Fiji Fish Marketing Group Ltd v Great Pacific Seafood Ltd [2005] FJHC 3; HBG0011d.2001s (4 January 2005)

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Mr. W. Clarke for the Plaintiff
Mr. F. Haniff for the 2nd, 3rd, 4th and 5th Defendants

INTERNATIONAL FREIGHT AND CLEARANCE SERVICE LTD
represented by Tuberi Chambers

JUDGMENT ON INTERVENERS’APPLICATIONS FOR PAYMENT OUT
THE APPLICATIONS – THE INTERVENERS

The Court has before it applications from Interveners for payment out of $1,316,069.03 deposited in Court being the proceeds from the appraisement and sale of the motor vessels "Mary M", "Holly G" and "Mary Q" (the "vessels"). By the action of the plaintiff the vessels were arrested, appraised and ordered to be sold on 1 February 2002, and the proceeds of sale be paid into Court after deduction of the Admiralty Marshal’s expenses and charges.

There are other claimants as interveners against this fund apart from the plaintiff in whose favour judgment has already been given. Included in the interveners as claimants are the alleged mortgagees of the vessels whose position I shall deal with hereafter.

The issues before me are firstly to determine the entitlement of each intervener’s claim and secondly to determine how the proceeds of sale deposited in Court is to be divided among the several claimants and whether any particular claimant is to be afforded priority over any other claimant. The determination of these issues involves a consideration of the law of priority.

In this case on 4 December 2001 the Fiji Fish Marketing Group Limited (the "plaintiff") instituted an action in rem against the defendants.

According to Graham Southwick’s affidavit sworn 4 December 2001 in support of motion for arrest of the said vessels the first defendant (Great Pacific Seafood Limited) is incorporated in Fiji. The registered owner of the vessels ‘Mary M’, ‘Holly G’ and ‘Mary Q’ respectively (the third, fourth and fifth defendants) is the second defendant (West Pacific Seafood Limited) a company related to the first defendant. The second defendant is in liquidation.

The plaintiff had on 4 December obtained a warrant of arrest of the vessels, namely, Mary M, Holly G, Mary Q. (hereafter referred to as ‘the vessels’) by the Admiralty Marshal until further order.

The debt owed by the first defendant at the time of arrest was $95,771.51 as claimed by it.

According to file record Mr. Clarke appeared before Fatiaki J (now Chief Justice) for the plaintiff and Mr. F. Haniff for the defendants and mortgagees on 1 February 2002 when certain orders by consent were made as follows:

"Court:	By consent there will be an order for the boats to be sold and the proceeds of sale be paid into court for distribution.
F. Haniff:	defendants are quite happy to conduct the sale which will be by transparent public tender.
W.Clarke:	Consent, better that boats be sold than left to depreciate and incur additional costs.
Court:	So ordered by consent That vessels be sold by the defendants and proceeds of sale be paid into court
	D. F "

Then on 17 April 2002 a further order by consent was made (by the Deputy Registrar) upon a motion by the defendants’ counsel (Mr. Haniff) supported by an affidavit of Mr. Tomasi Tuitoga, a solicitor with Munro Leys (the solicitors for the defendants).

The said order of 17 April 2002 which was drawn up and filed by the defendants’ counsel reads as follows:

"It is declared that the High Court of Fiji has jurisdiction over the motor vessels "Holy G", "Mary M", and "Mary Q".

Then on 15 May 2002 parties appeared before Fatiaki J (as he then was). It is noted that Mr. Haniff is recorded as now appearing for ‘Clark McLeod and Mary Quass as mortgagees’ having previously appeared for the defendants. Other appearances by a large number of counsel were for interveners. Certain orders were made on 15 May 2002 for creditors including McLeod and Quass to intervene on their application to intervene.

On 17 May 2002 the plaintiff obtained judgment in default of statement of defence against the defendants Great Pacific Seafood Limited and West Pacific Seafood Limited in that ‘they do pay the plaintiff the sum claimed with interest and costs’. The sum claimed was $167,958.71 with interest at the rate of 13.5% per annum.

On 12 September 2002, Mr. Haniff made conditional appearance for the first and second defendants and he said he was taking fresh instruction from them.

Then on 4 October 2002 this file was allocated to me to continue from where my brother Judge had left and I had made orders (inter alia) as follows:

"1. The Plaintiff’s solicitors be paid the following sums from the proceeds of sale currently held by this Honourable Court immediately:

I understand from the Admiralty Marshal that the position in regard to the said order is as follows:

Further, it is to be noted that the sum of $10,680.00 has also been paid out of the funds to the Chief Registrar under the mistaken belief that it was payable under Legal Notice No. 51 of 1993. It appears that this should not have been paid out to the Chief Registrar as there were authorized personnel on the said vessels.

The Admiralty Marshal’s said officers ought to be paid out the total sum of $4500.00 without delay by the Chief Registrar and not to attempt to defy the order of this Court thereby being in contempt of Court.

The Interveners (whose list appears hereafter) had been granted leave to intervene and on 9 February 2003 the hearing of applications for payment out of proceeds of sale were adjourned to 10th and 11th April 2003 in Court. All the interveners who were granted leave to intervene were ordered to file written submissions and prove their claims against the defendants.

I heard these interveners, who were represented by their respective counsels on their claims in Court.

The vessels were sold by consent under the Order of the Court and proceeds being directed to be paid into Court and claims to be thereafter determined. The sum of money held in Court being the proceeds of sale was $1,316,069.03 (one million three hundred sixteen thousand sixty nine dollars and three cents). According to the Admiralty Marshal the balance after payment out to Admiralty Marshal and for Guard Force is $1,270,389.03.

In addition to the claim by the plaintiff for which it has already obtained judgment there are a large number of claims by the Interveners, whose names and particulars of claim appear hereafter in this judgment.

The proceeds are sufficient to satisfy all the claims by the interveners and the question will be which or who is to have the preference as between the interveners depending on their entitlement. This I will determine when I deal with the subject of ‘priority’ hereafter.

The solicitors for all parties including interveners with claims appeared before the Court on the hearing of applications for payment out and none has objected to this payment out except the mortgagees.

Before I deal with the issues I shall now list the claim of each intervener so that we know how much is involved for payment out from the moneys deposited in Court and who is entitled to what sum of money.

The List of Interveners which is as follows states the names of the claimants, the nature of claim and the amount:

		Amount
1.	International Freight and Clearance Service Limited-
	Claim for freighting of seafood products – second defendant agreed to pay for such services	$ 91,500.00
2.	Agape Fishing Enterprises Limited-
	Claim for supply of baits	$154,283.80
3.	Joes Farm Produce Limited-
	Claim for food rations supplied for the crew for the three vessels	$26,350.43
4.	United Marine (SP) Limited-
	Claim for repair and maintenance
	- of the three vessels	$ 8922.85
	- Also dock charges	$25,168.00
5.	Shell Fiji Limited-
	Claim for supply of fuel and lubes for the 3 vessels	$130,528.32
6.	Shuttleworth & Ingersoll-
	(a) Mr. Clark McLeods B-
	Claim as mortgagee of the vessels Holly G and Mary M	(US$810,000.00 F$1,620,000.00
	(b) Ms. Mary Quass-
	Claim as mortgagee of vessel Mary Q	(US$265,000.00 F$ 530,000.00
7.	Sung Jin Company (Fiji) Ltd-
	Claims for supply of fishing equipment, gears and Tackles for tuna long line to the three vessels	$ 38,309.50
8.	Tripacific Marine Ltd-
	Claim for supply of ice and fish processing Services – judgment obtained 10.12.02 for$81,564.24	$ 81,564.24
9.	South Sea Engineering Limited-
	Claim for repair work on ‘Mary Q’	$ 8413.10
10.	Marine Union of Fiji-
	Claim for unpaid wages for the crew of Mary Q, and holiday pay entitlements for the crew of the three vessels	$84,585.00
11.	Seamech Ltd-
	Claim for engineering works and material supply	$ 5098.37
12.	Official Receiver of Fiji/Provisional Liquidation of 1st Defendant-
	Claim pursuant to winding up of the defendant on12.7.02
13.	Fiji Fish Marketing Group Ltd (Plaintiff)	$167,958.71
14.	Durga Prasad-
	Claim for VAT (bought Mary Q for $300,000.00 VIP – to be claimed from Admiralty Marshal as he is the Vendor	$22.272.00
15.	Captain Rea Chun Bak -
	Claim of Captain of Holly G for Wages, housing and meal entitlements	$ 15,303.68

E. LEGAL SUBMISSION ON MORTGAGEES’ POSITION: SUBMISSIONS BY COUNSEL FOR INTERVENERS AND BY COUNSEL FOR MORTGAGEES

In view of the fact that violent objections have been raised in regard to the manner in which McLeod and Quass in the guise of interveners have now emerged as claimants to the fund in Court, it is important that I give a complete picture of the situation and submissions made on their behalf and the arguments in opposition by all the interveners by their respective counsel.

All the counsel representing the interveners raised serious objection to Mr. F. Haniff now appearing for Clark E. McLeod and Mary Quass both of Cedar Rapids, Iowa, business persons (referred to as ‘M & Q’ hereinafter). They are alleged to be the mortgagees of the said vessels. Mr. Haniff acted initially for the defendants and now for the mortgagees as interveners without withdrawing as solicitor for the defendants.

Counsel argue that there is a conflict in Mr. Haniff appearing and acting as solicitor for the ‘mortgagees’ as well as for the ‘defendants’.

They want the ex parte leave to intervene granted to the mortgagees to be set aside.

Also, they want the monies paid into Court to be distributed and paid to the ‘local interveners’ and the left over of the proceeds may be paid out to the mortgagees.

Mr. D. Sharma for his Interveners submits that McLeod & Quass (M & Q) claim to have priority over all other claims. They are in effect trying to defeat all local claimants (who are interveners) through their purported mortgage.

Mr. Sharma says that ‘if the defendant did not own the vessels what gave the defendants’ solicitors the right to carry out the sale of the vessels. Why didn’t they bring to the Court’s attention that their clients did not own the vessels’

He submitted that the ‘defendants deliberately did not file a defence because the defendants’ solicitors wanted to control the sale process and did not wish to disclose to the court facts that may have materially affected the defendants’ ability to have any say in the sale of the vessels.

He continues that after the sale was concluded and monies paid into Court the defendants’ solicitors obtained leave to intervene on behalf of M & Q claiming to be mortgagees.

He further argues that ‘if the defendants solicitors were also representing mortgagees, then why didn’t they apply for the arrest of the vessels to be set aside. Why didn’t they take control of the vessels and call up their mortgage?’

It is Mr. Sharma’s argument that they (M & Q) through their solicitors (who are the same solicitors as for the defendants) acquiesced in the sale of the vessels by order of the Court. They allowed the vessels to be sold free from all encumbrances. In effect there was no encumbrances let alone a mortgage over the vessels at the time of the sale.

Counsel further submits that ‘it also appears to be a serious conflict where they have acted as solicitors for the defendants and allowed judgment to be entered against the said defendants on the facts contained in the plaintiff’s Statement of Claim and ‘now they are representing in essence two plaintiffs whose claim is based on facts that are materially different to those contained in the plaintiff’s claim. It must be noted that the sale was only conducted by the High Court of Fiji in the belief that it had jurisdiction to sell the vessels free from all encumbrances’. (emphasis mine)

Mr. Sharma submits that M & Q waived their rights under the document which they exhibited were in fact waived when they allowed the vessels to remain arrested in Fiji and for the vessels to be sold by the High Court of Fiji. He says that their right to claim against proceeds of sale have therefore been negated and their only remedy if any is an action in personam under the Promissory Note against West Pacific Inc. If these facts were disclosed to court leave would not have been granted to M & Q to intervene in these proceedings.

Mr. Sharma also raised a point that there is provision for ships mortgages to be registered with the Marine Department in Fiji. For this purpose the Mortgage has to be stamped. The document exhibited was not stamped but it was pleaded in these proceedings without compliance with section 41 of the Stamp Duties Act, Cap 205. It was wrongful to plead the mortgage without stamping the same first. The document was therefore inadmissible and ought not to have been pleaded.

Mr. Sharma has forcefully put forward to Court that it is contrary to the Rules of Professional Conduct and Practice under the schedule to the Legal Practitioners Act 19 of 1997 section 102 where it says that a party shall not act for more than one party in the same matter without prior consent of all parties. With reference to this case he says that ‘it is unheard of in this jurisdiction where one law firm represents defendants on the one hand and some of the plaintiffs on the other hand. The defendants’ solicitors have not filed any summons under Order 67 Rule 2(1) of the High Court Rules to withdraw from acting for the defendants’.

In his submission Mr. Clarke for his Interveners says that perhaps ‘the most obvious (and suspicious) characteristic of Messrs Mcleod and Quass is the fact that they were kept so secret for such a long period of time’. Local creditors were not informed of these mortgages. ‘This deceit was compounded by the fact that it was not until the vessels had been sold and the monies paid into Court that Munro Leys disclosed that they were also acting for a mortgagee’.

He says that even if the Court concludes that the ‘mortgages’ are valid securities, M & Q’s claim cannot succeed as once the vessels were sold by the Admiralty Marshal they were clear of all encumbrances. M & Q intervened after the vessels were sold and as there was no vessel as such to attack the ‘mortgage’. He says that ‘they therefore do not have any claim whatsoever against the proceeds of sale held by this Court. They had the right to sell under the mortgage but they waived that right. Also in this sale M & Q’s solicitors took part in ensuring that the vessels were sold free from encumbrances thus ensuring that by the time M & Q were given leave to intervene, they had no basis whatsoever to be included in doing so, they explicitly informed the court and the Admiralty Marshal that the vessels should be sold free from all encumbrances. ..... Further they facilitated the sale of the vessels. To now try and undo what they had done cannot be entertained by the Court’.

Mr. Clarke in his submission which is as follows alleges fraud on the part of M & Q:

In the alternative, it is submitted that the so-called "mortgage" document constitutes an attempt to defraud local creditors. As was shown from the wording of the documents themselves, they clearly vest beneficial ownership of the vessels in Messrs McLeod and Quass: they are in fact, owners. By allowing these vessels to operate and incur debt in Fiji through other companies such as the Defendants, Messrs McLeod and Quass had clearly entered into an arrangement whereby, the true ownership of the vessel was hidden. As has occurred in this case, the owner/mortgagees allowed the vessels to incur debt in Fiji. When, however, the local creditors, moved to arrest the vessels and recover the debt, the owner/mortgagee, pursuant to their "mortgage" have purported to simply take the proceeds of sale: flawed and clumsy as this has demonstrated to be.

From the wording of the documents filed by Messrs McLeod and Quass, it is apparent that the arrangement entered into, as demonstrated by the "mortgages", are and were an attempt to defraud creditors when execution proceedings are brought. This is a breach of section 51 of the Property Law Act.

Notwithstanding all this, the fact remains that Messrs McLeod and Quass, through their solicitors who also happen to be solicitors for the Defendants, allowed this Honourable Court to conclude, by the entering of judgment in default, that the Second Defendant is the owner. They sat by and let this happen, not raising any objection to that fact until after the vessels had been sold.

Counsel submits that M & Q are only entitled to the residual amount after the local creditors have been paid. They are not entitled to intervene.

Messrs. Howards for the plaintiff have summarised their case as follows (as stated on pages 7 and 8 of their written submission):

the so called mortgages are not mortgages, even if they are mortgages, by the time leave was granted, the subject matter of the "mortgages" had been destroyed in the sense that they had been sold free of all encumbrances:

have failed to abide by the notice provisions of their own mortgages. This however does not mean that they are simply unsecured creditors of the fund – the funds were "invested"/advanced in the First Defendant. They can only recover funds from the First Defendant.

4. The documents relied upon by Messrs McLeod and Quass are clearly an arrangement entered into to defeat local creditors.

The so-called "mortgagees, being owners of the vessels, are only entitled to the residual amount left after the local creditors have been paid. They are not entitled to intervene: they are only entitled to what funds are left over."

The learned counsel for the mortgagees (Mr. Haniff) made both oral and written submissions on their behalf.

They as mortgagees are seeking judgment and payment out to them in the sum of US$1,075,000.00 out of the proceeds of sale held by the Court from the sale of the vessels. Mr. McLeod claims as mortgagee of the vessels ‘Mary M’ and ‘Molly G’ and Ms. Mary Quass as mortgagee of the vessel ‘Mary Q’.

These vessels were sold for the following amounts: (I) Mary M - $426,000.00 (ii) Mary Q - $300,000.00 and (iii) Holly G - $590,000.03 making a total of F$1,316,069.03.

There are a number of claimants to the fund in Court and according to the mortgagees it comes to $2,961,389.96 (including claims by the mortgagees).

The learned counsel for the mortgagees submits that the proceeds currently held by the court will not be sufficient to meet all the claims. He says that it will be necessary for the Court to determine how the fund in Court is to be divided among the claimants (interveners) and whether any particular claimant is to be afforded priority over any other claimant.

Mr. Haniff deals at some length on the subject of general order of priorities, namely, maritime liens, mortgages, statutory liens and foreign mortgages. He says, inter alia, that the claim of a mortgagee has priority over a claim of ‘statutory liens’ and ‘necessaries suppliers’.

McLeod seeks payment of US$445,000.00 from the sale of Holly G and the sum of US$365,000.00 from the sale of Mary M and Mary Quass the sum of US$265,000.00 from the proceeds of sale the vessel and ‘Mary Q’ respectively.

Counsel submits that the default judgment obtained by the plaintiff was entered improperly.

I think I should point out the salient points from the affidavit of Clark E. McLeod ("McLeod") sworn herein on 12 March 2003 to give a complete picture of the situation.

McLeod was granted leave to ‘intervene’ on 15 May 2002. He confirms the contents of affidavit of Mr. Tomasi Tuitoga filed herein on 1 December 2001.

He agreed to lend to West Pacific Seafood Inc (the second defendant) a total of US$810,000.00 by way of two separate loans, the first one of US$365,000.00 and the second of US$445,000.00. West Pacific was to apply the loans in the purchase of two fishing boats, the "Holy G" and the "Mary M" and agreed to secure the loans to McLeod by promissory notes supported by registered mortgage over the boats.

On 7 February 2001 a mortgage was executed and was filed at the National Vessel Documentation Centre on 8 February 2001. The Promissory Note referred to above was secured by a First Preferred Mortgage of the Motor Vessel "Mary M" Official Number 621074. ‘Mary M’ was owned by West Pacific Seafood and was mortgaged to Mc Leod to secure the said principal sum.

Similarly, a Mortgage was registered on 13 March 2001 over Holly G to secure payment of US$445,000.00.

He came to know that the said vessels were arrested. On 31 January 2002 he instructed his solicitors to consent to the selling of the vessels and the proceeds of sale be made into Court.

The contents of the fax sent to Mr. F. Haniff on 31.1.02 through Mc Leod’s attorney Collin reads as follows:

This will confirm our phone call of a few moments ago. On behalf of the mortgagees and as their attorney, I request that you obtain the necessary order, if it pleases the Court, to sell the 3 boats and equipment and have the proceeds held by the Court pending further proceedings. As you know we claim 100% of the proceeds, and ask that you proceed on that basis." (emphasis mine)

McLeod said that he has ‘no equity in any of Mr. Kemp’s companies, nor was I ever asked to invest in his companies’.

A similar affidavit sworn 17 March 2003 was filed by Mary Quass. The amount secured was US$265,000.00 over Motor Vessel "Mary Q". Among other things she states that the vessel Mary Q is owned by West Pacific Seafood Inc. (the 2nd Defendant herein) and was mortgaged to her to secure the repayment of the said principal sum. The mortgage was executed on 26 December 2000 and was filed at the National Vessel Documentation Centre on 29 December 2000.

The deponent stated that on 31 January 2002 she instructed her solicitors to consent to the selling of the vessels and payment to be made into Court. She said that ‘Mary Q’ was resold and the proceeds of the sale have been paid into the High Court of Fiji.

The plaintiff moves the Court for the payment out to it the sum claimed by it, or such other sum as may be approved in respect of the judgment of this Court in its favour.

The plaintiff’s claim is for the supply of rice, bait, fishing gear and processing services.

It also claims $35,000.00 for producing the fund. It is entitled to this sum as under the practice of the Admiralty Court a claimant responsible for producing the fund in Court has to be paid for expenses so incurred. This is so irrespective of the priority of the substantive claim pursued by the "producing claimant". The claimant is also entitled to costs as the producer of the fund but this works next to the Admiralty Marshal’s costs but ranks in priority to all other claims.

In this regard in The "Falcon" ([1981]) 1 LL.L. Rep. 13 at 14, it was held:

‘(4) ... the proceeds of sale of a ship which had been sold by Order of the Court should be used first to pay the Admiralty Marshal’s charge and expenses and secondly to reimburse the plaintiffs or plaintiff who had incurred expenses in preserving the ship and maintaining the arrest ..." (Sheen J)

As far as the claim of the plaintiff for costs is concerned it is pertinent to note the reason for awarding it to the plaintiff as contained in the Judgment in Festive Holidays Limited and The Demise Charterers of the Ship "Ocean Glory I" (dated 20.11.01 – at p2).

"It is also accepted that, in exceptional circumstances where an arresting party has properly incurred costs, in the administration of the fund that has been held in Court and that is for the benefit of all claimants, then such costs may be claimed as part of the costs of the arrest. Whether the Court permits such costs to have priority is a matter of discretion: The Leoborg No. 2 [1964] 1 Lloyd’s Rep 380 at 384 per Hewson J. It is also agreed that the party that claims priority for such costs does not have to prove an actual benefit to the fund in incurring the costs. It is enough that the costs were (i) reasonably incurred; and (ii) the costs were aimed at producing or preserving the fund for the general benefit of all creditors; and (iii) those costs were incurred because the party incurring them was uniquely able to do something that did or might be for the general benefit of all creditors."

Mr. Haniff for the mortgagees opposes the plaintiff’s claim of $35,000.00 for producing the funds which is held in Court.

Counsel submits that if it is accepted by the plaintiffs that the vessels were sold at the insistence of the mortgagees then the plaintiff cannot claim to have incurred costs for producing the fund after 1 February 2002 for it was then that Fatiaki J (as he then was) Ordered the boats to be sold.

It is to be noted that the sum of $30,500.00 had on 4 October 2002 been ordered to be paid to the plaintiff for maintaining the arrest.

Mr. Haniff made submissions as to what costs should be paid to the plaintiff. He has cited a number of authorities on this aspect. (The ‘Ocean Glory’ [2003] 1 Lloyd’s L.Rep. 679, The "Falcon" [1981] 1 Lloyd’s L.R. 13, Re: Alexander Watt & Co. Pty Limited and the Ship "{Oceania Trader" and its Charterers Oceania Shopping Corporation Limited No. QG 139 of 1990 Fed. Ct. of Aust. The "World Star" [1987] 1 LL.L.R. 452)

I have considered the observations made in those cases as far as payment of costs are concerned and based on these I will give my decision.

Mr. Haniff concluded on costs by stating that the plaintiff is only entitled to fair and reasonable costs of arresting the boats and these costs are to be taxed unless agreed between the plaintiff and mortgagees.

In fact as far as the mortgagee’s opposition to costs is concerned, because it was by their action that the vessels were arrested, appraised and sold, it follows that the costs necessarily incurred by them in taking that action and bringing the fund before the Court must be secured in priority to the mortgages. (Hewson J in "The Regina" (No. 2) [1963] Vol.2 Lloyds L.Rep. 513 at 514).

Before I consider each claim (apart from the mortgagees’) I will deal with the law of admiralty particularly in relation to rights of interveners and the law of priority in admiralty matters.

‘Above all other consideration the court must endeavour to do justice between the parties. Litigants come before the court because there is a dispute between them or because the defendant is made to pay his debts. In the latter case the task of the court is to assist the creditor to make recovery. In the former case the overriding consideration must be to make that order which is most likely to achieve a just resolution of the dispute with minimum of expense. The practice of the Admiralty Court has been developed with these objectives in mind.’

An admiralty action does involve a difficult area of the law and it takes one through ‘waters which are full of hazards’ and the Court exercising its admiralty jurisdiction is greatly assisted by many decided cases and text book writers on Admiralty Law.

The admiralty jurisdiction of the High Court is contained in s21 of the High Court Act Cap. 13 which provides:

21. The Supreme Court shall be a Colonial Court of Admiralty within the meaning of the Colonial Courts of Admiralty Act, 1890, of the United Kingdom and shall have and exercise such Admiralty jurisdiction as is provided under or in pursuance of subsection (2) of section 56 of the Administration of Justice Act 1956 of the United Kingdom or as may from time to time be provided by any Act, but otherwise without limitation, territorially or otherwise. (Substituted by 35 of 1965, s.10).

As stated in section 21 the Court has jurisdiction to hear and determine any of the questions enumerated thereunder (as stated in the Administration of Justice Act 1956).

This action has a lot of interveners. Who are interveners and how does one intervene is discussed very well by Nigel Meeson in his book Admiralty Jurisdiction and Practice as follows:

"Where a person is not a party to the proceedings has an interest in the property under arrest, or the proceeds of sale in court, he may apply to the court to intervene in the action. Such an application is made ex parte by affidavit showing the interest of the applicant in the property against which the action is brought. Such applications are usually heard by the Admiralty Registrar or in a district registry action, the district judge. Where leave is granted the intervener becomes a party to the action, and the court may order the intervener to serve his notice of intervention and, if necessary a pleading within such period as it considers appropriate. This provision in the rules states the historic policy of the Admiralty Court that ‘if a person may be injured by a decree in a suit, he has a right to be heard against the decree; although it may eventually turn out that he can derive no pecuniary benefit from the result of the suit itself’. However, the right of an intervener who has intervened under this provision is limited to the protection of his interest in the res and the court will not permit him to raise extraneous issues. An intervener cannot stand in any better position than the defendant and is therefore only entitled to raise defences which the owner could have raised."

There is no limit to the category of persons who may have an interest in the property under arrest or the proceeds of sale, but the following are examples of the type of persons who have been permitted to intervene:

The relevant Rule under which intervener proceedings begin is R.S.C. O.75 r.17 (English) which provides:

"Where property against which an action in rem is brought is under arrest or money representing the proceeds of sale of that property is in court, a person who has an interest in that property or money but who is not a defendant to the action may, with the leave of the Court, intervene in the action."

This rule covers cases where the person seeking to intervene has an interest in the property arrested or in the money which represents it (The "Mardina Merchant" [1974] Vol 2 Lloyd’s L. Rep 424 at 425).

Here the following passage from the judgment of Brandon J in "Mardina Merchant" supra at 426 is relevant to the circumstances of this case and is to be borne in mind:

"The view which I take, however, is that the rule is not exhaustive of the powers of the Court to do justice in particular cases. I am of the opinion that there must be an inherent jurisdiction in the Court to allow a party to intervene if the effect of an arrest is to cause that party serious hardship or difficulty or danger. One can visualize cases where the presence of a ship in a particular place might cause not merely financial loss or commercial difficulty but even danger to persons or property.

In all such cases it seems to me that the Court must have power to allow the party who is affected by the working of the system of law used in Admiralty actions in rem, to apply to the Court for some mitigation of the hardship or the difficulty or the danger. If it were not so, then there would be no remedy available for such persons at all.

In this case law as to priorities arises in view of the fact that the mortgagees have also intervened by laying claim to funds in Court.

The principles involved in the matter of priorities is contained in Meeson (ibid) at 145-4. He states, inter alia:

"Unless the net proceeds of sale of a ship sold by the court in an action in rem are sufficient to meet all the claims against the ship, or all the parties reach agreement as to the distribution of the fund, it will be necessary for the court to determine how the fund in court is to be divided among the several claimants, and whether any particular claimant is to be afforded priority over any other claimant.

"Where in an action in rem against a ship the court has ordered the ship to be sold, any party who has obtained or obtains judgment against the ship or the proceeds of sale of the ship may then apply to the court by motion for an order determinating the order of priorities of the various claims against the proceeds of sale of the ship. Where the court has made an order that priorities shall be determined before the expiry of a specified period of time, the application must be made after the expiry of that period, otherwise it may be made after obtaining judgment. The notice of motion should be issued in the action in which the applicant has obtained judgment, and should be served upon all caveators and all persons who have obtained judgment against the ship or the proceeds of sale. The names and addresses of such persons are obtained from the Admiralty and Commercial Registry.

The Admiralty Marshal’s charges and expenses are a first charge on the proceeds of sale and will be paid out in priority to any other claim. These will include the expenses he incurred in effecting the arrest, in maintaining the arrest, for example port dues, the cost of a shipkeeper and supplies required to maintain the ship whilst under arrest, and any other expenses authorised by the court to enable the ship to be sold for the best possible price.

Before I consider the claims of the interveners including the mortgagees as interveners, I think I ought to clarify the position of the ‘mortgagees’ in these proceedings.

Bearing in mind the great importance of the question regarding the position of the mortgagees to the parties and interveners in this action I have discussed at length hereabove the arguments put forward by the interested parties and have carefully examined the facts and circumstances and the several authorities bearing on the subject-matter of mortgagees.

It is clear from the file record, the evidence and submissions of all counsel as stated hereabove. Mr. Haniff who at first appeared for the defendants and who has not till today withdrawn as their solicitors, had on 1 February 2002 consented to the sale of the vessels and proceeds of the sale to be paid into court for distribution and he said at that time that the ‘defendants are quite happy to conduct the sale’.

Then on 17 April 2002 in an order it was ‘declared that the High Court of Fiji has jurisdiction’ over the vessels and it was ordered that the vessels "be sold by the High Court of Fiji free and clear of any and all encumbrances and the proceeds of the sale be paid into Court ." It was further ordered that "application be made for the deletion of the United States of America Coast Guard Registration of the said vessels".

I find and hold on the facts that by consenting to the above orders Mr. Haniff had for both the defendants and the mortgagees agreed for the sale of the vessels ‘free and clear of any and all encumbrances’ and to take steps ‘to delete the registration of the mortgages from the National Vessel Documentation Centre in the United States of America’.

In these circumstances the way was clear for the sale of the vessels without in any way the sale being sold subject to mortgage. In other words through their solicitor the mortgagees had waived their rights as mortgagees. In effect this amounted to the mortgagees not having the right to claim from proceeds of sale.

At the time when the first order was made on 1 February 2002 Mr. Haniff did not tell Fatiaki J (as he then was) that the defendants were the owners of the vessels. This fact was not disclosed then and not even when he obtained the subsequent order for sale free from encumbrances.

I have come to the above conclusion on the evidence before me particularly from the Court file herein and the Orders made.

Because of the importance of the issue raised by Mr. Haniff for the mortgagees and by counsel for the interveners (other than the mortgagees), I cannot let the occasion pass without some comments.

The picture that I have in mind of the case is that whilst the defendants are the parties as defendants to this action, they have for some reason been abandoned by their Counsel Mr. Haniff and who appear to have fallen by the wayside for counsel has not only not withdrawn as their counsel but also he had not said a word about them when fighting for a share of the cake if not the whole cake on behalf of the mortgagees for whom he started acting and whom he introduced and added to this case as interveners.

The counsel representing the mortgagees in the way he has come in, is clearly an unprofessional and unethical behaviour on his part and if the firm of solicitors whom he represents have allowed him then they have some explanation to make. More on this aspect later suffice it to say that each counsel has bombarded him in this respect in no uncertain terms during their submissions on payment out.

It is my view and of all the counsel appearing for the plaintiff herein that the learned Counsel for the defendants should not have started to act for both the defendants in this action and the mortgagees.

It was the solicitor’s duty as was pointed in Farrington v Rowe McBride & Partners [[1985] NZCA 21; 1985] 1 NZLR 83 at 92-93, 97-99 "the solicitor had a responsibility, the least to explain" to the mortgagees "the nature of his dual responsibilities in order to obtain" their ‘informed consent to his continuing to act for both clients’. Burchett J goes on to say at 510 in Wan v McDonald & others 33 FCR 451 at 510, General Division, Qld, District Registry:

"And she should have been advised that because of his professional commitment to his other client, and his close personal association with it, and because too of the demonstrated reality that her interests and its interests would not necessarily coincide in the particular transaction, she should consider taking independent advice."

Even the Fiji Law society Code of Ethics (as at 1 October 1984) restricts a practitioner from acting for any other party in the same matter without the prior consent of both parties. It provides in 1.1.2 as follows:

A solicitor should not hide certain important matters as in this case when he started acting for the mortgagees and failing to disclose to them what orders he had already sought in this action from the Court. The following passage is pertinent when Megarry J said in Spector v Ageda [1973] Ch 30 at 48:

"A solicitor must put at his client’s disposal not only his skill but also his knowledge, so far as is relevant; and if he is unwilling to reveal his knowledge to his client, he should not act for him. What he cannot do is to act for the client and at the same time withhold from him any relevant knowledge that he has."

In this regard a particularly strong warning was given by Wootten J in Thompson v Mikkelsen (unreported, Supreme Court, NSW, 3 October 1974 – quoting from Wan, supra at 511) and I consider it quite apt in this case. He said:

"It seems to me that the practice of a solicitor acting for both parties cannot be too strongly deprecated. It is only because of the possibility that something may be wrong in a transaction, or may go wrong during its implementation, that the employment of highly trained professional people at professional scales of remuneration can be justified. To scrutinise a transaction to discover whether something is wrong in a way that may affect his interest, or to notice and deal with something that goes wrong during the transaction, is what a party employs such a person for. He is entitled to assume that that person will be in a position to approach the matter concerned with nothing [in mind] but the protection of his client’s interest against [those] of the other party. He should not have to depend on a person who has conflicting allegiances and who may be tempted either consciously or unconsciously to favour the other client, or simply to seek a resolution of the matter in a way which is least embarrassing to himself.

In the present case I have no doubt that the solicitor acted with complete integrity and with utmost good faith. Equally, I have no doubt that his position as a solicitor for both parties, one of whom was a long-standing client, placed him in a position of conflict, in which the defendant did not at any stage of the transaction, from beginning to end, reach the concerned interest and advice that a client is entitled to expect from a solicitor... I say all this not because I take any joy in criticising a member of the legal profession, but because I think it is important to draw to the notice of the other practitioners the great undesirability of a solicitor acting for both parties to a transaction."

As has happened in this case, in my view, it was clearly not possible for the solicitor to devote himself completely to the case of either client’s interests where he is acting for both the defendants as well as the mortgagees. The solicitor knows the facts and situation better and ought to exercise his proper judgment in his wisdom.

To conclude, having read the evidence which has been put before me in support of claims and in opposition by the mortgagees through their counsel, and having heard the Admiralty Marshal on the matter and having given an opportunity to the counsel for the plaintiff to be heard and to raise any objections which they might think fit I have come to the following conclusion:

(a) As far as the mortgagees are concerned, for the reasons I have already given hereabove their claims as mortgagees and as Interveners is denied.

From the evidence it is abundantly clear that the mortgagees had waived their right as mortgagees when the counsel consented to the sale of the vessels free from all encumbrances when an Order was made by Fatiaki J (now Chief Justice) and it was ordered accordingly.

It goes without saying that a buyer is not concerned only with the physical conditions of the vessel but he will want to be sure that these vessels are free from encumbrances such as liens and debts. It was held in The Barendels (Athens Cape Naviera S.A. v Dewtche Dampfschiffartrgessell Chatt [1985] 1 Lloyd’s Rep. 528) the ‘encumbrances’ could refer to ships’ mortgages and possessory liens.

In support of the conclusion which I have reached I rely entirely on the case of Hua Chiao Commercial Bank Ltd v The Proceeds of Sale of the Vessel "Fortune Founder" formerly registered at the port of Panama [1987] HKLR 156. This is a judgment of Hunter J in the High Court in Admiralty Jurisdiction No. 138 of 1986.

A somewhat similar situation as in this case arose in ‘Fortune Founder’ (supra). There the bank did not either enter any caveat nor was the Bank’s position as a prior claimant made known to Court until long after. Thereafter the Bank asserted its claim as mortgagee by instituting an admiralty action against the proceeds of sale. In the present case the mortgagees did the same by filing intervener proceedings.

I find that the following passage from the judgment of Hunter J hits the nail on the head on the facts and circumstances of this case and in answer to counsel’s arguments for mortgagees and I agree with His Lordship’s statements:

"I have here two very delicate exercises in balancing justice and injustice. Because the plaintiff has the legal priority beyond a peradventure, it can assert that anything which detracts from that is "unjust" to him in the sense that that word is used by Sir Robert Phillimore.

The successful plaintiff in the other action, the intervener, can counter that by saying "Look at the facts of this case, having regard to the bank’s conduct consistently since last December, it would be unjust to set this order aside now at the eleventh hour after all the costs have been incurred and restore them to their strict legal position".

As I have said, I found this matter a very nice one to deal with, but in the event, I have come to the conclusion that it would be wrong for me, in the particular circumstances of this case, to interfere with the order that Mayo, J made. I think there is considerable force in the point that a party, who is possessed in law of priority really is under an obligation to make its position clear at a very much earlier stage than the bank did here. I think the bank failed to look at its position properly way back in December and really allowed these three claims to go on together as if there was no sort of distinction between them at all. That is how they were dealt with from start to finish. If as a result the third claim gets the benefit of the actual priority of the first two, then I do not think by reason of their conduct, the bank can complain." (emphasis mine).

It will make a mockery of the law if I were to allow the mortgagee to enter the door in a ‘crooked manner’, for want of better term, which they adopted through their counsel to intervene as "Interveners" and lay claim to the funds in Court. It is quite obvious on the facts that if the mortgagees are paid their claim there will be no balance left for all other interveners. The Court will not allow such intervention in this case on the part of the mortgagees. Their own Solicitor Mr. Haniff consented to the sale of the vessels free from all encumbrance. Counsel cannot be allowed to blow hot and cold. The way the mortgagees have gone about claiming shows complete dishonesty on their part.

There cannot be any dispute that the vessels were sold by the defendants themselves with the full consent of their counsel free from all encumbrances which means in this case that the alleged mortgagees will not be an encumbrance. And His Lordship Fatiaki J (now Chief Justice) ordered accordingly. Here the owners as has come out in evidence were the defendants and not the mortgagees. In shipping law, the mortgagee is considered to be the assignee of the owner’s rights. It is considered that the mortgagee has left the owner in possession with liberty to adventure.

I agree wholeheartedly with all the arguments put forward by Mr. Sharma and Mr. Clarke in opposition to Mr. Haniff’s arguments for the mortgagees.

For these reasons I hold that the mortgagees as Interveners are not entitled to claim from the proceeds of sale.

I allow the claims of all the other Interveners to the extent stated hereafter. Judgment had previously been entered in favour of the plaintiff as a result whereof the appraisement and sale of the vessels took place and proceeds of sale deposited in Court.

I have considered the claims of the remaining Interveners (other than the mortgagees) and will give judgment on their respective claims in the amounts stated after their names hereafter.

It is to be borne in mind that an intervener cannot seek extraneous orders for they are restricted and limited to the protection of his/its interest in the vessels and the law will not allow extraneous issues to be raised.

The Admiralty jurisdiction of the High Court is set out in Part I of the Administration of Justice Act 1956 (UK).

Among others, it has jurisdiction in respect of (ibid Administration of Justice Act): ‘(c) any claim in respect of a mortgage of or charge on a ship or any share thereon;’ ‘(m) any claim in respect of goods or materials supplied to a ship for her operation or maintenance’, ‘(m) any claim in respect of the construction, repair or equipment of a ship or dock charges or dues’; ‘(n) any claims by a master or member of the crew of a ship for wages ...,; ‘(p) any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship’,

The nature of the claims of the various claimants as interveners are set out hereabove under the caption ‘claimants and nature of claims’.

Applications have been made by the interveners for payment out of the funds in Court. The court may order payment out on the account where all interested parties ‘consent’, as in the case here except the mortgagees as interveners, or where it is plain that a particular claimant will have priority to the amount in question, and this is particularly done in the case of wages claims when the court will order immediate payment out when the wage claimants obtain judgment (Meeson).

As already stated hereabove the Admiralty Marshal’s charges and expenses are a first charge on the proceeds of sale and will be paid out in priority to any other claim.

After the admiralty marshal’s priority, in addition, the party (the plaintiff) who is responsible for arresting the ship and bringing about the sale is normally granted their costs of doing so. The plaintiff which incurred costs and expenses during the arrest for the benefit of all is entitled to be granted priority equivalent to Marshal’s expenses.

In this case apart from the mortgagees’claim there are other claimants whose service to the vessels were not only necessaries but also added to the value of the vessels to the benefit of all creditors and because the mortgagees had been dilatory in the enforcement of the mortgage.

The court has an inherent discretion to depart from the usual ranking of priorities in appropriate cases. In order to depart from the usual order of priorities the Court must be satisfied that the usual ranking would produce "an obvious injustice" or "a plainly unjust result".

On this aspect in the light of my observations on the conduct of the mortgagees represented by Mr. Haniff the following passage from Meeson at p.167 is apt:

"However, the court may in a particular case deprive a claimant of his priority on equitable grounds where, for example, he is guilty of unconscionable conduct or where there has been gross delay in bringing or pursuing his claim and prejudice has been caused to another claimant; (The "Helgoland" (1859) Swa.491). or where a mortgagee has stood by and allowed necessaries to be supplied to the ship on the credit of the shipowner, knowing him to be insolvent; (The "Pickaninny" [1960] 1 Lloyd’s Rep. 533), where such an allegation was made, but was not found to be substantiated on the facts), or where a party has failed to assert priority in due time. [The "Fortune Founder" [1987] H.K.L.R. 156 (Hunter J.)].

In the outcome I approve of payment out to the following claimants in the amount stated against their names:

The sum to be paid out by the Chief Registrar to his 3 Officers as stated hereabove. He already has the money with him and is subject to an order of this Court. 4500.00

On 17.5.02 judgment in default of Defence was entered against the 1st and 2nd defendants in sum claimed ($95,771.51) interest and costs – amounting to
$167,958.71;- 167,958.71

By motion the Union claims $61,785.00 being unpaid wages to holiday pay, $1536.00 being leave pay, $10,296.00 holiday pay for crew of Mary M, $10,968.00 holiday pay for crew of Holy G

(For details see motion dated 9.4.03 and affidavit in support). I enter judgment for these claims totalling $84,585.;- 84585.00

Claims for food rations supplied for the crew for the three vessels (see motion dated 6.12.01 and affidavit in support). Judgment is entered for this sum of $26,350.43 as claimed.;- 26350.43

(a) Claims is for $8922.85 against the 3 vessels being for repair and maintenance works on these vessels (vide motion of 16.9.02 & affidavit in support). Judgment is entered in the said sum 8922.85

(b) The Company further claims dock charges which I allow in sum of $25168.00 (Vide affidavit and said sum; 25168.00

The company claims the sum of $130,528.32 for Supply of fuel and lubes (see motion dated 10.9.02 & affidavit in support) Judgment is entered in the said sum-130,528.32

Company’s claim is for supply of baits to the vessels in the sum of $154,283.80. Vide motion dated 6.12.01 and affidavit in support. Judgment is entered for this sum- 154,283.80

(a) The claim is for $38,309.50 for supply of fishing equipment. Vide Motion dated 30.1.03 and affidavit in support. Judgment is entered for the said sum- 38,309.50

(b) Captain Rea Chun Bak Wages, housing and Meal entitlement for sum of $15,303.68. Vide Motion dated 1.4.03 and affidavit in support.Judgment is entered for the said sum 15,303.68

The claim is for $91,500.00 being for freighting of seafood products of Great Pacific Seafood Limited.Vide affidavit sworn 6 December 2001. Judgment is entered for that sum 91,500.00

Claim is for $81,564.26 pursuant to Judgment by default being $81,564.26 for provision of ice, including fish processing and delivery charges, interest and other administrative charges- 81,564.24

Claim is for repair work in Mary Q in the sum of $8413.10 (vide motion 8.5.02 and affidavit in support). Judgment is entered for the said sum- 8413.10

Claim is for $5098.37 being for engineering work done and material supplied (Vide motion dated 7.8.02 and affidavit in support). 5098.37

As far as Durga Prasad’s claim for VAT of $22,272.00 is concerned, the VAT amount has not been paid by the Vendor (the Admiralty Marshal to the VAT Unit. Once the relevant amount is paid then the claimant will be able to apply for refund from the VAT UNIT.

It appears that the sale was VAT inclusive but this aspect has to be clarified from Mr. Haniff, as he handled the sale, before the Admiralty Marshal pays out to VAT UNIT the VAT.

In this situation I will hear the claimant and Mr. Haniff in due course on a date to be given. Hence this amount will have to be withheld from the funds in Court.

As for Mr. B. Southwick’s claim to be reimbursed for wages paid by him to seamen of the arrested vessels in the sum of $18,000.00, I withhold this sum until it is verified by me from the Marine Union’s claim for wages lest there be duplicity. In this regard I shall hear the claimant on a date to be assigned. Similarly, I will hear him on his claim for $26,500 for security costs in consultation with the Admiralty Marshal.

In the outcome, the order of payment out will be Admiralty Marshal for his costs and Wages of claims of crew etc. The next will be the secured creditors. In this case the mortgagees I have found are not entitled to claim for the reasons I have given. The next to be paid out is the plaintiff which generated the fund. Then come the others who supplied the necessaries etc. The funds are sufficient to meet the claims of all the interveners except the mortgagees who have already been eliminated.

As far as the Official Receiver as Intervener is concerned her application for the order she seeks will be unnecessary as the Court itself is looking after the interest of all the creditors something which she would have done herself. The Court handling the matter is a neater way and no-one would be prejudiced. Hence I do not make the order sought by the Official Receiver although it was perfectly in order for her to have intervened.

It is ordered that the following sums of money stated against the names of the following claimants be paid out to them from the funds in Court totalling: $837,986.00.

		$
1.	Fiji Fish Marketing Group Ltd	167,958,71
2.	Marine Union of Fiji	84,585.00
3.	Joes Farm Produce Ltd	26,350.43
4.	United Marine (S.P.) Ltd	8,922.85
5.	United Marine (S.P.) Ltd	25,168.00
6.	Shell Fiji Ltd	130,528.32
7.	Agape Fishing Enterprises Ltd	154,283.80
8.	Sung Jin Co. (Fiji)	38,309.50
9.	Capt. Rea Chan Bak	15,303.68
10.	International Freight Service Ltd	91,500.00
11.	Tripacific Marine Ltd	81,564.24
12.	South Sea Engineering Ltd	8413.10
13.	Seamech Ltd	5098.37

It is further ordered that the sum of $22,272.00 being the VAT claim by Durga Prasad be held in Court (from the fund in Court) until the Court hears the claimant and Mr. Haniff on payment of VAT to VAT UNIT on a date to be assigned.

It is further ordered that the sum of $10,680.00 paid to Chief Registrar as Admiralty Marshal for his cost be returned to the Fund as it appears that he is not entitled to it after I have heard him on a date to be assigned.

It is further ordered that the claim of Marine Union of Fiji in the sum of $84,585.00 for wages and Cap. Rea Chan Bak’s claim for wages in sum of $15,303.68 be paid out immediately as they have priority after Admiralty Marshal’s claims and before any mortgagee’s claim.

It is further ordered that the Chief Registrar as Admiralty Marshal pay out to his three officers (Mr. C.D. Singh $3500, Mr. V.D. Sharma $700 and Mr. S. K. Sharma $300) for their work when the vessels were under arrest the total sum of $4500.00 out of the funds which he already has with him.

It is directed that Mr. Durga Prasad appear before me on a date to be appointed by me to clarify his claim for VAT refund in the sum of $22,272.00.

It is directed that Mr. B. Southwick appear before me on a date to be appointed to clarify his claim for wages payment in the sum of $18,000.00 and $26,500.00 for security costs.

I make no order as to costs and interest on the respective claims as I would like to hear counsel on these matters.

Also I would like to hear counsel on whether I ought to make an order for costs against the mortgagees on their unsuccessful claims.

Counsel will be informed of hearing date on these outstanding matters after my return from leave early March 2005.