Atlasnavios Navegacao, LDA v The Ship "Xin Tai Hai" (No 2) [2012] FCA 1497

This case confirms that an Australian court must exercise its jurisdiction unless it is established to be a clearly inappropriate forum. The judgment examines the relevant principles and factors to be considered in determining that question.  Moreover, it confirms the disclosure requirements for a party seeking an arrest warrant in the Federal Court of Australia. This case provides good commentary on the clearly inappropriate forum test but must be read in light of the more recent Full Court decision in Chou Shan.

On 29 July 2011 the vessels "B Oceania" and "Xin Tai Hai" collided in the Straits of Malacca. On 24 August 2011, the owners of the "Xin Tai Hai", China Earth Shipping Inc. ("China Earth"), began proceedings in the Qingdao Maritime Court of China to establish a limitation fund. On 4 November 2011, the owners of the "B Oceania", Atlasnavios Navegacao LDA ("Atlas"), commenced proceedings in the Federal Court of Australia seeking damages against "Xin Tai Hai". The "Xin Tai Hai" was arrested at Port Headland on 2 May 2012.

Clearly inappropriate forum

The Court held, following the principles established in Voth,  that an Australian Court must exercise the jurisdiction that is conferred upon it, except where it is established to be a clearly inappropriate forum. This position differs from the English position which requires local proceedings to be stayed where a more appropriate forum exists.  As such, an Australian court will not be a clearly inappropriate forum merely because another is more appropriate.  Therefore, the focus is directed to the inappropriateness of the Australian Court. This question is one that depends on the general circumstances of the case, taking into account the true nature and full extent of the issues involved.

It will be prima facie vexatious and oppressive to bring proceedings concerning the same issues in different countries that have jurisdiction in respect of the matter.  Where the issues are not the same in the different courts, the question is whether, having regard to the controversy as a whole, the Australian proceedings are vexatious and oppressive in that it is 'productive of serious and unjustified harassment' or 'seriously and unfairly burdensome, prejudicial or damaging.'  The Court may consider whether connecting factors exist (including the applicable law on substantive issues, convenience for the parties, expense and availability of witnesses) or a legitimate juridical advantage (including higher damages, more favorable limitation regimes or better trial procedures). These factors will provide valuable assistance in determining whether Australia is a clearly inappropriate forum.

The Court held that neither China nor Australia was a natural forum for litigation as the collision occurred in the Straits of Malacca and neither had any substantive connection to the parties or the law of the place of the wrong (lex loci delicti). The substantive law was likely to be the same in each jurisdiction except in respect of the quantum of the limitation fund. Whilst there were differences between the practice and procedure in the courts, there was no reason to think anything should turn on that. The Australian proceedings commenced when the writ was issued, not when it was later served, so it was not correct to say that the proceedings brought in the Chinese Court began before those in Australia. Based on these factors, the Court held that it would not be reasonable to conclude that the continuation of the Australian proceedings was oppressive or vexatious on the parties in the context of the parallel proceedings in the Chinese Court.

Atlas' purpose in bringing proceedings in Australia was not improper as it had regularly invoked the Australian Court’s jurisdiction and sought the legitimate advantages of greater security for its claim. Once the limitation fund had been established under the domestic law of China, Atlas could not attain the status of a secured creditor. As China had not ratified the 1976 Limitation Convention  the existence of the limitation fund in the Maritime Court did not inhibit anyone from arresting the ship in an action in rem anywhere else. The Court was not satisfied that the Australian Court was a clearly inappropriate forum in the circumstances and therefore a stay of the proceedings was not granted. 

Failure to disclose the Chinese proceedings

The Court held that it is not appropriate to impose a duty on a plaintiff seeking the issue of an arrest warrant to make full and frank disclosure of other material facts beyond those specified in theAdmiralty Rules. The registrar is only required to be satisfied that the form 13 affidavit establishes the facts that must be proved and that no disqualifying circumstance exists to authorise the issue of the warrant.

Accordingly, when the conditions required for an arrest warrant are satisfied, and no countervailing factor under rule 40(3) exists, the Court held that the plaintiff is entitled to arrest a ship named in the writ. The Court held that the complexities of the position in the Qingdao Maritime Court, which Atlas failed to disclose, would and should not influence the registrars' decision to grant the arrest warrant.