Felicity Monteiro Kerryn Webster October 9 2013 High Court confirms boat builder's right to arrest Wilson Harle | Shipping & Transport - New Zealand Felicity Monteiro, Kerryn Webster Shipping & Transport FactsJurisdictionOther ordersIn Westpark Boat Builders Ltd v The Ship "Bayliner 38"(1) the High Court examined whether a boat builder's right to bring an in rem claim in the admiralty jurisdiction and to arrest a vessel was extinguished by a subsequent payment arrangement with the vessel owner.FactsThe plaintiff, Westpark Boat Builders Ltd, undertook modification work on the pleasure craft Bayliner 38 under a contract with the owner of the vessel, Mr Hills. The work was completed and on completion NZ$22,221.54 was outstanding. Hills told Westpark that he could not afford to pay the entire amount. The parties then entered an arrangement under which Hills would pay in instalments a total of NZ$20,000 and the plaintiff would waive its contractor's lien by releasing the vessel.Hills made one payment of NZ$3,000 and then breached the payment arrangement by failing to make further payments. Westpark demanded payment of the full outstanding amount of NZ$19,221.54. Hills refused to pay.Westpark filed in rem proceedings and applied to the High Court for the Bayliner 38 to be arrested. On March 22 2013 the vessel was taken into the registrar's custody.JurisdictionWestpark's claim was brought in the in rem jurisdiction on the basis that it was a claim in respect of the construction, repair or equipment of a ship under Section 4(1)(m) of the Admiralty Act 1973. Hills brought an application to set aside the in rem proceeding. He alleged that the payment arrangement extinguished the original arrangement between him and Westpark relating to the work which he acknowledged would have been within the admiralty jurisdiction.The court noted that the burden was on the plaintiff to resist a challenge to jurisdiction by establishing, on the balance of probabilities, the underlying facts required to invoke the in rem jurisdiction. In order to come within Section 4(1)(m) of the act, Westpark had to show that its claim was "in respect of" the work identified. In the court's view, the words "claims in respect of" suggested the need for a practical approach involving a consideration of facts going beyond the technical nature of the contractual arrangement.Hills relied particularly on an earlier High Court decision, UAB Garant v The Ship "Aleksandr Ksenofontov".(2) The circumstances of the two cases were similar in some respects, but different in others:Repairs were made to a vessel.The claimant arrested the vessel.The parties entered into a subsequent payment arrangement.The vessel was released from arrest, but was re-arrested when the vessel owner defaulted under the payment arrangement.The owner challenged the jurisdiction to re-arrest.The court in the earlier case held that an agreement of compromise discharged all original claims, unless it expressly provided for their revival in the event of breach. The implication was that if a ship repairer entered into a compromise by way of a payment arrangement with a vessel owner, its claim was converted from one under the Admiralty Act into one for debt. In the earlier case, the parties had expressly agreed that if the owner breached the payment agreement, UAB Garant could re-arrest the vessel.In the present case, the owner of the vessel accepted that if the claim related to the work originally done, it fell within the admiralty jurisdiction, but argued that the payment arrangement discharged the original obligations. Although the judge had earlier concluded that the burden of proof was on the plaintiff to establish facts to invoke the in rem jurisdiction and so resist the challenge to jurisdiction, the way in which the conclusion was expressed in the judgment tended to indicate that the burden was applied to the defendant. The court concluded that the pleadings and evidence did not go far enough to enable it to find that there had been a compromise that meant that the original debt (which came within the admiralty jurisdiction) had been discharged. The court set out the following reasons as to why it could not confidently conclude that the debt in respect of the work on the vessel was discharged:The agreement to compromise was signed on a document headed "without prejudice".It did not make clear that the obligation to pay money owing in respect of the work undertaken on the vessel had been discharged.On one view, the document could be seen purely as an agreement to pay over time.The agreement was equivocal as to whether default would reignite the obligation to pay the full cost of work or the lesser settlement sum.The court was not prepared to hold that the proceeding was incapable of being brought in the admiralty jurisdiction of the court. The application to set aside the proceeding accordingly failed.Other ordersThe court also had to consider three further applications. The first was an application that Hills's fiancée be added as a defendant. Hills claimed that she should be added on the basis that the Admiralty Act requires that the person against whom an in personam claim arises must be the beneficial owner of all shares of the vessel when the action is brought. Hills claimed that his fiancée had a beneficial interest in the vessel under relationship property legislation. The application was dismissed because, while Hills's fiancée arguably had an inchoate claim under the legislation, Hills had held himself out to Westpark as the owner and none of the contemporaneous documents supported his claim that his fiancée was joint owner.In relation to the other two applications, the court set security for release of the vessel at NZ$25,000 and ordered Westpark to pay NZ$15,000 into court as security for costs.For further information on this topic please contact Felicity Monteiro or Kerryn Webster at Wilson Harle by telephone (+64 9 915 5700), fax (+64 9 915 5701) or email ([email protected] or [email protected]).Endnotes(1)  NZHC 1690.(2) HC Auckland CIV-2006-404-4167, December 21 2007 (Judge Hugh Williams).