SHIPTALK: What Is A ‘Proprietary Maritime Claim’?

This case arose from a dispute between the Owners and Charterer of the “Houston” as to whether the vessel could be properly arrested under the Admiralty Act 1988 (Cth) (the Act). The question to be decided was whether the Owners had a ‘proprietary maritime claim’ within the meaning of section 4(2) of the Act.

Background of the dispute: In 2010, TBONE chartered the “Houston” for the purpose of, amongst other things, carrying locomotives to be used for mining in Western Australia. On 2 December 2015, the Owners served a notice purporting to terminate the Charterparty due to non-payment of hire.

TBONE countered that the Owners had previously wrongfully arrested the vessel in the US, describing this conduct as “a breach of the covenant of good faith inherent” in the Charterparty, and for this reason gave notice of early redelivery of the “Houston”. TBONE also stated that it had paid all hire up to the date of redelivery.

The parties corresponded in relation to the redelivery. However, TBONE eventually wrote to the Owners that as a direct result of their “continued bad faith conduct”, the proposed redelivery was delayed. TBONE sought confirmation that the vessel would not be arrested and asserted that redelivery would be in accordance with the “charter terms” governing termination due to “the Owner’s breach”.

The Owners responded asserting their right to terminate, demanding hire, and complaining that TBONE ignored demands for immediate redelivery at various ports of call.Proceedings

On 23 December 2015, TBONE filed and served a caveat against arrest. The Owners subsequently issued a writ claiming hire, loss and damage for detention/conversion of the vessel, indemnity for loss, damage and expense incurred by Owners, delivery up of the vessel, interest, and costs. On 11 January 2016, TBONE filed an interlocutory application seeking an order that the writ be set aside for want of jurisdiction.

The Owners contended that the claims for loss and damage arising from the detention/conversion of the “Houston” and for delivery up of the vessel were claims which related to the possession of a ship under s 4(2)(a)(i) of the Act. They were, it was argued, properly characterised as proprietary maritime claims invoking the Court’s jurisdiction under section 16 of the Act.

Section 4(2) of the Act states that a reference to a proprietary maritime claim is a reference to a claim relating to possession or ownership of, or title to a ship.In support of its argument for lack of jurisdiction, TBONE made a number of submissions which depended upon the acceptance of its version of the facts advanced in its submissions. For example, TBONE contended that, after 2 December 2015, it held the “Houston” as a bailee and, therefore, the Owners’ claims were misconceived because the Owners already held constructive possession.

Decision: The Court dismissed the interlocutory application, holding that the Owners’ claims did relate to possession of the ship and therefore the Court had jurisdiction. The Court followed the “Shin Kobe Maru” decision in determining that the proper approach to determining the jurisdictional question was to examine the legal characterisation of the claims, not the merits. It was also noted that the High Court held in “Shin Kobe Maru” that a wide meaning was to be given to the words “relating to” in s 4(2)(a) of the Act. The claim for delivery up was held clearly to be a claim for possession of a ship in that it was a claim for the delivery up of possession of the “Houston”. The loss and damage claim was held to be founded upon an assertion that TBONE, whilst the “Houston” was in its actual possession, denied the Owners’ right to possession. In the Court’s view, that claim was to be characterised as relating to possession of a ship, as it sought to vindicate the Owners’ asserted right to possession of the “Houston”.

Comment: This case serves as a reminder that when asserting that a claim is outside the Court’s jurisdiction under the Act, it is important to attack the legal basis for the claim, rather than the merits of the claim. This may be difficult, given that a wide meaning is to be given to the words “relating to” in section 4(2)(a) of the Act.

Rather than seeking that the writ be set aside for want of jurisdiction, TBONE’s efforts may have been better focussed on defending the claims with its arguments on the merits.  

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