Smithers v Lokys [2001] FCA 239 (13 March 2001)

Last Updated: 14 March 2001

FEDERAL COURT OF AUSTRALIA

Smithers v Lokys [2001] FCA 239

PRACTICE AND PROCEDURE - Maritime claim - whether proceedings should be transferred to the Supreme Court of New South Wales - where the Supreme Court proceedings relate to damages for personal injury resulting from a collision - where the plaintiff instituted separate proceedings in the Federal Court to limit its liability resulting from the collision

Limitation of Liability for Marine Claims Act 1989

Admiralty Act 1988 s 27

Jurisdiction of Courts (Cross-Vesting) Act 1987 s 5(4)

Convention on Limitation for Liability for Maritime Claims 1976

The "Volvox Hollandia" [1988] 2 Lloyd's Rep 361 applied

James Patrick & Co Ltd v Union Steamship Co of New Zealand [1938] HCA 22; (1938) 60 CLR 650 applied

SS Pharmaceutical v Qantas [1991] 1 Lloyd's Rep 289 cited

SIMON RUSSEL SMITHERS v

JOHN SIGITAS LOKYS AND DAVID NOFERI

N 1315 OF 2001

TAMBERLIN J

13 MARCH 2001

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY	N1315 OF 2001

BETWEEN:	SIMON RUSSEL SMITHERS PLAINTIFF
AND:	JOHN SIGITAS LOKYS FIRST DEFENDANT DAVID NOFERI SECOND DEFENDANT
JUDGE:	TAMBERLIN J
DATE OF ORDER:	13 MARCH 2001
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The application for transfer is granted.

2. This proceeding is transferred to the Supreme Court of New South Wales on condition that the parties agree to take the necessary steps to have the proceedings heard together with the proceedings on foot in the Supreme Court of New South Wales.

3. The plaintiff pay the defendants' costs of this application

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY IN ADMIRALTY	N1315 OF 2001

BETWEEN:	SIMON RUSSEL SMITHERS PLAINTIFF
AND:	JOHN SIGITAS LOKYS FIRST DEFENDANT DAVID NOFERI SECOND DEFENDANT

JUDGE:	TAMBERLIN J
DATE:	13 MARCH 2001001
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 This proceeding relates to a collision ("the collision") between the plaintiff's motor vessel, the "SharkN" ("the vessel"), and the defendants. The collision occurred on 12 July 1997. The plaintiff's Application was filed on 11 December 2000. It seeks a declaration that by reason of the Limitation of Liability for Marine Claims Act 1989 ("the Limitation Act") the plaintiff is entitled to limit his liability in respect of any loss or damage occurring in connection with the collision. Further declarations are also sought. In particular they include a declaration that the amount of the limitation fund calculated in accordance with the Limitation Act is 333,000 Special Drawing Rights ("the limitation amount") plus interest from 12 July 1997 to the date of constitution of the limitation fund and that the plaintiff's liability is no more than the monetary equivalent of the limitation amount. In addition, an order is sought that upon the plaintiff constituting a limitation fund, either by depositing the sum into Court or providing a guarantee for the amount determined, all future proceedings against the plaintiff should be stayed.

2 By Notice of Motion the defendants seek orders that the plaintiff's Application and Statement of Claim be struck out or stayed, or in the alternative, an order that the plaintiff's Application and Statement of Claim be transferred for hearing to the Supreme Court of New South Wales ("the Supreme Court").

3 When the Notice of Motion was heard the defendants did not press for orders that the Application be struck out or stayed and they are clearly without substance. There is no question as to the jurisdiction of this Court to make such an order and the material before me on this application provides no basis for striking out the Application or the Statement of Claim as being vexatious, an abuse of process or being without foundation. The authorities cited by Counsel for the plaintiff make it clear that a shipowner can select the forum in which to bring the limitation proceeding and is not bound to bring it in the forum where he is sued: The "Volvox Hollandia" [1988] 2 Lloyd's Rep 361 at 363-370. Nor is it necessary that a limitation be pleaded by way of defence to the primary claim alleging liability as it is not procedural in nature but is an independent, substantive right: see James Patrick & Co Ltd v Union Steamship Co of New Zealand [1938] HCA 22; (1938) 60 CLR 650 at 673.

4 This leaves the question of whether the proceedings should be transferred to the Supreme Court.

5 The jurisdiction of this Court to transfer the limitation proceeding derives from s 27 of the Admiralty Act 1988 ("the Admiralty Act") and s 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 ("the Cross-Vesting Act"). The latter subsection provides as follows:

"(4) Where:

(a) a proceeding (in this subsection referred to as the `relevant proceeding') is pending in the Federal Court or the Family Court (in this subsection referred to as the `first court'); and

(b) it appears to the first court that:

(i) the relevant proceedings arises out of, or is related to, another proceeding pending in the Supreme Court of a State or Territory and it is more appropriate that the relevant proceeding be determined by that Supreme Court;

(ii) having regard to:

(A) whether, in the opinion of the first court, apart form this Act and any law of a State relating to cross-vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Supreme Court of a State or Territory;

(B) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-paragraph (A)and not within the jurisdiction of the first court apart from this Act and any law of a State relating to cross-vesting of jurisdiction; and

(C) the interests of justice;

it is more appropriate that the relevant proceeding be determined by that Supreme Court, or

(iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory

the first court shall transfer the relevant proceedings to that Supreme Court."

6 Sections 25 and 27 of the Admiralty Act provide:

" Limitation of Liability under Liability Convention

25. (1) A person who apprehends that a claim for compensation under a law (including a law of a State or Territory) that gives effect to provisions of a Liability Convention may be made against the person by some other person may apply to the Federal Court to determine the question whether the liability of the first-mentioned person in respect of the claim may be limited under that law.

(2) Subsection (1) does not affect the jurisdiction of any other court.

(3) On an application under subsection (1), the Federal Court may, in accordance with the law referred to in that subsection:

(a) determine whether the applicant's liability may be so limited and, if it may be so limited, determine the limit of that liability;

(b) order the constitution of a limitation fund for the payment of claims in respect of which the applicant is entitled to limit his or her liability; and

(c) make such orders as are just with respect to the administration and distribution of that fund.

(4) Where a court has jurisdiction under this Act in respect of a proceeding, that jurisdiction extends to entertaining a defence in the proceeding by way of limitation of liability under a law that gives effect to provisions of a Liability Convention.

...

Transfer

27.(1) Where a proceeding commenced under this Act is pending in the Federal Court, in the Supreme Court of a State or Territory or in a court of a State or Territory exercising jurisdiction under section 11, the court (in this section called the `first court') may, at any stage of the proceeding, upon application or on its own motion, by order, transfer the proceeding to some other court that has jurisdiction under this Act with respect to the subject-matter of the claim (in this section called the `second court').

(2) Subsection (1) does not authorise the transfer of a proceeding commenced as an action in rem to a court that does not, apart from the operation of subsection 28(7), have jurisdiction in respect of proceedings so commenced.

(3) Where a proceedings has been so transferred, the second court shall proceed as if:

(a) the proceeding had been commenced in that court;

(b) the same or similar steps in the proceeding had been taken in that court as were taken in the first court; and

(c) the orders and directions made by the fist court in the proceedings had been made by the second court."

BACKGROUND

7 For present purposes the circumstances of the collision can be conveniently summarised as follows: At about 3.30 pm on 12 July 1997 the plaintiff was navigating the vessel in waters off Port Kembla in New South Wales. At that time the defendants were snorkelling in the waters between two islands off Port Kembla and the vessel collided with them. It is claimed that the plaintiff negligently caused the collision and the defendants suffered substantial injuries as a consequence. On 10 April 2000 the second defendant commenced proceedings for damages against the plaintiff in the Supreme Court. On 11 May 2000 the first defendant also commenced proceedings for damages in the Supreme Court.

8 On 22 November 2000 the plaintiff filed a Defence to both of the defendants' claims in the Supreme Court. No application was made to the Supreme Court by the plaintiff in relation to the Limitation Act nor was any pleading made in the Defence on the basis of that Act. I am informed that the two matters in the Supreme Court have not been consolidated nor has any order yet been made for the hearing of the claims concurrently although, in my view, that is clearly the appropriate course.

9 The plaintiff claims to be entitled to limit his liability for any loss or damage pursuant to the Convention on Limitation for Liability for Maritime Claims 1976 ("the Convention"), the relevant parts of which are incorporated into Australian law by the Limitation Act: see ss 6 and 9. The latter section, in subs (5), provides that the provision does not exclude or limit the operation in any way of s 25 of the Admiralty Act.

SUBMISSIONS

10 In support of their application to have the matter remitted to the Supreme Court the defendants point to the following considerations:

* proceedings were first commenced in the Supreme Court more than six months ago;

* defences have been filed in the Supreme Court which do not raise the limitation issue, nor has any attempt been made by the plaintiff to commence a limitation proceeding in that court;

* the existence of duplicated proceedings is to be avoided in related matters;

* duplicated proceedings result in greater costs and waste of time to all parties;

* there may be a dispute between the parties as to the application of Art 6 of the Convention, the resolution of which may be unnecessary if the damages awarded by the Supreme Court are less than the limitation amount. In other words, consideration of the limitation question may not arise on the one possible outcome;

* there is likely to be a question in the limitation proceedings as to whether the conduct of the applicant amounted to such a degree of negligence as to constitute "recklessness" and the determination of this question could involve an overlap with the determination of the lower level of negligence in the Supreme Court proceedings.

11 The contentions of the plaintiff in response to the application for remittal are essentially that:

* the ship owners' right to seek a limitation is independent of the underlying claims which are the subject of the Supreme Court proceedings;

* the ship owner is not required to plead the limitation by way of defence and is entitled to institute a separate limitation action;

* the plaintiffs omission to plead reliance on the limitation in the Supreme Court is not a bar to subsequently claiming an entitlement to a limitation;

* a limitation proceeding must be a separate proceeding in personam if the ship owner is to secure the full benefit of the limitation provisions;

* there are no common issues and the limitation proceeding is a discrete issue;

* there is no force in the argument that the determination of the limitation question may be academic;

* there is no indication to date as to the areas in which the plaintiff's right to limit damages is disputed;

* the argument as to recklessness being an issue is not made out because there is no material before the Court upon which the submission could be founded and the question has not yet been raised;

* there has been no consolidation of the hearing of the Supreme Court proceeding.

REASONING

12 It is not in dispute that this Court can transfer this proceeding to the Supreme Court and, indeed, under the Cross-Vesting Act it must transfer it if the statutory basis set out in subs 5(4) is made out. I am informed by Counsel that there does not appear to have been any cases which have relied on the question of a transfer effected under s 25 of the Admiralty Act, which raises different considerations to those general principles which can be found in the case law which underlies the approach taken in the Cross-Vesting Act.

13 The relevant questions under the Cross-Vesting Act are (i) whether the Federal Court proceeding can be said to arise out of or is related to the Supreme Court proceedings; (ii) whether a substantial part of the proceeding would have been incapable of being instituted in the Federal Court but is capable of being instituted in the Supreme Court; (iii) the extent to which the matters for determination in the Federal Court proceeding involve questions as to the application of State law; (iv) the appropriateness of having the proceeding determined by the Supreme Court; and, (v) the interests of justice.

14 In this case, the claims for damages and the limitation claims arise out of the same incident. However, it is the proceedings which must be related and not simply the sequence of events which give rise to the claims. In my view a sufficient relationship between the present proceedings arises from the following considerations. The first is that the defendants' claims for damages in the Supreme Court raise the question whether the plaintiff was negligent and involve a consideration of the circumstances which are said to constitute negligence. Counsel for the defendant informed me that a defence will be raised to the limitation action, under Art 4 of the Convention, which provides that:

"A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result."

15 The determination of whether the conduct of the plaintiff in the present case constitutes reckless conduct with knowledge that the loss would result would involve a careful consideration of the nature and extent of the plaintiff's acts or omissions. The authorities in relation to the question of recklessness point out that negligence is of different degrees including "mere negligence", "gross negligence", "recklessness", or "recklessness together with intent." In view of the proposed reliance by the defendants on Art 4 of the Convention this Court, in the present limitation proceedings, would need to examine the nature of the negligence and whether the necessary element of intent is present. This raises a common area of consideration in the two proceedings sufficient to bring them within the description of "related proceedings". Of course, to make good the defence under Art 4 it is necessary not only to prove such a high degree of negligence as to amount to reckless conduct but also actual subjective knowledge. This is a very high threshold: see SS Pharmaceutical v Qantas [1991] 1 Lloyd's Rep 289 at 290-291 where the New South Wales Court of Appeal described the standard as one of "highly reprehensible conduct". On behalf of the plaintiff it is said that there is no evidence before the Court on which to base an allegation of recklessness with knowledge. Some reliance is placed by the plaintiff on assertions in material placed before me in relation to the circumstances surrounding the collision. It is not the task of the Court on this application to make decisions which are more appropriate to a strike-out application or determine questions of fact which are to be properly agitated at the trial. In view of the fact that the issue of recklessness is intended to be raised I consider that the Supreme Court proceedings and the limitation proceeding are related to a sufficient extent.

16 A second consideration on which the defendants rely to support a conclusion that the proceedings are related is based on an argument as to the proper construction of Art 6(1) and (2) of the Convention in relation to the general limits. The defendants submit that any question of construction may become academic if the Supreme Court awards an amount less than the limitation amount. In my view, there is some substance in this submission and it adds further support to the contention that the two proceedings are related.

17 Although the claims in the Supreme Court proceedings have not yet been consolidated or listed for hearing it is clearly appropriate that this should take place. Indeed, the defendants have indicated that they will accept a requirement that this should take place if the limitation proceeding is transferred.

18 As to the appropriateness of transferring the proceedings in the interests of justice, it is important to have regard to the balance of convenience and also to considerations which the authorities indicate are relevant. It is apparent that if the two proceedings are heard together by the same Judge at the same time then the whole matter can be disposed of in one comprehensive hearing. An important general principle is that multiplicity of proceedings is undesirable because of the associated duplication and waste of time, expense, costs and the possibility of inconsistent findings, not to mention the inconvenience to parties faced with litigation on two fronts. The present case provides an illustration in which the application of these principles is appropriate. I consider it relevant and important that the Supreme Court proceedings have been on foot for many months and have been the subject of directions hearings. It would have been a simple matter for the plaintiff to have elected to raise the limitation claim in the Supreme Court rather than file in this Court and require the defendants to engage in two parallel proceedings. In addition, it is appropriate for the limitation and Supreme Court proceedings to travel together from the point of view of any possible appeal. The Supreme Court matters have now progressed under the management and directions of that Court to the stage where a defence was filed on 22 November 2000. No satisfactory explanation has been proffered as to why proceedings were not commenced in the Supreme Court in relation to the limitation issue rather than institute limitation proceedings in this Court.

19 The foregoing considerations support the conclusion that this is an appropriate proceeding to transfer to the Supreme Court. The parties have indicated that they are in agreement, if an order is made, that the transfer should be conditional on steps being taken to hear the negligence and limitation claims together.

20 In relation to the question of costs, the position is that the plaintiffs have succeeded in not having the proceedings struck out or stayed but the defendants have won the substantive issue argued on the hearing of the application, namely the question of transfer. Although the plaintiff was entitled to commence proceedings in the Federal Court, I have found that this was not appropriate and for this reason I consider that the defendants should have the whole of their costs. It would have been a simple matter for the plaintiff to have instituted proceedings in the Supreme Court. No real explanation has been given as to why this Court was selected when there were proceedings before the Supreme Court which plainly had jurisdiction.

21 As a general observation, I add that this is not a practice which is to be encouraged in that it unnecessarily duplicates litigation. Had the limitation application been made in the Supreme Court then this application for transfer by the Federal Court would have been unnecessary.

I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated: 13 March 2001

Counsel for the Plaintiff:	G J Nell H L A Cox
Solicitor for the Plaintiff:	Norton White
Counsel for the Defendants:	L King SC C A Webster
Solicitor for the Defendants:	Russell McLelland Brown
Date of Hearing:	22 February 2001
Date of Judgment:	13 March 2001