In two recent judgments in the same proceeding, the Federal Court of Australia found that a claimant could not arrest a ship for a claim against the bare legal owner of the ship if the ship was beneficially owned by another party who was not liable for the claim. The Court also found that a ship under construction but not yet launched was not at ‘ship’ for the purposes of a surrogate arrest under the Admiralty Act 1988 (Cth).
HWL Ebsworth recently acted successfully for the Commonwealth of Australia in an application to the Federal Court to set aside a writ in rem filed by a Maltese ferry operator against a patrol boat under construction at an Australian shipyard for the Commonwealth.
Writ in rem
The ferry operator filed the writ in rem on 18 February 2015 to obtain security for an alleged claim against the shipyard in relation to a ferry constructed at the shipyard and delivered in 2010. The patrol boat was a surrogate ship for the ferry, and s19 of the Admiralty Act 1988 (Cth) (Act) gives a right to proceed in rem against surrogate ships.
As at the time of filing of the writ in rem, the patrol boat was about 96% complete and close to being delivered.
Although there was no actual application for an arrest, the shipyard applied to the Federal Court for orders that the writ in rem was invalid and should be set aside. The Commonwealth intervened in favour of the shipyard.
First instance decision
At first instance, in its judgment of 20 March 20151, the Court found that the Commonwealth had a right to an order for specific performance compelling the shipyard to deliver the patrol boat to the Commonwealth. That right was equal to beneficial ownership of the patrol boat. This meant that, for the purposes of the Act, the patrol boat was properly “owned” by the Commonwealth at the time of filing of the writ in rem. It did not matter that the shipyard was possibly also a legal owner, albeit with no right to dispose of the patrol boat.
Therefore, s 19(b) of the Act was not satisfied. The Court also found that the patrol boat was a “government ship” within the meaning of s8 of the Act and therefore no in rem proceeding could be commenced against the patrol boat. The writ in rem was dismissed.
The ferry operator appealed to the Full Federal Court and this appeal was heard on 24 April 2015, only about a week before the patrol boat was due for delivery.
Full Court decision on appeal
By its judgment of 30 April 20152, the Full Federal Court also dismissed the writ in rem, but for different reasons.
One of the causes of action pleaded related to the shipyard’s alleged breaches committed while the ferry was under construction but before launch. The Full Federal Court found that a ship under construction that has not been launched is not a “ship” for the purposes of s 19(a) of the Act.
The Court also found that another cause of action pleaded, said to arise between launch and delivery of the ferry and based on terms implied into the construction contract for the ferry, was not reasonably arguable.
The Full Federal Court did not address the question of ownership of the patrol boat.
The decision at first instance, while arguably partly in line with findings in The “Maria Luisa”  FCAFC 93, adds further illustration to a long line of Australian decisions on the meaning of “ownership”. Proving ownership of the relevant ship is an issue that needs to be considered carefully before any arrest.
The decision on appeal highlights the need to ensure that adequate evidence can be adduced to support any cause of action pleaded in support of the arrest. If a writ in rem is based upon mere assertions with little or no evidence, the Court may set aside the writ in rem.
This article was prepared by Joe Hurley, Partner, and Jesper Martens, Special Counsel, acting for the Commonwealth, represented by Australian Customs and Border Protection Service.
1 Virtu Fast Ferries Ltd v The Ship “Cape Leveque”  FCA 324
2 Virtu Fast Ferries Ltd v The Ship “Cape Leveque”  FCAFC 58