiralty Act 1988.

Alternatively, the owner argued that if the Court did find it had jurisdiction, any maritime lien had been extinguished or rebutted by the owner’s no liability notices (the summary judgment application). Reiter argued that the owner was bound by the bunker supply contract, by reason of the charterer’s agency or ostensible authority.

Decision

In finding that the Court had jurisdiction to consider a claim for a maritime lien for the supply of bunkers, Justice McKerracher held that The Halycon Isle “does not represent the state of law in [Australia]”.

McKerracher J considered the significant judicial and commentators’ criticisms of the majority decision in The Halycon Isle. He held that the dissenting view of the minority should be preferred as it accorded with the substantive nature of a maritime lien as identified by the High Court of Australia in John Pfeiffer. As such, matters which relate to the existence, extent or enforceability of a party’s rights, such as the grant of a maritime lien and the right to arrest the vessel, are to be determined by the proper law of the particular circumstances, and not the law of the forum.

On the facts, this might be Canadian law (the law of the bunker supply contract), US law (the law provided for the determination of the existence of maritime liens), the law of Turkey (being the place of delivery of the bunkers) or the law of Hong Kong (being the law of the vessel’s place of registration).

McKerracher J decided he did not have to find whether the lien actually existed. He referred to the non-exhaustive definition of a maritime lien under s.15 Admiralty Act 1988, identified by Justice Allsop in The Ship “Global Peace”[2006], and was satisfied that jurisdiction had been conferred on the Court.

In respect of the summary judgment application, McKerracher J held there were triable issues raised by both parties, such that it was not appropriate to deal finally with those matters at this early stage of the proceedings.