Panasia Realty & Finance Ltd v. The Owners of the Ship or Vessel "Mingren Success" (Panamanian Flag)

Case No.HCAJ 215/1978

Court

HCAJ

Date06 Feb 1979

Judge—

Case Document

100%Judiciary

HCAJ000215/1978

IN THE SUPREME COURT	Admiralty Jurisdiction
	Folio 173 of 1978

BETWEEN
	Dharamdas and Co. (Nigeria) Ltd.	1st Plaintiff
	G N Busani (London) Ltd.	2nd Plaintiff
	AND
	The owners of the ship or vessel "Mingren Development" (Panamanian Flag)	Defendant

	and

	Panasia Realty & Finance Ltd.	Intervener

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Folio 207 of 1978

BETWEEN
	Panasia Realty & Finance Ltd.	Plaintiff
	AND
	The owners of the ship or vessel "Mingren Success" (Panamanian Flag)	1st Defendant
	Sea Wide Navigation Co. Ltd. S.A.	2nd Defendant

-----------------

Folio 215 of 1978

BETWEEN
	Panasia Realty & Finance Ltd.	Plaintiff
	AND
	The owners of the ship or vessel "Mingren Enterprise" (Panamanian Flag)	Defendant

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Coram: Cons, J.

Date of Judgment: 6 February 1979

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JUDGMENT

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1. This matter concerns three ships. In August last year the "Mingren Development" was arrested by cargo interests who claimed for damage and short delivery on a voyage some two years earlier. Two months later Panasia Realty and Finance Ltd. intervened in the action. At much the same time the same company arrested the "Mingren Enterprise" and the "Mingren Success". Despite the similarity of name these three were not strictly speaking sister ships. All told there were ten like them. Each was owned by a separate Panamanian company and each was separately mortgaged to Panasia Realty against a loan to the Mingren Shipping and Trading Co. Ltd. There was then and additional agreement which linked all the mortgages together.

2. In November the three ships were ordered to be appraised and sold. At the time each had on board a substantial amount of general cargo. The Chief Bailiff, who in this jurisdiction holds the same office as the Admiralty Marshal in England, applied for directions. On the 23rd November the learned Chief Justice made three orders which were identical except as to the name of the ship in question:

"	1. All cargo laden on board the (three ships) be offloaded by the Chief Bailiff and placed in a godown until the same is claimed.
	2. The quotations submitted by Great Sun Godown Limited in respect of offloading and storage be accepted and they be employed to offload and store the cargo offloaded from the (three ships).
	3. The lighterage insurance premium rate submitted by the Prudential Assurance Company Limited be accepted and that they be appointed as Underwriters.
	4. Messrs. Wood & Browne be employed as surveyor.
	5. Requirements mentioned in Paragraph 10 of the Chief Bailiff's affidavit dated 14th November 1978 (which were as to showing title) be observed by claimants for cargo offloaded from the (three ships) and that in addition the said claimants for cargo shall each deposit with the Chief Bailiff such security in respect of the cargo which they claim as shall be satisfactory to the Chief Bailiff in respect of expenses incurred in offloading and storage in a godown such security to be held by the Chief Bailiff pending the determination by this Court on Friday 5th day of January 1979 as to whether the said cargo should bear the expenses of offloading and storage in a godown or whether the said expenses should be bailiff's expenses and accordingly a first charge on the proceeds of sale, provided that where the cargo goes unclaimed the Chief Bailiff shall be at liberty to sell the same and to deduct the expenses of offloading and storage in a godown from the proceeds of sale thereof and if those proceeds of sale are insufficient to meet the said expenses of offloading and storage in a godown the balance over and above the proceeds of sale shall form part of the Bailiff's expenses.
	6. The Chief Bailiff shall send by post a copy of this order to all those claiming to have an interest in cargo of whom he has notice or shall come to have notice."

The question came on for determination before me.

3. Two years ago the same question came before the English Court of Appeal: The Myrto⁽¹⁾. Lord Denning, M.R., put it shortly thus (at p.13):

"The rival views were these. The mortgagees said that the cost of unloading this whole cargo would be about £15,000. They said that it was the duty of the cargo-owners to take this cargo off the ship. So it was the cargo-owners who ought to pay that £150,000. The venture having been frustrated it was for them to take their cargo off and pay the costs of the discharge of the cargo. On the other hand the cargo-owners said that in order to get this ship sold she had to be emptied of cargo, and the costs of discharging it (so as to make the ship saleable) should be part of the costs of realising the sale of the ship. The discharge costs ought to be added to the costs of the Admiralty Marshal and so become a first charge on the proceeds of sale of the vessel."

At first instance Brandon, J. had adopted the latter view. His order was that the discharge and storage costs should form part of the Marshal's expenses. The Court of Appeal expressed no opinion. They felt it "impossible to resolve the rights and wrongs of the contending parties at the moment". But they also felt that the mortgagee was entitled to some protection of his interests in case the eventual decision should be in his favour. They accordingly varied the order to one similar to those made in the present instance.

4. In 1976 the question was twice before this court. In The Anlan⁽²⁾ the learned Chief Justice ordered the discharge costs to be part of the Bailiff's expenses. At the time the mortgagee raised no objection. Later he sought leave to appeal the order out of time but the Court of Appeal declined to grant leave. The Contisun⁽³⁾ came before me one month later. I had the benefit of argument from counsel, although not as full as in the present instance. However, I was not referred to the decision of the Chief Justice in The Anlan. I made an order imposing discharge costs upon the cargo owners. I made no record of the reasons for my decision but I understand that it was based on what I felt to be the current English practice.

5. Roscoe's Admiralty Practice 5th edition at p. 287 says this:

"When the marshal has in his custody a vessel with a cargo on board, and he is ordered to sell the vessel only, the cargo-owners will be given a reasonable time by the Court wherein to effect the unlivery of the cargo, but if the unlivery is not effected in the time fixed, the cargo-owners will thereafter be ordered to pay the cost of the detention of the vessel for which they may be responsible: The Carl Hendric (1903), Fo. 468; The Selina Stanford (1908, Shipping Gazette, Dec. 8)."

Vol. I of British Shipping Laws, edited by McGuffie, at para. 389 is to similar effect:

"If an arrested vessel has cargo on board and an order is made for the sale of the vessel only, the marshal will advise the cargo owners to have the cargo discharged and will give them reasonable time for this to be done. If no steps have been taken within the time allowed the marshal will apply to the court for directions."

Both refer to The Selina Stanford⁽⁴⁾, which is a short report and may conveniently be set out in full:

	"This case was again before the Court by way of an application on behalf of the owners of cargo for a further extension of time in which to tranship their cargo from the Selina Stanford to another vessel. It may be remembered that in September last the Selina Stanford was towed into Portland by sailing tugs which subsequently obtained salvage awards and an order for the sale of the vessel. The cargo owners who had settled with the salvors, obtained an order postponing the sale of the ship on the ground that the cargo, if landed at Portland or Weymouth, would be valueless, and it was therefore necessary to arrange for its transhipment, for which purpose they wanted time. They now asked for further time.
	The President said it was obviously undesirable that the sale of the ship should be postponed so as to take place during the Christmas holidays. He should therefore allow the cargo owners till January 11th in which to effect the transhipment of their cargo but they must pay the expenses of the detention of the vessel up to the time the transhipment was effected."

It is reasonable to assume that the cargo owners were to pay the transhipment in this instance, although it may be noted that it was a salvage case, that is the salvors would have rights against the cargo as well as against the ship.

6. That was the same in the earlier case of The Gettysburg ⁽⁵⁾, where the cargo had been arrested as well as the ship. The cargo owners did not appear before the court and an order was made for its sale, the discharge costs to be paid out of the proceeds unless the cargo owners made an application for delivery within fourteen days.

7. In The Unity ⁽⁶⁾ only the ship was arrested. It was ordered to be appraised and sold subject to her cargo being disposed of. In a subsequent application the plaintiffs asked for an order permitting the Marshal to discharge and sell the cargo, recouping himself for his expenses out of the proceeds and paying the balance into court, unless the cargo owners within a fortnight took the cargo from the vessel. The cargo owners had been given prior notice of the application and were legally advised. They did not appear and the court made the order requested. More recently a similar order was made in The Brave Enterprise ⁽⁷⁾, where the cargo owners could not be ascertained. Any costs unmet by the sale were to form part of the Marshal's expenses.

8. When I consider these last two cases I find it impossible to avoid the impression that the position implicit in the comments of Roscoe and McGuffie was accepted by both Bar and Bench. To say that it is established practice is perhaps to put the matter too strongly. The modern concept of a guideline would seem more appropriate. It can more readily be departed from when occasions so warrant, for example, as in The Myrto. Brandon J. did not record the reasons for his decision. He may perhaps have been influenced by the fact that loading was allowed to continue after the ship had been arrested.

9. It seems to me that the English position derives from the old common law doctrine of frustration. American courts have approached from a different direction. They appear to look at it this way, that from the moment of its arrest a ship is a common fund administered by the court for the common benefit of all those interested in the fund and that any expenses incurred in the administration of that fund should be borne by the fund itself as an "expense of justice". These may include wharf dues: The Poznan ⁽⁸⁾ or the cost of discharging cargo to make a vessel more easily disposed of by sale: The Emilia ⁽⁹⁾. However this approach has not been without its critics: Gilmore and Black Admiralty Law, 2nd edition, p.603. Obviously there is no perfect solution. Financial disaster, like any other disaster at sea, is likely to cause suffering to the innocent. The argument that the suffering should fall primarily upon the mortgagee I find largely emotional. It is true that he may sometimes have a free choice of when and where he arrest the ship and may thus be able to lessen the impact on others. But so sometimes do other claimants. And no one can, as a general rule, be blamed for exercising his rights at such time as he thinks most propitious to himself. If he takes undue advantage in any particular circumstance the court may take that into account against him when exercising its discretion. The present position is of long standing. As I see it the position was confirmed in 1943 when contracts for the carriage of goods by sea were deliberately excluded from the operation of the Law Reform (Frustrated Contracts) Act. I am not persuaded that the American approach is so much more just or that conditions now are so different from those in 1943 that I should take it on myself to make a general change.

10. I have not yet dealt with what counsel for the cargo owners has called his fundamental reason for saying that the costs of discharge should in any event fall upon the mortgagee. He contends "that the arrest of vessels by mortgagees constitutes unlawful interference with contractual rights of cargo owners which would render mortgagees liable in damages which include, but are not limited to, expenses arising from the arrest, that is the discharge costs". He refers in support to p. 253 of The Myrto ⁽¹⁰⁾ where Brandon J. summarises the principles of law involved and sets out the three remedies available. These are:

	(a)	Where the mortgagee interferes by taking possession or seeking to sell, an injunction restraining him from doing so;
	(b)	where the mortgagee interferes by arresting the ship in an action in rem, an order for the release of the ship in such action;
	(c)	further or alternatively to (a) or (b) above damages."

With every respect to counsel for the cargo owners I agree with counsel for the mortgagee that the argument is not appropriate to these proceedings. The cargo owners have not sought an injunction or the release of any of the ships. No enquiry has been made whether they would be so entitled. I cannot say, for example, whether any of the owners has been dealing with its ship in speculative or improvident circumstances so as to impair the security of the mortgage which would be a good defence for the mortgagee. If the cargo owner should eventually bring a successful action for damages the amount to be awarded would naturally take into account the costs of discharging the cargo here. I do not see why that should influence my decision now. These provisions show that the courts are concerned to contain a mortgagee within his lawful boundaries. The courts will act swiftly if necessary should be overstep the limits. I do not think counsel's argument takes the matter any further than that.

11. It only remains to consider whether in the present instance there are any particular circumstances to warrant departure from the normal guideline and to say that from what has been put before me I find none. It is therefore ordered that the expenses of offloading and storage in the godown incurred in respect of cargo which has been claimed shall be taken first from the securities lodged by claimants with the Chief Bailiff; if these are not sufficient the balance of the costs are to form part of the Bailiff's expenses; if they are more than sufficient the balance is to be returned to the party or parties which put up the security.

Representation:

Mr. William Waung and Mr. Ronny Tong (Deacons) for plaintiffs in Folio 207/78 and Folio 215/78 and for intervener in Folio 173/78.

Mr. Richard Mills-Owens (Johnson, Stokes & Master) for interveners in Folio 173/78 and Folio 207/78.

Mr. S.H. Mayo, Registrar of the Supreme Court, for Chief Bailiff.

(1) [1978] 1 Li. R. 11

(2) Folio 38 of 1976

(3) Folio 42 of 1976

(4) Shipping Gazette, 7th December 1908

(5) 52 L.T. 60

(6) Shipping Gazette, 23rd April 1909

(7) Folio 674 of 1974

(8) [1927] A.M.C.723

(9) [1963] A.M.C.1447

(10) [1977] 2 Li. R. 243