Patrick Stevedores No 2 Pty Ltd v the proceeds of sale of the vessel MV "Skulptor Konenkov&amp" [1997] FCA 1634; [1997] FCA 1424 (12 December 1997)

FEDERAL COURT OF AUSTRALIA

ADMIRALTY - sale of vessel pursuant to order for appraisement and sale - claim in rem against the fund representing the proceeds of sale - running account between plaintiff and shipowner - whether Court can go behind balance of running account to determine whether claims are in personam or in rem - whether claim for agency commission is a claim in rem - whether agency commission is a "disbursement" on account of the ship - whether agency commission is in respect of goods and services supplied to a ship for its operation and maintenance - whether claim for expenses incurred in servicing and handling containers is a claim in rem - whether servicing and handling of containers is in respect of the supply of services to a ship for its operation and maintenance - whether servicing and handling of containers is in respect of the "equipping of a ship"

Admiralty Act 1988 (Cth), subs 4(3)

Patricks Stevedores No 2 Pty Ltd v The Proceeds of Sale of the Vessel "Skulptor Kononkov" (1997) 144 ALR 394, applied.

Morlines Maritime Agencies Ltd v The Proceeds of Sale of the Ship "Skulptor Vuchetich" (unreported, 15 May 1997), applied

Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co [1984] UKHL 8; [1985] AC 255, cited

The "River Rima" [1987] 2 Lloyd's Rep 106, applied

The "River Rima" [1988] 1 WLR 758, cited

Port of Geelong Authority v The "Bass Reefer" [1992] FCA 378; (1992) 37 FCR 374, cited

Lewmarine Pty Ltd v The Ship "Kaptayanni" [1974] VR 465, distinguished

PATRICK STEVEDORES NO 2 PTY LIMITED & ORS - v -

THE PROCEEDS OF SALE OF THE VESSEL MV "SKULPTOR KONENKOV"

NG 495 OF 1995

TAMBERLIN J

SYDNEY

12 DECEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY	NG 495 of 1995

BETWEEN:	PATRICK STEVEDORES No 2 PTY LIMITED (Formerly known as STRANG PATRICK STEVEDORING PTY LIMITED) (ACN 003 893 141) First PLAINTIFF PATRICK STEVEDORES No 1 LIMITED (Formerly known as Australian Stevedores No 1 LIMITED) (ACN 003 621 645) Second PLAINTIFF
AND BY AMENDMENT: and:	BERGEN BUNKERS A/S ENSO-GUTZEIT OY FINNPAP MARKETING ASSOCIATION GLAVERBELL SA and G JAMES AUSTRALIA PTY LIMITED ROMET LIMITED (Formerly METRO MEAT LTD) and SHEED THOMSON INTERNATIONAL LIMITED OPAL MARITIME AGENCIES PTY LIMITED additional plaintiffs THE PROCEEDS OF SALE OF THE VESSEL MV "SKULPTOR KONENKOV" DEFENDANTS

JUDGE:	TAMBERLIN J
DATE:	12 december 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

The additional plaintiff Opal Maritime Agencies Pty Ltd ("Opal") seeks payment from the proceeds of the sale, pursuant to an order of this Court, of the vessel "Skupltor Konenkov".

The claims by Opal were previously considered by Sheppard J in his judgment of 14 May 1997, which is now reported: see Patrick Stevedores No 2 Pty Limited v Proceeds of the Sale of the Vessel "Skulptor Konenkov" (1997) 144 ALR 394 especially at 407-421.

After consideration of the evidence adduced on behalf of Opal, his Honour concluded that Opal had not proven its claim.

On 21 May 1991, his Honour granted leave to Opal to re-open its case by leading such evidence as it might be advised in relation to what is known as the Equipment Operation Account and the General Account referred to in the Provisional Liquidator's affidavit, and also in relation to the appropriation of amounts credited to those accounts. As a condition of such leave his Honour directed that Opal could only recover a judgment in rem in a sum of not more than $364,146.57 together with interest and costs. He also directed that Opal should recover no costs in rem in addition to those which it would have recovered if its claim had been fully presented and heard on 17 and 18 June 1996.

Opal has filed further evidence and has made submissions in response to the leave granted.

The parties represented before me on the further hearing were Opal, for whom Mr Glacken of Counsel appeared; the Admiralty Marshal, for whom Mr Douglas Coleman solicitor appeared, and the Receivers and Managers of the Baltic Shipping Company ("Baltic") for whom Mr Nell of Counsel appeared.

Opal's claim

Opal has drawn up and handed to the Court a Statement (MFI 2) ("the Statement"), which reads as follows:

"Personal liability of Baltic Shipping Company

on running account $1,244,823 (JRI)

Possible in personam debits pre 30 April 1995

Lease container repairs on Equipment Operation

Account $ 174,847.12 (JR2)

$ 10,575.61 (JR4)

$ 197,079.00 (JR5)

Agency Commission on Equipment Operation

Account $ 113,710.68 (JR2)

Agency Commission on General Account $ 58,483.33 (JR8)

Agency Commission on General Account $ 34,730.39 (JR9 and

JR11)

Container Fees $ 151,817.73 (JR10

para 32)

Slot Charters $ 99,180.00 (JR11

para 33)

Possible in personam debits post 30 April 1995

Lease container repairs on Equipment Operation

Account $ 56,997.00 (JR12)

Agency Commission on Equipment Operation

Account $ 19,572.95 (JR12)

Agency commission on General Account $ 162,518.71 (JR13 and JR14)

Container Fees $ 22,891.91 (JR10

para 32)

Slot Charters $ 156,513.00 (JR11

para 33)"

The sum of $1,244, 823 which appears at the head of the Statement is the balance at July 1995, said to be due to Opal on a running account over the period from March 1994 to July 1995. This running account was terminated on and from 15 May 1995. The consequence of termination is said to be that as from that date the intention of the parties to deal on the basis of a running account ended. The closest convenient accounting date to 15 May was 30 April 1995. There is no substantial dispute that this is a convenient and appropriate date for determining the present dispute.

As can be seen on its face the document is to be read in two parts. The first part consists of the items under the heading "Possible in personam debits pre 30 April 1995". The second comprises the items under the heading "Possible in personam debits post 30 April 1995".

The expression "possible" is used in the statement to indicate that there may be some disagreement as to whether the amounts referred to are recoverable against the in rem fund because it may be argued that they are of an in personam character. The question of characterisation will be considered later.

Under the running account, Opal has offset payments in respect of both in personam and in rem claims against the total debt, both in rem and in personam, owing by Baltic to Opal.

Opal submits that the starting point in deciding whether the claims are in rem, and therefore recoverable against the fund, should be taken as 30 April 1995. In other words, the submission is that the Court should not go behind the balance struck as at that date on the running account because that represents the agreed sum owing at that date as between Baltic and Opal. After 30 April 1995 it is conceded that it may be appropriate to disallow some items claimed on the ground that they are not of an in rem character.

Certain consequences follow from an acceptance of 30 April 1995 as a cut-off date. If all the claims in the Statement both pre and post-April 1995, which are referred to as "possible" in personam debts are disallowed, then Opal will recover $468,835. If, however, the pre 30 April 1995 in personam claims are not excluded, but all the post 30 April claims are excluded, the resultant debt is $1,049,776 in favour of Opal. These amounts may, in turn, be further reduced if certain claims relating to the service and handling of containers are disallowed as in rem claims. This will also be considered later.

The Running Account

Opal submits that the Court should accept the running account balance struck as at 30 April 1995 between Opal and the shipowner and that the Court should not go behind that balance amount to investigate, accept or reject claims on the basis that they are not in rem in nature. While the running account existed, up to 30 April 1995, credits should be applied against debits of any character whether in personam or in rem. Thereafter, in personam debts might be excluded so that only in rem debts could be recovered.

The consequence of accepting this submission, is that the pre 30 April claims which are in personam would be recovered from the in rem fund arising from sale of the vessel. This result is contrary to well-settled Admiralty principles that claims against the proceeds of sale, which stand in place of the vessel itself, must be in rem in character. This is not a case where the nature of the pre 30 April 1995 items is unknown. The general description of the claims are specified. It seems to me therefore that the Court should consider each claim in the Statement and determine so far as possible its proper characterisation. If a claim is in personam then it should be disallowed against the fund.

The Statement of Account is between the shipowner, Baltic, and the agent, Opal. It is not an account between Opal and the ship itself, which is a party in its own right, or between Opal and someone on behalf of the ship. This being so, I cannot see how the ship, as a distinct legal entity, can be bound by a set-off of in personam entries in a set of accounts kept as between Baltic and Opal, which, as Sheppard J pointed out is comprised of "all matters of debit and credit which are involved in that account": The "Skulptor Konenkov" at 420.

Accordingly, I consider it is neither necessary nor appropriate to approach the claims on the basis that a cut-off point should be drawn as at 30 April 1995 and that the Court should accept that balance as recoverable and not decide whether particular items arising before that date are recoverable against the in rem fund. The Court is not, in my view, limited to a consideration of the post 30 April 1995 figures in the running account.

The Statement

I now turn to a characterisation of the items set out in the Statement

As noted earlier, the Statement under the headings pre and post 30 April, refers to two classes of account, namely the General Account and the Equipment Operation Account.

The nature of the General Account and the Equipment Operation Account is described in the affidavit of Mr James Rolfe sworn on 13 August 1997. Mr Rolfe is the sole director of Opal.

In pars 45 and 46 he states:

"45. The components or categories of the general account are port charges, loading expenses, discharging expenses, agency expenses, vessel expenses and miscellaneous expenses. Port charges include pilotage, towage and mooring costs. Loading and discharge expenses include stevedoring, wharfage and cartage costs. Agency expenses comprises agency commission and fees payable to Opal by Baltic under the agency agreement. Vessel expenses include the provision of medical care and food to the crews of Baltic ships. Miscellaneous expenses will include items such as postage and the provision of funds to the master of the Baltic ship.

"46. The components or categories of the equipment operation account are repairs to containers owned by Baltic; repairs to containers leased by Baltic; rental for the storage of containers at container depots; the lifting on and off of containers from trucks at container depots; the loading and discharging of containers from ships; container survey fees; the transportation of containers at the port; miscellaneous items; and agency commission payable to Opal by Baltic under the agency agreement. The item for repairs to containers leased by Baltic relates to slot charters. The miscellaneous items relate to the missing equipment operation accounts for which it is not possible to provide a breakdown and for which the total amounts payable are taken from the letters comprising annexures `JR-3' and `JR-11'."

It is common ground that the claims relating to "Lease container repairs" in respect of both periods are not recoverable against the fund. These claims relate to containers leased by Baltic which were used on "slot" charters rather than on ships owned by Baltic. A "slot" charter is a charter of a ship by a fleet operator such as Baltic for a specific voyage when none of the vessels in the fleet is available. These accounts cannot be claimed against the fund.

The items described in the Statement as "container fees" are conceded not to be in rem claims. The amounts separately referred to in items "slot charters" are not recoverable against the fund because these claims do not relate to Baltic vessels.

Agency Commission

In relation to the Statement there then remains the claim with respect to agency commission on the Equipment Operation Account and on the General Account both before and after 30 April 1995.

The question is whether agency commission can be characterised as a general maritime claim within s 4(3) of the Admiralty Act 1989 (Cth) ("the Act"). That section relevantly provides:

"4(3) A reference in this Act to a general maritime claim is a reference to:

...

(m) a claim in respect of goods, materials or services (including stevedoring and lighterage services) supplied or to be supplied to a ship for its operation or maintenance;

...

(r) a claim by a master, shipper, charterer or agent in respect of disbursements on account of a ship." (Emphasis added)

In his judgment of 15 May 1997 in the related proceedings of Morlines Maritime Agencies Limited v The Proceeds of Sale of the Ship "Skulptor Vuchetich" (unreported, 15 May 1997), Sheppard J (at 46-47) considered these provisions in relation to a claim for solicitors' fees. The unpaid fees were said to have been incurred on behalf of Baltic in defending Baltic's interests when three admiralty actions were brought against ships owned by Baltic in a United States District Court. His Honour held that the fees were not recoverable from the fund because the claims were in respect of services rendered to the shipowner and were not services rendered to the ship itself for its operation or maintenance within par (m).

His Honour also considered that par (r) was not wide enough to cover the claims. In relation to the expression "disbursements" he considered that, although on a broad literal reading the expression was wide enough to include legal fees, the better view was that the expression meant out of pocket expenses or monies paid on behalf of the ship by the claimant. The essential difficulty for the claimant, in his Honour's view, was that the services provided were in reality for the shipowner and not the ship. He adopted a similar approach in relation to par (m). It was not sufficient, in his Honour's view, that the legal fees were directed to the possible release of the ship and might in that sense be considered to relate to the operation of the vessel.

In order to determine whether agency commission claimed in the present case can be characterised as an in rem claim, Opal referred to the relevant Agency Agreement made with the Baltic Shipping Company on 24 January 1992. Counsel for Baltic referred to certain provisions of the agreement.

I will refer to the general terms of that agreement. Under the heading "Agents Obligation" the agent is charged with protecting and promoting the owner's interests in all respects and representing the owner before harbour authorities, institutions and commercial enterprises. The agent is also obliged to arrange for and attend to any services and formalities appertaining to the owner's vessels, the cargo, passengers and crew before and on arrival of the vessel and during its stay. In addition, the agent must promote, co-ordinate and control cargo operations on the owner's vessel, in arranging for stuffing and transhipment of containers in an efficient manner.

Under the heading "Agency Services to Owners Vessels" the agent is obliged to communicate with the vessel and assist the master with any useful information and advice. The agent must arrange for berthing of the vessel as well as providing for pilotage, towage, mooring and unmooring, as well as arranging for fuel, lubricants and provisions, as required by the master and the owner. The agent is authorised to engage stevedores, terminal operators, towage, mooring, including pilots and other contractors for the services essential for the owner's vessels.

The financial provisions obliged the agent to collect and remit freight, demurrage and other amounts due to the owner. The agent undertook to provide full information regarding the settlement of freight, demurrage and other accounts due to the owner in accordance with the owner's instructions. There is provision with respect to disbursements whereby the agent undertakes to check and settle local accounts appertaining to the services rendered to the owner's vessels at the ports covered by the agreement upon the request of the master of owner vessels. In other words the agent itself is required to pay for the disbursements. In addition, the agent must settle accounts in due time to prevent any claims against the owner on the part of the subcontractors with special attention to local rules regarding the payments due to local officials.

With respect to agency fees, any agency fees appertaining to owner tramp vessels are to be included in the final disbursement account. The amount and basis of the remuneration is to be in conformity with the current scale of agency fees issued by the Institute of Chartered Shipbrokers. Agency commission is calculated on net freight after deducting from gross freight, any taxes, levies, forwarding commission, brokerage and other matters.

The agent is fully accountable to the owner for improper or inefficient execution of its obligations under the Agreement.

There are several Addenda to the Agency Agreement. These record that for agency services rendered by the agents to the owners' tramp cargo and non-cargo vessels calling at agreed ports, the owners are to pay to the agents an agency fee on a ship call basis at the level of 75% of official recommended tariffs issued by the Australian Chamber of Shipping. The agents are to provide the owners with all tariffs and scales of charges properly adopted. Agency commission is to be calculated on the net freight as set out in Addendum No 2. Addendum No 3 sets out procedures for the settlement of freights and disbursements so that upon completion of the disbursement accounts, the agent may deduct the balance due from freight collections owed to the owners. The agent is to notify the owners weekly as to the balance of freight due to the owner. Where the balance of the owner's account with the agent is in credit, the owner may direct the agent to disburse the funds in any way the owner sees fit. Where the balance is in debit the owner is required to remit appropriate amounts to the agent's bank.

Opal makes the following submissions in relation to agency commission:

1. Where an agent incurs a disbursement and becomes liable for the disbursement, then it comes within par (r).

2. Whether agency commission is recoverable as a maritime claim depends on the nature of the underlying service provided by the agent. By way of example, it is said that if agency commission is charged for arranging stevedoring, then the service providers' fees are disbursements on account of a ship. If, by way of contrast, the agency commission is for the collection of freight, that would relate to transactions conducted in respect of the business of the shipowner or carrier and the fee would not be recoverable.

3. The words "in respect of" in par (r) are words of extension and include a claim for an agent's commission. A claim for commission is in respect of disbursements on account of a ship. The emphasis in par (r) is not on "a claim by an agent for disbursements", but rather a claim "in respect of" disbursements.

Mr Coleman, on behalf of the Admiralty Marshal, points out that agency commission is nowhere referred to in s 4(3) of the Act. He emphasises the importance of the word "disbursements" which he submits covers outgoings but does include a reward or profit element for the benefit of the agent.

In relation to a contention on behalf of Opal that stevedoring fees, for example, if provided directly by a stevedoring company would include an element of profit analogous to the profit made by an agent for arranging such services, Mr Coleman submits that the ship should not be liable for any more than the amount of the disbursement itself which is incurred for the service or goods provided to the vessel. The commission payable to the agent is an additional amount over and above the "disbursement" itself, and is therefore not a maritime claim.

Mr Nell, on behalf of the Receivers of Baltic, supports the above approach.

In my opinion the submissions of Mr Coleman are correct.

In The "Skulptor Vuchetich" Sheppard J rejected a claim for agent's commission by Morlines. It appears from a reading of his Honour's judgment as a whole in that case that he did not consider agent's commission to be either a "disbursement" or as being made on account of the ship within the meaning of par 4(3)(r). Agency commission is not a "disbursement" as that term is normally used, namely, an out of pocket expense. It is not made on account of the ship because it is properly to be classified as a service to the shipowner rather than to the ship.

His Honour discussed this distinction in some detail in his judgment of 14 May in The "Skulptor Konenkov", particularly at 414-417.

In my view the agent's remuneration in the present case is payable in respect of services provided to the shipowner. The commission is paid in consideration for the agent arranging the supply of goods and services to the vessel. It cannot properly be said that the commission itself constitutes the supply of goods or services to the vessel. Nor, in my view, can it be said that the agent's reward is in respect of the supply of goods or services to the vessel. Properly analysed the remuneration payable to the agent by Baltic, on account of work done, for or on account of Baltic, is not for services to the vessel itself. The nature of the commission is not, in my view, to be characterised by reference to the underlying service as suggested by Mr Glacken. In no way can the act of arranging or procuring, by an agent, the supply of goods or services by a third party to the ship be described as the supply of those goods or services to the ship within par (m) or as a "disbursement" on account of the ship. The services are supplied to the shipowner for its purposes and not to the ship for its operation or maintenance. The actual "disbursement" for the goods or services themselves, on the other hand, can properly be described as a "disbursement" on account of the ship. It is the super-added element of an agency fee or commission which does not fit the description.

The payment of commission is not the same as payment for goods or services. Nor can it be said to be either for the operation or maintenance of a ship, or in respect of an out-of-pocket expense for the ship itself. Any analogy between the agent's commission and the profit component in the price charged for the actual supply of the goods or services, eg the stevedoring company, cannot be sustained. In the latter case the "profit" is part of the disbursement itself, whereas the agent's commission is a charge different and discrete from the payment made to the supplier. For example, the agent's commission for arranging supply of services by a stevedoring company is over and above, and different from, stevedoring charges made by the stevedoring company.

For the above reasons, in my view, the agent's commission claimed was payable for services to the shipowner and not for or on account of the ship. The claim for agent's commission is not an in rem claim and accordingly cannot be recovered from the proceeds of sale.

Container claims

In relation to what may broadly be described as container disbursements, the question is whether the expenses incurred by Opal in the servicing and handling of the containers used on Baltic ships comes within any of the following paragraphs of s 4(3) of the Act, namely:

"(m) a claim in respect of goods, materials or services (including stevedoring and lighterage services) supplied or to be supplied to a ship for its operation or maintenance;

(o) a claim in respect of the ... equipping of a ship;

(r) a claim by a[n] ... agent in respect of disbursements on account of a ship.

..."

The nature of these disbursements is described in pars 21-28 in the affidavit of Craig James, sworn on 22 August 1997, in these terms:

"Equipment Operation Accounts

21. The equipment operation accounts recorded disbursements incurred by Opal on account of services supplied to containers owned or leased by Baltic that were used by Baltic ships. The services included the storage of containers, the transport of containers, the carrying out of repairs to containers, the lifting of containers on and off trucks that would collect the containers either from Baltic ships at port or from transport centres (sometimes referred to as container parks), the inspecting and certifying of containers for seaworthiness, survey fees for the purpose of insurance claims and the packing and repacking of containers. The suppliers of these services would render invoices to Opal for payment by Opal. In turn, Opal would render to Baltic equipment operation accounts on a periodic basis for reimbursement of the costs incurred by Opal in respect of the servicing and handling of the containers.

22. Opal maintained equipment operation account files that were open and closed on a periodic basis. Each equipment operation account file was given a file number. Contained within each equipment operation account file were invoices rendered to Opal by the supplier of goods and services, a computer print out generated from computer accounting records maintained by Opal and a carbon copy of an invoice or account rendered by Opal to Baltic recording the total amount of disbursements incurred by Opal in respect of the servicing and handling of containers within the period covered by the equipment operation account file.

23. The computer print outs referred to in the preceding paragraph were generated from the computer accounting systems maintained by Opal in respect of the equipment operation account. Staff of Opal would key in to the computer information taken from invoices provided to Opal by suppliers of services in respect of the servicing and handling of the containers. The information keyed in would include a description of the service provided and the amount invoiced by the supplier of the service.

24. At any given time it was possible for Opal to identify and track the whereabouts of a container owned or leased by Baltic by reference to the relevant container number through computer records maintained by Opal. In this respect, on an inward journey it was possible to identify the Baltic ship upon which a container arrived at an Australian port, the date of its unloading at the relevant port and the container park to which the container had been transported for collection and unpacking. From that time it was then possible to identify the days upon which the container had been repacked and transported to an Australian port for loading onto a Baltic ship for an outward journey. The computer records of Opal also supplemented computer records maintained by Transglobe Container Services Singapore which provided to Baltic a computer tracking system of containers owned or leased by Baltic that were used on Baltic ships throughout the world.

25. If an exporter in Australia wanted to use a container owned or leased by Baltic the exporter would obtain from Opal an authorisation number issued in the name of Baltic. The authorisation number would identify the container and would be issued to the exporter with the bill of lading. At the time the authorisation number was issued the Baltic ship upon which the container was to be placed for the outward journey would be identified in the cargo manifest used in preparing the bill of lading.

26. At the time Opal performed its responsibilities under the agency agreement in respect of the servicing and handling of containers owned or leased by Baltic for an outward journey, the identity of the Baltic ship that was to carry the relevant container out of Australia was known to Opal. Likewise, at the time Opal performed its responsibilities under the agency agreement in respect of the servicing and handling of containers owned or leased by Baltic for an inward journey, the identity of the Baltic ship which carried the relevant container into Australia was known to Opal.

27. Because Opal acted exclusively as maritime agent in respect of Baltic ships, it was not possible for containers owned or leased by Baltic to be used by ships other than Baltic ships which, as noted above, included ships both owned and chartered by Baltic. The containers the subject of the equipment operation accounts for which Opal incurred charges from service providers were therefore used only on ships owned or chartered by Baltic.

28. From time to time Baltic chartered spaces on ships owned by other fleet operators for specific voyages to and from ports within Australia. These are known as slot charters. The slot charters were used so as to fulfil obligations assumed by Baltic for the shipment of cargo. Containers owned and leased by Baltic which were the subject of the equipment operation accounts were not used on slot charters. Instead, containers for slot charters would be provided by or on behalf of the ship chartered by Baltic for the slot charter."

In relation to the claim under par (m) the question is whether there is a sufficient nexus between the work done and the relevant ship.

The sufficiency of the connection between the services and the vessel was considered by the House of Lords in Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co [1984] UKHL 8; [1985] AC 255. Their Lordships there decided that for an agreement to fall within the description of "any agreement relating to the carriage of goods in any ship whether by charter party or otherwise" it must have a reasonably direct connection with the carriage of goods on a ship. It was held that a contract of insurance was not connected with the carriage of goods in a sufficiently direct sense to be capable of falling within this description. In the course of considering this question their Lordships discussed the connection. In his speech Lord Keith, with whom the other members of the House agreed, said (at 270-271):

"It is necessary to attribute due significance to the circumstance that the words of the relevant paragraphs speak of an agreement `in relation to' not `for' the carriage of goods in a ship and the use or hire of a ship. The meaning must be wider than would be conveyed by the particle `for'. It would, on the other hand; be unreasonable to infer from the expression actually used, `in relation to', that it is intended to be sufficient that the agreement in issue should be in some way connected, however remotely, with the carriage of goods in a ship....

I consider that in The `Sonia S' [1983] 2 Lloyd's Rep 63 there was likewise an insufficiently direct connection between the agreement for the hire of containers and the carriage of goods in a ship. There is clear fallacy in the reasoning of Sheen J in the latter part of his judgment, where he equates the use to which the containers were to be put with the use to which the salvage vessel was to be put in The Eschersheim [1976] 1 WLR 430. The salvage vessel there was a ship which was to be used under the salvage agreement. The containers were not a ship. In my opinion that decision was wrong and should be overruled." (Emphasis added)

The Court of Appeal in The "River Rima" [1987] 2 Lloyd's Rep 106, considered the question whether the plaintiffs' claim for damages for conversion of containers leased to a shipowner, and a claim for damages for breach of an obligation to maintain those containers could be maintained as an action in rem. The provision there under consideration was s 20(2)(m) of the Supreme Court Act 1981 (UK) which reads:

"any claim in respect of goods or materials supplied to a ship for her operation or maintenance."

At first instance Sheen J held that par (m) gave the Court jurisdiction because the containers were goods supplied to a ship for her operation. He dismissed an application to set aside the writ.

There was a successful appeal to the Court of Appeal.

In the Court of Appeal Sir John Donaldson MR observed at 112:

" ... As Mr Justice Sheen pointed out, containerization is encouraged by shipowners because it makes cargo handling easier and quicker and in some circumstances increases the cargo-carrying capacity of the ship by making deck storage available for goods which otherwise would not be so carried. But it can equally, and as I think more cogently, be said that the purpose of supplying containers is to meet the convenience of shippers by providing them with ready made packaging for their goods, something which has nothing to do with the operation of the ship." (Emphasis added)

His Lordship continued at 113:

".... I consider that I must hold that this leasing agreement between the plaintiffs and NNSL [the ship owner], whilst no doubt designed to enable NNSL to provide a service for cargo-owners, to encourage the routing of cargo via NNSL and to enable NNSL to handle cargo more easily in cases in which they were themselves the carriers, is not sufficiently directly connected with the operation of ships to enable me to say that the containers were supplied by the plaintiffs to NNSL `for the operation of a ship or ships.'"

Nourse LJ said at 113:

"In the present case there can be no doubt that the containers were `goods'. I am also prepared to accept that it is possible to conceive of a state of affairs in which they would have been goods supplied to a ship for the operation. The question is whether the existence of that state of affairs is disclosed by the evidence. In my judgment it is not.... [Y]ou find that the containers were delivered, not to a ship, but to the location where they were required, normally direct to the shippers so that they could be stuffed by them. That suggests to me that they were supplied not to the ship but to the shippers, and I do not think that reality was transformed ... by the fact that they were leased to the shipowner and not to the shippers. All that that meant was that the shipowner provided the shippers with a facility for the more convenient shipment of their goods ....It did not mean that the containers were supplied to the ship."

Wolfe LJ agreed with both judgments.

That decision was appealed to the House of Lords. It is reported as The "River Rima" [1988] 1 WLR 758. The appeal was dismissed.

In his speech at 763, Lord Brandon, with whom the other members of the House agreed, said:

"... the expression used in paragraph (m) is `supplied to a ship' and not `supplied to a shipowner'. The question is what meaning should be given to the former expression. There are two main kinds of contract pursuant to which goods or materials required for the operation of a ship may reach her. The first kind of contract is one which expressly provides that the goods or materials are required for the use of a particular ship, the identity of which is specified in the contract or will be specified by the time when the contract comes to be performed. The second kind of contract is one which contains no reference to a particular ship for the use of which the goods or materials are required, leaving the shipowner to make his own decision about that later. The first kind of contract is, in my opinion, a contract under which goods or materials are `supplied to a ship' within the meaning of paragraph (m). The second kind of contract, however, is, in my opinion, not a contract for goods or materials to be `supplied to the ship'... It is no more than a contract for the supply of goods or materials to a shipowner and as such does not come within paragraph (m)."

His Lordship concluded that the claims did not come within the Admiralty jurisdiction of the High Court.

The House of Lords decision in The "River Rima" was considered by Foster J in Port of Geelong Authority v The "Bass Reefer" [1992] FCA 378; (1992) 37 FCR 374. That case concerned a claim by the Port Authority, by way of a writ in rem, for payments due in respect of a lease of land, a priority berthing licence, and stevedoring services. The ship was a specialised freight carrying vessel which operated a regular service between Geelong and Stanley in Tasmania. The ship was the only vessel used by the charterer for the performance of its freight service. The land, the subject of the lease, adjoined the berth used by the ship in the Port of Geelong and was used to handle container cargo for the ship.

His Honour relevantly held that the question whether there was "services supplied to a ship" within the meaning of s 4(3)(m) of the Admiralty Act must be looked at as at the time when the services were supplied and determined, as a question of fact, at that time. The question was not to be determined solely by the provisions of a formal contract of supply which made no reference to a particular vessel. In that case his Honour held that the provision of a sea terminal storage area for a ship's cargo was not sufficiently proximate to the operation of a ship to warrant its falling within par (m). He considered it was strongly arguable that the berthing of a vessel at a quay was sufficiently related to the ship's operations to amount to a service supplied to the vessel itself and not merely to the owner or charterer. The priority berthing services were supplied to the ship for its operation and there was therefore a strong argument that the claim in respect of the priority berthing fees was a maritime claim. His Honour did not consider that there was a strong argument that the amounts owing under the lease agreement in respect of the land were owing in relation to a ship because rent payable in respect of a sea terminal storage area could not be said to have a sufficiently direct connection with the ship. Accordingly, the result was that his Honour considered there was a strongly argument for inclusion in the writ the amount of licence fees claimed under the priority berthing and, therefore, he refused the application to set aside the writ and release the ship from arrest.

After considering the speech of Lord Brandon in The "River Rima" his Honour said (at 385):

"I am not persuaded that The `River Rima' is authority for the wide proposition that there can be no supply to a ship unless the contract of supply specifies and nominates the vessel. It is clear that the relevant contract in The `River Rima' was one of the second kind referred to by Lord Brandon. The containers were leased to the respondent who could then, at his discretion, use them for his own ships or for other ships.

.....

I am of the opinion that The `River Rima' does not prevent the mounting of an argument in the present case that there was a supply of facilities to the ship, notwithstanding that the contracts did not refer to the ship specifically. The sub-section itself refers to `services supplied to a ship'. In my view, the matter must be looked at as at the time when services were supplied and the question determined at that time, is a question of fact: was there supply to a ship within the meaning of the sub-section? That investigation cannot be foreclosed by the fact that there was a formal contract of supply in existence which made no reference to the particular vessel."

In submissions Opal emphasised the difference between the circumstances of the present case and The "River Rima". It pointed to the evidence that at the time when Opal performed its responsibilities under the agency agreement in respect of servicing and handling of containers owned or leased by Baltic the identity of the Baltic ship which was to carry the relevant container was known to Opal. Accordingly, it was said that on the reasoning in The "River Rima", the relationship between the services and handling of the container arising from the identification was sufficiently proximate to the operation or maintenance of a ship owned by Baltic as to come within par (m).

There is United States authority for the view that a contract to lease containers to a ship owner can give rise to a maritime "contract": see Integrated Container Service Inc v Starlines Container Shipping Ltd 476 F Supp 119 (1979) and CTI-Container Leasing Corporation v Oceanic Operations Corporation [1982] USCA2 640; 682 F 2d 377 (1982). The decisions proceed on the basis that containers are a form of substitute for the ship's hold. Be that as it may, those decisions are distinguishable in three important respects. The first is that they relate to the supply of the containers themselves to the ship and not to services to the containers. The second is that the tests apparently applied as to what is a maritime contract are framed in wider terms than par (m). For example, in the CTI-Container case, the question addressed by the Court was whether the contract relates to a ship in its use as such, or whether it is a contract for the furnishing of services, supplies, or facilities to a vessel in maritime commerce. In Integrated Containers the test applied was whether the services or supplies were directly or substantially related to the vessel's participation in maritime commerce. The third is that it appears that the vessels in question were containerised ships in the sense that they were dedicated to container carriage. In the present case, the Baltic vessels were not containerised ships in the sense that they were adapted for containerisation. The Courts in those decisions expressed the view that the containers were the functional equivalent of the hold of the vessel. This was an important consideration in both decisions.

The services, storage and handling referred to in pars 21-28 of the affidavit of Mr James do not in my view come within par (m). My reasons for this view are set out below.

Firstly, the claim in the present case is not for supply of the containers themselves. It is for charges incurred in providing services such as storage, transport, handling, lifting, inspecting and certifying of containers. Therefore, it is one step removed from the circumstances in The "River Rima".

Secondly, the services provided in respect of the containers, cannot in my view, be properly described as being supplied to a ship for its operation or maintenance. The containers are not the ship. Rather, as the Master of the Rolls indicated in The "River Rima" [1987] 2 Lloyd's Rep 106 at 112, the purpose of supplying containers is to meet the convenience of shippers by providing them with ready-made packaging for their goods and that this is something which has nothing to do with the operation of the ship. A fortiori, services to containers are not "for" the operation or maintenance of the ship. The same observations equally apply in respect to "maintenance" of the ship. It is true that Lord Brandon in The "River Rima" assumed, without deciding, that the use of a container after being previously stuffed with cargo on board a ship designed to carry containers is a use for the operation of such a ship within the meaning of par (m). The statement was somewhat tentative. His Lordship said at 763 that such a proposition "may well be correct". In any event, this tentative view is distinguishable from present circumstances because his Lorship was there speaking of a use of the container itself and not with respect to services or handling expenses provided to the container.

Thirdly, the operations relating to the container are removed in time and space from the operation of the ship. There is no close or immediate connection between the services and the ship. The repair or survey of a container, for example, represents services provided in respect of the containers themselves, and not the vessel on which they are to be carried.

It was further submitted that the claims in respect of containers would become within par (o) as being claims in respect of the "equipping of a ship". In aid of this submission reference was made to Lewmarine Pty Ltd v The Ship "Kaptayanni" [1974] VR 465, a decision of Pape J. That case concerned an action in rem to recover moneys in respect of the supply of a pump, nuts and bolts, and other equipment to a ship at Geelong and the performance of cleaning operations to the holds of the ship. His Honour held that the above works could be described as "equipping of the ship". In his reasons for judgment, his Honour said (at 471):

"... I am disposed to think that all of these works may be said to constitute the equipping of the ship - they were operations necessary to be undertaken to make the ship fit to carry out the primary purpose for which she was in the port of Geelong, namely to load a cargo of wheat and carry it to Alexandria, and when they were completed and not before was the ship equipped to undertake the carriage of the cargo. The `equipping of the ship' relates to work done on the ship as opposed to things supplied to it. (see Roscoe Admiralty Practice 5th ed p. 207)"

In that case the goods were supplied to the ship itself and the cleaning work was done in the ship itself to prepare it to receive cargo. Those circumstances are quite different from the present case where the services were provided to containers. The repairs and services to the containers in the present case could not be said, in any sense, to be necessary or appropriate to make the ship fit to load and carry the cargo.

The plaintiff referred to pars 170 and 171 of the Australian Law Reform Commission, Civil Admiralty Jurisdiction, Report No 33 (1986). However, no further light is thrown on the question because that reference simply refers to Lewmarine and to another decision in which it was held that radar equipment supplied to a ship was held to be a "necessary".

In my view, the furnishing of a container to be placed on a ship would not generally be considered to be "equipping" the ship. The concept of "equipping" denotes fitting out or providing with what is necessary for action, or, providing with arms or apparatus for performance of a task. See the New Shorter English Oxford Dictionary (1993), volume 1, p 842; and The Macquarie Dictionary, (1991) 2nd edn, p 589.

Accordingly, I do not accept this submission.

Finally, reference was made to par (o), discussed above, which relates to a claim in respect of disbursements on account of a ship. For the reasons given above, I do not think it can be said that moneys paid in respect of the servicing or handling of containers, as described in the affidavit of Mr James, were incurred on account of a ship, because the connection between services to the container and the ship itself is too remote.

For the above reasons, my conclusion is that the expenses referred to in the Equipment Operation Account which have been claimed are not recoverable against the proceeds of sale because they cannot be properly characterised as in rem claims.

Disbursement accounts

In his reasons for decision in The "Skulptor Konenkov" (1997) 144 ALR 394 at 419 Sheppard J said:

"The case made by Opal Maritime is, however, stronger in relation to the items making up the general account which are said to be for stevedoring, bunkers, crew costs, repairs and maintenance and other costs referable to a specific Baltic vessel under the charge of Opal Maritime as agents in Australia. These items seem likely to have been incurred for expenditure the payment of which would give rise to general maritime claims. That there is so little detail means that it is difficult to make a judgment whether all amounts are properly characterised as general maritime claims."

In view of the further evidence furnished by Mr Craig James, in relation to these expenses, there was no substantial contest before me as to their character. I am satisfied in the light of that evidence that the items referred to in the disbursement accounts give rise to general maritime claims. They should be accepted for this purpose.

Conclusion

The view which I have reached is none of the items set out in the Statement, MFI 2, in relation to pre and post 30 April 1995, should be accepted as maritime claims. The agency commission claimed is not an in rem claim. I am not satisfied that the claims asserted in respect of the Equipment Operation Account in relation to the servicing and handling of containers and other matters referred to therein should be accepted as maritime claims. I direct the parties to bring in Short Minutes to give effect to these reasons.

I certify that this and the preceding twenty-one (21) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin

Associate:

Dated: 12 December 1997

Counsel for Opal Maritime Agencies Pty Ltd:	Mr S Glacken
Solicitor for Opal Maritime Agencies Pty Ltd:	Goldsmiths
Counsel for the Receivers and Managers of the assets of the Baltic Shipping Company:	Mr G J Nell
Solicitor for the Receivers and Managers of the assets of the Baltic Shipping Company :	Zaparas Dandanis Pty Ltd
Solicitor for the Admiralty Marshal:	Douglas Coleman
Date of Hearing:	24 October 1997
Date of Judgment:	12 December 1997