Practical issues in Admiralty Arrests

Presented by Deputy Registrar Tony Tesoriero at the MLAANZ conference, 'The Year in Review' on 28 March 2012.

PowerPoint version

[slides 1, 2, 3]

I am going to talk about the practical issues that the Marshal may face which may possibly impact on you in an arrest.

This paper and other relevant material such as the Marshal’s Manual can be found on the Court website www.fedcourt.gov.au.

Appointment of Marshals. [slide 4]

Marshals are appointed by the Registrar pursuant to s18N(3) of the Federal Court Act 1976. They are usually Federal Court staff however, there are a few external people who are appointed in remote localities such as State Police and State Supreme Court staff.

There are presently about 40 people who have been appointed as Marshals.

MSIC Card [slide 5]

Marshals are required under Maritime Transport and Offshore Facilities Security Act 2003 and the Maritime Transport and Offshore Facilities Security Regulations 2010 to obtain a MSIC (Maritime Security Identification Card) card. An MSIC is a nationally consistent identification card which is issued to identify a person who has been the subject of a background check being a criminal record check and an ASIO check. It is valid for 4 years with a background check every 2 years. The cards are administered by the Department of Infrastructure and Transport.

A person has an operational need to hold an MSIC if his or her occupation or business interests require, or will require, him or her to have unmonitored access to a maritime security zone at least once a year. Maritime Security Zones are areas within regulated ports and also on offshore oil and gas facilities.

It shows that the holder has met the minimum security requirements and needs to work unescorted or unmonitored in maritime security zones. The MSIC is not an access card and the relevant authority at each port or facility still controls access to its maritime security zones.

A person can be denied a MSIC card if they have been convicted of a maritime-security-relevant offence and sentenced to imprisonment. The Regulations define maritime-security-relevant offences such as a conviction for terrorism; treason, sedition, espionage or selling national secrets; weapons of mass destruction; hijacking or destruction of an aircraft, vessel or offshore facility, armed robbery, money laundering.

The cost for a MSIC card is $144.00 for 4 years.

Documents to be filed for an arrest

Introduction

Most arrests and releases of ships take place without any intervention by the Court. In many instances commercial ships are arrested and released after no more than a couple of days after a debt is paid or security has been paid into the Court. Alternatively, security being provided in the form of a P & I Letter of Undertaking.

Documents required to be filed

An application is made to the Registrar by filing:

• A writ in rem; Form 6 [slide 6 ]
• an application for an arrest warrant; (Form 12) subrule 39(1) [slide 7]

An application for an arrest warrant constitutes an undertaking to the Court to pay to the Marshal, on demand, an amount equal to the amount of the costs and expenses of the Marshal in relation to the arrest, including costs and expenses while the ship or other property is under arrest (see rule 41).

The undertaking is given by the applicant personally or by the applicant’s solicitor.

• an affidavit in support; (Form13) subrule 39(3) of the Rules [slide 8 ] Note the reference in clause 4 to a search of the caveat register.

Pursuant to Rule 40(1)(3) of the Admiralty Rules 1988 (Cth) an arrest warrant shall not, except with the leave of the Court, be issued if the Registrar is made aware that:

- a caveat against the arrest of the ship is in force; or

- the proceeding is stayed because payment has been made into Court; or

- a bail bond in not less than the amount claimed has been filed (see Rule 40(1)(3)). On Bail Bonds see Rares J, Navios International Inc v The Ship "HUANG SHAN HAI" [2011] FCA 895

A statement to the effect that a search of the register of caveats against arrest has been undertaken and that no such caveat is in force in relation to the ship that is being sought to be arrested should therefore be included in the supporting affidavit.

Similarly, any details in relation to any prior proceedings having been brought in this jurisdiction or in any foreign jurisdiction which have been stayed because of a payment having been made into Court or security having been put up in the form of a bail bond should be included in the supporting affidavit.

Rule 39A of the Admiralty Rules 1988 (Cth) imposes a duty of disclosure on parties to a proceeding commenced as an action in rem. Essentially the rule provides that where a party is aware of a fact or matter that may affect the safety of the Marshal or any other person, or the ship or property, it must disclose this to the Marshal as soon as it becomes aware of it. Any such information should therefore be included in the supporting affidavit or brought to the attention of the Marshal when it becomes known.

Practically such "safety information" may not be available to the Plaintiff seeking to arrest a vessel. This will especially be the case where the Plaintiff is not a charterer of the vessel but has merely provided services/supplies to the vessel (e.g. stevedoring, bunkers, marine paint, food and water).

• a draft Arrest Warrant; (Form 14) subrule 40(2) of the Rules.[slide 10].

Registrars have a discretion in deciding whether to issue an arrest warrant or not (see Rule 40(1) – A Registrar may issue an arrest warrant.) Dr Cremean is of the view that although there clearly is a discretion, it is limited and "… there would be no ground for refusing to issue a warrant if the requirements of the Act and Rules have been met".^[1]

Document Not Required to be filed

No need to file a genuine steps statement pursuant to the Civil Dispute Resolution Act 2011 as excluded by:

section 15(f) proceedings in relation to the exercise of a power to issue a warrant, or the exercise of a power under a warrant; and

section 15 (h) ex parte proceedings.

Getting there [slides 10-15]

Getting to a ship can be challenging.

Execution of an arrest warrant [slide 16 ]

The manner in which an arrest warrant is to be executed is set out in Rule 43.

Subrule 43(2) provides that the arrest warrant must be executed, and the affidavit served, in the same way as the initiating process (i.e. the Writ in Rem) is served.

In this regard, Rule 30 provides that the Writ in Rem must be served by securely affixing a sealed copy of the process to:

• a mast (purely historical), or some other conspicuous part (usually the bridge window), of the ship, or
• to the property or package or container containing the property.

Subrule 43(1A) provides that the affidavit in support of the application for the arrest warrant must be served at the same time the arrest warrant is executed.

Who may execute?

Pursuant to Rule 43(1) the execution of an arrest warrant must be undertaken by the Marshal. This is not the case in relation to the initiating process (i.e. Form 6 – Writ in Rem). Pursuant to Rule 33 a Marshal may serve initiating process in a proceeding commenced as an action in rem against a ship or other property.

Rule 43(3) provides that an arrest warrant must not be executed on a ship or other property unless initiating process in the proceeding concerned has previously been served, or is to be served concurrently with the execution of the warrant, on the ship or property.

In my experience, the Marshal always serves the writ concurrently when executing an arrest warrant.

Marshal’s duties and obligations arising after execution of the warrant

Rule 45 provides that execution of an arrest warrant must be verified (by the Marshal) by affidavit in accordance with Form 16

Rule 47(2) [slide 17] provides that upon arrest the ship is within the custody of the Marshal who is obliged, in the absence of an express court order to the contrary, to take all appropriate steps to retain safe custody of and preserve the ship. The Marshal is empowered to remove property from the ship, to store cargo and other perishable goods and is allowed to authorise the ship to be moved to another place. It is a contempt of court for any person to move the ship after notice that a warrant has been issued without authorisation. The Seraglio[1885]10PD120.

The Marshal will usually appoint the Ship’s master as Shipkeeper after receiving an undertaking to hold and faithfully keep for the Marshal the ship and not to move it without written consent.

Money on account of costs and expenses
[slide 18 ]

The Admiralty Rules provide that fees and expenses in connection with an arrest and sale are recovered from the plaintiff personally or the plaintiff’s solicitor pursuant to the undertaking given to the Court under rules 41, 49, 69 or 74.

It should be noted that the rules refer sometimes to fees and expenses and at other times costs and expenses while the Act refers to costs and expenses.

Before the arrest, in addition to the undertaking, the Marshal may, if it is considered necessary, demand an amount of money as a deposit to discharge his or her duties effectively in relation to the arrest and while the ship or other property is under arrest (see rule 41(2)).

This amount should be based on an estimate of any travel costs (such as air fares) and other expenses which can be foreseen (such as launch hire), including insurance premiums. In most cases it will be reasonable to ask for an amount of $5,000 where the ship to be arrested is a large ship.

No GST is payable on Marshal’s costs and expenses nor on any demand made by the Marshal.

After the arrest warrant has been executed, the Marshal may make interim demands under rule 78(b) for money on account of costs and expenses, whether or not those expenses have been incurred (see Waitemata Stevedoring Services Pty Ltd v The Ship "Rangitata" & Anor [1998] FCA 441 per Lindgren J and see rule 41 generally).

The costs associated with an arrest may vary depending on factors like: where the arrest is to be effected, whether the ship in question is at anchor or at a berth and the length of the arrest.

Some of the typical expenses that an arresting party may expect to incur are, as follows:

Insurance: Ships arrested by a Marshal are insured by the Court while under arrest. The insurance policy covers, amongst other things, loss or damage to the vessel and personal injury. Arresting parties are required to pay the applicable premium which varies depending on the value of the ship and length of time of the arrest.

Marshal’s expenses: Reasonably incurred in the service or the execution of an arrest warrant as well as a charge calculated at the hourly rate of salary payable to the officer for the time involved in the service or execution may be charged (see Item 21 – Schedule 1 of the Federal Court of Australia Regulations 2004).

Formerly, all the Marshal’s fees and expenses in connection with an arrest and sale were recovered from the plaintiff personally or plaintiff’s solicitor pursuant to the undertaking given to the Court in the Admiralty Rules.

The current Practice Note ADM 1 headed "Admiralty and Maritime Work in the Federal Court of Australia" was issued by the Chief Justice on 25 September 2009, it provides that:

"The approach of the Court to the Marshal’s costs is to restrict the costs charged to the parties to the direct third party costs involved in the arrest, other than in exceptional cases where the amount of work necessitates the provision of additional staff".

Helicopter hire (should arrest occur at anchor): This varies depending on the size of helicopter, flight time to ship and region where arrest is to be effected. As a rough guide: it costs approximately $3,000.00 to $5,000 to hire a helicopter for one return trip flight. Alternatively, pilot vessel hire costs are approximately $2,000.00 for one return trip.

Flight, accommodation and vehicle hire costs: Incurred by the Marshal in the event that the arrest is effected at a regional port and no local police officer or federal agent has/can be appointed. In Western Australia it is no longer always possible to rely on the assistance of the Police to act as Marshals on behalf of the Court in some regional ports like Port Hedland. This is because this is not considered to be "core work". In such instances it may therefore be necessary to fly up two Marshals to effect an arrest. An initial deposit of at least $10,000.00 is therefore usually obtained by the Marshal.

Ship movement costs:[slide 19]. They vary considerably form port to port and are generally more expensive in the regional ports. Hiring tugs – the rates vary from port to port and on the movement involved (e.g. An inner harbour movement will cost less than a movement from the outer harbour to the inner harbour)

For example: a single movement of a Bulk carrier within the Port of Fremantle with a gross tonnage of 55 000 tonnes will cost $4,169 per tug incl GST, so $8,338 to move such a large vessel. Albany charges are at http://www.albanyport.com.au/images/tugcharges.pdf, and they are $6,410 for vessels 35,001 tonnes and over. Esperance charges are at http://www.esperanceport.com.au/charges.asp, and they charge $9,350 for such a vessel. Bunbury charges are at http://www.byport.com.au/, and they charge $7,874.90 in and $5,118.30 out. Geraldton charges are at http://www.gpa.wa.gov.au/Assets/Documents/Geraldton%20Tariff%20Svitzer.pdf, and they charge per tug per gross tonne, so a move of a 55,000 GRT vessel with two tugs would cost about $11,220 (if such a vessel could get into such a small port). Also large bulk carriers may require two tugs when moved.

Bunkers and food and water: Depending on the length of an arrest it may become necessary to place additional bunker fuel, diesel on board the arrested ship as well as additional food and water for the crew.

No poundage^[2] is payable when the Court proceeds to sell a ship under arrest.

The Marshals Account

Principal registry maintains a central account known as the "Marshals Account". When money is received by the arresting Marshal it will be deposited into the Marshals Account under a designated project code. Payments in and out will be debited to the code.

Insurance of property arrested under the Admiralty Act 1988

The Marshal has a common law duty to take reasonable care in carrying out his or her statutory duties.

The Marshal cannot rely on any insurance cover obtained by the shipowner or charterer as the Marshal is not a party to that arrangement and, in any event, such arrangements often include a clause to the effect that the cover will lapse or be suspended upon a ship being arrested.

The Marshal will obtain indemnity insurance for the period the vessel is in the custody of the Marshal. The cost of that insurance will be an expense incurred by the Marshal payable by the party issuing the application for the arrest of the vessel.

The Court has an insurance policy with OAMPS Gault Armstrong who are maritime insurers and are a wholly owned subsidiary of the Wesfarmers Group. The policy is underwritten by Lloyds’ London. The policy covers the liability of the Marshal arising out of the arrest of a vessel including hull, machinery, equipment, cargo, bunkers and fuel.

The Marshal must complete an insurance declaration form after a vessel has been arrested. It is a condition of cover that this declaration form be completed as comprehensively as possible and returned to the office of Insurance Brokers, OAMPS Gault Armstrong Pty Ltd within fourteen (14) days of an arrest warrant being executed. On release of the vessel a "Release of Vessel" form is to be completed and to be transmitted to OAMPS Gault Armstrong Pty Ltd.

The assured pursuant to the policy is "Admiralty Marshals and Sheriffs in the Federal Court of Australia" and "The Northern Territory Government Office of Courts Administration, The Supreme Courts of Queensland, New South Wales, South Australia, Tasmania, Victoria and Western Australia, The Sheriff of New South Wales".

The policy applies to "Liabilities arising out of the arrest of vessels by Admiralty Marshals, Sheriffs, their Deputies and their Agents anywhere in the Commonwealth of Australia and territorial islands of Australia" and to arrests Anywhere in the Commonwealth of Australia and External Territories and in respect of arrested Vessels whilst within the limits of any port in Australia (including whilst at places within 100 miles of any port in Australia) with leave to load, unload, move, be moved and towed, dock, undock including hauling out, launching, overhauling, fitting out, trials and trial trips within port limits."

It is to be noted that movement of vessels between ports within Australia and transportation in excess of 100 miles between places and ports in Australia is not automatically covered and, if required, incurs extra premiums.

Practically this means that the Marshal must notify the insurer if a ship is to be moved between ports which are more than 100 miles apart. Also, this is not something that a Marshal should agree to as between the Marshal and the arresting party. Court orders should be sought. At the hearing of the application the Marshal should be able to inform the Court whether the insurer has been notified, whether the insurer has agreed to hold the vessel covered and, if so, at what rate. It may well be necessary for the arresting party to provide additional funds to the Marshal should such an order be made particularly in circumstances where only an initial payment of $5,000 has been received.

Also, query whether such Orders should be made by the Court? In the case of Comandate Marine Corp v The Ship "Boomerang " [2006] FCA 859, Justice Allsop granted an application for the ship to be allowed to sail from the Port of Fremantle to Sydney. The decision to allow the ship to set sail was based, at least in part, on His Honour’s finding that there was serious doubt as to the legitimacy of the arrest. Professor Sarah Derrington submits that this approach is wrong "in principle". Professor Derrington states that : "Either the vessel is properly under arrest, in which case-at any rate absent very strong factors making it correspondingly unlikely that the vessel will abscond – obvious practical considerations militate against its being permitted to set sail, even if its ostensible destination is another port within jurisdiction. Or it is not properly under arrest, in which case it ought to be released".^[3]

The policy indemnifies the Marshal (subject to terms and conditions specified in the policy) in respect of the following:

• Property Damage (i.e. loss or damage to the vessel under arrest, it’s cargo already loaded or to cargo loaded or discharged while the vessel is under arrest and "loss or damage to other third party property or vessels".
• Personal Injury;
• Pollution;
• Salvor’s compensation; and
• Wreck Removal.

The limit of Indemnity is AUD$100,000,000.00.

In the event of a claim, a deductible applies. It applies as follows:

All claims from each event for property damage $ 10,000

All claims from each occurrence for personal injury $ 1,000

Insurance Rates

Insurance rates are calculated on a daily basis. There is, however, a minimum rate payable regardless of how short the arrest is. Also, the rates are calculated as a percentage of the value of the vessel. The higher the value of the vessel the lower the percentage.

An example of the comparative rates based on the value of the arrested ship is as follows:

Vessel valued at $800.000.00 or less and under arrest for 10 days – Total rate payable: $1,446.00. Vessel valued at $35 million or less and under arrest for 10 days – Total rate payable: $7,441.20.

Locating the Vessel

The Port’s Website where the ship is to berth has the ETA of the vessel but a Marshal may have to make certain enquiries with Harbourmaster and Water Police.

Information of a pending arrest gets around in a port so a Marshal has to act promptly.

The policy of the Marshal and the Registry is to neither to confirm or deny an arrest warrant. Otherwise a party can move or hide the vessel.

Upon filing the writ and Application for an arrest they are entered in casetrack however, following concerns by some practitioners about the applications for arrest being seen on casetrack it has within it a feature to prevent the information being displayed through public searching termed "exclude from public view" this is switched the other way after arrest allowing for the information to be viewed.

The Arrest

Essentially the role of the Marshal is to take custody of the vessel under arrest and maintain it until such time as it is released by the Court or sold pursuant to an order of the Court.

The Marshal is to act as an officer of the Court subject to the supervision of the judges and as such he is not a party to the proceedings. Patrick Stevedores No2 Pty Ltd v The Ship "Turakina" Tamberlin J, 13 March 1998.

The Marshal is entitled to be fully indemnified for the cost involved in discharging his duty.

The first few days of an arrest are critical and can be very active for the Marshal especially for a large commercial vessel.

Marshal usually requests the attendance of the police when boarding vessel as the Marshal does not know what he is walking into. Attendance of the police is essential with pleasure craft and houseboats.

In the past Marshals in NSW have tried to coordinate the arrest with the vessel arriving at a berth before loading. This is the most convenient and the least expensive option for the Marshal. Otherwise the Marshal would require a tug, or helicopter to get out to ship. Sometimes the harbourmaster assists lending his launch or helicopter, or sometimes the Water Police will assist with their boat.

After the Marshal executes the arrest warrant he will appoint the Master as Shipkeeper. The arresting Marshal will then complete a checklist for recording the condition of the ship and its provisions, water and fuel.

It is important that the Marshal does this. We have had recent instances where shipowners have sought to test the resolve of the Plaintiff by placing through the Master of the ship spurious demands on the Marshal for drinking water, provisions and fuel. I mention this as an indication of the pressures that Marshals may find themselves under.

From 1 July 2006 to 31 December 2011 there have been 74 ships arrested nationally.

Guidelines for offshore arrests

Most major Australian ports no longer have lay berths or harbour moorings at which vessels may be arrested or kept while in the Marshal’s custody.

The arrest of a ship at a working berth can lead to significant disruptions of port operations and inevitably involves the further disruption and expense of having to relocate the ship.

It is desirable that the Marshal, wherever possible, should avoid or minimise this disruption and expense by arresting and holding ships other than at, or in the vicinity of, working berths.

After consultations between the Court, Ports Australia and AMSA guidelines have been developed to assist Marshals to manage the issues that may arise in cases where a ship is to be arrested or held in custody at anchor.

When a Marshal is aware of an impending arrest of a ship, contact should be made as soon as is reasonably possible with the relevant port authority and AMSA.

The discussions between the Marshal, the Harbour Master and AMSA should be kept confidential.

While it is generally desirable to arrest a ship while it is at berth, there will be circumstances in which this is not possible because no berth is available or arresting a ship at a berth will cause significant disruption to the relevant port’s operations.

In such circumstances the Marshal will need to consider arresting the ship at anchor.

Arresting a ship at anchor will usually mean that the Marshal is not able to exercise the same degree of control as over a ship that is arrested while at a berth or an inner harbour mooring. This may increase the flight risk in relation to the ship that is to be arrested or that has been arrested.

A Marshal who has arrested a ship that is at anchor should take steps to minimise or avoid any flight risk.

These steps should be proportionate to the level or degree of flight risk, and might include removing original ship documents from the vessel.

The type of original ship documents that the Marshal may seek to remove include:

Ø Classification certificates (hull and machinery)

Ø Survey Certificate

Ø Registration Certificate

Ø Safety Equipment Certificate

Ø Radio Certificate

Ø International ship security certificate

Ø Safe Stowage Manual.

Original ship documents should be removed only with the consent of the Master of the ship or pursuant to an order of the Court made under Rule 50 of the Rules.

After the arrest

Rule 48(1) provides that the Marshal who has custody of a ship or other property, or a party, may at any time apply to the court for directions with respect to the ship or property.

Rule 50 also allows the court to make appropriate orders with respect to the preservation, management or control of a ship or other property that is under arrest.

Depending on the requirements of the Harbourmaster in relation to requirements of the Port the Marshal may seek orders to move the ship from wharf to wharf, or out to anchor.

In relation to moving a ship under arrest the Marshal applies the "necessity test"

ie., is it necessary for the purposes of the arrest.

Orders may also be sought to load or unload the ship. The Marshal would be very concerned to load a bulk coal or ore carrier under arrest as if not released and the ship is ordered to be sold there no way of getting it off the ship. Australia is an exporter of coal and ore not an importer.

If the ship is arrested in a damaged state orders may be sought allowing people on to inspect it such as assessors and also to carry out repairs.

Release

Rule 44 provides that a ship or other property is under arrest until such time as it is released or sold by the Court.

The Rules contain two methods for obtaining release.

The first is by Application to Registrar pursuant to rule 51; the second is by way of application to the Court pursuant to rule 52.

The vast majority of arrested ships are released by consent through the Registrars.

Pursuant to rule 51(1) the Registrar can release a ship if satisfied that an amount equal to (the lesser of) the amount claimed or the value of the ship or property has been paid into court, or that bail bond for a similar amount has been filed in court.

If the Registrar is satisfied to release the ship a notice is given to the Marshal who will then proceed to release the ship (Rule 51(7)), subject to his being satisfied that arrangements have been made for payment of his fees and expenses (Rule 53).

For an application to the Registrar Form 18 is filed. [slide 20] Note the comments re search of caveats Register and also note the undertaking.

Registrar will issue a Form 19A [slide 21]

Release of a vessel by the court pursuant to rule 52 is discretionary and may be made on such terms as are just (Rule 52(3)). Similarly, the Marshal may decline to release a ship or other property when an order has been made under rule 52 if he is not satisfied about arrangements for payment of outstanding fees and expenses.

It can be seen that there can be two undertakings given to the Court. One at the time of arrest and another at the time of release. What happens when one is given by both the Plaintiff and the Defendant? What is the interaction between rule 41 and rule 53.

Rule 75C provides that if the Court accepts more than one undertaking in relation to the Marshal’s costs and expenses. The Court may make orders and directions in relation to the just and fair allocation of responsibilities between those undertakings.

This issue arose in EMAS Offshore Pte Ltd v The Ship "APC Aussie 1" (No2) [2009] FCA 1583. In this case both the Plaintiff and Defendant paid money to the Marshal on their respective undertakings. Each thought that the other should have the whole burden.

Justice Rares said that the purpose of the undertaking under rule 41 is to ensure that the Marshal will be able to meet the costs and expenses first, of the actual arrest and, secondly, of preserving and maintaining the ship or other property while it is under arrest. The purpose of the undertaking in rule 53 given to obtain the release from arrest of the ship under rules 51 and 52 is different. It is to meet the cost and expenses actually incurred by the marshal "…in connection with the custody of the ship or property while it was under arrest, including costs and expenses associated with its release from arrest". He held that the amounts to be paid by the Plaintiff and Defendant be apportioned accordingly.

Caveats

Rule 14(1) provides that the Federal Court shall maintain a register to be known as the register of Caveats Against Arrest.

Rules 14(2) provides that the Register of a court in which a proceeding under the Act may be commenced as an action in rem must maintain a register to be known as the Register of Caveats Against Release.

Tony Tesoriero, Deputy District Registrar

Federal Court of Australia

Delivered to the MLAANZ conference. ‘The Year Review/The Year Ahead’ on March 28, 2012.