Seafreight Pty Ltd v The Ship 'Manutea' [1975] PGSC 28; [1975] PNGLR 64 (29 March 1975)

Papua New Guinea Law Reports - 1975

[1975] PNGLR 64 - Seafreight Pty. Ltd. v The Ship "Manutea"

[1975] PNGLR 64

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

SEAFREIGHT PTY. LIMITED

V

THE SHIP “MANUTEA” HER CARGO AND FREIGHT

Port Moresby

Raine J

25 March 1975

29 March 1975

SHIPPING - Salvage - Lloyd’s Salvage Agreement - “No cure-no pay” agreement - Salvage performed - No claim made - Whether maritime lien exists before claim made - Whether “claim” which has not been “satisfied” within requirements of O. VII r. 11 of the Supreme Court Rules.

In the course of successful salvage operations involving the ship “Manutea”, an oral salvage agreement was entered into. The agreement (subsequently executed in writing) was in the terms of Lloyd’s Salvage Agreement, described as a “no cure — no pay” agreement and provided by cl. 4 thereof for the immediate notification of the Committee of Lloyd’s of the amount required for security; and by cl. 5 thereof that:

“pending the completion of the security as aforesaid, the Contractor shall have a lien on the property salved for his remuneration. The salved property shall not without the consent in writing of the Contractor be removed from the place of safety to which the property is taken by the Contractor on completion of the salvage services until security has been given as aforesaid. The Contractor agrees not to arrest or detain the property salved unless the security be not given within 14 days ... of the termination of the services ... or the Contractor has reason to believe that the removal of the property salved is contemplated contrary to this agreement ...”

On an application to set aside a warrant for the arrest of the ship, which arrest was made after the salvage operation was performed but before any claim for salvage was made, or notification made to Lloyd’s of the amount required to be given for security;

Held

N1>(1)      that there was a period after the successful operation, and before claim, where, under the “no cure — no pay” agreement, there was no maritime lien, except as provided in cl. 5 where “the contractor has reason to believe that the removal of the property salved is contemplated contrary to the ... agreement”.

N1>(2)      accordingly, there could be no true “claim against the ship ‘Manutea’,” nor could there be a “claim” which had “not been satisfied” within the requirements of O. VII r. 11 of the Supreme Court Rules, during that period and sufficient to found an action in rem for a warrant for the arrest of property; all that could be said was that there was a prospective claim not yet satisfied.

N1>(3)      in the circumstances, the warrant for arrest of the ship should be set aside.

Application

This was an application for an order to set aside a warrant to arrest the ship “Manutea” and to release it from the arrest made under the warrant.

Counsel

R. Wood, for the applicant.

J A. Griffin, for the respondent.

Cur. adv. vult.

29 March 1975

RAINE J: This is an application for an order to set aside a warrant to arrest a ship and to release it from the arrest made under the warrant. Put shortly, it is claimed by the applicant that the warrant was wrongly obtained because the statements made in the affidavit in support of its issue as required by a rule of court were made without basis and justification, not in the sense that they were deliberately false, but in the sense that they were quite misconceived, and wrong.

Order VII r. 11 reads:

N2>“11.    In Admiralty actions in rem a warrant for the arrest of property, which shall be in one of the forms in the First Schedule, with such variations as circumstances may require, may be issued by the Registrar at the instance either of the plaintiff or the defendant, at any time after the writ of summons has been issued. But, except by leave of the Court or a Judge, a warrant of arrest shall not be issued until an affidavit by the party or his agent setting forth the particulars hereby prescribed, has been filed, and the following provisions have been complied with, that is to say:

(a)      The affidavit shall state the name and description of the party at whose instance the warrant is to be issued, and the nature of the property to be arrested, and that the claim or counter claim has not been satisfied, and that the aid of the Court is required to enforce it;”

The problem that I am left with involves the construction of both r. 11 and the Committee of Lloyd’s standard form of salvage agreement.

On 24th February, 1975 the ship “Manutea” got into difficulties some distance from Port Moresby and sent out a distress signal. As a result a ship owned by the plaintiff, the “M.V. Maluka”, went to the “Manutea’s” aid and there is no doubt, and no issue arises, that the “Maluka” succeeded in her salvage task, and that the “Manutea” was successfully brought to Port Moresby. The necessary tow lasted for about nine hours, and early in the tow, or just before it, the captains of the two vessels entered into an oral salvage agreement which was to be in the terms of Lloyd’s Salvage Agreement, which is described, as it has been for years, as a “no cure — no pay” agreement. Counsel told me that the agreement was executed on the same day as the salving operation but in fact the agreement is dated 25th February, and the mistake counsel have made is probably caused by the fact that the “Manutea” was towed to the heads at Basilik Passage, and was there taken over by a tug, which towed her into the main wharf at Port Moresby at 2310 hours on 24th. No doubt the agreement was signed in the early hours of 25th. This sort of “ex post facto” situation is specifically provided for by the concluding sentence of cl. 1 of the salvage agreement, no doubt for the very good reason that there must be many salvage operations conducted in dangerous situations where a formal agreement cannot possibly be executed, and where, even informal and oral agreements are difficult to achieve. On 7th March the “Manutea” left Port Moresby and went to Lae. This was in contravention of cl. 5 of the “no cure — no pay” agreement, because the salved ship was not removed from her place of safety in Port Moresby to Lae with the consent in writing of the plaintiff, called the Contractor in the agreement. It is proper for me to observe that no real suggestion has been made, either from the Bar table, or in the evidence, that this was a deceitful attempt by the “Manutea” to escape from her obligations under the agreement, or under the general law relating to the salvage of ships, and I refer, of course, to the maritime lien that generally attaches to a ship that has been salvaged. Possibly the move looked a suspicious one to the plaintiff, I do not know. In fact, there were good reasons, on the face of it, why the “Manutea” should proceed to Lae and, as I said during argument, if there had been any dishonest reasons, one would not have expected the “Manutea” to be taken to any major port within the jurisdiction of the Supreme Court. One would have expected her to be taken to some foreign port. In fact she is a foreign-owned ship. In any event, from what counsel told me informally from the Bar table, it does appear that she was insured, and I gather that sooner or later, but not as soon as the owners of the “Manutea” would like, money ought to be available to put up a bond to ensure her release. The reason that I mention “her release” is that on 10th March, 1975 a writ “in rem” issued out of this court at the behest of the owners of the “Maluka” claiming $200,000.00 for salvage services rendered to the “Manutea”, her cargo and her freight, and on the same day the Registrar issued a warrant to the Marshal of the Supreme Court commanding him to arrest the “Manutea”, her cargo, and freight, and the arrest was duly performed in Lae on the following day, namely 11th March. In fact the Registrar is also the Marshal.

On the evidence before me the only claim that has been made, except in the sense that the writ in rem is a claim, was by a notice served on Burns Philp (N.G.) Limited on 17th March, 1975. Of course this was after the writ, and after the arrest. It was sent, in the form of a letter, to Burns Philp, which company is the Port Moresby agent for Lloyd’s of London. Mr. Wood attaches great significance to the time sequence that I have set out above. This is because of the terms of the agreement that I have referred to, and in particular to cll. 4 and 5 thereof which are set out hereunder:

“PROVISIONS AS TO SECURITY

N2>4.       The Contractor shall immediately after the termination of the services or sooner notify the Committee of Lloyd’s of the amount for which he requires security (inclusive of costs, expenses and interest) to be given. Unless otherwise agreed by the parties such security shall be given to the Committee of Lloyd’s, and security so given shall be in a form approved by the Committee and shall be given by persons firms or corporations resident in the United Kingdom either satisfactory to the Committee of Lloyd’s or agreed by the Contractor. The Committee of Lloyd’s shall not be responsible for the sufficiency (whether in amount or otherwise) of any security which shall be given nor for the default or insolvency of any person firm or corporation giving the same.

N2>5.       Pending the completion of the security as aforesaid, the Contractor shall have a maritime lien on the property salved for his remuneration. The salved property shall not without the consent in writing of the Contractor be removed from the place of safety to which the property is taken by the Contractor on the completion of the salvage services until security has been given as aforesaid. The Contractor agrees not to arrest or detain the property salved unless the security be not given within 14 days (exclusive of Saturdays and Sundays or other days observed as general holidays at Lloyd’s) of the termination of the services (the Committee of Lloyd’s not being responsible for the failure of the parties concerned to provide the required security within the said 14 days) or the Contractor has reason to believe that the removal of the property salved is contemplated contrary to the above agreement. In the event of security not being provided as aforesaid or in the event of any attempt being made to remove the property salved contrary to this agreement or of the Contractor having reasonable grounds to suppose that such an attempt will be made the Contractor may take steps to enforce his aforesaid lien. The Arbitrator appointed under clause 10 or the person or persons appointed under clause 12 hereof shall have power in their absolute discretion to include in the amount awarded to the Contractor the whole or such part of the expenses incurred by the Contractor in enforcing or in taking reasonable steps to enforce his lien as they shall think fit.”

As one of his arguments Mr. Griffin contends that Mr. Wood has not proved that no notification was given by the salving vessel’s owners to the Committee of Lloyd’s, or at all, of the amount which they required for security, and it will be seen from cl. 4 above that such notification under the contract shall be given to Lloyd’s “immediately after the termination of the services or sooner”. Mr. Griffin contends that Mr. Wood has the onus cast upon him to prove this important fact, which is virtually the plinth upon which Mr. Wood’s argument stands. Mr. Griffin did not submit an affidavit saying whether or not his clients had informed the Committee of Lloyd’s and he submits to me that there was no requirement for him to do so, that it was a matter for Mr. Wood to provide the evidence. With great respect to that argument I quite disagree that I am left in any doubt, or should regard myself as being left in any doubt, about this issue. The letter of 17th March was addressed to Burns Philp “as agents, Lloyd’s of London, Port Moresby”. The letter concludes “in my telephone call of 25th February I requested that you notify Lloyd’s of London of the circumstances, and your confirmation that this was effected would be appreciated”. There is nothing in the evidence before me to suggest that the plaintiff company did anything more than this and, unhesitatingly, I draw the inference that the claim was not made until 17th March, and then was only made to Burns Philp as agents for Lloyd’s. See, in addition, Mr. Thacker’s affidavit of 19th March. He says, and it is not denied, that F. Kennish of Seafreight told him, on 14th March, that no claim, or notification “qua” security, had been made to Lloyd’s.

The affidavit leading to the warrant was sworn by the same Mr. Kennish, the Port Moresby Manager of the plaintiff. His affidavit was purely formal. He stated that his company had a claim against the ship “Manutea”, its cargo and freight, for salvage services. And so it did although the amount had not been specified, either to Lloyd’s, or the owners of the “Manutea”. He said that the claim had not been satisfied, and this had not been denied. But Mr. Wood says “How could it have been satisfied, at the time when the affidavit was sworn, it had not been quantified?” The affidavit went on to seek “the aid and process of this honourable court to enforce it (meaning the claim)”.

For very many years it has been recognised that it is highly desirable that ships should be encouraged to salve other ships that are in distress. As I read some of the reports it seems to me that the law has encouraged this by making pretty generous awards. Administrative, commercial and legal measures have developed over the years in relation to salvage operations. A most useful examination of Lloyd’s part in this is seen in an article by a learned contributor at p. 138 of Lloyd’s Maritime and Commercial Law Quarterly in August, 1974. Lloyd’s of London, under the supervision of the Committee of Lloyd’s have prepared a salvage agreement, which I have already referred to, and which the learned contributor suggests had its origin in the year 1890. I note from the exhibit tendered before me that the first form, or possibly a revised form, was drawn up on 15th January, 1908. Since then it has been amended in 1924, 1926, 1950, 1953, 1967 and 1972. As the learned contributor says at p. 144 of the Quarterly (supra), “In what I have written I have tried to give an outline, a description of the way in which Lloyd’s form works. There are few things of which it can be said that they could not be improved upon and I am sure that Lloyd’s form is not one of them. However, it has certainly stood the test of time, it does work and I believe that its procedure has been made as simple as is possible and that relatively it is inexpensive and speedy.” I would only add, as an Australian, that the great part played by English commercial lawyers in this field, and by Lloyd’s, and its like, is certainly not lost on me.

The problem that arises here is largely caused by the fairly peremptory action of the plaintiff in causing the “Manutea” to be arrested at Lae. I hasten to add that when I use words like “peremptory” I am only using them in an interlocutory or provisional way, because this could be very much an interlocutory application, and, if this matter goes further, here, or in another action, I do not want my remarks to be read as being over critical of the actions of one party or the other in relation to a factual situation about which I really know very little.

It will be seen that the “no cure — no pay” agreement provides that the Contractor (plaintiff ) must immediately “or sooner” notify Lloyd’s of the amount for which he requires security to be given. In this case no notification, on the evidence before me, was given to Lloyd’s, until, at the earliest, 17th March, 1975. Probably 18th March. This was after the writ. Now under cl. 5 of the agreement the salving ship has the ship that she salves as a lien for her remuneration for the valuable, and sometimes dangerous work that she performs. As I have said above, it is not suggested that some remuneration, although less than that originally claimed, is not deserved here. This maritime lien on the ship salved is, in effect, an exchange for a covenant on the part of the Contractor that he will not “arrest or detain the (ship) salved unless the security be not given within 14 days (exclusive of certain days) of the termination of the (salvage) services”.

But what is the position here, where no claim is made?

I feel very diffident, placed as I am, with inadequate libraries, with a non-Admiralty background, to make any criticism of an agreement evolved over a period of at least sixty-seven years, in a country like England, surrounded by the seas. And, as Lord Diplock said in his foreword to the Quarterly I have quoted from, a place where “the English courts were able to play a leading part in the development of the law merchant when Britain was the greatest trading nation in the world. Lloyd’s played a leading part in making it so.” But with great respect I think the position is not as clear as it might be where, as here, a claim is not made. What is the situation between the time the salvage operation is performed and the time the claim is made?

Clause 4 of the agreement provides for the immediate notification to Lloyd’s “of the amount for which (the plaintiff) requires security ... to be given”. Clause 5 commences “Pending the completion of the security as aforesaid, ...” Further on in cl. 5 it provides “The Contractor agrees not to arrest or detain the property salved unless the security be not given within 14 days ... of the termination of the services ...” (The italics are mine).

Turning again to cl. 5, I have already mentioned that it commenced “Pending the completion of the security as aforesaid”. I mentioned that above in a rather different context. I read the word “completion” as completion in the conveyancing sense. In other words, notification to all interested parties that a bank cheque or a satisfactory cheque, or a satisfactory bit of paper, or, gold if you like, is in hand, and that everybody can proceed with complete safety, that ships can be freed, and cargoes allowed to unload. In this case, so it seems, everybody knew there was a claim. In fact there was a just one. This has not been contested. But for what? For how much?

Mr. Wood submits that to formulate a claim one does not merely say that something is owed, but that a particular sum is owed. He submits that as a matter of common sense it is ridiculous to hold up ships on no claim at all, and that a real claim, showing some attempt by the claimant to quantify and explain his interest, should be put forward, and under the contract.

Mr. Griffin, in his answer to this, suggested that it is very difficult for the owner of the salvage vessel to make a quick estimate of the value of the salved ship, and the value of its cargo. I rather think this is not so, and is a little unreal. The people involved, both those ashore and those at sea, are seafarers, or commercial people with a knowledge of ships and cargoes, and not only theirs, and I have no doubt would be able to make a pretty intelligent guess as to the values. And the salvage vessel knows what the operation involved, and to what inconvenience and expense she has been put by the use of her crew and gear, or on account of deviations made necessary by the salvage operation. And I note that in the long run the good old round sum of $200,000.00 was picked on, obviously at random. Thus the think that concerns me is what is the situation where a Contractor does not “immediately after the termination of the services or sooner notify the Committee of Lloyd’s of the amount for which he requires security”, which I find to have been the case here? Does the Contractor, in such an event, have the right to ignore his covenant as contained in cl. 5, which reads, “The Contractor agrees not to arrest or detain the property salved unless the security be not given within 14 days ... of the termination of the services ...?”

Does the successful Contractor, (because we have a successful Contractor here) keep his maritime lien on the property salved, and keep it for, as here, proper remuneration, where he has entered into a “no cure-no pay” agreement? Was it intended that the Contractor, where he was slow in making a claim for security, was deemed to have no maritime lien on the property that he had salved until his claim was made? On the other hand, it is extremely significant that “the Contractor agrees not to arrest or detain the property salved unless the security be not given within 14 days ... of the termination of the services ...” This seems to negate a lien in the usual case. As Mr. Wood says, how can security be provided if it is not known what amount is needed?

Reference was made to a judgment of Bateman J in The Goulandris[lxxii]¹. His Lordship dealt at length there with maritime liens, and upheld the claim by the salvage vessel to its lien under a “no cure — no pay” agreement. But if one reads the correspondence set out at p. 594 it is plain that a proper claim had been formulated, in particular see, at the bottom of p. 594, the letter from the owner of the salved vessel, the “Carston”, the name of which was later changed to the “Goulandris”. In the letter the owner mentions “the amount of the remuneration claimed by it (meaning the Ocean Salvage Co.)” I might add that thumbing through Lloyd’s Law Reports, and various works dealing sparsely with the subject I found no cases like this one at all, where a proper claim, a quantified one, had not been made.

After anxious thought, I have formed the view that the covenant by the Contractor “not to arrest or detain the property salved unless the security be not given within 14 days ...”, combined with the opening words of the same clause, cl. 5, that “Pending the completion of the security as aforesaid, the Contractor shall have a maritime lien on the property salved for his remuneration”, indicates that there is a period, after the successful operation, and before claim, where under the “no cure — no pay” agreement, there is no maritime lien, except as further provided in cl. 5, where “the Contractor has reason to believe that the removal of the property salved is contemplated contrary to the ... agreement”. I feel I am supported in the view I take by the further provisions in cl. 5 that follow the ones I have just quoted.

I do not apprehend that my view produces undesirable and inequitable results. It is not lost on me that “The maritime law as to salvage is a particularly equitable jurisdiction”. (Per Lord Denning, The “Teh Hu”[lxxiii]²). Nor is it lost upon me that “It is also clear that the policy as to maritime law favours the grant of awards for meritorious salvage in order to encourage the rendering of salvage services”. (Per Lord Wright, The “Beaverford” v. The “Kafiristan”[lxxiv]³). I would not wish to offend against any rule suggested by principles laid down by great Judges such as the above.

However, under the agreement, one that is well known to mariners, we find Lloyd’s virtually enjoining Contractors to act with great speed, “immediately ... or sooner notify the Committee of Lloyd’s of the amount for which (they) require security”. Until this is done, and I contemplate that it also involves a claim on the salved vessel, then under the agreement the Contractor has every right preserved, namely to arrest that vessel if any attempt is made to remove it “from the place of safety to which (it) is taken”. In fact, cl. 5 goes further, for if “the Contractor has reason to believe that the removal of the property salved is contemplated contrary to the ... agreement”, then he is not prohibited from moving to “arrest or detain” it.

There is no evidence before me that these provisions “qua” removal should be called in aid by the respondent. Maybe the respondent got upset. The removal to Lae, although in breach of cl. 5, was not, on the evidence, an attempt to remove the ship contrary to the agreement, at least in the sense that the ship was escaping, or trying to escape from her obligations. Even if the respondent, as I said, in broad terms, “got upset”, this is not enough.

I am somewhat concerned at the conclusions I have reached, as I would be the last to wish salvage efforts to be diminished by anything that fell from me. However, I suppose Mr. Wood would say that if all salvage operators were instantly apprised of my judgment, and even accepted it, then there would be no trouble, and no less salvage, but that claims, and quantified claims, for greater caution, would be made “immediately after the termination of the (salvage) services or sooner”.

I do not think that the warrant for arrest should have issued. This is not to say the Registrar was wrong. On the material placed before him, there was no other order he could have made. Nor is this to say that Mr. Kennish swore a false or misleading affidavit, and I do not find, nor suggest that he did.

But I doubt whether there was, as he says in the first paragraph of his affidavit, a true “claim against the ship ‘Manutea’ ”. A right to claim maybe, but a right to claim is one thing, a “claim” is another.

As to the second paragraph, I feel that it cannot be said, as deposed to, that “The said claim (ha(d)) not been satisfied”. All that could have been said then was that “The prospective claim has not been satisfied”.

As to the final words in the second paragraph, it does not appear to me that at that stage the process of the Supreme Court was “necessary to enforce it (meaning the claim)”. The salvage vessel had its rights under the contract — because it was under a contract that this whole matter arose, under which the rights of both vessels arose.

I note that the arrest was in Lae, which is in New Guinea, whereas the salvage operation brought the ship to Port Moresby, which is in Papua. In law, Papua and New Guinea are separate places, and it might well be that O. VII r. 11 is ultra vires “qua” New Guinea. But this was never raised, therefore I say nothing about it.

Orders as asked.

Costs reserved.

Liberty to apply.

Solicitors for applicant: McCubbery Train Love & Thomas.

Solicitors for respondent: Gaden, Bowen & Stewart.

R>

[lxxii][1927] All E.R. Rep. 592.

[lxxiii] [1969] 2 Lloyd’s Rep. 365, at p. 369.

[lxxiv] [1938] A.C. 136, at p. 147.